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PL

Integrated Report 2020

56.2. Credit risk

Credit risk is inherent in the core financial operations of the Group, the scope of which includes both lending and providing funding with the use of capital market products. Consequently, credit risk is identified as the risk with the highest potential to affect the present and future profits and equity of BNP Paribas. Proof of the key nature of credit risk is its 71% share in the total economic capital estimated by the Group for purposes of covering major risks involved in the Group’s operations, in addition to its 89% share in the total value of regulatory capital.

Credit risk management is primarily aimed at implementation of the Group’s strategy through a harmonious increase in the loan portfolio, accompanied by maintenance of the credit risk appetite at an acceptable level.

Credit risk management principles adopted by the Group include:

  • each credit transaction requires comprehensive credit risk assessment expressed in internal rating or scoring;
  • in-depth and careful financial analysis serves as the basis for regarding the customer’s financial information and collateral-related data as reliable; prudential analyses performed by the Bank always take into account a safety margin;
  • as a rule, financing is provided based on the customer’s ability to generate cash flows that ensure payment of liabilities to the Group;
  • credit risk assessment is additionally verified by credit risk assessment personnel, independent of the business;
  • pricing terms of a credit transaction have to take account of the risk involved in such a transaction;
  • credit risk is diversified with regard to geographical regions, industries, products and customers;
  • credit decisions may only be taken by competent employees;
  • the Group enters credit transactions only with known customers and long-term relationships are the basis for cooperation with customers;
  • the customer and the transactions made with the customer are monitored transparently from the perspective of the customer, in a manner strengthening the relationship between the Bank and the customer.

Concentration risk is the Bank’s risk inherent to its statutory operations, which is appropriately defined and managed.

The Management Board assesses the concentration risk policy in terms of its application. In particular, it analyses the efficiency and adequacy of the principles applied in the context of the current and planned operations and risk management strategy. The adequacy of the concentration risk management is reviewed if any material changes are observed in the Group’s environment or if the risk management strategy is modified. The appropriate assessment of the concentration risk of the Group is highly dependent on correct identification of all key concentration risks. In justified cases, the Group identifies concentration risk when planning its new activities involving the development and launch of new products, services, expansion to new markets, considerable alterations of products and services or market changes.

Credit portfolio diversification is one of the key credit risk management tools. The Group avoids excessive credit concentration, as it increases the risk. Possible losses pose a considerable threat, and therefore the concentration level should be monitored, controlled and reported to the Group’s management. Key concentration risk mitigation tools include risk identification and measurement mechanisms and exposure limits in individual Bank portfolio segments and in subsidiaries. These tools enable internal differentiation of the loan portfolio and mitigation of negative effects of adverse changes in the economy.

A significant concentration area (aspect) is the one whose share in the Group’s balance sheet total is equal or higher than 10% or 5% of the net profit planned for a given year. In such cases, a given concentration area (aspect) is subject to analyses, reporting and management under the concentration risk management process.

High concentration of the Group’s credit exposures to each entity or group of entities with equity or organisational relationships is one of the potential sources of credit risk. For purposes of its reduction, the Regulation No. 575/2013 specifies the Group’s maximum exposure limit. Under Article 395 of the Regulation No. 575/2013: the institution does not assume any exposure to the client or related clients, the value of which, taking into account the effect of limiting credit risk in accordance with Articles 399-403, exceeds 25% of the value of its recognised capital. If a client is an institution or if a group of related clients include at least one institution, the value does not exceed 25% of its recognised capital or of the amount of EUR 150 million, depending on which one of these two amounts is higher, provided that the sum of the exposure to all related non-institutional customers, after taking into account the effect of credit risk mitigation under Articles 399-403, does not exceed 25% of the value of the institution’s recognised capital.

The Group’s concentration limits are monitored in accordance with Article 387 of the Regulation No. 575/2013. The limits, defined in Article 395 of the Regulation No. 575/2013, had not been exceeded as at the end of 2020. As at the end of 2020, the Group’s exposure to customers/groups of customers with equity or organisational relationships had not exceeded the concentration limit. The total of exposures equal to or exceeding 10% of the Bank’s equity was 16%.

