This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
PKO Bank Hipoteczny SA
Directors’ Report
for the year ended 31 December 2023
Selected financial data for the period from 1 January 2023 to 31 December 2023
INCOME STATEMENT IN PLN MILLION |
01.01.2023 – 31.12.2023 |
01.01.2022 – 31.12.2022 |
Change y/y |
Net interest income |
365.3 |
(320.8) |
686.1 |
Net fee and commission income |
(3.1) |
(0.2) |
(2.9) |
Net foreign exchange gains / (losses) |
(4.1) |
0.3 |
(4.4) |
Net allowances for expected credit losses |
(7.6) |
(6.1) |
(1.5) |
Net other operating income and expenses |
0.2 |
0.2 |
- |
Administrative expenses |
(47.4) |
(43.3) |
(4.1) |
Regulatory charges |
(22.4) |
(37.3) |
14.9 |
Tax on certain financial institutions |
(58.0) |
(69.6) |
11.6 |
Operating profit |
222.9 |
(476.8) |
699.7 |
Profit before tax |
222.9 |
(476.8) |
699.7 |
Corporate income tax |
(57.1) |
71.0 |
(128.1) |
Net profit |
165.8 |
(405.8) |
571.6 |
|
|
|
|
STATEMENT OF FINANCIAL POSITION IN PLN MILLION |
31.12.2023 |
31.12.2022 |
|
Cash and balances with the Central Bank |
0.3 |
60.7 |
|
Amounts due from banks |
2.4 |
0.1 |
|
Derivative hedging instruments |
55.4 |
508.1 |
|
Securities |
945.3 |
1,017.4 |
|
Loans and advances to customers |
17,898.7 |
18,955.4 |
|
Other assets[1] |
33.8 |
138.8 |
|
TOTAL ASSETS |
18,935.9 |
20,680.5 |
|
Amounts due to banks |
4,580.7 |
5,635.9 |
|
Derivative hedging instruments |
213.2 |
25.7 |
|
Liabilities in respect of mortgage covered bonds issued |
10,444.6 |
12,063.6 |
|
Liabilities in respect of bonds issued |
1,991.3 |
1,495.9 |
|
Other liabilities and provisions[2] |
67.2 |
55.1 |
|
Equity |
1,638.9 |
1,404.3 |
|
TOTAL LIABILITIES AND EQUITY |
18,935.9 |
20,680.5 |
|
Table of Contents
2. External operating conditions
2.1. Macroeconomic environment
2.2. Residential real estate market
2.4. Mortgage covered bonds market
2.5. Regulatory and legal environment
3. Financial performance and capital adequacy
3.1. Key financial ratios of PKO Bank Hipoteczny SA
3.2. Statement of financial position of PKO Bank Hipoteczny SA
3.3. Income statement of PKO Bank Hipoteczny SA
3.4. Requirements relating to own funds (Pillar I)
3.5. Internal capital (Pillar II)
4. Business of PKO Bank Hipoteczny SA
4.1. Sales of residential mortgage loans under the agency model
4.2. Acquisition of residential mortgage loan receivables
4.3. Structure of the residential mortgage loan portfolio
4.5. Financial market operations
4.6. Bonds – Bond Issue Programme agreement concluded with PKO Bank Polski SA
5. Internal Operating Conditions
5.1. Lending process and cooperation with PKO Bank Polski SA
5.5. Measurement of residential mortgage loan collaterals
5.6. Cover pool for mortgage covered bonds
6. Organization and Governing Bodies of PKO Bank Hipoteczny SA
6.2. Organizational structure of PKO Bank Hipoteczny SA
6.3. Powers of the governing bodies and committees of PKO Bank Hipoteczny SA
6.4. The Management Board of PKO Bank Hipoteczny SA
6.5. The Supervisory Board of Bank Hipoteczny SA
6.6. Remuneration and Human Resources Management Policy
6.7. Benefits for key management of PKO Bank Hipoteczny SA
7. Corporate governance and investor information
7.1. Representation on compliance with the rules for corporate governance
8. Representation of the Management Board of PKO Bank Hipoteczny SA
PKO Bank Hipoteczny SA (Bank) specialises in granting residential mortgage loans to individual customers and acquiring receivables in respect of such loans. The Bank acquires loans for its portfolio based on its strategic cooperation with PKO Bank Polski SA.
PKO Bank Hipoteczny SA is the leader of the Polish mortgage bank market in terms of total assets and the balance of residential mortgage loans. The Bank is Poland’s largest issuer of mortgage covered bonds on the domestic and international markets. It was the only bank in Poland to carry out benchmark issues of euro-denominated mortgage covered bonds. Until 31 December 2023, the Bank carried out six such issues. The value of mortgage covered bonds issued by the Bank exceeds 56% of the total value of outstanding mortgage covered bonds issued by mortgage banks operating in Poland.
In 2023, the Bank’s total assets exceeded PLN 18.9 billion, of which PLN 17.9 billion constituted a high quality portfolio of residential loans.
Evaluation of PKO Bank Hipoteczny SA’s financial credibility – ratings
The financial credibility of PKO Bank Hipoteczny SA and the mortgage covered bonds issued by the Bank is assessed by the Moody’s Investors Service Ltd international rating agency (“Moody’s”).
As at 31 December 2023, PKO Bank Hipoteczny SA had the following ratings assigned by Moody’s:
|
Rating |
Outlook |
Date of initial rating/rating confirmation date |
Long-term issuer rating |
A3 |
Stable |
20.12.2022
|
Short-term issuer rating |
P-2 |
n/a |
|
Opinion on long-term counterparty risk |
A2(cr) |
n/a |
|
Opinion on short-term counterparty risk |
P-1(cr) |
n/a |
|
Long-term counterparty risk rating |
A2 |
n/a |
|
Short-term counterparty risk rating |
P-1 |
n/a |
The ratings take into account Moody’s assessment of the Bank’s mutual relations with its Parent company, PKO Bank Polski SA, and reflect a low probability that the Parent company would consider meeting the Bank’s liabilities a lower priority compared to the Parent Company’s liabilities should financial tensions occur within the Group.
As at 31 December 2023, the mortgage covered bonds of PKO Bank Hipoteczny SA had the following ratings assigned by Moody’s:
|
Rating |
Rating confirmation date |
Mortgage covered bonds denominated in PLN |
Aa1 |
02.11.2023 |
Mortgage covered bonds denominated in EUR |
Aa1 |
07.07.2022 |
The rating assigned to the mortgage covered bonds of PKO Bank Hipoteczny SA is the highest rating achievable for Polish securities. The limit for the ratings is the Polish country ceiling[3] for debt instruments, which currently is at the level of Aa1.
Mortgage covered bonds issued
In 2023 PKO Bank Hipoteczny SA conducted three issues of PLN denominated mortgage covered bonds totalling PLN 1.75 billion, redeemable in 2026. The issues were conducted as part of an international Mortgage Covered Bonds Issue Programme based on a base prospectus.
The value of outstanding mortgage covered bonds issued by PKO Bank Hipoteczny SA was PLN 10.4 billion as at 31 December 2023.
Borrowers Support
In connection with the cycle of interest rate increases, in 2023 PKO Bank Hipoteczny SA continued to support its borrowers.
With respect to borrowers support, in connection with the provisions of the Act on crowdfunding for businesses and aid to borrowers, the Bank enabled customers:
• to suspend loan repayments for up to 4 months in 2023;
• to use the support from the Borrowers Support Fund under new service principles.
War in Ukraine and its impact on the Bank’s operations
In connection with the continuing military conflict, the Bank has identified geopolitical risk which has or may have an indirect impact on the Bank’s operations as an issuer.
The Bank is monitoring the developments relating to the conflict in Ukraine and adjusting its actions accordingly.
PKO Bank Hipoteczny SA’s strategy for the years 2023 – 2025
In the first quarter of 2023 the Bank’s Management Board adopted and the Supervisory Board approved a new Strategy of PKO Bank Hipoteczny SA for the years 2023 – 2025.
The Bank’s strategic goals under the strategy comprise:
Selected projects
Implementation of a modified offer for funding “green” residential real estate
The Bank is the leader in developing a comprehensive green product offer, acting as a centre of excellence for mortgage loans for the entire PKO BP Group.
The work on the green product is performed as part of a strategic initiative for sustainable development in the context of ESG, with the goal of, among other things, creating an offer of “green” mortgage loans within the PKO BP Group to build the potential for issuing “green” mortgage bonds.
In November 2023, a higher discount on the margin was introduced to customers who submit an energy performance certificate (consistent with the criteria specified by the Bank). Such customers will be offered a discount of 0.1 p.p. on the margin applied after the promotional margin period.
Eligibility criteria for this promotion have not changed – it will continue to be available to those Customers who have concluded an agreement for a residential mortgage loan “Własny Kąt” and submitted an energy performance certificate for the real estate securing the loan. The energy performance certificate must meet the following criteria:
• validity of no less than 60 months from of the date of submitting the certificate to the Bank;
• the primary energy demand indicator (PE) no higher than:
√ 58 kWh/m2/year - for energy performance certificates issued for apartments;
√ 63 kWh/m2/year – for energy performance certificates issued for single-family houses.
The possibility to take advantage of a higher additional discount on the margin until the end of the lending period applies to agreements concluded after 28 November 2023.
Creation of the ESG centre of excellence in PKO Bank Hipoteczny SA
Creating the ESG Centre of Excellence is one of the tasks undertaken to achieve one of the Bank’s strategic goals for the years 2023 – 2025: “Taking action in the area of sustainable development within the context of ESG”.
The purpose of the Centre of Excellence is to ensure that the organization has access to comprehensive and up-to-date knowledge of the ESG area, enabling it to achieve its business objectives in compliance with the dynamically expanding regulatory environment in the area of sustainable development.
Implementation of external communication to educate customers
In the first half of 2023, PKO Bank Hipoteczny began actions related to educating customers by publishing articles on the Bankomania educational website and posts on the Bank's LinkedIn profile.
The Bank described eco solutions that may be implemented by anyone in their own house, informed about the introduction of mandatory energy performance certificates, explained who and how should obtain the certificate and how to read it. Other issues discussed included proposed solutions for customers facing difficulties in timely repayment of their liabilities.
Development of a uniform template for residential loan agreements
The strategic goal of this project is to develop template clauses of a mortgage loan agreement to improve its understanding and mitigate the risks related to mortgage products. The template will be further consulted with representatives of the Polish Financial Supervision Authority, the Financial Ombudsman and the Office of Competition and Consumer Protection (“UOKiK”), taking into account the supervisory and control authorities’ interest in supporting an approved template containing adequate clauses.
Adaptation to the requirements of CRR III
In connection with the planned coming into force of amendments to Regulation No. 575/2013 and Directive 2013/36/EU (the so-called CRR III and CRD VI) as of 1 January 2025, aimed at fully implementing the international standards agreed by the Basel Committee on Banking Supervision in the acquis communautaire, the Bank started adaptation work consisting of gap analysis, analysis of available data sources, and calculation of the impact of amendments on its capital requirements.
Process optimization and automation
The strategic goal of this initiative is the digitization and simplification of the Bank’s processes. Among other things, the Bank participates in the PKO BP Group’s project “The Digital Mortgage” which aims at optimizing and digitizing the process of granting and servicing mortgage loans, and regularly implements improvements and automates tasks forming part of other processes, such as those relating to the reporting platform.
Implementation of the WIRON index
In connection with the assumed, as part of the reform, replacement of WIBOR with WIRON, a WIBOR Benchmark Reform Taskforce (the “Taskforce”) was established within the Bank. The objective of the Taskforce is to prepare the Bank for the implementation of the new interest rate benchmark and to replace the currently used WIBOR benchmark. The Taskforce’s objectives include, in particular:
• aligning contracts with counterparties and customers and changing the product offer;
• aligning methodologies and tools relating to valuation and risk management;
• aligning methodologies and tools relating to accounting (including, among other things, hedge accounting and transfer pricing);
• implementing changes to IT systems;
• estimating the impact of the reform on the Bank’s financial results.
Taskforce representatives actively participate in meetings of specific NWG workstreams and in the work realized at the level of the PKO Bank Polski S.A. Group. At the current stage of the project conducted at Group level intense work is underway to adapt the technological infrastructure and prepare internal processes and documentation.
The Bank and the Group are working on introducing to their offer residential mortgage loans based on a benchmark from the WIRON Compound Indices Family in the third quarter of 2024. At the same time, WIBOR-based mortgage loans will be withdrawn from the offer.
Macroeconomic environment
Residential real estate market
Residential loan market
Mortgage covered bonds market
Regulatory and legal environment
The macroeconomic factors which shaped the national economy in 2023 are presented below.
GDP on the brink of recession and recovery in the second half of the year
|
In the first half of the year national economy was on the brink of recession, and GDP dropped year on year. The second half of the year brought about an improvement - GDP growth accelerated from -0.6% y/y in the second quarter to approx. 1% y/y in the fourth quarter of 2023. At the beginning of the year, consumption declined as a result of a decrease in real purchasing power of income caused by inflation which exceeded 10%. In the third quarter a drop in inflation accompanied by the stable growth of nominal income amid record low unemployment contributed to the recovery of consumer demand, although its strength dropped slightly at the end of the fourth quarter. Throughout the year, investments grew substantially, by 8%, supported by energy transformation processes forced by high costs of energy. Finalization of projects funded under the ending EU financial perspective also had a positive impact on investments. The reversal of the inventories cycle after their unnaturally strong increase in 2022 had a negative impact on economic activity in 2023. On the other hand, net exports had a positive contribution to GDP growth. During 2023, the external balance of the Polish economy improved – the current account deficit which amounted to 2.4% of GDP in 2022 changed to a surplus of over 1% of GDP in 2023, partly due to a sudden drop in the prices of imported goods.
Labour market immune to economic slowdown
|
|
In 2023, the labour market was stable despite the ongoing economic slowdown. Registered unemployment rate in December 2023 was 5.1% and was 0.1 p.p. lower than at the end of 2022. Labour activity ratios improved – according to the Labour Force Survey, in the third quarter of 2023 a record 56.8% of the population aged 15-85 was employed, and the labour activity ratio was 58.4%.
A decrease in demand for work was reflected in the lower number of vacancies in the economy (111 thousand in the third quarter) and decreasing employment in the enterprise sector. Nominal wages increased at a double-digit rate in 2023; with the strongest increase noted at the beginning of the year. The average increase in minimum wage of 17.8% (on average) in 2023 provided a noticeable boost reflected in the above-average nominal wage growth observed in sectors with relatively higher share of minimum wages (e.g. accommodation and catering, administration). In the first half of the year, wage growth in the enterprise sector was slower than inflation. However, real wage growth resumed in the autumn and its acceleration is driving the upcoming recovery in consumption.
Quick disinflation
|
In 2023, there was a marked disinflation – CPI inflation decreased from 18.4% y/y in February to 6.2% y/y in December. The drop in inflation was possible due to easing of the adverse cost shock caused by a sudden spike in energy and food prices after Russia's attack on Ukraine. At the same time, fiscal measures which had limited increases in food and energy commodity prices in the past remained in force. Between February and the end of the year, the growth rates of food prices decelerated from 24.0% y/y to 6.0% y/y, energy prices –from 31.1% y/y to 9.8% y/y, and fuel prices, which in February 2023 increased by 30.8% y/y dropped in December by 6.0% y/y. At the same time, core inflation, i.e. CPI net of food and energy prices, decelerated to 6.9% y/y in December from 12.0% y/y in February 2023. By the end of 2023, core inflation was lower by half compared with the beginning of the year, but at the same time, it stopped decreasing further, thus signalling that core inflation may remain anchored at an exceedingly high level.
Public finances under pressure, but also under control
|
|
Since mid-2022, the condition of public finances has been gradually deteriorating compared to other EU Member States. Poland migrated from the circle of top achievers in terms of the fiscal balance in 2021 to the bottom of the EU ranking over the two following years. This was due, among other things, to the energy price freezing programmes, Personal Income Tax reform and the necessity to abruptly increase military expenditure (from approx. 2% of GDP before 2022 to approx. 4% of GDP in 2023). After the third quarter of 2023, the general government deficit was 5.4% of GDP. The Ministry of Finance expects it to reach 5.6% of GDP for the entire year. Public debt increased to 48.7% of GDP in the third quarter and remains low compared to the EU results.
Adjustment of interest rate levels
In the first half of 2023, the Monetary Policy Council (MPC) maintained interest rates at an unchanged level. It was only at the September meeting that interest rates of the National Bank of Poland (NBP) were unexpectedly cut as deep as by 75 basis points. Another, more conservative decrease of 25 basis points followed in October. The MPC then adopted a wait-and-see stand with no further changes in its monetary policy parameters. The MPC emphasized high uncertainty as regards the future fiscal and regulatory policy and the pace of economic recovery in Poland. In such circumstances, the Council decided that the current level of interest rates was conducive to meeting the inflation target in the medium term.
NBP interest rates (at the end of the period):
Rates |
Q4 2023 [%] |
Q4 2022 [%] |
reference rate |
5.75 |
6.75 |
rediscount rate |
5.80 |
6.80 |
discount rate |
5.85 |
6.85 |
Lombard rate |
6.25 |
7.25 |
deposit rate |
5.25 |
6.25 |
Situation on the residential real estate market in Poland
The residential real estate market started 2023 in the weakest condition in a decade. This was an offshoot of the deep drop in demand caused mainly by interest rate increases, lower availability of residential loans and a drop in real household income, accompanied by a strong increase in construction costs which stimulated continued upward trend in apartment prices. However, in the following months of 2023, the demand continued to visibly strengthen resulting in a recovery of sales on both the primary and the secondary market. Among the factors which contributed to this trend was a steady decline in inflation which led to improved consumer sentiment, gradual lowering of market interest rates, mitigating the effect of the drop in real income in the first half of the year, and an increase in real income in the second half of the year as prices grew at a lower rate than wages. This was accompanied by easing the conditions of granting residential loans by banks encouraged by the PFSA and a systematic recovery in lending. Major impulses stimulating the increase in demand for residential real estate appeared in the second half of the year. They included interest rate cuts of a surprising scale ordered by the Monetary Policy Council (of 1 p.p. in total in September and October 2023), and above all, the introduction of the “Safe 2% Loan” programme of residential loans with preferential interest rates in July 2023. The demand for loans under the programme exceeded previous expectations; and according to credit information bureau BIK, 92.6 thousand people took such loans totalling PLN 27.2 billion, which comprised 36% of the annual value of lending in the residential loan segment, and more than one-half in the second half of the year only (51%).
Primary market
The data on the development market activity in the six largest cities[4] published by Jones Lang LaSalle (JLL) clearly confirm the recovery of demand in 2023. Throughout 2023 almost 58 thousand apartments were sold, which is 65% more than in the crisis year of 2022, and only 11% less than the annual average in the period of prosperity between 2016-2021. Taking into account difficult macroeconomic conditions, and in particular the still high level of interest rates and deceleration of the economic growth, this result was a positive surprise for market participants and observers. Developers’ sales in 2023 could have been even higher was it not for supply-side constraints which redirected demand to the secondary market. In the first three quarters of 2023, sales volumes were distinctly higher than the number of apartments on offer. This was due to the fact that developers refrained from launching new projects in response to the sudden drop in demand in 2022. As a result, the number of apartments offered in the discussed market segment fell to 34.3 thousand as at the end of the third quarter of 2023, i.e. to the lowest level noted since 2010, which constituted a drop of 33% compared with the corresponding quarter of the previous year. Only in the fourth quarter of 2023, a sixty percent increase in the number of apartments on offer was noted, and for the first time in five quarters the number of apartments offered exceeded the volume of sales. As at the end of the fourth quarter, the number of apartments on offer increased by 2 thousand (to 36.3 thousand), which still meant a 25% drop on an annual basis. The increase in supply of new apartments at the end of 2023 was possible not only as a result of a marked recovery in demand, but also thanks to accelerated growth in residential real estate prices, which - accompanied by a decrease in the cost of raising funds and stabilization of construction costs allowed developers to achieve the expected break-even point.
The data published by the NBP indicates that in the third quarter of 2023, transaction prices on the primary market in the six largest Polish cities were 6% higher than in the previous year (including 10% higher in Warsaw and 4% higher in the other cities). In the medium-sized cities segment comprising 10 cities[5] the transaction price increase was 4% in the same period. According to RedNet Property Group Sp. z o.o. data (RedNet), in the segment of the six largest cities, the prices of apartments sold in the third quarter of 2023 increased by 6.5%, and the average prices of apartments on offer at the end of the quarter was 14% higher than in the previous year. According to the data published by the Otodom real estate agency for the fourth quarter of 2023, the average offer price of residential real estate on the primary market in Poland increased by 13.7% y/y. Irrespective of the data source, a strong increase in the price dynamics could be noted in the second half of 2023, which should be associated with the excess of demand over supply resulting mainly from the high popularity of the “Safe 2% Loan” programme.
Secondary market
The price and volume trends on the secondary market were to a large extent convergent with those observed on the primary market. Both markets react to the same demand conditions, and purchases on the primary market are a material supply-creating factor on the secondary market (the purchase of a new apartment very often involves an improvement in living conditions and the sale of the previously occupied apartment).
The data published by the National Bank of Poland (NBP) for the secondary market in the six largest Polish cities show trends similar to those on the primary market, i.e. a drop in the pace of price increases in the first two quarters of 2023 by 5% y/y and 3% y/y, respectively, and a rebound in the third quarter to 8% y/y and i 5% q/q. Otodom data on offer prices confirms the downward trend in offer price dynamics on the secondary market in the first two quarters of 2023 and a strong increase in the second half of the year. In the fourth quarter of 2023, the annual price growth rate of 15% and a quarterly price growth rate of as much as 7.1% was recorded (this was the highest quarterly growth rate in the history of data collected by Otodom). It should be emphasized that, in contrast to the first three quarters of the year, in the fourth quarter prices on the secondary market grew faster than on the primary market. This was mainly caused by a shift in demand on the part of a material portion of customers using the “Safe 2% Loan” programme to the secondary market due to the lack of apartments meeting the price criteria of the programme on the primary market.
Supply and demand on the residential real estate market
The conditions on the residential real estate market in 2022, in particular the decreased supply and increased construction costs, translated into a drop in activity in the residential construction sector in 2023.
In 2023, developers started constructing 114.5 thousand apartments, i.e. 1% less than the already weak figure for 2022 (when a 31% decrease compared to the previous year was noted). On the other hand, an increase in sales of apartments during the year was conducive to supply recovery; therefore, the result for the second half of 2023 (66.5 thousand apartments) was 39% better than in the first half of the year and 52% better than in the second half of the previous year. Thus, there was a significant improvement in activity in the developer sector (construction of apartments for sale). However, the situation is worse in the individual construction segment (construction for own residential purposes) as it has not yet recovered to the same extent as the developer segment. Throughout 2023 there was a 15% drop in the number of started apartment constructions, while in the second half of the year only the drop was only 5% compared to the second half of the previous year.
A synthetic measure of availability of apartments in Poland published by the Association of Polish Banks (Centrum Amron), namely the Index of Availability of M3-class Apartments, after a visible drop in 2022 from 196 points to 138 points decreased further to 131 points during the three quarters of 2023. This was mainly due to acceleration of apartment price increases, with the level of interest rates remaining high. The index reflects the changes in availability of apartments for an example family comprising two working parents and an older child who avail themselves of mortgage funding.
Purchases of residential real estate are funded with mortgage loans and household savings. According to the data published by the NBP, the estimated share of cash purchases of residential real estate on the primary market of the six largest cities was 76% in the third quarter of 2023. Growing sales of residential loans during 2023 contributed to a gradual drop in the value of this ratio from 83% in the first quarter of 2023.
According to the data of the Polish Central Statistical Office (GUS), the nominal value of household deposits increased by 11.5% y/y in the fourth quarter of 2023 (compared with an increase of 3.2% in 2022). Given the drop in inflation to 6.4%, this means that the real value of household deposits increased.
According to the data published by the NBP, the amounts due to banks in respect of residential loans in Poland were PLN 481.7 billion as at 31 December 2023, down by 3.5% y/y. As at 31 December 2023, the balance of loans in PLN amounted to PLN 405.6 billion (84% of the total amounts due to banks in respect of residential loans in Poland) and increased by 2.2% y/y.
The total balance of residential loans in relation to the Gross Domestic Product expressed at market prices stood at 15.7% at the end of the second quarter of 2023. This amount was significantly below the average for the EU countries, which was approx. 36.7% as at the end of the second quarter of 2023 (last available data). This shows a significant potential for a further growth of the residential loan market in Poland.
As at 31 December 2023, five mortgage banks were operating in Poland:
• PKO Bank Hipoteczny SA
• mBank Hipoteczny SA
• Pekao Bank Hipoteczny SA.
• ING Bank Hipoteczny SA
• Millennium Bank Hipoteczny SA.
The Polish mortgage covered bond market is relatively small and moderately liquid. At the end of December 2023, the total value of outstanding mortgage covered bonds issued by the mortgage banks operating in Poland amounted to PLN 18.5 billion, i.e. PLN 2.5 billion less than at 31 December 2022. As at 31 December 2023, mortgage covered bonds issued by Polish banks corresponded to 3.85% of the amount of residential loans granted by banks.
PKO Bank Hipoteczny SA is the largest issuer of mortgage covered bonds in Poland. The value of outstanding mortgage covered bonds issued by PKO Bank Hipoteczny SA was PLN 10.4 billion as at 31 December 2023, which constituted over 56% of the total value of outstanding mortgage covered bonds issued by mortgage banks operating in Poland.
The operations of PKO Bank Hipoteczny SA were affected by legal, regulatory and supervisory solutions which entered into force in 2023, in particular those which related to:
Outsourcing |
The Act of 16 August 2023 amending certain laws with a view to ensuring the development of the financial market and the protection of investors in that market introduced a number of changes to the Banking Law provisions relating to outsourcing in banks, such as the reduction of restrictions on sub-outsourcing and the liberalization of outsourcing between supervised institutions, with a particular focus on mortgage banks. |
Issues of bonds |
The Act of 16 August 2023 amending certain laws with a view to ensuring the development of the financial market and the protection of investors in that market introduced a number of changes to the Bonds Act, including those relating to extension of the disclosure obligations of bond issuers or the introduction of the minimum amount for the nominal value of bonds purchased by retail customers who are natural persons. |
Mortgage loans |
The Act of 26 May 2023 on State support in saving for residential purposes determined the principles of granting residential loans with a right to subsidized loan instalments (the “Safe 2% Loan”). The aim of the programme was to help people up to the age of 45 acquire their first home. PKO Bank Hipoteczny SA did not grant “Safe 2% Loans”, but the programme had a significant impact on the mortgage market. |
The Act of 26 May 2023 on the mObywatel (mCitizen) application regulated the functioning of the mObywatel application. This included introducing the legal equivalence of digital documents operated in this application with documents in a traditional form. Under the terms of the Act, banks accept electronic personal identity cards (e-dowód) generated in the mObywatel application as a customer due diligence measure for customer identification and identity verification. |
The Act of 16 August 2023 amending certain laws with a view to ensuring the development of the financial market and the protection of investors in that market introduced, among other things, amendments to the Banking Law imposing an obligation on banks to inform customers of their right to request information on creditworthiness assessments carried out. The same Act also amended the provisions of the Act on crowdfunding for businesses and aid to borrowers by clarifying which deadlines under loan agreements would be extended when taking advantage of loan repayment holidays. |
Credit risk |
The Resolution No. 242/2023 of the Polish Financial Supervision Authority of 19 June 2023 amended Recommendation S relating to good practices in |
The Resolution No. 119/2023 of the Polish Financial Supervision Authority of 24 March 2023 amended Recommendation J concerning the rules for collection and processing of real estate market data by banks. The amendments to the recommendation narrow the scope of the data collected by banks to the data representative “for the real estate market financed by the bank” rather than "for the entire real estate market” as before, and allow banks to use, as the reference value, the value of collateral determined by them in assessments of the value of the real estate constituting collateral. |
Personnel issues |
The Act of 1 December 2022 amending the Labour Code and certain other acts and the Act of 9 March 2023 amending the Labour Code and certain other acts introduced, among other things, provisions on remote working and implemented the so-called work-life balance directive into the Polish legal order. |
Key financial ratios of PKO Bank Hipoteczny SA
Statement of financial position of PKO Bank Hipoteczny SA
Income statement of PKO Bank Hipoteczny SA
Requirements regarding own funds (Pillar I)
Internal capital (Pillar II)
Disclosures (Pillar III)
|
31.12.2023 |
31.12.2022 |
Total assets (in PLN million) |
18,935.9 |
20,680.5 |
ROA[6] |
0.8 |
- |
ROE[7] |
11.2 |
- |
Total capital ratio (TCR) |
20.9% |
18.9% |
Leverage ratio (LR) |
8.5% |
7.7% |
Cost to income ratio (C/I)[8] |
19.5% |
- |
in PLN million |
31.12.2023 |
31.12.2022 |
Cash and balances with the Central Bank |
0.3 |
60.7 |
Amounts due from banks |
2.4 |
0.1 |
Derivative hedging instruments |
55.4 |
508.1 |
Securities |
945.3 |
1,017.4 |
Loans and advances to customers |
17,898.7 |
18,955.4 |
Other assets[9] |
33.8 |
138.8 |
TOTAL ASSETS |
18,935.9 |
20,680.5 |
in PLN million |
31.12.2023 |
31.12.2022 |
Amounts due to banks |
4,580.7 |
5,635.9 |
Derivative hedging instruments |
213.2 |
25.7 |
Liabilities in respect of mortgage covered bonds issued |
10,444.6 |
12,063.6 |
Liabilities in respect of bonds issued |
1,991.3 |
1,495.9 |
Other liabilities and provisions[10] |
67.2 |
55.1 |
Equity |
1,638.9 |
1,404.3 |
TOTAL LIABILITIES AND EQUITY |
18,935.9 |
20,680.5 |
As at 31 December 2023 the total assets of PKO Bank Hipoteczny SA amounted to PLN 18,935.9 million. Residential loans were the key component of the Bank’s assets. Their carrying amount, taking into account allowances for expected credit losses recognized as at 31 December 2023, amounted to PLN 17,898.7 million, of which loans granted by PKO Hipoteczny SA amounted to PLN 9,791.8 million, whereas loans acquired from PKO Bank Polski SA amounted to PLN 8,106.9 million.
As at the end of December 2023, the carrying amount of mortgage covered bonds was PLN 10,444.6 million, i.e. 55.2% of the balance sheet total. This represents a decrease of 13.4% compared with the end of 2022 resulting from redemption of mortgage covered bonds which matured in 2023 and the impact of the EUR/PLN exchange rate on the measurement of mortgage covered bonds denominated in EUR.
