Liquidity risk

• finance assets and meet the Bank’s obligations on a timely basis in the course of its daily operations or in other conditions, without the necessity to incur loss, whereas, as maintenance of liquidity is the Bank’s top priority, optimization of liquidity costs is considered in the last place;
• obtain alternative funds and supplementary funds to those held at present if they are withdrawn early and/or not renewed, so as to meet the current or potential demand for funds from the current depositors, ensure sufficient resources for purposes of lending and discharging other potential obligations related to processing derivative transactions or collateral put up by the Bank;
• generate a positive balance of cash flows over a specified time horizon, regardless of macroeconomic developments, achievement of business plans and changes in the regulatory environment.

The Bank operates in a free-market environment and is a financial markets participant, specifically in the retail, corporate and interbank markets, which offers a wide range of opportunities to control the liquidity level, but, at the same time, makes the Bank sensitive to crises in each of these environments. The Bank has a uniform risk monitoring system covering the core business of Raiffeisen Bank Polska S.A. acquired in 2018, which ensures up-to-date information on the level of the Bank’s liquidity risk.

Customers’ deposits supplemented by medium- and long-term lines of credit and equity are the major sources of funding used by the Bank. Medium- and long-term lines of credit, including subordinated loans and the funds obtained in the process of loan portfolio securitization, are provided mainly by the BNP Paribas Group, the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the Council of Europe Development Bank (CEB) Bank and other financial institutions. The policy adopted by the Bank allows the use of other funding sources, such as:issuing own debt securities or entering structured transactions.

At the end of 2019, the Bank financed a portfolio of mortgage loans in CHF with funds in EUR and USD by concluding medium- and long-term foreign exchange transactions.

The Bank limits the risk of financing, which is associated with the risk of having insufficient stable sources of financing in the medium- and long-term and with the necessityto incur an unacceptable level of losses.

The Bank’s loans are financed mainly with the use of customers’ current and term deposits and it is the Bank’s intention to maintain a stable relationship between these items and the funds deposited in the accounts of non-banking institutions, which is presented in the table below:

At the end of December 2019, compared to the end of 2018, the amount of wholesale funding received from the BNP Paribas Group remained at the same level. The Bank finances its foreign currency loans with deposits accepted from customers using, if necessary, foreign exchange transactions. If necessary, the Bank may use funds from medium and long-term loans from the BNP Paribas Group, which provides stable financing to cover currency shortages inEUR, USD or CHF.

As at 31 December 2019, the structure of open long-term lines of credit was as follows:

The net liquidity coverage ratio (LCR) at the end of 2019 equaled 162%, and increase by 10 p.p. as compared to the end of 2018 (152%).

In addition, in the process of securitisation of the loan portfolio, the Bank received financing of the total amount of PLN 2,179 million.