Notes to the consolidated financial statements
Download note46.3 Market risk
Market risk involves the risk of impairment of assets, increase in liabilities or change in the Group’s financial performance and capital as a result of sensitivity to fluctuation of market parameters (prices). Market risk applies to both on- and off-balance sheet items. In the Group, market risk is divided into interest rate risk, currency risk and credit valuation adjustment (CVA) risk.
The primary objective of market risk management in the Bank and in the Group is to optimize the exposure management process and protect the financial performance at the same time.
The Group’s market risk is managed at the level of the Bank as the market risk assumed by the subsidiaries is immaterial considering the nature of their business.
Market risk management in the Bank is based on written policies and procedures defining the objectives of market risk management as well as the methods of identification, measurement, monitoring, limiting and reporting of market risk. The regulations determine also the scope of competencies assigned to each unit of the Bank in the market risk management process.
In order to ensure high standards of operational risk management, compliant with best banking practices, once a year the Bank reviews the applicable policies and procedures.
The Bank has separate organizational units in charge of market risk control, monitoring and management.
Market risk reports present separately the interest rate risk related to the banking book, the trading book and the currency risk. Daily reports are used for operational market risk management purposes, while periodic reports are prepared for management purposes.
In the Bank’s opinion, as at 31 December 2016 and 31 December 2015 CVA risk was insignificant and regarded a few derivative transactions concluded with banks included in investment ratings. The CVA-related capital requirement was PLN 12 thousand as at 31 December 2016 and PLN 49 thousand as at 31 December 2015.
As for market risk, in 2015 the Bank started to apply cash flow hedge accounting to WIBOR 3M-based housing loan portfolio using IRS contracts. In 2016 the Bank started to apply cash flow hedge accounting to WIBOR 6M-based housing loan portfolio using IRS contracts. As at 31 December 2016 and 31 December 2015 the par value of 3M WIBOR-based IRS transactions concluded for the purpose of hedge accounting was PLN 140 million, while as at 31 December 2016 the par value of 6M WIBOR-based IRS transactions concluded for the purpose of hedge accounting was PLN 75 million.
Interest rate risk
Interest rate risk results from the exposure of the Bank and the Group’s financial performance and equity to adverse changes in interest rates.
The interest rate risk arises from:
- the risk of a mismatch of revaluation dates – a mismatch between the amount of assets, liabilities and off-balance sheet items revalued at a certain time; the risk represents a threat to the Bank’s revenue, mostly interest income, in case of adverse changes in market interest rates or significant changes in the on-balance sheet items revaluation structure resulting in changes in the net interest income;
- basis risk arising from imperfect correlation between interest rates on products that generate interest income and expense and have the same revaluation dates,
- yield curve risk where the ratio between the interest rates concerning different periods but the same index or market changes;
- option risk arising when customers change the amount and time schedule of cash flows related to assets, liabilities and off-balance sheet items, to which they are entitled under the loan or deposit agreement at no additional cost, and various types of debt instruments with embedded call or put option, which enables them to redeem the instrument early.
The Bank adapts its interest rate risk management to the type and scale of its business. Interest rate risk in the Bank may be related to the banking book and to the trading book.
The objective of interest rate risk management is to build a structure of assets and liabilities ensuring protection of the present value and the net interest income of the Bank for the banking book and to obtain financial benefits through transactions on interest rate instruments concluded on own account in the trading book, with the accepted interest rate risk level.
Interest rate risk management in the Bank is based on written policies and procedures, which define the methods of:
- risk identification;
- risk measure calculation (risk measurement);
- risk exposure limiting – determining the acceptable risk level,
- monitoring items and changes in each book, portfolio and the limit use levels,
- risk exposure reporting;
- hedging exposures against interest rate risk.
Interest rate risk related to the banking book is measured and monitored with the use of such risk measures as:
- BPV (Basis Point Value) denoting interest rate risk expressed as a cash value, related to maintaining of a given position when interest rates change by one basis point,
- NII (net interest income) – a change in the net interest income representing the difference between interest income and expense with an interest rate change at a specified level;
- BPV gap value in each revaluation range;
- duration: a measure of interest rate risk interpreted as the average duration of an instrument or portfolio,
- early repayment of loans and withdrawal of deposits ratios for each type of products and entities.
