Impact of the COVID-19 pandemic on the activity and results of the Bank and the Group in 2020

• enabling remote working on a mass scale (both for employees of the headquarters and branches), if the nature of the work allows it; Over the course of 2020, since mid-March, a basic and recommended form of work organisation in the Bank was remote working; in organisational units, in which such form of work was not possible for whole teams, work organisation was based on an interchangeable system (split-team), where teams were divided to separate people executing the same duties; at the end of 2020 about 90% of the headquarters’ employees worked remotely. On average 85% of the headquarters’ employees worked remotely since the beginning of the pandemic;
• providing tools for remote work, among others replacement of desktops and terminals in branches with laptops, increase of the Internet limit in company mobile phones;
• equipping the Bank’s branches with protective plexiglass, masks, gloves, disinfectants;
• In order to ensure the safety of employees and Customers, in the period from 18 March to 8 May, the number of people in the branches was reduced, opening hours were shortened, a dedicated service hour for seniors was introduced, and selected branches, including the cashiers, were temporarily excluded from service due to employees' child care responsibilities. As of 11th May this year, standard Customer service hours were restored in the branches. At the end of 2020, 7 branches were excluded from service. Since the outbreak of the pandemic, an average of 99% of the branches were accessible to Customers with appropriate safety rules;

• enabling employees to carry out PCR test in ALAB diagnostic laboratories, at the Bank’s expense tests – if there is a reasonable suspicion that the employee may have had contact with another employee or Customer who was diagnosed with COVID-19 infection;
• preparation of online educational materials for employees' children to support them in organising children’s time;
• remote recruitment of new employees, virtual welcome training #NiceToSeeYou for new employees;
• providing telephone psychological support and mental health materials on the Worksmile Wellbeing Platform (formerly Fitqbe);
• all educational and pro-employee initiatives have been transferred to an online platform, i.e. organisation of CSR Days, Children’s Day, training offers, webinars (including remote work organisation, COVID-19 pandemic);
• a special section in the internal Echonet network dedicated to information about the coronavirus;
• marketing campaigns of #stayhome – promoting the Bank’s personal account, without leaving home.

From the beginning of April 2020, the Bank has provided its Customers with the possibility of deferring the repayment of principal and interest or principal only repayments (the so-called „loan moratoria”, “non-statutory/private moratoria”) in a convenient remote process. Since 1 October 2020 only statutory moratoria have been available. As at the end of 2020, the number of loans and advances subject to moratoria was 43.3 thousand with the Group’s total gross balance sheet exposure value of PLN 7,251,102 thousand, of which PLN 3,374,952 thousand related to individual Customers, PLN 3,095,593 thousand to business entities and PLN 780,557 thousand to leasing and other receivables. Total gross value of loans and advances subject to statutory moratoria was PLN 135,935 thousand. The balance of expired moratoria at the end of 2020 amounted to PLN 6,949,777 thousand, and the balance of active moratoria – PLN 301,325 thousand.

Detailed information on moratoria provided by the Bank and the Group in 2020 were presented in Credit Risk Note in the Stand-alone and Consolidated Financial Statements for the year ended 31 December 2020.

In the middle of January 2021 non-statutory moratoria were reintroduced. Moratorium assistance facilities will be provided to Customers until March 31, 2021.

In addition, the Bank actively joined the Polish Development Fund’s (PFR’s) fundraising program for the execution of the PFR Financial Shield Program for micro, small and medium-sized enterprises in relation to the effects of the COVID-19 epidemic in Poland as part of the government’s anti-crisis shield. Under the program the Bank purchased on 27 April the PFR0324 bonds for PLN 1 billion, on 8 May the PFR0325 bonds for PLN 1 billion, on 25 May the PFR0925 bonds for PLN 1 billion and on 5 June the PFR0627 bonds for PLN 1 billion. Thus, the Bank’s total exposure to the Polish Development Fund (PFR) bonds amounted to PLN 4 billion. Additionally, the Bank acquired PLN 6.38 billion of bonds issued by Bank Gospodarstwa Krajowego (BGK) for the COVID-19 Counteraction Fund.