Concentration risk tolerance in the Group is determined by a system of internal limits, including both assumed development directions and speed of the Group’s business, an acceptable level of credit risk and liquidity, as well as external conditions, macroeconomic and sectoral perspective. Among others, internal limits for credit concentration risk are determined for:

  • selected sectors / industries;
  • exposures denominated in foreign currencies;
  • customer segments (intra-bank customer segmentation);
  • loans secured with a given type of collateral;
  • geographical regions;
  • average probability of default;
  • exposures with a specified rating (the Group’s internal rating scale);
  • exposures with a specified debt-to-income ratio;
  • exposures with a specified loan-to-value ratio.

Activities that limit Group’s exposure to concentration risk may include systemic measures and one-off / specific decision and transactions. Systemic measures that limit concentration risk include:

  • reduction of the scope of crediting of determined customer types through credit policy adjustment;
  • reduction of limits charged with concentration risk;
  • diversification of asset types on the level of the Group’s statement of financial position;
  • change of business strategy to ensure prevention of excessive concentration;
  • diversification of accepted collateral types.

Systemic measures that limit concentration risk include:

  • reduction of further transactions with a given customer or a group of related customers;
  • sale of selected assets/loan portfolios;
  • securitization of assets;
  • establishing of new collateral types (e.g. credit derivatives, guarantees, sub-participation, and insurance contracts) for existing or new credit exposures.

A concentration analysis by industry, conducted by the Group, focuses on all credit exposures of the Group to institutional customers. The Group defines industries based on Polish statistical classification of economic activities (NACE/PKD 2007). The Group’s exposure to industries analysed at the end of 2020 (presented based on the classification of industries in NACE/PKD), similarly as at the end of December 2019, is concentrated in the following industries: Agriculture, Forestry, Hunting and Fishing. As at the end of December 2020, they accounted for 26% of industrial exposure, while at the end of December 2019, the exposure to these industries reached 27%.

The table below presents a comparison of the share of impaired loans in industries (gross balance sheet value) as at 31 December 2020 and 2019.

XLS
Exposure* Share of impaired loans
Industry 31.12.2020 31.12.2019 31.12.2020 31.12.2019
Agriculture, forestry and fishing 10,756,142 12,373,340 9.2% 8.1%
Mining and quarrying 36,341 53,548 9.5% 7.2%
Manufacturing 8,772,763 10,166,548 5.5% 5.0%
Electricity, gas, steam and air conditioning supply 648,737 446,764 0.8% 2.8%
Water supply; sewerage, waste management and remediation activities 166,344 313,287 6.6% 3.4%
Construction 2,540,629 3,003,321 8.5% 12.7%
Wholesale and retail trade; repair of motor vehicles and motorcycles 5,725,092 7,683,605 7.5% 6.4%
Transportation and storage 1,216,516 1,579,139 6.9% 8.4%
Accommodation and food service activities 273,257 318,433 20.5% 22.8%
Information and communication activities 1,439,082 1,045,644 3.4% 4.9%
Financial and insurance activities 891,461 777,841 11.5% 2.9%
Real estate activities 4,657,921 3,853,066 3.0% 4.6%
Professional, scientific and technical activities 2,368,361 1,848,429 2.4% 3.9%
Administrative and support service activities 767,882 803,433 9.7% 9.4%
Public administration and defence, compulsory social security 96,875 118,349 0.0% 0.0%
Education 87,763 100,269 12.0% 11.8%
Human health and social work activities 652,849 557,161 3.5% 4.0%
Arts, entertainment and recreation activities 16,257 22,524 21.0% 14.1%
Other activities 88,598 195,229 7.6% 4.2%
Total 41,202,870 45,259,930 6.7% 6.8%
including:
Industry (BCDE sections) 9,624,185 10,980,147 5.20% 4.88%
* Financial data have been rounded and presented in PLN ‘000, and therefore, in some cases, the totals may not correspond exactly to the total sum.

