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Notes to the consolidated financial statements

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34. Provisions

 

 

Description of the major disputes entered into by the Group and for which Group companies have recognized provisions

In a decision of 4 December 2015, President of Office for Competition and Consumer Protection (OCCP) instigated proceedings to examine whether collective consumer interests have been breached in the course of actions undertaken by the Bank that involved: 

• failing to provide important information (legal basis, factual circumstances underlying the change) allowing consumers to check whether the proposed amendments comply with the law when sending them information on unilateral amendment of provisions of “Regulations on opening and maintaining bank accounts for individuals at Bank Pocztowy S.A.” and “Fees and commissions for customers of Bank Pocztowy S.A.”;
• charging account holders with fees for sending them monthly account balances without obtaining a consent for another form of communication and balance determination, which may be considered non-compliant with Article 728.2 of the Civil Code. 

As at the date of these consolidated financial statements, the proceedings were pending.  The Bank has estimated the risk related to the proceedings and recognized a provision for potential liabilities in the amount of PLN 10,130 thousand as at 31 December 2016.

Other disputes pending

On 29 December 2006, 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 the Bank, equal to PLN 2,895 thousand (participating only in the VISA system) (OCCP President’s decision No. DAR 15/2006). 

The Bank and other participants of the proceedings appealed against the decision to the Court for Competition and Consumer Protection (CCCP).  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.

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 on the Bank a fine of PLN 2,895 thousand became binding. The fine was paid on 20 October 2015. 

On 19 April 2016, the Bank filed a cassation appeal against the judgment.  As at the date of these consolidated financial statements, examination of the case by the Supreme Court is pending.

Key items affecting the provision for retirement and disability benefits

As the Group 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. 

Provisions for retirement and disability benefits have been estimated using actuarial measurement methods with an assumed discount rate of 3.6% as at 31 December 2016 (3.1% as at 31 December 2015).  The table below presents amounts recognized in the consolidated income statement and consolidated statement of other comprehensive income with respect to the defined benefit plan.