45. Securitization

In December 2017, the Group performed a securitization transaction on the portfolio of cash and car loans. using BGZ Poland ABS1 DAC (SPV) subsidiary. The transaction is a traditional securitization involving the transfer of ownership of the securitized receivables to SPV (BGŻ Poland ABS1 DAC based in Ireland). The revolving period was 24 months and ended in December 2019. From January 2020, the transaction is amortised.

As a result of the securitization the Group obtained financing for its operations in exchange for giving away rights to future flows resulting from the securitized loan portfolio in the amount of PLN 2,300,471 thousand as at 22 November 2017 (the so-called cut-off date). The maximum term of the full redemption of bonds and loan repayment is 27 April 2032.

SPV issued bonds with a total value of PLN 2,180,850 thousand on the basis of securitized assets and received a loan of PLN 119,621 thousand, which was secured by a registered pledge on the rights to cash flows from securitized assets. At the end of December 2020, the value of bonds and loan amounted to PLN 1,390,318 thousand.

The main benefit of the performed transaction is a positive impact on capital adequacy ratios and improvement of liquidity and diversification of financing sources.

In the light of the provisions of IFRS 9, the contractual terms of the securitization do not fulfil the conditions for derecognition of securitized assets. In connection with the above, the Group recognises securitized assets in “Loans and advances to customers” as at 31 December 2020 at net value of PLN 1,393,049 thousand.

The Group acts as a servicing entity in the transaction.

In 2020, the transaction was affected by factors related to the effects of the coronavirus pandemic. On one hand, the value of current and future cash flows in the transaction was affected by the deferrals of loan payments granted by the Group since 19 March 2020 in order to mitigate possible negative effects related to the coronavirus pandemic, and currently, those resulting from the Act of 19 June 2020 on interest rate subsidies for bank loans granted to entrepreneurs affected by COVID-19 and on simplified proceedings for approval of the arrangement in connection with COVID-19.

On the other hand, the Bank was also affected by the decisions of the Monetary Policy Council to reduce the NBP base interest rates, in particular the reference rate to 0.10% on 29 May 2020, which resulted in a reduction of the maximum interest rate on loans and borrowings as well as a decrease in market WIBOR rates.

At the moment, it is not possible for the Group to precisely estimate the consequences of the coronavirus pandemic on this transaction, in particular those related to a possible long-term of borrowers’ financial situation.

Balance sheet values and fair values of financial assets covered by securitization and related liabilities: