Contingent liabilities and off-balance commitments received and granted

Accounting policies

As part of its operating activities the Group concludes transactions which, at the time of conclusion, are not recognized as assets or liabilities in the statement of financial position, but which give rise to contingent liabilities. Pursuant to IAS 37 a contingent liability is:

1) a potential obligation resulting from past events whose existence will be confirmed at the moment of occurrence or non-occurrence of one or more uncertain future events which are not fully under the Group’s control; or

2) a current obligation which arises as a result of past events but is not recognized in the statement of financial position because it is not probable that cash or other assets would have to be expended to meet the obligation or the amount of the liability could not be assessed reliably.

Upon initial recognition a financial guarantee agreement is measured at fair value.

Financial information

Securities programmes covered with underwriting agreements (the Group’s maximum commitment to take up securities)

ISSUER OF UNDERWRITTEN SECURITIESTYPE OF UNDERWRITTEN SECURITIESOff-balance sheet liabilities resulting
from underwriting agreements
Contract expiry date
As at 31 December 2017 
 
Company Acorporate bonds1 45331/12/2020
Company Bcorporate bonds76931/07/2020
Company Ccorporate bonds5831/12/2022
Total 2 280 

ISSUER OF UNDERWRITTEN SECURITIESTYPE OF UNDERWRITTEN SECURITIESOff-balance sheet liabilities resulting
from underwriting agreements
Contract expiry date
As at 31 December 2016   
Company Acorporate bonds1 12631/12/2020
Company Bcorporate bonds1 05531/07/2020
Company Ccorporate bonds51215/06/2022
Company Dcorporate bonds6931/12/2022
Company Ecorporate bonds931/12/2026
Total 2 771 

All contracts relate to the Agreement for Organization, Conducting and Servicing of the Bond Issuance Programme.

All securities of the Group under the underwriting programme have unlimited transferability, are not listed on the stock exchange and are not traded on a regulated OTC market.

Contractual commitments

VALUE OF CONTRACTUAL COMMITMENTS CONCERNING:31.12.201731.12.2016
   
intangible assets2136
property, plant and equipment7824
   
Total9960

   

Financial liabilities granted

NOMINAL VALUE OF LOAN COMMITMENTS GRANTED31.12.201731.12.2016
   
Credit lines and limits
to financial entities2 8242 764
to non-financial entities37 37439 525
to public entities4 2733 856
Total44 47146
of which irrevocable loan commitments33 60731 078

     

Guarantee liabilities granted

GUARANTEES AND PLEDGES GRANTED31.12.201731.12.2016
   
Guarantees granted in domestic and foreign trading5 8136 020
to financial entities320154
to non-financial entities5 4625 856
to public entities3110
Guarantees and pledges granted – domestic corporate bonds2 3503 769
to non-financial entities2 3503 769
to financial entities--
Letters of credit granted1 4091 600
to non-financial entities1 4091 600
to public entities--
Guarantees and warranties granted – payment guarantees252191
Guarantees and pledges granted - domestic municipal bonds316351
   
Total10 14011 931
of which performance guarantees granted2 6302 447

 

Information about the provisions recognized for off-balance sheet financial and guarantee liabilities is presented in the Note ‘Provisions’.

Liabilities granted by maturity

OFF-BALANCE SHEET LIABILITIES GRANTED
BY MATURITY AS AT 31.12.2017
up to 1 month1 to 3 months3 months to 1 year1 to 5 yearsover 5 yearsTotal
       
Loan commitments granted9 01452412 13515 0007 79844 471
Guarantee liabilities granted7525543 2134 72689510 140
       
Total9 7661 07815 34819 7268 69354 611

OFF-BALANCE SHEET LIABILITIES GRANTED
BY MATURITY AS AT 31.12.2016
up to 1 month1 to 3 months3 months to 1 year1 to 5 yearsover 5 yearsTotal
       
Loan commitments granted13 8102 54312 35410 9936 44546 145
Guarantee liabilities granted2665763 7226 66869911 931
       
Total14 0763 11916 07617 6617 14458 076

 

Off-balance sheet liabilities received

OFF-BALANCE SHEET LIABILITIES RECEIVED
BY NOMINAL VALUE
31.12.201731.12.2016
   
Financial95304
Guarantees14 2277 972
   
Total14 3228 276

Due to the provisions of the Agreement which require the Nordea Bank AB (publ) Group to participate in the default risk of the Mortgage Portfolio, on 1 April 2014, PKO Bank Polski SA and Nordea Bank AB (publ) concluded a special indemnity agreement (the ‘Special Indemnity Agreement’), according to which Nordea Bank AB (publ) covers, for a period of 4 years following the Closing Date, 50% of the excess of the Mortgage Portfolio cost of risk over the annual cost of risk set at 40 basis points for each year of the above-mentioned four-year contract period of the Special Indemnity Agreement.

As a part of the work related to the settlement of the transaction, the Group has made a valuation of the Special Indemnity Agreement based on the conducted analysis of the probability of cash flows arising from the Agreement. The estimated expected value is zero.

On 21 December 2017, after obtaining the necessary corporate consents, the Bank concluded a guarantee agreement with the counterparty which ensured unfunded credit protection in respect of a portfolio of selected corporate loan receivables of the Bank, in accordance with the CRR Regulation (“Guarantee”).

The total value of the Bank’s portfolio of receivables covered by the Guarantee amounts to PLN 5,495 million, and the portfolio comprises a portfolio of bonds with a value of PLN 1 097 million (“Portfolio A”) and a portfolio of other receivables of PLN 4 398 million (“Portfolio B”). The Guarantee coverage ratio amounts to 90% – in respect of Portfolio A and 80% – in respect of Portfolio B, therefore the total Guarantee amounted to PLN 4 505 million. The maximum period of the Guarantee amounts to 60 months, whereas the Bank is entitled to terminate the Guarantee before the end of the period.

Right to sell or pledge a collateral established for the Group

As at 31 December 2017, and as at 31 December 2016 there were no collaterals established for the benefit of the Bank’s Group, which the Group was entitled to sell or pledge, if all obligations of the collateral holder were performed.