 

The Group manages the risk of collateral concentration. For this purpose, the Group introduced limits for the involvement of particular types of collateral, ensuring their appropriate diversification. As at the end of 2020, as well as at the end of 2019, the limits were not exceeded.

In the case of an individually assessed exposures, the Group expects to recover, due to established collateral, the amount of PLN 446 million, which is 30% of the total exposure assessed individually with an impairment recognised as at 31 December 2020 (PLN 879 million and 49% as at 31 December 2019).

Maximum exposure on credit risk

The table below presents the Group’s maximum exposure to credit risk for financial instruments both recognised and not recognised in the financial statements. The maximum exposure was presented in its gross value, before considering the impact of collateral and other credit quality improvement instruments.

XLS
31.12.2020
Assets Maximum exposure on credit risk – no collaterals included Maximum exposure on credit risk – collaterals included
Cash and balances at Central Bank 3,421,877 3,421,877
Amounts due from other banks 776,390 774,722
Derivative financial instruments 1,531,617 1,531,617
Adjustment of the hedged item fair value 531,793 531,793
Loans and advances to customers measured at amortised cost 77,284,074 74,097,269
Loans and advances to customers measured at fair value through profit or loss 1,539,848 1,539,848
Securities measured at amortised cost 23,373,414 23,361,022
Securities measured at fair value through profit or loss 371,900 371,900
Securities measured at fair value through other comprehensive income 10,228,560 10,228,560
Deferred tax assets 745,606 745,606
Other assets 786,839 786,839
Total assets 120,591,918 117,391,053
Total contingent liabilities 4,889,575 4,889,575
Total exposure on credit risk 125,481,493 122,280,628

 

XLS
31.12.2019
Assets Maximum exposure on credit risk – no collaterals included Maximum exposure on credit risk – collaterals included
Cash and balances at Central Bank 4,658,545 4,658,171
Amounts due from other banks 680,227 679,308
Derivative financial instruments 800,886 800,886
Adjustment of the hedging item fair value 228,120 228,120
Loans and advances to customers measured at amortised cost 75,064,852 71,836,643
Loans and advances to customers measured at fair value through profit or loss 1,974,396 1,974,396
Securities measured at amortised cost 17,939,171 17,916,645
Securities measured at fair value through profit or loss 241,754 241,754
Securities measured at fair value through other comprehensive income 7,953,358 7,953,358
Deferred tax assets 976,748 976,748
Other assets 884,845 884,845
Total assets 111,402,902 108,150,874
Total contingent liabilities 3,528,537 3,528,537
Total exposure on credit risk 114,931,439 111,679,411

Exposure to credit risk by credit quality ratings

The table below presents significant credit risk exposures to which the expected credit loss model was applied. The breakdown was based on the rating scale presented below:

XLS
31.12.2020
Gross loans and advances measured at amortised cost, for which impairment allowance is estimated as*:
Rating 12-month expected credit loss – exposures without impairment Expected credit loss during the exposure period – exposures without impairment Expected credit loss during the exposure period – exposures with impairment Expected credit loss during the exposure period – POCI exposures Gross portfolio value for a given rating category Net portfolio value for a given rating category
1 289 – – – 289 279
2 110,426 – – – 110,426 110,417
3 329,527 1 – – 329,528 329,507
4 1,494,647 1,903 – – 1,496,550 1,496,122
5 5,191,773 120,809 3,615 62 5,316,259 5,300,019
6 12,078,510 432,815 21,329 2,089 12,534,744 12,402,994
7 12,155,128 1,571,548 34,668 20,144 13,781,487 13,507,505
8 2,501,199 1,404,451 44,648 2,300 3,952,598 3,832,457
9 100,811 775,060 64,280 4,803 944,954 860,858
10 36,627 651,220 691,922 15,440 1,395,208 1,004,431
11 to 12 5,878 7,395 1,531,945 205,669 1,750,887 824,001
Total 34,004,815 4,965,202 2,392,407 250,507 41,612,930 39,668,590
* Financial data have been rounded and presented in PLN ‘000, and therefore, in some cases, the totals may not correspond exactly to the total sum.