As at 31 December 2023, financial liabilities to PKO Bank Polski SA constituted a significant item of the Bank’s liabilities and equity. They consisted of liabilities in the form of loans and overdraft facilities within the limit available, liabilities in respect of the mortgage covered bonds and unsecured bonds taken up by PKO Bank Polski SA and other liabilities to PKO Bank Polski SA. Their total balance was PLN 4,835.3 million. Unsecured bonds issued by the Bank constituted another significant source of funding the Bank’s operations. As at 31 December 2023, they amounted to PLN 1,991.3 million, which is a 33.1% increase compared with the end of 2022. Equity of PLN 1,638.9 million (PLN 1,404.3 million as at the end of 2022) constituted a material item in the Bank’s funding structure.
in PLN million |
01.01.2023 – 31.12.2023 |
01.01.2022 – 31.12.2022 |
Change y/y |
Net interest income |
365.3 |
(320.8) |
686.1 |
Net fee and commission income |
(3.1) |
(0.2) |
(2.9) |
Net foreign exchange gains / (losses) |
(4.1) |
0.3 |
(4.4) |
Net allowances for expected credit losses |
(7.6) |
(6.1) |
(1.5) |
Net other operating income and expenses |
0.2 |
0.2 |
- |
Administrative expenses |
(47.4) |
(43.3) |
(4.1) |
Regulatory charges |
(22.4) |
(37.3) |
14.9 |
Tax on certain financial institutions |
(58.0) |
(69.6) |
11.6 |
Operating profit |
222.9 |
(476.8) |
699.7 |
Profit before tax |
222.9 |
(476.8) |
699.7 |
Corporate income tax |
(57.1) |
71.0 |
(128.1) |
Net profit |
165.8 |
(405.8) |
571.6 |
In 2023, PKO Bank Hipoteczny SA generated a net profit of PLN 165.8 million, up PLN 571.6 million compared with 2022.
During the period analysed, the Bank generated interest income of PLN 1,641.1 million, of which interest income on residential loans measured at amortized cost amounted to PLN 1,572.7 million. During this period, the Bank incurred interest expenses of PLN 1,275.8 million, including interest on mortgage covered bonds and costs from hedging transactions. The respective interest expense amounted to PLN 744.8 million in total.
Realized turnover (understood as interest income and fee and commission income) was derived entirely from activities in Poland.
In 2023, the Bank incurred administrative expenses of PLN 47.4 million. Overheads of PLN 26.0 million, of which PLN 19.3 million were costs related to services provided by PKO under an outsourcing contract, were a material significant item in the administrative cost structure. Costs of employee benefits amounted to PLN 19.8 million.
In 2023, regulatory charges amounted to PLN 22.4 million. A contribution to the Bank Guarantee Fund's resolution fund which amounted to PLN 18.5 million was the main component of this item.
Tax on certain financial institutions, which amounted to PLN 58.0 million in the reporting period, was a material component of costs of the Bank’s activities.
A high level of costs of regulatory charges and taxes has a negative impact on the Bank’s profitability.
Dividend paid
In 2023 the Bank did not pay dividend due to the loss incurred in 2022.
The Bank’s funding structure
The table below presents the structure of the Bank’s funding sources:
|
31.12.2023 |
31.12.2022 |
Mortgage covered bonds issued |
55.2% |
58.3% |
Funds from the parent company |
24.2% |
26.6% |
Bonds issued |
10.5% |
7.2% |
Equity |
8.7% |
6.8% |
Other |
1.4% |
1.1% |
Total |
100.0% |
100.0% |
As at 31 December 2023 and 31 December 2022, the Bank had no contractual liabilities where it had not met its payment obligations in a timely manner.
The Impact of the Act of 7 July 2022 on crowdfunding for businesses and aid to borrowers on the Bank’s performance
The impact on the Act on crowdfunding for businesses and aid to borrowers (hereinafter: “The Act”) with respect to the statutory loan repayment holidays is described in the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2023 in Note 26 “Loans and advances to customers”.
The Act also introduced changes in the operation of the Borrowers Support Fund which offers support to borrowers of up to PLN 2,000 per month for up to 36 months. The support is repaid after two years in 144 equal and interest-free instalments. The support may be partially forgiven for customers who have repaid the first 100 instalments on a timely basis. A customer may take advantage of the support when one of the following conditions has been met:
• at least one of the borrowers has the status of an unemployed person;
• the monthly costs of servicing the housing loan exceed 50% of the monthly income;
• the monthly income, after deducting the monthly costs of servicing the loan has not exceeded PLN 1,552 per person in a single-person household and PLN 1,200 in a multi-person household (as of January 2022).
In 2023 the Bank did not contribute to the Borrowers Support Fund.
The Act also assumes that the WIBOR index will be replaced by another index, as discussed in Note 58 “IBOR interest rate benchmark reform” to the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2023.
General Information
In accordance with the CRR Regulation, the Bank calculates own funds requirements for the following risks:
• credit risk – according to the standardized approach;
• credit valuation adjustment (CVA) risk – according to the standardized approach;
• settlement and delivery risk – according to the standardized approach;
• operational risk – using the Basic Indicator Approach (BIA);
• market risk (foreign exchange risk only) – using basic methods.
At 31 December 2023, own funds requirements concerning the credit valuation adjustment, settlement and delivery, and market risks were nil, therefore the total own funds requirement comprised solely the requirements for credit and operational risks.
Own funds requirements |
31.12.2023 |
31.12.2022 |
Credit risk (in PLN million) |
570.1 |
614.5 |
Operational risk (in PLN million) |
47.3 |
47.0 |
Total own funds requirement (in PLN million) |
617.5 |
661.5 |
Common Equity Tier 1 capital ratio (CET1) |
20.9% |
18.9% |
Tier 1 capital ratio (T1) |
20.9% |
18.9% |
Total capital ratio (TCR) |
20.9% |
18.9% |
The following tables show exposure values, risk weighted assets (RWA) and own funds requirements by exposure class.
31.12.2023 in PLN million |
Gross exposure |
Exposure value[11] |
Risk-weighted assets (RWA) |
Own funds requirement |
Retail exposures[12] |
2,014.5 |
1,200.0 |
1,466.1 |
117.3 |
Exposures secured by mortgages on real estate |
15,996.8 |
15,953.7 |
5,583.7 |
446.7 |
Exposures to central governments or central banks |
945.3 |
945.3 |
- |
- |
Exposures to institutions |
203.2 |
203.2 |
- |
- |
Exposures in default |
72.1 |
41.8 |
44.0 |
3.5 |
Other exposures |
33.9 |
33.9 |
32.9 |
2.6 |
Total |
19,265.7 |
19,177.8 |
7,126.7 |
570.1 |
31.12.2022 in PLN million |
Gross exposure |
Exposure value[13] |
Risk-weighted assets (RWA) |
Own funds requirement |
Retail exposures[14] |
1,864.8 |
1,834.1 |
1,375.6 |
110.1 |
Exposures secured by mortgages on real estate |
17,152.4 |
17,108.7 |
5,988.0 |
479.0 |
Exposures to central governments or central banks |
1,170.8 |
1,170.7 |
232.2 |
18.6 |
Exposures to institutions |
1,417.9 |
1,417.9 |
- |
- |
Exposures in default |
61.7 |
38.1 |
39.3 |
3.1 |
Other exposures |
45.9 |
46.0 |
45.9 |
3.7 |
Total |
21,713.5 |
21,615.5 |
7,681.0 |
614.5 |
Credit risk adjustments
For the purpose of specific credit risk adjustments, the Bank uses an impairment allowance included in the Bank’s Tier 1 capital in accordance with the CRR and the implementing legislation.
The approach applied by the Bank to identifying exposures at risk of impairment and methods for estimating allowances for expected credit losses and provisions for loan commitments are described in Note 45.2 “Allowances for expected credit losses” to the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2023.
Use of credit risk mitigation techniques
The Bank uses mortgage collateral for the classification of exposures to classes of exposures secured by mortgages on real estate and the use of preferential risk weights. Detailed information about the main types of collateral accepted by the Bank and the method of determining the mortgage lending value is presented in Note 47 “Residual risk management” to the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2023.
Internal capital is the estimated amount of capital required to cover all identified material risks in the Bank’s activities, as well as the effect of changes in the business environment, taking into account the expected level of risk.
PKO Bank Hipoteczny SA regularly monitors the materiality of different risks involved in the Bank’s operations.
The Bank separately assesses its internal capital for the following risks considered to be material:
• credit risk;
• liquidity risk;
• operational risk;
• interest rate risk;
• business risk;
• model risk.
The internal capital required to cover particular risks is calculated in accordance with the methods specified in the Bank’s internal regulations. Total internal capital is the sum of the internal capital necessary to cover risks material for the Bank.
Structure of internal capital |
31.12.2023 |
31.12.2022 |
For credit risk |
69.8% |
76.0% |
For liquidity risk |
5.8% |
2.7% |
For operational risk |
3.7% |
5.8% |
For interest rate risk |
8.3% |
5.1% |
For business risk |
12.2% |
10.1% |
For model risk |
0.2% |
0.2% |
Total |
100.0% |
100.0% |
As at 31 December 2023, the relation of own funds to the Bank’s internal capital was above both the statutory and internal limits.
To estimate the amount of own funds necessary to engage in prudent operations in unfavourable market conditions the Bank regularly conducts stress tests.
Considering the scale and specific nature of its operations, the Bank discloses in particular the following information in its financial statements and in the Directors’ Report:[15]
• risk management objectives and strategies;
• own funds for capital adequacy purposes;
• capital buffers;
• financial leverage;
• capital requirements;
• credit risk adjustments;
• credit risk mitigation techniques used;
• the Bank’s remuneration policies, in accordance with Recommendation Z;
• the key provisions of the Rules of managing conflicts of interest, in accordance with Recommendation Z;
• the requirements referred to in Article 111a of the Banking Law and Recommendation H;
• operational risk, in accordance with Recommendation M;
• credit risk and information on the impairment of financial assets, in accordance with Recommendation R and IFRS 9;
• liquidity risk management system and the liquidity position, in accordance with Recommendation P;
• impact on capital adequacy of transitional arrangements relating to implementation of International Financial Reporting Standard 9 (IFRS 9).
As a member of the PKO Bank Polski Group, the Bank also provides information to the Parent company for consolidation purposes.
A detailed scope of the information disclosed and the method of its verification and publication are presented in the Disclosure Policy of PKO Bank Hipoteczny SA concerning capital adequacy and other reportable information, which is available on the Bank’s website (https://www.pkobh.pl/en/).
Sales of residential mortgage loans under the agency model
Acquisition of residential mortgage loan receivables
Structure of the residential mortgage loan portfolio
Mortgage covered bonds
Financial market operations
Bonds – Bond Issue Programme agreement concluded with PKO Bank Polski SA
PKO Bank Hipoteczny SA has been granting residential loans in Polish zloty since 1 April 2015. Residential loans are sold under the agency model, through Poland’s largest network of branches, agents and intermediaries of PKO Bank Polski SA. The Bank accepts apartments and single-family houses as collateral.
Since 2023, in line with the strategy for the years 2023 – 2025, sales of residential mortgage loans under the agency model were systematically increased. In 2023, the Bank granted mortgage loans of PLN 785 million, which is an increase of 233% compared with 2022.
In accordance with Recommendation S of the Polish Financial Supervision Authority, the Bank only grants loans for which the loan-to-value ratio does not exceed 80%. In the event that the required own down payment is insured, the Bank allows granting a loan where the ratio does not exceed 90%. Moreover, in accordance with the Polish Covered Bonds and Mortgage Banks Act, the Bank only grants loans whose value in relation to the mortgage lending value of the real estate does not exceed 100%.
The following table shows the main criteria applied by PKO Bank Hipoteczny SA in the process of granting mortgage-secured loans.
Criteria |
Agency model |
Loan amount/market value of the real estate |
Max 80%[16] |
Loan amount/mortgage lending value of the real estate |
Max 100% |
Legal title to the real estate |
Ownership |
Loan collateral |
Mortgage recorded as the first in Section IV of the Land and Mortgage Register |
Currency |
PLN |
Purpose |
Residential |
As part of its business activities, PKO Bank Hipoteczny SA acquires residential mortgage loan receivables from PKO Bank Polski SA based on a framework agreement signed in 2015.
The following table shows the main criteria applied by PKO Bank Hipoteczny SA in the process of acquiring mortgage secured loans.
Criteria |
Pooling Model |
Loan amount/mortgage lending value of the real estate |
Max 100% |
Legal title to the real estate |
Ownership |
Loan collateral |
Mortgage recorded as the first in Section IV of the Land and Mortgage Register |
Currency |
PLN |
Days past due or indications of impairment |
None |
Purpose |
Residential |
Portfolio structure by LtV
The structure of the portfolio of residential loans included in the statement of financial position of PKO Bank Hipoteczny SA by the LtV ratio based on market valuation[17] and the LtV ratio based on the MLV is presented in the following tables.
Gross loans to customers by LtV based on market valuation |
31.12.2023 |
31.12.2022 |
below 50% |
87.9% |
82.6% |
51% - 60% |
7.9% |
13.8% |
61% - 70% |
2.0% |
2.9% |
71% - 80% |
1.7% |
0.6% |
81% - 90% |
0.5% |
0.1% |
over 90% |
0.0% |
0.0% |
Total, gross |
100.0% |
100% |
Average LtV based on market valuation |
35.0% |
37.4% |
Gross loans to customers by LtV based on mortgage lending value |
31.12.2023 |
31.12.2022 |
below 50% |
23.9% |
21.8% |
51% - 60% |
13.4% |
12.7% |
61% - 70% |
17.2% |
16.8% |
71% - 80% |
21.8% |
22.5% |
81% - 90% |
21.0% |
23.1% |
over 90% |
2.7% |
3.1% |
Total, gross |
100.0% |
100% |
Average LtV based on MLV |
63.8% |
65.1% |
In 2023 the average LtV based on the market valuation of the loan portfolio dropped by 2.4 p.p. (in 2022, it dropped by 6.6 p.p.), which is the effect of the depreciation of the portfolio accompanied by a further growth in the market values of the real estate constituting the collateral for the loans granted by the Bank. In the case of LtV based on MLV the drop is smaller and results exclusively from the depreciation of the portfolio. The MLV determined as at the moment of granting the loans did not require remeasuring – in the Bank’s opinion it is at a safe level, lower than the market value, and meets the requirements of the Rules for Determining the MLV of Real Estate by PKO Bank Hipoteczny SA.
Interest on loans
The Bank grants loans bearing an interest rate based on WIBOR 6M and a periodically fixed interest rate. In the past, the Bank also offered loans based on WIBOR 3M.
The Bank also has in its offer loans bearing interest based on a five-year fixed base rate. In addition, the Bank offers the possibility of changing a variable interest rate on a loan to a fixed interest rate over a five-year period.
Issuing mortgage covered bonds which are the main source of the long-term funding for loans secured with real estate is the key objective of PKO Bank Hipoteczny SA.
Issues of mortgage covered bonds under the National Mortgage Covered Bond Issue Programme
From the beginning of its operations, PKO Bank Hipoteczny SA has issued thirteen series of Polish mortgage covered bonds, including two issues of Green Covered Bonds. These issues were conducted under the National Mortgage Covered Bond Issue Programme of PKO Bank Hipoteczny SA.
The total value of outstanding mortgage covered bonds issued by PKO Bank Hipoteczny SA for the domestic market (at the nominal value) was PLN 1,990.0 million as at the end of 2023.
All series of domestic mortgage covered bonds issued are traded on the regulated parallel market of the Warsaw Stock Exchange and on the regulated market of the BondSpot platform. They are also accepted in repo transactions by the National Bank of Poland.
Currently, the Bank is issuing mortgage covered bonds exclusively under the International Mortgage Covered Bond Issue Programme, and its activities under the National Mortgage Covered Bond Issue Programme have been discontinued.
In 2023, PKO Bank Hipoteczny SA redeemed one series of mortgage covered bonds with a total nominal value of PLN 500 million.
PLN-denominated mortgage covered bonds of PKO Bank Hipoteczny SA issued under the National Mortgage Covered Bond Issue Programme and outstanding until 31 December 2023:
Series |
Mortgage covered bond number (ISIN) |
Issue date |
Redemption date |
Series value (in PLN million) |
Interest rate |
Currency |
Rating of the issue |
Listing |
7 |
PLPKOHP00074 |
27.04.2018 |
25.04.2024 |
700 |
WIBOR3M +0.49% |
PLN |
Aa1 |
Bondspot, WSE regulated parallel market |
9 |
PLPKOHP00090 |
27.07.2018 |
25.07.2025 |
500 |
WIBOR3M +0.62% |
PLN |
Aa1 |
Bondspot, WSE regulated parallel market |
10 |
PLPKOHP00108 |
24.08.2018 |
24.08.2028 |
60 |
3.4875% |
PLN |
Aa1 |
Bondspot, WSE regulated parallel market |
11 |
PLPKOHP00116 |
26.10.2018 |
28.04.2025 |
230 |
WIBOR3M +0.66% |
PLN |
Aa1 |
Bondspot, WSE regulated parallel market |
12 |
PLPKOHP00132 |
10.06.2019 |
30.09.2024 |
250 |
WIBOR3M +0.60% |
PLN |
Aa1 |
Bondspot, WSE regulated parallel market |
13 |
PLPKOHP00199 |
02.12.2019 |
02.12.2024 |
250 |
WIBOR3M +0.51% |
PLN |
Aa1 |
Bondspot, WSE regulated parallel market |
Issues of mortgage covered bonds under the International Mortgage Covered Bond Issue Programme
From the beginning of its operations, PKO Bank Hipoteczny SA has issued eleven series of mortgage covered bonds under the International Mortgage Covered Bond Issue Programme, including eight issues denominated in EUR and three denominated in PLN.
The total value of outstanding mortgage covered bonds issued by PKO Bank Hipoteczny SA under the International Mortgage Covered Bond Issue Programme (at the nominal value) denominated in EUR and PLN was EUR 1,525 million and PLN 1,750 million as at the end of 2023, respectively, which totals PLN 8,380.7 million at the mid-exchange rate for the euro announced by the National Bank of Poland as at 29 December 2023.
All series of mortgage covered bonds issued under the International Mortgage Covered Bond Issue Programme are listed on the Luxembourg Stock Exchange and, in addition, series 4, 6, 8, 9, 10 and 11 are listed on the regulated parallel market of the Warsaw Stock Exchange. Mortgage covered bonds denominated in EUR are also accepted in repo transactions by the European Central Bank.
In 2023, PKO Bank Hipoteczny SA conducted three issues of PLN-denominated 9, 10 and 11 series mortgage covered bonds with a total nominal value of PLN 1,750 million.
In 2023, PKO Bank Hipoteczny SA redeemed one series of EUR-denominated mortgage covered bonds with a total nominal value of PLN 500 million.
Outstanding issues of mortgage covered bonds of PKO Bank Hipoteczny SA issued under the International Issues of Mortgage Covered Bond Programme conducted until 31 December 2023:
Series |
Mortgage covered bond number (ISIN) |
Issue date |
Redemption date |
Series value (in millions) |
Currency |
Coupon |
Rating of the issue |
Listing |
2 |
XS1559882821 |
02.02.2017 |
02.02.2024 |
25 |
EUR |
0.82% |
Aa1 |
LuxSE |
4 |
XS1690669574
|
27.09.2017 |
27.08.2024 |
500 |
EUR |
0.75% |
Aa1 |
LuxSE, WSE regulated parallel market |
6 |
XS1795407979 |
22.03.2018 |
24.01.2024 |
500 |
EUR |
0.75% |
Aa1 |
LuxSE, WSE regulated parallel market |
8 |
XS2495085784 |
04.07.2022 |
25.06.2025 |
500 |
EUR |
2.125% |
Aa1 |
LuxSE, WSE regulated parallel market |
9 |
XS2583335943 |
09.02.2023 |
09.02.2026 |
500 |
PLN |
WIBOR 3M + 0.85% |
Aa1 |
LuxSE, WSE regulated parallel market |
10 |
XS2641919639 |
28.06.2023 |
29.06.2026 |
500 |
PLN |
WIBOR 3M + 0.78% |
Aa1 |
LuxSE, WSE regulated parallel market |
11 |
XS2711876370 |
02.11.2023 |
02.11.2026 |
750 |
PLN |
WIBOR 3M + 0.78% |
Aa1 |
LuxSE, WSE regulated parallel market |
The funds raised from the issues of mortgage covered bonds have been used by PKO Bank Hipoteczny SA to grant residential loans and to acquire receivables in respect of such loans from PKO Bank Polski SA.
Pursuant to Article 7d of the Polish Covered Bonds and Mortgage Banks Act of 29 August 1997, mortgage covered bonds may be labelled as European Covered Bonds or European Covered Bonds (premium). Mortgage covered bonds of PKO Bank Hipoteczny are labelled as European Covered Bonds (premium). The “premium” label allows easy and unequivocal identification of whether the mortgage covered bonds meet the requirements of Article 129 of the CRR, which is to facilitate assessment of their quality by investors and therefore increase their attractiveness as an investment instrument both in the EU and in other countries.
The list of mortgage covered bonds issues under which European Mortgage Bonds and European Mortgage Bonds (premium) have been issued is available on the PFSA website:
https://www.knf.gov.pl/podmioty/Podmioty_sektora_bankowego/Banki_hipoteczne
The Covered Bond Label
On 6 February 2018 PKO Bank Hipoteczny SA, as the first issuer of mortgage covered bonds from Poland, joined The Covered Bond Label. The Covered Bond Label is a quality certificate intended to build awareness of the safety and high quality of assets such as mortgage covered bonds among investors.
The Bank’s details on the website of The Covered Bond Label are available at:
https://coveredbondlabel.com/issuer/132-pko-bank-hipoteczny-spolka-akcyjna
Energy Efficient Mortgage Label
The Energy Efficient Mortgage Label was created by the European Mortgage Federation – European Bond Council (EMF-ECBC) as a clear and transparent quality label for consumers, lenders and investors, aimed at identifying energy-efficient residential mortgage loans.
PKO Bank Hipoteczny joined the Energy Efficient Mortgage Label in 2021 as the first Polish bank. The initiative is aimed at supporting the EU Green Deal and climate neutrality by 2050, and at adapting the product portfolio to regulatory changes such as the new EU taxonomy.
The Bank’s details on the website of Energy Efficient Mortgage Label are available at:
https://www.energy-efficient-mortgage-label.org/issuers/directory
Green Covered Bonds
In 2019, PKO Bank Hipoteczny SA published the Green Covered Bond Framework (GCBF) for the first time. In June 2022 the GCBF was published by the Bank in an updated version, in connection with the planned issue of Green Covered Bonds. The GCBF specifies, among other things, the principles for selecting assets to secure the Green Covered Bond issues. Green issues by PKO Bank Hipoteczny SA are secured with mortgages that meet the highest energy efficiency and CO2 emissions standards.
The proceeds from Green Covered Bonds are used exclusively to provide full or partial funding or refunding of new and/or existing projects which have been classified as green assets. The Green Covered Bonds of PKO Bank Hipoteczny SA satisfy the criteria set by the International Capital Market Association (ICMA), which are known as Green Bond Principles (GBP). The GBP are a set of guidelines concerning the purpose of funding, assessment and selection of assets, managing the proceeds from the issue and reporting the allocation of funds.