Interest rate risk related to the trading book is measured and monitored with the use of such risk measures as:
- BPV and BPV gap value in each revaluation range,
- Value at Risk (VaR).
Additionally, the Bank performs stress tests involving sensitivity analysis and examining the effects of interest rate changes on the present value of risk-exposed items based on specified changes in the yield curve, and the effects of changes in interest rates on the net interest income of the Group. Under stress tests, the Bank measures its exposure using a variety of interest rate risk scenarios, among others assuming:
- sudden parallel upward and downward shifts on the yield curve;
- sudden changes in the shape of the yield curve (e.g. increasing/decreasing/flat short-term interest rates when medium- and long-term ones change at a different pace or in opposite direction);
- basis risk (including that arising from changes in relations among key market rates);
- potential behavior changes of various types of assets or liabilities under the assumed scenarios.
The Bank prepares the following cyclical reports on interest rate risk exposure related to the banking and trading book:
- daily report for the ALCO, Management Board and Treasury Department;
- monthly report for the ALCO and the Management Board;
- quarterly report for the Supervisory and Management Board.
For the purpose of calculating the Banking Book risk measures, the current value of loans and deposits is determined based on reference rates arising from revaluation dates and liquidity adjustment excluding the commercial margin realized on each product. Additionally, stress tests for downward curve shift purposes are based on the assumption that interest on items sensitive to interest rate risk shall not drop below 0%.
The following tables present the interest rate risk level for the banking book (BPV and stress tests) as at 31 December 2016 and 31 December 2015.
BPV for the banking book
| BPV (1 b.p.) | ||
|---|---|---|
| Balance as at | Balance as at | |
| 31 December 2016 | 31 December 2015 | |
| PLN’000 | PLN’000 | |
| Banking book | 144 | 5 |
Results of stress tests for +/- 200 b.p. for the banking book
| Change in the present value of the banking book | ||
|---|---|---|
| Balance as at | Balance as at | |
| 31 December 2016 | 31 December 2015 | |
| PLN’000 | PLN’000 | |
| 200 b.p. down | (32 658) | 69 |
| 200 b.p. up | 24 797 | 1 359 |
The table below presents the change in the annual net interest income in the 12-month period from the end of the reporting period assuming a change in interest rates of +/- 100 b.p. and an unchanged balance as at the end of the reporting period. The analysis is based on the following assumptions:
- for interest rate decrease: interest rates on loans shall not exceed the interest rate cap determined in applicable laws and interest rates on deposits (both term and current accounts) shall not drop below 0%;
- for interest rate increase: interest on interest-free current accounts shall not increase.
Change in annual net interest income with the rate change by +/-100 b.p.
| Change in the annual net interest income | ||
|---|---|---|
| Balance as at | Balance as at | |
| 31 December 2016 | 31 December 2015 | |
| PLN’000 | PLN’000 | |
| 100 b.p. down | (31 963) | (29 045) |
| 100 b.p. up | 19 150 | 14 589 |
In 2016 and 2015, Bank’s trading activities regarding interest rates were limited to transactions on Polish treasury securities denominated in PLN. The Bank did not conclude speculative derivative transactions on its own behalf or derivative transactions with its customers. In 2016 the Bank held no open speculative interest rate positions at day closing.
The following table presents the interest rate risk level for the trading book (BPV) as at 31 December 2016 and 31 December 2015.
BPV for the trading book
| BPV (1 b.p.) | ||
|---|---|---|
| Balance as at | Balance as at | |
| 31 December 2016 | 31 December 2015 | |
| PLN’000 | PLN’000 | |
| Trading book | 0 | 0 |
Presented below are the Group’s assets, liabilities and off-balance sheet items classified based on the interest rate risk criterion – revaluation date for floating rate items or maturity for fixed rate items – as at 31 December 2016 and 31 December 2015.
| Balance as at | Up to 1 month | From 1 month to 3 months |
From 3 months to 1 year |
From 1 year to 5 years |
Over 5 years | Assets/ | Total |
|---|---|---|---|---|---|---|---|
| 31 December 2016 | Non-interest bearing liabilities | ||||||
| Assets | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 |
| Cash in hand and deposits with the Central Bank | 60 094 | 0 | 0 | 0 | 0 | 5 271 | 65 365 |
| Receivables from other banks | 0 | 0 | 40 000 | 0 | 0 | 5 898 | 45 898 |
| Financial assets held for trading | 0 | 0 | 0 | 0 | 0 | 695 | 695 |
| Financial hedges | 0 | 0 | 0 | 0 | 0 | 1 146 | 1 146 |
| Loans and advances granted to clients | 2 016 917 | 2 100 261 | 910 988 | 8 054 | 0 | 118 119 | 5 154 339 |
| Investments in financial assets: | 168 000 | 0 | 291 000 | 972 600 | 20 000 | 12 957 | 1 464 557 |
| - available for sale | 168 000 | 0 | 281 000 | 705 600 | 20 000 | 1 086 | 1 175 686 |
| - held to maturity | 0 | 0 | 10 000 | 267 000 | 0 | 11 871 | 288 871 |
| Property, plant and equipment | 0 | 0 | 0 | 0 | 0 | 43 713 | 43 713 |
| Intangible assets | 0 | 0 | 0 | 0 | 0 | 75 260 | 75 260 |
| Current income tax receivables | 0 | 0 | 0 | 0 | 0 | 31 | 31 |
| Net deferred tax asset (asset items) | 0 | 0 | 0 | 0 | 0 | 39 113 | 39 113 |
| Other assets | 0 | 0 | 0 | 0 | 0 | 46 449 | 46 449 |
| Total assets | 2 245 011 | 2 100 261 | 1 241 988 | 980 654 | 20 000 | 348 652 | 6 936 566 |
| Balance as at | Up to 1 month | From 1 month to 3 months |
From 3 months to 1 year |
From 1 year to 5 years |
Over 5 years | Assets/ | Total |
|---|---|---|---|---|---|---|---|
| 31 December 2016 | Non-interest bearing liabilities | ||||||
| Liabilities | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 |
| Liabilities to the Central Bank | 0 | 0 | 0 | 0 | 0 | 2 | 2 |
| Liabilities to other banks | 20 984 | 0 | 0 | 0 | 0 | 872 | 21 856 |
| Liabilities from securities sold under repo and sell-buy-back agreements | 1 040 | 0 | 0 | 0 | 0 | 0 | 1 040 |
| Financial liabilities held for trading | 0 | 0 | 0 | 0 | 0 | 205 | 205 |
| Financial hedges | 0 | 0 | 0 | 0 | 0 | 932 | 932 |
| Liabilities to clients | 4 100 429 | 455 352 | 662 911 | 524 100 | 20 | 20 202 | 5 763 014 |
| Liabilities arising from issue of debt securities | 0 | 0 | 315 000 | 40 000 | 0 | 641 | 355 641 |
| Subordinated liabilities | 43 000 | 0 | 100 000 | 0 | 0 | (182) | 142 818 |
| Current income tax liabilities | 0 | 0 | 0 | 0 | 0 | 5 001 | 5 001 |
| Provisions | 0 | 0 | 0 | 0 | 0 | 13 246 | 13 246 |
| Other liabilities | 0 | 0 | 0 | 0 | 0 | 109 369 | 109 369 |
| Equity | 0 | 0 | 0 | 0 | 0 | 523 442 | 523 442 |
| Total equity and liabilities | 4 165 453 | 455 352 | 1 077 911 | 564 100 | 20 | 673 730 | 6 936 566 |
| Gap | (1 920 442) | 1 644 909 | 164 077 | 416 554 | 19 980 | (325 078) | 0 |
| Off-balance sheet items | Total | ||||||
|---|---|---|---|---|---|---|---|
| Interest rate transactions: | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 |
| Assets | 0 | 0 | 140 000 | 120 000 | 0 | 0 | 260 000 |
| Liabilities | 140 000 | 20 000 | 100 000 | 0 | 0 | 0 | 260 000 |
| Gap | (140 000) | (20 000) | 40 000 | 120 000 | 0 | 0 | 0 |
| Total gap | (2 060 442) | 1 624 909 | 204 077 | 536 554 | 19 980 | (325 078) | 0 |
| Balance as at | Up to 1 month | From 1 month to 3 months |
From 3 months to 1 year |
From 1 year to 5 years |
Over 5 years | Assets/ | Total |
|---|---|---|---|---|---|---|---|
| 31 December 2015 | Non-interest bearing liabilities | ||||||
| Assets | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 |
| Cash in hand and deposits with the Central Bank | 421 682 | 0 | 0 | 0 | 0 | 5 193 | 426 875 |
| Receivables from other banks | 0 | 0 | 40 000 | 0 | 0 | 5 346 | 45 346 |
| Receivables from securities purchased under reverse repo and buy-sell-back agreements | 19 782 | 0 | 0 | 0 | 0 | 12 | 19 794 |
| Financial assets held for trading | 0 | 0 | 0 | 0 | 0 | 603 | 603 |
| Financial hedges | 0 | 0 | 0 | 0 | 0 | 1 140 | 1 140 |
| Loans and advances granted to clients | 1 939 936 | 2 361 130 | 885 468 | 2 205 | 0 | 124 143 | 5 312 882 |
| Investments in financial assets: | 75 000 | 50 000 | 194 000 | 849 600 | 30 000 | 49 437 | 1 248 037 |
| - available for sale | 75 000 | 0 | 94 000 | 572 600 | 30 000 | 31 747 | 803 347 |
| - held to maturity | 0 | 50 000 | 100 000 | 277 000 | 0 | 17 690 | 444 690 |
| Property, plant and equipment | 0 | 0 | 0 | 0 | 0 | 46 015 | 46 015 |
| Intangible assets | 0 | 0 | 0 | 0 | 0 | 54 122 | 54 122 |
| Current income tax receivables | 0 | 0 | 0 | 0 | 0 | 98 | 98 |
| Net deferred tax asset (asset items) | 0 | 0 | 0 | 0 | 0 | 19 929 | 19 929 |
| Other assets | 0 | 0 | 0 | 0 | 0 | 38 189 | 38 189 |
| Total assets | 2 456 400 | 2 411 130 | 1 119 468 | 851 805 | 30 000 | 344 227 | 7 213 030 |
In the above table, the Group has changed the presentation of overdue loans and advances, as well as impairment losses in the amount of PLN 108,431 thousand, presented under “Up to 1 month” item of “Loans and advances granted to customers” in the financial statements for the year ended 31 December 2015. In these consolidated financial statements overdue loans and advances along with impairment losses are presented under “Non-interest bearing assets/liabilities”.
| Balance as at | Up to 1 month | From 1 month to 3 months |
From 3 months to 1 year |
From 1 year to 5 years |
Over 5 years | Assets/ | Total |
|---|---|---|---|---|---|---|---|
| 31 December 2015 | Non-interest bearing liabilities | ||||||
| Liabilities | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 |
| Liabilities to the Central Bank | 0 | 0 | 0 | 0 | 0 | 10 | 10 |
| Liabilities to other banks | 32 893 | 0 | 0 | 0 | 0 | 1 547 | 34 440 |
| Liabilities from securities sold under repo and sell-buy-back agreements | 154 006 | 0 | 0 | 0 | 0 | 11 | 154 017 |
| Financial liabilities held for trading | 0 | 0 | 0 | 0 | 0 | 377 | 377 |
| Liabilities to clients | 3 875 860 | 537 146 | 879 183 | 438 128 | 25 | 12 035 | 5 742 377 |
| Liabilities arising from issue of debt securities | 0 | 0 | 462 850 | 40 000 | 0 | 650 | 503 500 |
| Subordinated liabilities | 90 340 | 0 | 50 000 | 0 | 0 | 1 547 | 141 887 |
| Current income tax liabilities | 0 | 0 | 0 | 0 | 0 | 2 145 | 2 145 |
| Provisions | 0 | 0 | 0 | 0 | 0 | 1 459 | 1 459 |
| Other liabilities | 0 | 0 | 0 | 0 | 0 | 90 333 | 90 333 |
| Equity | 0 | 0 | 0 | 0 | 0 | 542 485 | 542 485 |
| Total equity and liabilities | 4 153 099 | 537 146 | 1 392 033 | 478 128 | 25 | 652 599 | 7 213 030 |
| Gap | (1 696 699) | 1 873 984 | (272 565) | 373 677 | 29 975 | (308 372) | 0 |
| Off-balance sheet items | Total | ||||||
|---|---|---|---|---|---|---|---|
| Interest rate transactions: | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 |
| Assets | 0 | 0 | 150 000 | 360 000 | 0 | 0 | 510 000 |
| Liabilities | 272 480 | 20 000 | 225 000 | 0 | 0 | 0 | 517 480 |
| Gap | (272 480) | (20 000) | (75 000) | 360 000 | 0 | 0 | (7 480) |
| Total gap | (1 969 179) | 1 853 984 | (347 565) | 733 677 | 29 975 | (308 372) | (7 480) |
Currency risk
Currency risk arises from the current and future performance of the Bank and the Capital Group as well as their equity being exposed to adverse changes in foreign exchange rates.