 

XLS
31.12.2019
Gross loans and advances measured at amortised cost, for which impairment allowance is estimated as*:
Rating 12-month expected credit loss – exposures without impairment Expected credit loss during the exposure period – exposures without impairment Expected credit loss during the exposure period – exposures with impairment Expected credit loss during the exposure period – POCI exposures Gross portfolio value for a given rating category Net portfolio value for a given rating category
1 1,208 33 – – 1,241 1,205
2 123,452 – – – 123,452 123,443
3 414,505 39 – – 414,544 414,507
4 1,713,892 5,798 93 – 1,719,783 1,719,238
5 5,529,123 234,995 6,275 – 5,770,393 5,760,068
6 12,987,709 394,335 50,568 3,116 13,435,729 13,353,709
7 13,252,635 1,367,739 24,636 4,275 14,649,285 14,498,755
8 2,953,267 1,976,620 40,473 29,534 4,999,895 4,850,953
9 51,087 769,144 31,782 3,279 855,291 801,372
10 48,814 511,048 738,557 26,117 1,324,537 930,023
11 to 12 5,441 5,714 1,878,912 267,146 2,157,212 989,548
Total 37,081,133 5,265,465 2,771,296 333,467 45,451,362 43,442,821
* Financial data have been rounded and presented in PLN ‘000, and therefore, in some cases, the totals may not correspond exactly to the total sum.

 

For large enterprises and clients from the SME segment that prepare full financial reporting, the Group determines internal rating classes in accordance with the adopted credit policy. The rating classes are based on the risk model dedicated to this part of the loan portfolio and are the basis for estimating the amount of the provision in accordance with IFRS 9. The Group’s customers are assigned ratings from 1 (clients for whom the Group identifies the lowest credit risk) to 12 (clients for whom the Group identifies the highest credit risk). In order to assign ratings, the annual financial data provided by the client and the general quality assessment of its market situation are used.

The structure of overdue receivables

The purpose of repayment overdue analysis is to indicate the level of potential credit loss (in respect of receivables without impairment). The higher delinquency in repayment, the more likely it is to identify an objective impairment trigger in the future. An increase in the delay in repayment above zero days increases the chance of identifying impairment trigger, but does not itself constitute grounds for giving this trigger. In the case of exposures overdue below 91 days, the impairment trigger may, however, be identified based on additional information about the economic and financial situation of the client.

The structure of the loan portfolio (measured at amortised cost and measured at fair value through profit or loss) divided into impaired exposures and not impaired exposures along with the level of arrears in repayment are presented in the tables below. For the purposes of calculating the amount of the allowance, as well as for the presentation of data in the tables below, the loan is considered not due on the day on which the instalment payment expires, but on the next day.

XLS
31.12.2020
Structure of overdue loan portfolio
(net balance sheet value)*		 not impaired impaired Total
0 days 1-30 days 31-60 days 61-90 days
Mortgage loans and advances 21,967,159 7,477 3,829 4,382 448,995 22,431,842
Cash loans 7,413,543 49,281 16,476 5,322 206,064 7,690,686
Car loans 1,569,276 4,343 1,598 511 14,699 1,590,427
Credit cards 1,124,625 7,942 1,737 1,007 30,137 1,165,448
Investment loans 19,864,473 40,268 17,491 1,191 684,423 20,607,846
Limits in current accounts 7,941,707 31,014 6,878 1,642 259,558 8,240,799
Corporate revolving loans 8,087,622 51,799 6,654 2,017 398,504 8,546,596
Leases 3,822,553 15,958 3,799 1,439 108,131 3,951,880
Other 1,375,712 1,345 338 126 34,072 1,411,593
Total 73,166,670 209,427 58,800 17,637 2,184,583 75,637,117
* Financial data have been rounded and presented in PLN ‘000, and therefore, in some cases, the totals may not correspond exactly to the total sum.

