The calculation of the capital adequacy of the Bank and the Group as at 31 December 2021 has been performed applying the provisions of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013. (CRR) on prudential requirements for credit institutions and investment firms, as amended by Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019.(CRR2) in relation to leverage ratio, net stable funding ratio, own funds and minimum eligible liabilities requirements, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements.
On the 12th of December 2017, the European Parliament and the Council of the EU adopted Regulation No 2017/2395 amending Regulation (EU) No 575/2013 as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds and for treating as large exposures certain exposures to public sector entities denominated in the domestic currency of any Member State. This Regulation entered into force on the day following its publication in the Official Journal of the European Union and applies from 1 January 2018. The European Parliament and the Council (EU) recognized that the application of IFRS 9 could lead to a sudden increase in the allowance for expected credit losses and, consequently, a decrease in Common Equity Tier 1 capital.
The Group, after analyzing the requirements of Regulation No. 2017/2395, decided to apply the transitional provisions provided by this Regulation, which means that for the purposes of assessing the capital adequacy of the Bank and the Group, the full impact of the implementation of IFRS 9 will not be taken into account. As a result of adjusting the calculation of the regulatory capital requirements, it was estimated that taking into account the full impact of the implementation of IFRS 9 on the Bank’s total capital ratio would reduce its value by 25 basis points as estimated at the date of implementation of IFRS 9.
On 27 June 2020, Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020, amending Regulations (EU) No 272/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic, entered into force, allowing, inter alia, a reduction in risk weights for a portion of SME loans, a temporary partial exclusion from the calculation of Common Equity Tier 1 items of the amount of unrealised gains and losses measured at fair value through other comprehensive income in relation to the COVID-19 pandemic.
As of December 31, 2021, the adjustment related to the temporary partial exclusion from the calculation of Common Equity Tier 1 capital items of the amount of unrealized gains and losses measured at fair value through other comprehensive income in connection with the COVID-19 pandemic was PLN 367,167 thousand.
On 23 December 2020, Commission Delegated Regulation (EU) 2020/2176 of 12 November 2020, amending Delegated Regulations (EU) No 241/2014 with regard to the deduction of software assets from Common Equity Tier 1 items, entered into force.
As at 31 December 2021, the adjustment in Common Equity Tier 1 capital related to other intangible assets amounted to PLN 367,295 thousand.
Pursuant to the Resolution of the Annual General Meeting of the Bank dated 24 March 2021, the entire profit of the Bank for 2020, in the amount of PLN 731,060 thousand, was allocated to reserve capital.
On 28 December 2020, the Bank received the decision of the Polish Financial Supervision Authority to approve the inclusion of subordinated loan in the amount of PLN 2,300,000,000 (two billion three hundred million) as an instrument in the Bank’s Tier II capital. The subordinated loan agreement was signed by the Bank with BNP Paribas SA on 7 December 2020 to meet the minimum requirement of the level of own funds and eligible liabilities (MREL).
The Bank’s total capital ratio at December 31, 2021 was 17.77%, a decrease of 1.69 p.p. compared to December 2020. The Bank’s Common Equity Tier 1 (CET I) capital ratio and Tier 1 capital ratio at December 31, 2021 were identical at 12.96% (decrease by 1.20 p.p. from year-end 2020).
Total own funds at 31 December 2021 decreased by PLN 260,023 thousand compared to 31 December 2020.
Total risk exposure as at 31 December 2021 amounted to PLN 87,410,438 thousand and increased by PLN 6,264,632 thousand compared to 31 December 2020.