The objective of currency risk management is to protect the exchange gain and obtain financial benefits through transactions concluded in FX instruments on own account with the accepted risk level.
Currency risk management process involves its measurement through:
- calculation of the total position of the Bank,
- calculation of the position in each currency;
- calculation of Value at Risk (VaR),
- stress tests.
Value at Risk (VaR) is defined as the maximum loss which may be incurred by the Bank within a specified time horizon and with a specified probability. The Bank calculates VaR using the historical simulation method assuming a 99.2% confidentiality range and a 10-day position maintenance period.
Stress tests are complementary to VaR for the currency risk and they are performed to estimate the loss which may be incurred by the Bank in case of extremely adverse (stress) changes in foreign exchange rates.
The currency risk management process includes daily monitoring of:
- the value of positions in each currency;
- VaR and total currency position limits;
- daily, weekly and monthly stop-loss limits.
VaR statistics for currency risk in 2016 and as at 31 December 2016 and 31 December 2015
| Minimum value in 2016 |
Maximum value in 2016 |
Average value in 2016 |
Balance as at | Balance as at | |
|---|---|---|---|---|---|
| 31 December 2016 | 31 December 2015 | ||||
| PLN’000 | PLN’000 | PLN’000 | PLN’000 | PLN’000 | |
| VaR | 4 | 461 | 157 | 235 | 409 |
The Bank prepares the following cyclical reports on its currency risk exposure:
- daily report for the ALCO, Management Board and Treasury Department;
- monthly report for the ALCO and the Management Board;
- quarterly report for the Supervisory and Management Board.
The table below presents the values of currency positions for USD, EUR, GBP and CHF in 2016 and as at 31 December 2016 and 31 December 2015. The maximum, minimum and average amounts have been presented for absolute position values (in thousands).
| Minimum value in 2016 |
Maximum value in 2016 |
Average value in 2016 |
Balance as at | Balance as at | |
|---|---|---|---|---|---|
| 31 December 2016 | 31 December 2015 | ||||
| ‘000 | ‘000 | ‘000 | ‘000 | ‘000 | |
| USD | 0 | 1 044 | 440 | 879 | (66) |
| EUR | 5 | 3 500 | 449 | (164) | 3 328 |
| GBP | 0 | 36 | 15 | 13 | 27 |
| CHF | 7 | 50 | 25 | 32 | 39 |
In 2016 and 2015, the Bank’s currency risk was low due to an insignificant share of foreign currency assets and liabilities in the balance sheet total (below 2%). In the period from 31 December 2015 to February 2016, the value of total currency position exceeded 2% of equity. In the period from February 2016 to 31 December 2016, the value of total currency position did not exceed 2% of equity.
The following table presents assets, liabilities and off-balance sheet items of the Group as at 31 December 2016 and 31 December 2015 by currency.