 

XLS
31.12.2019
Structure of overdue loan portfolio
(net balance sheet value)*		 not impaired impaired Total
0 days 1-30 days 31-60 days 61-90 days
Mortgage loans and advances 17,851,522 272,210 28,903 8,732 342,371 18,503,738
Cash loans 7,342,714 123,147 24,211 7,413 187,339 7,684,824
Car loans 1,507,568 8,540 2,607 540 14,692 1,533,947
Credit cards 1,228,027 52,010 12,723 1,444 26,155 1,320,359
Investment loans 19,696,537 306,585 9,648 7,631 782,977 20,803,378
Limits in current accounts 10,851,918 38,440 5,703 10,091 341,984 11,248,136
Corporate revolving loans 7,436,518 106,063 5,876 3,676 292,293 7,844,426
Leases 3,624,307 98,241 9,457 5,493 123,372 3,860,870
Other 971,146 7,734 1,024 256 31,201 1,011,361
Total 70,510,257 1,012,970 100,152 45,276 2,142,384 73,811,039
* Financial data have been rounded and presented in PLN ‘000, and therefore, in some cases, the totals may not correspond exactly to the total sum.

Impairment allowances

Impairment allowances reflect the expected credit loss calculated using the three-step approach required by IFRS 9, as described in Note 3.

Collaterals

Description of collateral held or other mechanisms that improve the credit quality

The Group assesses the creditworthiness of each client on an individual basis. The value of collateral obtained, if it is deemed necessary by the Group due to the granting of a loan, is subject to valuation by the Group. The Group accepts various forms of collateral for loans, while the main categories include:

  • real estate mortgage;
  • insurance of real estate being the subject of a mortgage;
  • life insurance of the borrower;
  • registered pledge.

Impact of collaterals on the valuation of exposure with impairment identified (loans measured at amortised cost and measured at fair value through profit or loss)*:

XLS
31.12.2020 Gross value with impairment Collateral value Net value with impairment
Loans and advances to:
Other financial institutions 1,625 4 907
Retail customers 1,444,716 762,882 696,385
Corporates: 2,621,013 1,886,370 1,384,433
including retail farmers 898,771 805,607 610,300
Public sector entities 44 – 32
Lease receivables 204,124 – 102,825
Total gross loans and advances 4,271,522 2,649,256 2,184,584
Allowances (negative value) (2,086,939)
Total net loans and advances 2,184,583

 

XLS
31.12.2019 Gross value with impairment Collateral value Net value with impairment
Loans and advances to:
Other financial institutions 908 6 511
Retail customers 1,332,616 577,300 566,593
Corporates: 2,896,289 2,096,194 1,453,870
including retail farmers 896,537 828,523 599,644
Public sector entities 134 – 47
Lease receivables 196,747 – 121,363
Total gross loans and advances 4,426,694 2,673,500 2,142,384
Allowances (negative value) (2,284,310)
Total net loans and advances 2,142,384
* Financial data have been rounded and presented in PLN ‘000, and therefore, in some cases, the totals may not correspond exactly to the total sum.

 

In the period covered by the present financial statements, there were no significant changes in the quality of collateral as a result of deterioration or changes in the Group’s collateral policy.

Loans and advances – credit quality

Loans and advances are classified in the overdue category, but in the case impairment is not identified and if the market current value of the collateral is sufficient to cover the value of principal, interest and other fees due to the Group in relation to a given exposure.

Mortgage loans denominated in foreign currencies

Mortgage loans to individual customers account for ca. 29% of the loan portfolio of non-financial sector of the Group (gross carrying amount), with (22%) being loans in foreign currencies the major part of which (99%) are denominated in CHF (the Swiss franc). The total gross carrying amount of mortgage loans in foreign currencies is PLN 4,872,443 thousand.

The Group performs revaluation of the residential property pledged as collateral for loans on an annual basis, on the following assumptions:

  • where the debt is below PLN 12 million at the revaluation date – the property is revalued using a statistical method;
  • where the debt is more than PLN 12 million at the revaluation date – the property is revalued on a case-by-case basis.

The revalued amount is the basis for calculation of the current LTV for a single exposure and the average LTV for the entire portfolio as the average weighted by the gross carrying amount of individual LTVs.

The total on-balance sheet exposure and the average LTVs for mortgage loans in foreign currencies considering impairment and delinquency in days is presented below.

Exposure structure and average current LTV by impairment and delinquency

XLS
days past due gross balance
sheet value		 average LTV weighted with gross balance
sheet value
0-30 days 4,653,532 81.84%
31-60 days 4,871 77.89%
61-90 days 9,930 72.71%
over 90 days 204,110 112.50%
Total 4,872,443 83.10%

 

XLS
impairment identified gross balance
sheet value		 average LTV weighted with gross balance
sheet value
NO 4,475,953 81.29%
YES 396,490 103.45%
Total 4,872,443 83.10%

 

The average current LTV for the entire foreign currency mortgage loan portfolio exceeds the average current LTV for mortgage loans in the Polish currency (73%).

Exposure structure and average current LTV by loan granting year (mortgage loans in foreign currencies) are presented in the table below:

XLS
date of agreement number of loans granted gross balance
sheet value		 average LTV weighted with gross balance
sheet value		 gross balance
sheet value *
2005 and before 2,445 320,813 0.00% 304,684
2006 5,094 1,104,030 59.25% 1,044,927
2007 4,565 1,504,480 89.48% 1,390,720
2008 5,603 1,683,832 101.18% 1,526,258
2009 635 138,168 67.74% 127,847
2010 and after 314 121,120 93.93% 81,517
Total 18,656 4,872,443 83.10% 4,475,953
* Non-impaired loans.

Forbearance practices

The Group treats its exposures as forborne if the obligor is provided with a forbearance due to economic reasons (financial difficulties), including any forbearance granted for exposures with identified impairment triggers. In case the forbearance is granted for a customer with a material economic loss, the Bank classifies such a customer as default.

A facility is understood as the occurrence of at least one of the following events:

  • a change to the repayment schedule, especially extending the loan maturity date;
  • cancellation of overdue amounts (e.g. capitalisation of an overdue amount, which can be repaid at a later date);
  • redemption of principal, interest or fees;
  • consolidation of loans into one new product, if the amounts of payments of the consolidated loan are lower than the sum of payments of these loans separately before the consolidation occurred;
  • decrease of the base interest rate or margin;
  • originating a new loan to repay the existing debt;

Only in the period of customer’s financial difficulties or, in the period when, due to changes on the market, such difficulties may occur, i.e.:

  • the exposure is subject to debt collection; or
  • the exposure is not subject to debt collection but there is evidence (provided by the customer or obtained in the decision-making process) that the customer is facing financial difficulties or may be facing them in the near future.

A material economic loss is defined by the Bank as the drop of present value of expected cash flows, resulting from forbearance granted, equal or higher than 5%. The drop of the present value is calculated in accordance with the below formula:

NPV0 – NPV1
__________

NPV0

where:

NPV0 – the present value of expected cash flows (including interest and fees / commissions) prior to the introduction of changes in loan terms, discounted with the original effective interest rate ,

NPV1 – the present value of expected cash flows (including interest and fees / commissions), after the introduction of changes in the loan terms, discounted using the original effective interest rate. In the case of consolidation of many loans for the original interest rate for the purpose of assessing the significance of economic loss, the average EIR weighted with the gross balance sheet exposure at the moment of granting the facility is assumed.

The “forborne” status is no longer assigned if the following conditions have been satisfied:

  • exposure reclassified to performing portfolio as a result of the analysis of financial situation (in case of corporate portfolio), which proved that the customer does not meet the criteria for being classified to the impaired portfolio;
  • the exposure has not been considered impaired for 24 months in a row;
  • none of the exposures to the customer are past due by more than 30 days;
  • the obligor has been making regular and considerable payments for at least a half of the trial period.

