Financial results

Download note 34 in XLS

34. Provisions

	Provisions for disputes	Provision for retirement and disability benefits	Provisions for off-balance sheet liabilities	Other provisions	Total
	PLN’000	PLN’000	PLN’000	PLN’000	PLN’000
Balance as at 1 January 2015	1 260	668	631	296	2 855
Recognized provisions	182	114	1 837	200	2 333
Revised provisions	0	116	0	0	116
Applied provisions	(1 114)	(40)	0	(330)	(1 484)
Derecognized provisions	(299)	0	(2 062)	0	(2 361)
Balance as at 31 December 2015	29	858	406	166	1 459
including:
Short-term (up to 1 year)	29	13	406	166	614
Long-term (over 1 year)	0	845	0	0	845
Balance as at 31 December 2015	29	858	406	166	1 459

 

	Provisions for disputes	Provision for retirement and disability benefits	Provisions for off-balance sheet liabilities	Other provisions	Total
	PLN’000	PLN’000	PLN’000	PLN’000	PLN’000
Balance as at 1 January 2014	1 371	757	1 125	166	3 419
Recognized provisions	576	107	2 225	224	3 132
Revised provisions	0	(153)	0	0	(153)
Applied provisions	(44)	(43)	0	(94)	(181)
Applied provisions	(643)	(2 719)	0	0	(3 362)
Balance as at 31 December 2014	1 260	668	631	296	2 855
including:
Short-term (up to 1 year)	1 225	15	631	296	2 167
Long-term (over 1 year)	35	653	0	0	688
Balance as at 31 December 2014	1 260	668	631	296	2 855

 

Description of the major disputes entered into by the Group

On 29 December 2006, the President of the Office for Competition and Consumer Protection (OCCP President) decided that practices consisting in the banks’ common determination of the interchange fee reduced competition in the market of acquiring services relating to payment of consumers’ liabilities to merchants, arising from payments for goods and services purchased by consumers with the use of payment cards in Poland, and ordered their discontinuation, imposing, at the same time, financial penalties on the banks, including Bank Pocztowy S.A., equal to PLN 2,895 thousand (participating only in the VISA system) (OCCP President’s decision No. DAR 15/2006).

An appeal against the abovementioned decision was filed with the Court of Competition and Consumer Protection (“CCCP”) by the Bank and other parties to the proceedings. In its judgment of 21 November 2013 the CCCP changed the amount of fines imposed on banks and considerably reduced the fine levied on the Bank. Following the appeal filed by OCCP President the Bank decided to recognize a provision of PLN 1,043 thousand despite the fine reduction to PLN 25 thousand.

As a result of appeals filed by banks and OCCP President, on 6 October 2015 the Court of Appeals in Warsaw rejected all banks’ appeals in whole and accepted the appeal filed by OCCP President. Consequently, the decision of OCCP President No. DAR 15/2006 imposing a fine of PLN 2,895 thousand on the Bank was executed on 20 October 2015. The costs of the fine paid and not provisioned for were recognized under "Other operating expenses”.

Key items affecting the provision for retirement and disability benefits

As the Bank estimates its provisions for retirement and disability benefits using actuarial methods, it is exposed to the actuarial risk, including mainly the interest rate, longevity and compensation risk.

 

Risk	Effect on measurement
Interest rate risk	A drop in interest rates on financial instruments which are not exposed to credit risk results in higher present value of provisions for retirement and disability benefits.
Longevity risk	The present value of liabilities under the defined benefit plan is determined by reference to best estimates of program participants’ mortality both during and following the term of service. Any increase in the program participants’ life expectancy results in a rise in the value of provisions for retirement and disability benefits.
Compensation risk	The present value of liabilities under the defined benefit plan is determined by reference to program participants’ future compensation level. Therefore, any increase in the program participants’ compensation results in a rise in the value of provisions for retirement and disability benefits.

 

Key parameters used for determining the provision for retirement and disability benefits have been presented below.

 

	Balance as at	Balance as at
	31 December 2015	31 December 2014
Discount rates	3,1%	3,5%
Expected pay growth rate	2,5% - 3,5%	2% - 3,5%
Mortality tables used for calculation purposes*	100% PTTZ 2014	100% PTTZ 2013
Inflation rate	1,1% - 2,5%	2,5%
Turnover (p.a.)	6,0% - 10,0%	6,0% - 10,0%

The table below presents amounts recognized in profit or loss and in other comprehensive income with respect to the defined benefit plan.
_{* it is assumed that mortality of those employed is reduced by 10%}