| Currency | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| PLN | EUR | USD | CHF | Other currencies | |||||
| Balance as at | translated into PLN | in foreign currency | translated into PLN | in foreign currency | translated into PLN | in foreign currency | translated into PLN | Total | |
| 31 December 2016 | |||||||||
| Assets | PLN’000 | PLN’000 | ‘000 | PLN’000 | ‘000 | PLN’000 | ‘000 | PLN’000 | PLN’000 |
| Cash in hand and deposits with the Central Bank | 62 624 | 2 200 | 497 | 495 | 118 | 0 | 0 | 46 | 65 365 |
| Receivables from other banks | 42 721 | 1 551 | 351 | 1 014 | 243 | 135 | 33 | 477 | 45 898 |
| Financial assets held for trading | 695 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 695 |
| Financial hedges | 1 146 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 146 |
| Loans and advances granted to clients | 5 153 690 | 649 | 147 | 0 | 0 | 0 | 0 | 0 | 5 154 339 |
| Investments in financial assets: | 1 460 538 | 84 | 19 | 3 935 | 942 | 0 | 0 | 0 | 1 464 557 |
| - available for sale | 1 171 667 | 84 | 19 | 3 935 | 942 | 0 | 0 | 0 | 1175686 |
| - held to maturity | 288 871 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 288871 |
| Property, plant and equipment | 43 713 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 43 713 |
| Intangible assets | 75 260 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 75 260 |
| Current income tax receivables | 31 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 31 |
| Net deferred tax asset (asset items) | 39 113 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 39 113 |
| Other assets | 45 402 | 1 047 | 237 | 0 | 0 | 0 | 0 | 0 | 46 449 |
| Total assets | 6 924 933 | 5 531 | 1 251 | 5 444 | 1 303 | 135 | 33 | 523 | 6 936 566 |
| Currency | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| PLN | EUR | USD | CHF | Other currencies | |||||
| Balance as at | translated into PLN | in foreign currency | translated into PLN | in foreign currency | translated into PLN | in foreign currency | translated into PLN | Total | |
| 31 December 2016 | |||||||||
| Liabilities | PLN’000 | PLN’000 | ‘000 | PLN’000 | ‘000 | PLN’000 | ‘000 | PLN’000 | PLN’000 |
| Liabilities to the Central Bank | 2 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 2 |
| Liabilities to other banks | 21 856 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 21 856 |
| Liabilities from securities sold under repo and sell-buy-back agreements | 1 040 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 040 |
| Financial liabilities held for trading | 205 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 205 |
| Financial hedges | 932 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 932 |
| Liabilities to clients | 5 755 978 | 5 260 | 1 189 | 1 762 | 422 | 4 | 1 | 10 | 5 763 014 |
| Liabilities arising from issue of debt securities | 355 641 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 355 641 |
| Subordinated liabilities | 142 818 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 142 818 |
| Current income tax liabilities | 5 001 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 5 001 |
| Provisions | 13 246 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 13 246 |
| Other liabilities | 109 356 | 6 | 1 | 7 | 2 | 0 | 0 | 0 | 109 369 |
| Total liabilities | 6 406 075 | 5 266 | 1 190 | 1 769 | 424 | 4 | 1 | 10 | 6 413 124 |
| Equity | 523 442 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 523 442 |
| Total equity and liabilities | 6 929 517 | 5 266 | 1 190 | 1 769 | 424 | 4 | 1 | 10 | 6 936 566 |
| Net exposure | (4 584) | 265 | 61 | 3 675 | 879 | 131 | 32 | 513 | 0 |
| Off-balance sheet items | 183 446 | (1 084) | (245) | 0 | 0 | 0 | 0 | (51) | 182 311 |
| Assets | 183 640 | 52 | 12 | 0 | 0 | 0 | 0 | 0 | 183 692 |
| Equity and liabilities | 194 | 1 136 | 257 | 0 | 0 | 0 | 0 | 51 | 1 381 |
| Gap | 178 862 | (819) | (184) | 3 675 | 879 | 131 | 32 | 462 | 182 311 |
| Currency | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| PLN | EUR | USD | CHF | Other currencies | |||||
| Balance as at | translated into PLN | in foreign currency | translated into PLN | in foreign currency | translated into PLN | in foreign currency | translated into PLN | Total | |
| 31 December 2015 | |||||||||
| Assets | PLN’000 | PLN’000 | ‘000 | PLN’000 | ‘000 | PLN’000 | ‘000 | PLN’000 | PLN’000 |
| Cash in hand and deposits with the Central Bank | 424 421 | 2 266 | 532 | 131 | 34 | 0 | 0 | 57 | 426 875 |
| Receivables from other banks | 42 073 | 1 471 | 345 | 994 | 255 | 156 | 40 | 652 | 45 346 |
| Receivables from securities purchased under reverse repo and buy-sell-back agreements | 19 794 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 19 794 |
| Financial assets held for trading | 603 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 603 |
