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 SECURITIES | TYPE OF UNDERWRITTEN SECURITIES | Off-balance sheet liabilities resulting from underwriting agreements | Contract expiry date |
|---|---|---|---|
| As at 31 December 2017 | |||
| Company A | corporate bonds | 1 453 | 31/12/2020 |
| Company B | corporate bonds | 769 | 31/07/2020 |
| Company C | corporate bonds | 58 | 31/12/2022 |
| Total | 2 280 |
| ISSUER OF UNDERWRITTEN SECURITIES | TYPE OF UNDERWRITTEN SECURITIES | Off-balance sheet liabilities resulting from underwriting agreements | Contract expiry date |
|---|---|---|---|
| As at 31 December 2016 | |||
| Company A | corporate bonds | 1 126 | 31/12/2020 |
| Company B | corporate bonds | 1 055 | 31/07/2020 |
| Company C | corporate bonds | 512 | 15/06/2022 |
| Company D | corporate bonds | 69 | 31/12/2022 |
| Company E | corporate bonds | 9 | 31/12/2026 |
| 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: | 31.12.2017 | 31.12.2016 |
|---|---|---|
| intangible assets | 21 | 36 |
| property, plant and equipment | 78 | 24 |
| Total | 99 | 60 |
Financial liabilities granted
| NOMINAL VALUE OF LOAN COMMITMENTS GRANTED | 31.12.2017 | 31.12.2016 |
|---|---|---|
| Credit lines and limits | ||
| to financial entities | 2 824 | 2 764 |
| to non-financial entities | 37 374 | 39 525 |
| to public entities | 4 273 | 3 856 |
| Total | 44 471 | 46 |
| of which irrevocable loan commitments | 33 607 | 31 078 |
Guarantee liabilities granted
| GUARANTEES AND PLEDGES GRANTED | 31.12.2017 | 31.12.2016 |
|---|---|---|
| Guarantees granted in domestic and foreign trading | 5 813 | 6 020 |
| to financial entities | 320 | 154 |
| to non-financial entities | 5 462 | 5 856 |
| to public entities | 31 | 10 |
| Guarantees and pledges granted – domestic corporate bonds | 2 350 | 3 769 |
| to non-financial entities | 2 350 | 3 769 |
| to financial entities | - | - |
| Letters of credit granted | 1 409 | 1 600 |
| to non-financial entities | 1 409 | 1 600 |
| to public entities | - | - |
| Guarantees and warranties granted – payment guarantees | 252 | 191 |
| Guarantees and pledges granted - domestic municipal bonds | 316 | 351 |
| Total | 10 140 | 11 931 |
| of which performance guarantees granted | 2 630 | 2 447 |
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 month | 1 to 3 months | 3 months to 1 year | 1 to 5 years | over 5 years | Total |
|---|---|---|---|---|---|---|
| Loan commitments granted | 9 014 | 524 | 12 135 | 15 000 | 7 798 | 44 471 |
| Guarantee liabilities granted | 752 | 554 | 3 213 | 4 726 | 895 | 10 140 |
| Total | 9 766 | 1 078 | 15 348 | 19 726 | 8 693 | 54 611 |
| OFF-BALANCE SHEET LIABILITIES GRANTED BY MATURITY AS AT 31.12.2016 | up to 1 month | 1 to 3 months | 3 months to 1 year | 1 to 5 years | over 5 years | Total |
|---|---|---|---|---|---|---|
| Loan commitments granted | 13 810 | 2 543 | 12 354 | 10 993 | 6 445 | 46 145 |
| Guarantee liabilities granted | 266 | 576 | 3 722 | 6 668 | 699 | 11 931 |
| Total | 14 076 | 3 119 | 16 076 | 17 661 | 7 144 | 58 076 |
Off-balance sheet liabilities received
| OFF-BALANCE SHEET LIABILITIES RECEIVED BY NOMINAL VALUE | 31.12.2017 | 31.12.2016 |
|---|---|---|
| Financial | 95 | 304 |
| Guarantees | 14 227 | 7 972 |
| Total | 14 322 | 8 276 |
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.