59. Subsequent events

The Bank applied a two-stage approach to adjust its operations to the requirements regarding the new definition of default under the EBA Guidelines on the application of the default definition described in Article 178 of the Regulation (EU) No 575/2013. In the first stage, i.e. as at 31 December 2020, the Bank introduced the relative and absolute thresholds resulting from the Regulation of the Minister of Finance, Investment and Development of 3 October 2019 on the materiality level of a past due credit obligation for the purposes of identifying material past due. A past due credit obligation is considered material when both materiality thresholds are exceeded in aggregate:

• the amount of past due liabilities exceeds PLN 400 for retail exposures or PLN 2000 for non-retail exposures, and
• the share of past due liabilities in the total exposure of the obligor is greater than 1%.

Accordingly, the calculation of overdue days for the purpose of determining a default event starts once both of the aforementioned thresholds are exceeded.

In the second phase, i.e. as of 1 January 2021, the Bank has aligned its activities with the remaining requirements of the EBA Guidelines. Significant changes introduced in connection with the implementation of the new definition of default include:

• establishing the level of recognition of default and calculation of overdue liabilities (customer or exposure level depending on the portfolio),
• changing the calculation of the number of days past due to a mechanism of continuous material past due (only repayment decreasing the past due liability below one of the two materiality thresholds will result in discontinuation of the calculation of past due days)
• the introduction of a new default trigger based on NPV loss, and
• the introduction of the concept of technical past due (not resulting in classification into default status).

The impact of adjusting to the new definition of default recognised after the reporting date, i.e. related to the second stage of NDoD implementation, amounted to PLN 23,336 thousand on a separate basis. The impact of the first stage of implementation of the new rules is immaterial.