| Financial hedges | 1 140 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 140 |
| Loans and advances granted to clients | 5 311 704 | 1 178 | 276 | 0 | 0 | 0 | 0 | 0 | 5 312 882 |
| Investments in financial assets: | 1 233 223 | 14 814 | 3 476 | 0 | 0 | 0 | 0 | 0 | 1 248 037 |
| - available for sale | 788 533 | 14 814 | 3 476 | 0 | 0 | 0 | 0 | 0 | 803347 |
| - held to maturity | 444 690 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 444690 |
| Property, plant and equipment | 46 015 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 46 015 |
| Intangible assets | 54 122 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 54 122 |
| Current income tax receivables | 98 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 98 |
| Net deferred tax asset (asset items) | 19 929 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 19 929 |
| Other assets | 37 519 | 670 | 157 | 0 | 0 | 0 | 0 | 0 | 38 189 |
| Total assets | 7 190 641 | 20 399 | 4 786 | 1 125 | 289 | 156 | 40 | 709 | 7 213 030 |
| Currency | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| PLN | EUR | USD | CHF | Other currencies | |||||
| Balance as at | translated into PLN | in foreign currency | translated into PLN | in foreign currency | translated into PLN | in foreign currency | translated into PLN | Total | |
| 31 December 2015 | |||||||||
| Liabilities | PLN’000 | PLN’000 | ‘000 | PLN’000 | ‘000 | PLN’000 | ‘000 | PLN’000 | PLN’000 |
| Liabilities to the Central Bank | 10 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 10 |
| Liabilities to other banks | 34 440 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 34 440 |
| Liabilities from securities sold under repo and sell-buy-back agreements | 154 017 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 154 017 |
| Financial liabilities held for trading | 377 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 377 |
| Liabilities to clients | 5 734 759 | 6 205 | 1 456 | 1 374 | 352 | 0 | 0 | 39 | 5 742 377 |
| Liabilities arising from issue of debt securities | 503 500 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 503 500 |
| Subordinated liabilities | 141 887 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 141 887 |
| Current income tax liabilities | 2 145 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 2 145 |
| Provisions | 1 459 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 459 |
| Other liabilities | 90 297 | 29 | 7 | 7 | 2 | 0 | 0 | 0 | 90 333 |
| Total liabilities | 6 662 891 | 6 234 | 1 463 | 1 381 | 354 | 0 | 0 | 39 | 6 670 545 |
| Equity | 542 485 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 542 485 |
| Total equity and liabilities | 7 205 376 | 6 234 | 1 463 | 1 381 | 354 | 0 | 0 | 39 | 7 213 030 |
| Net exposure | (14 735) | 14 165 | 3 323 | (256) | (65) | 156 | 40 | 670 | 0 |
| Off-balance sheet items | 216 522 | (636) | (149) | 0 | 0 | 0 | 0 | 0 | 215 886 |
| Assets | 216 845 | 305 | 72 | 0 | 0 | 0 | 0 | 0 | 217 150 |
| Equity and liabilities | 323 | 941 | 221 | 0 | 0 | 0 | 0 | 0 | 1 264 |
| Gap | 201 787 | 13 529 | 3 174 | (256) | (65) | 156 | 40 | 670 | 215 886 |
Financial derivatives
Although its offering includes derivatives, the Group has not actively participated in the market of derivative instruments. The Group’s transactions include those on derivatives concluded for currency and interest rate risk management purposes regarding IRS, OIS and FRA transactions denominated in PLN and FX swaps. In 2016 and 2015 the Group did not conclude speculative derivatives on own account or derivative transactions with customers.
Derivatives are measured on a daily basis using the discounted cash flow model. The measurement is based on commonly available rates and market quotations. As the scale of derivative transactions which until June 2015 were entered into with banks with investment rating only and which have been settled mostly through KDPW CCP clearing house since July 2015 (IRS, OIS and FRA transactions denominated in PLN) , is inconsiderable, the Group’s measurement of derivatives does not take into account the counterparty credit risk or own credit risk, which the Group believes exert a marginal effect on measurement of its derivative transactions.
The Group prepares the following cyclical reports on interest rate risk exposure related to the banking and trading book:
- daily report for the ALCO, Management Board and Treasury Department;
- monthly report for the ALCO and the Management Board;
- quarterly report for the Supervisory and Management Board.
Additionally, the Group performs stress tests involving sensitivity analysis and examining the effects of interest rate changes on the present value of risk-exposed items based on specified changes in the yield curve.