XLS
31.12.2020
Forborne exposures Total portfolio including forbearance exposures including change of terms including refinancing
Loans and advances for: 78,823,922 1,448,966 1,380,968 67,998
Non-banking financial institutions 595,102 – – –
Retail customers 33,802,097 414,718 387,464 27,254
Corporate customers 40,212,881 999,526 958,782 40,744
including retail farmers 9,462,022 401,262 394,387 6,875
Public sector institutions 101,382 – – –
Lease receivables 4,112,460 34,722 34,722 –
Impairment allowances on loans and advances (3,186,805) (396,096) (377,340) (18,756)
Non-banking financial institutions (1,934) – – –
Retail customers (1,172,830) (145,977) (139,637) (6,340)
Corporate customers (1,863,349) (237,774) (225,358) (12,416)
including retail farmers (453,098) (50,380) (49,648) (732)
Public sector institutions (2,268) – – –
Lease receivables (146,424) (12,345) (12,345) –
Total loans and advances (net) 75,637,117 1,052,870 1,003,628 49,242

 

XLS
31.12.2019
Forborne exposures Total portfolio including forbearance exposures including change of terms including refinancing
Forborne exposures 77,039,248 1,383,336 961,070 422,266
Loans and advances for: 576,521 – – –
Non-banking financial institutions 29,997,525 415,075 317,032 98,043
Retail customers 42,339,843 968,261 644,038 324,223
including retail farmers 10,456,551 290,659 259,831 30,828
Public sector institutions 129,915 – – –
Lease receivables 3,995,444 – – –
Impairment allowances on loans and advances (3,228,209) (395,411) (271,968) (123,443)
Non-banking financial institutions (2,314) – – –
Retail customers (1,158,392) (131,026) (101,783) (29,243)
Corporate customers (1,939,521) (264,385) (170,185) (94,200)
including retail farmers (408,748) (37,971) (25,426) (12,545)
Public sector institutions (1,925) – – –
Lease receivables (126,057) – – –
Total loans and advances (net) 73,811,039 987,925 689,102 298,823

In connection with the outbreak of the COVID-19 pandemic, the Group undertook a number of actions regarding, among others:

  • the possibility to request temporary postponement of principal and interest instalments on loans by clients,
  • review of the loan portfolio with focus on industries, particularly those affected by and sensitive to the consequences of the COVID-19 pandemic;

The Group also actively participated in the works of the banking sector, regulators and organizers of government assistance addressed to entrepreneurs, has launched a number of solutions allowing customers to submit application to the Bank electronically and online as well as to use assistance programmes related to the effects of a pandemic and has been conducting ongoing monitoring of the number of clients and credit exposures affected by the pandemic, including ongoing decisions on individual clients regarding the type and structure of client financing adequate to his current situation and government support programmes.

The Group started cooperation with BGK in relation to PLG-FGP liquidity guarantees offered to the Group’s clients, other liquidity guarantees and loan interest rate subsidy programmes.

An electronic and simplified process of applying for postponement of principal and interest instalments on investment loans was introduced.

As a partner of the PFR programme, the Bank provided its clients with technical possibilities to apply for funding from these programmes using electronic banking.

Before 30 September 2020, the Group was focusing on the use of available assistance programmes for clients, including temporary postponement of instalments, examining clients' applications in this respect on an ongoing basis.

After 30 September 2020, until the end of 2020, clients’ applications to postpone loan instalments could have been submitted and examined in a mode analogous to the situation before the COVID-19 pandemic was announced.

The data in the tables below are based on balance sheet value and present the amounts recognised in the Group’s books as at 31 December 2020.