In the GOonline and BiznesPl@net internet banking systems, the Bank enabled entrepreneurs to submit applications under the anti-crisis shield and the financial shield of the Polish Development Fund (PFR). The Bank’s Clients, who benefitted from the PFR Financial Shield 1.0 for micro, small and medium-sized enterprises received support in the form of financial subsidies for the total amount of PLN 5.05 billion. The total amount paid out by the PFR to enterprises under Shield 1.0 was PLN 60.5 billion.

In the middle of January, the Bank’s Clients were provded with the possibility of benefit from Financial Shield 2.0 through the Bank.

• financing 2,000 tests for the presence of SARS-CoV-2 in cooperation with Warsaw Genomics, Diagnostic Group and ALAB company,
• donating 20,000 protective masks to health care,
• fighting against digital exclusion – over PLN 1 million for a purchase of over 500 laptops with routers and Internet access and donating 250 refurbished and prepare for usage Bank laptops to students in need of support in education and on-line activities,
• donation to support the development of a tool to manage public fundraising for hospitals: www.wsparciedlaszpitala.pl – a free-of-charge platform that helps hospitals to communicate their needs and support those who want to help them find out what is most needed,
• support of the Association of Little Brothers of the Poor (PLN 15 thousand donation for a basket for an Easter basket for the Senior Citizen),
• The Bank, as a strategic partner of the Wiosna (Spring) Association’s Noble Parcel action, supported the organisation in its assistance activities, especially by promoting the „Good Words – Help for Seniors” info-line project, which aims to help the elderly during the COVID-19 pandemic. Thanks to the action, seniors can count on the support of specialists – psychologists, therapists and volunteers,
• financial support for the Alivia Oncological Foundation, a social partner of the BNP Paribas Foundation, to purchase protective gear for oncological patients. The BNP Paribas Foundation supported the organisation with a sum of PLN 20 thousand,

• financial support for the Itaka Foundation Anti-Depression Trust Line action, allowing for the extension of the on-call time from 4 to 15 hours per week for 12 months. The helpline operates within the framework of the „Stop Depression” program of the Foundation and is an important aid in the fight against depression, especially in times of pandemic. Thanks to our initiative, the Foundation was able to offer 750 additional duty hours of specialists working at Itaka Foundation Anti-Depression Trust Line,
• delivering meals for the medical personnel of Wolski Hospital from the Paribar Bank canteen and for the medical personnel of Sochaczew Hospital from the Leszno palace’s restaurant, which belongs to the Bank’s subsidiary – Campus Leszno Sp z o. o. Total value of the meals donated by BNP Paribas Bank Polska S.A. to the medics from Wolski Hospital in Warsaw and Sochaczew Hospital amounted to PLN 155 thousand,
• a group of employees-volunteers from the PF Operations Division made 450 masks, which were donated to two orphanages with which the Bank’s volunteers cooperate and to the Centre for the Advancement of Women Foundation,
• involvement in the national aid action #hot16challenge2 – the action was accompanied by a fundraising organised via the siepomaga.pl portal, the funds from which were entirely donated to help the healthcare staff in the fight against the coronavirus,
• an information campaign #stayhome, encouraging safe banking and leaving home only when necessary, including a dedicated section on coronavirus on the Bank’s website,
• The Bank constantly monitors the situation and engages in assistance activities for groups most affected by the pandemic.

• The Bank monitors and assesses the impact of the coronavirus epidemic on the Bank’s liquidity and capital situation, which remains good. The liquidity of the banking sector was positively affected by the Monetary Policy Council’s decision of 17 March 2020 to reduce the mandatory reserve rate from 3.5% to 0.5% (which means that more funds were left at Banks' disposal) and by the decisions of the National Bank of Poland regarding the purchase of treasury bonds, a bill-of-exchange loan and repo operations (increasing Banks' ability to manage current liquidity).
• By decision of the Minister of Finance, as of 19 March 2020, the level of the systemic risk buffer was reduced from 3% to 0%. This means that the minimum capital requirements for the Bank and the Group have been reduced to 10.75% for the Bank’s total capital adequacy ratio (TCR) and to 8.75% for the Tier 1 capital ratio. As at 31 December 2020, the consolidated TCR was equal to: 18.65% and Tier 1: 13.55%.
• Since the announcement of an epidemic threat and the so-called „lockdown” in Poland (March-May), the Bank has recorded much lower Customer activity despite the ensured availability of the branch network and other channels of contact with the Bank. In the third quarter of 2020 the Bank recorded a rebuilding Customer activity, which did not fall so drastically during another partial lockdown in the fourth quarter of 2020. Thanks to the adaptation of channels and forms of service delivery to Customer needs and the new environment, in the retail segment the Bank did not see any clear declines in sales volumes. Key products such as personal accounts, mortgage loans and investment products recorded higher sales volumes than in 2019. On the other hand, lower demand for cash loans and corporate loans was noticeable. This translated into the maintenance of lending volumes over the year, but thanks to the significant increase in lending volumes in early 2020, the annual growth rate of net lending was positive (+3.1%). At the same time, as a result of anti-crisis measures, a significant growth of non-financial Customer deposits was observed, whose partial outflow occurred towards the end of the year. These factors, additionally taking into account the aforementioned changes concerning the amount of the mandatory reserve, resulted in a significant improvement of liquidity ratios – the Bank’s LCR increased from 150-160% to over 180%, and the loan-to-deposit ratio decreased to 84%.

• Minimum level of own funds and eligible liabilities (MREL): on 16 March 2020 the Bank received a letter from the Bank Guarantee Fund concerning a joint decision of the resolution authorities, i.e. the Single Resolution Board, the Central Bank of Hungary, Finanstilsynet, Bank of England and the Bank Guarantee Fund, on the minimum level of own funds and eligible liabilities (MREL). This decision is based on the BNP Paribas Group’s forced restructuring strategy assuming a Single Point of Entry (SPE). The MREL requirement for the Bank was set at the sub-consolidated level at 16.001% of total liabilities and own funds („TLOF”), which corresponds to 20.866% of total risk exposure („TRE”). This requirement should be achieved by 31 December 2022. In addition, the Bank Guarantee Fund has set MREL interim targets at sub-consolidated level, which in relation to the TLOF are: 12.363% at the end of 2020 and 14.182% at the end of 2021; and in relation to the TRE are: 16.122% at year-end 2020 and 18.494% at year-end 2021. The MREL requirement was determined on the basis of consolidated balance sheet data as at 31 December 2018 and the required buffers valid as at 1st January 2019 and the additional capital requirement of the Polish Financial Supervision Authority valid as at 9 July 2019 (on 9 July 2019 the Bank was released from the obligation to maintain that requirement). According to the Bank Guarantee Fund announcement of 26 March 2020, as a consequence of lifting of the systemic risk buffer, the MREL requirements will be significantly reduced and the target date for compliance will be extended to 1st January 2024 (instead of 1st January 2023) as well as the deadline for meeting the first binding medium-term target to 1st January 2022 (instead of 1 January 2021). The Bank informs that binding decisions on the MREL requirements for the Bank are issued at the Single Resolution Board level in agreement with the Bank Guarantee Fund and have not changed as of the date of publication of this Report. The Bank met the defined MREL requirements at the end of 2020.

At the moment, it is not possible for the Bank to precisely estimate the impact of the coronavirus epidemic on the Bank’s activity and financial results in subsequent periods. The development of the economic situation is and will be dependent on a number of factors, including the duration of the epidemic, the vaccination pace, the restrictions introduced and potential additional support activities within the framework of economic and monetary policy undertaken by Polish and/or European authorities. In the Bank’s opinion, the deterioration of the global and domestic economic outlook may result in lower Customer activity and lower sales of banking products, and consequently, lower business and financial results of the Bank and the Group. At present it is impossible to reliably estimate the impact of the coronavirus epidemic on the quality of assets and the level of risk costs in subsequent periods. The Bank’s Management Board intends to actively adjust the Bank’s policy and procedures to the changing economic conditions and plans actions aimed at limiting the impact of these factors on the financial results.