XLS
31.12.2020
Loans and advances to customers subject to a moratorium Number of clients granted with moratoriums Value of loans and advances covered by ongoing and expired moratoriums including regulatory moratorium including ongoing moratorium
not impaired impaired
Gross balance sheet value 43,309 7,251,102 135,935 171,565 129,760
Non-banking financial institutions 1 33 – – –
Retail customers 33,257 3,374,952 135,848 45,132 94,051
Corporate clients 7,460 3,095,593 87 120,067 35,625
including retail farmers 1,492 523,060 87 40,981 4,465
Public sector institutions 2 1,121 – 886 –
Lease receivables 2,589 779,403 – 5,480 84
Allowance x (375,835) (32,988) (5,206) (32,835)
Non-banking financial institutions x (3) – – –
Retail customers x (201,320) (32,987) (2,136) (26,281)
Corporate clients x (137,439) (1) (2,780) (6,532)
including retail farmers x (39,932) (1) (696) (1,011)
Public sector institutions x (238) – (233) –
Lease receivables x (36,835) – (57) (22)
Loans and advances to customers subject to the moratorium together 43,309 6,875,267 102,947 166,359 96,925

 

XLS
31.12.2020 Residual term for moratoriums
Gross balance sheet value Total up to 3 months from 3 to 6 months
Retail customers 139,183 136,262 2,921
Corporate clients: 155,692 139,303 16,389
including retail farmers: 45,446 39,401 6,045
Public sector institutions: 886 886 –
Lease receivables 5,564 419 5,145
Loans and advances to customers subject to the moratorium together 301,325 276,870 24,455

 

XLS
31.12.2020
Newly granted loans and advances to customers covered by public guarantee programmes Number of clients who received the public guarantee Residual maturity of the public guarantee
Value up to 6 months from 6 to 12 months from 1 to 2 years from 2 to 5 years Value
Gross balance sheet value 3,034 1,298,960 20,314 334,725 693,771 234,531 15,619
Corporate clients 3,034 1,298,960 20,314 334,725 693,771 234,531 15,619
including retail farmers 103 23,631 – 600 6,437 16,594 –
Allowance x (9,931) (147) (1,825) (3,644) (3,933) (382)
Corporate clients x (9,931) (147) (1,825) (3,644) (3,933) (382)
including retail farmers x (75) – – (3) (72) –
Total newly granted loans and advances to customers covered by public guarantee programmes 3,034 1,289,029 20,167 332,900 690,127 230,598 15,237

 

 

As at 31 December 2020 the value of expired moratoriums amounted to PLN 6,949,777 thousand.

As part of its response to the situation related to COVID-19 pandemic, the Group has introduced changes to the process of recognition of material increases in risk. The Group monitors the behaviour of exposures subject to moratorium. In 2020, the Bank offered statutory moratoria from 19.06.2020 to the present moment and non-statutory moratoria from 08.06.2020 to 30.09.2020. Exposures covered by statutory credit vacations are transferred to Stage 3. In case of exposures covered by non-statutory credit vacations, the Group applies stricter criteria and these are classified to Stage 2. For these exposures, more than 30 days overdue within 3 months after the end of moratorium is an indication of a significant increase of credit risk (Stage 2), which results in calculation of allowances within the exposure life horizon.

Country risk

Within credit risk, the Group additionally distinguishes country risk, which covers all risks related to conclusion of financial agreements with foreign parties, assuming that it is possible that economic, social or political events will have an adverse effect on creditworthiness of the Bank’s obligors in that country or where intervention of a foreign government could prevent the obligor (which could also be the government itself) from discharging his liabilities.

The Group’s policy concerning country risk has been conservative. Country limits have been reviewed periodically and the limit level modified to match precisely the anticipated business needs and risk appetite of the Group.

As at the end of 2020, 54% of the Group’s exposure to countries other than Poland were transactions related to the Group’s foreign lending activities, treasury transactions (including placement and derivative transactions) accounted for 14% while the remaining part, i.e. 32% was related to foreign trade transactions (letters of credit and guarantees). France accounted for 33%, the Netherlands and Luxembourg for 11% each, the Czech Republic for 8% and Switzerland for 7% of the exposure. The remaining exposure was concentrated in Belgium, Germany, Turkey and Austria.

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