In June 2019 and then in June 2022 PKO Bank Hipoteczny SA obtained a second party opinion for its Green Covered Bond Framework from Sustainalytics, a specialized and certified international institution. PKO Bank Hipoteczny SA’s Green Covered Bonds are certified by the Climate Bond Initiative (CBI) - the latest post-issuance certification was in May 2023. The CBI certificate is awarded to bonds and mortgage covered bonds which meet the highest standards with regard to having a positive impact on the environment.
At least once a year the Bank publishes a report on the allocation and environmental impact of the issues of Green Covered Bonds.
For more detailed information concerning Green Covered Bonds issued by the Bank, please visit:
https://www.pkobh.pl/en/covered-bond/green-covered-bonds/
PKO Bank Hipoteczny SA executes treasury transactions on the wholesale financial market. The purpose of the transactions is to manage liquidity (over short-, mid- and long-term horizons) and the Bank’s foreign-currency position. Additionally, the Polish Covered Bonds and Mortgage Banks Act imposes an obligation on PKO Bank Hipoteczny SA to mitigate the risk caused by fluctuations in exchange rates.
For the purpose of funding the granting of residential loans and the purchase of receivables for residential loans granted by PKO, PKO Bank Hipoteczny SA issues mortgage covered bonds, unsecured bonds, takes out credit lines and assumes liability for purchased receivables.
In the Management Board’s opinion, as at 31 December 2023, there were no indications of a risk of late payment of the liabilities incurred by the Bank. As at 31 December 2023, the Bank complied with all internal and regulatory liquidity limits. Details of the levels of the Bank’s liquidity limits are provided in Note 48 “Liquidity risk management” to the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2023.
In the case of issues of EUR-denominated covered bonds, in order to hedge interest rate risk and currency risk, PKO Bank Hipoteczny SA entered into Cross-Currency Interest Rate Swap (CIRS) transactions, under which the Bank pays a coupon in PLN based on a variable interest rate, and receives a coupon based on a fixed interest rate for EUR. Should PKO Bank Hipoteczny SA be declared bankrupt by a court, the CIRS transactions would automatically be extended by 12 months on the terms set on the transaction date. Additionally, the Bank has executed a series of FX-Forward contracts to hedge its currency exposures with maturities on the payment dates of the coupons for the EUR-denominated mortgage covered bonds.
In the case of issues of fixed-interest rate mortgage covered bonds in PLN, in order to hedge interest rate risk, PKO Bank Hipoteczny SA entered into IRS transactions. Under these transactions, the Bank pays a coupon based on a variable PLN rate, and receives a coupon based on a fixed PLN rate.
On 30 September 2015 PKO Bank Hipoteczny SA concluded an agreement for an Own Bonds Issue Programme with PKO Bank Polski SA, based on which zero coupon bonds, variable coupon bonds and fixed coupon bonds with maximum tenors up to 36 months may be issued.
In 2023, the Bank issued bonds with a total nominal value of PLN 3,564.0 million under this Programme. At the same time, the Bank redeemed bonds with a total nominal value of PLN 3,058.5 million. The balance of bonds issued under the Programme was PLN 2,025.0 million as at 31 December 2023. The Bank intends to continue raising funds under this Programme.
Lending process and cooperation with PKO Bank Polski SA
Internal control system
Risk management
Measurement of residential mortgage loan collaterals
Cover pool for mortgage covered bonds
Cover Pool Monitor
Statutory limits
PKO Bank Hipoteczny SA acquires residential loans for its portfolio as part of its strategic cooperation with PKO Bank Polski SA. The banks work together under two models:
• agency model;
• pooling model.
The cooperation with PKO Bank Polski SA is governed in detail by an outsourcing agreement concluded on 16 January 2015. The agreement governs the scope of the cooperation and describes in detail the method of performing the outsourced functions, first and foremost in the area of offering and administering residential loans and performing support functions for PKO Bank Hipoteczny SA. Additionally, the agreement imposes obligations on PKO Bank Polski SA to properly perform the functions entrusted to it, as well as broad reporting and controlling obligations towards PKO Bank Hipoteczny SA.
On 17 November 2015, the Receivables Sale Framework Agreement was signed with PKO Bank Polski SA. On the basis thereof, the Bank has been acquiring portfolios of receivables in respect of residential mortgage loans from PKO Bank Polski SA since December 2015.
An effective and transparent internal governance system is operative in the Bank, as specified in PKO Bank Hipoteczny SA’s Articles of Association and the adopted internal regulations, which comprises:
• the Bank’s management system;
• the Bank’s organization; and
• operating principles, rights, duties and responsibilities, and mutual relationships between the Bank’s particular authorities and organizational units, including the Supervisory Board, Management Board and key employees.
The key elements of internal governance, their goals and relationships between them and the basic principles of the Bank’s organization are defined in the Bank’s management strategy.
The Bank’s Management System covers all the aspects of the Bank’s functioning, and in particular strategic planning and managing the Bank’s Strategy, the internal control system, risk management system, ethical principles, whistleblowing procedures and the ethical procedures and standards binding in the Bank, capital adequacy, the manner of shaping products, managing human resources and remuneration policy.
The Bank conducts its activities in a responsible manner, taking into consideration the principles of internal governance, guided by the need to maintain the highest diligence, professionalism and ethics. The Bank discharges its duties under the binding legal regulations, complies with the requirements for supervised institutions imposed by the Polish Financial Supervision Authority in the form of recommendations and good practices addressed to the banking sector, the Corporate Governance Framework for supervised institutions, and guidelines specified by the European Banking Authority adopted for implementation in the national supervisory practice to the extent applicable to the Bank’s operations and the adopted business model, in consideration of the scale, specificity and nature of the Bank’s operations. The aforementioned rules support the Bank in its endeavours to reinforce operating transparency and maintain the safety of its operations.
The Bank’s Management Board is responsible for designing, implementing, ensuring compliance with and the correct functioning of its internal governance, taking into account all of its components. The Bank’s Management Board regularly informs the Bank’s Supervisory Board of the progress in implementation of the governance strategy realized by the Bank and the risk management strategy, and of the most important related issues, and if necessary, it immediately notifies of events and circumstances material for the assessment of the Bank’s position and its management.
The Bank’s Supervisory Board oversees the implementation and functioning of the internal governance and assesses its adequacy and effectiveness. The assessment takes into account, in particular, the results of evaluation of individual elements comprising the internal governance and potential material changes, if any, in internal and external factors which may have an impact on the Bank’s operations.
Taking into account the recommendation of the Management Board and the results of periodical reviews and evaluations of particular areas comprising the Bank’s internal governance disclosed in comprehensive “Report on the assessment of the functioning of internal governance in PKO Bank Hipoteczny SA for the year 2023”, the Supervisory Board has assessed the internal governance implemented in the Bank as satisfactory, which means that it is adequate to the business model adopted by the Bank and functions effectively with respect to its particular components.
The internal control system in PKO Bank Hipoteczny SA is one of the elements of managing the Bank. The objective of the internal control system is to support the Bank’s decision-making processes to ensure:
• effectiveness of the Bank’s operations;
• reliability and accuracy of financial reporting, administrative and accounting procedures, and reliable internal and external reporting;
• compliance with the risk management policy;
• compliance of the Bank’s operations with the generally applicable laws, internal regulations and market standards adopted by the Bank, taking into account regulatory recommendations.
The Bank’s internal control system includes:
• the control function designed to ensure compliance with controls relating, in particular, to risk management; this function covers all of the Bank’s organizational units which are responsible for carrying out the tasks assigned to this function;
• the compliance function, which, together with the organizational units, is responsible for identifying, assessing, controlling and monitoring the risk of the Bank’s non-compliance with the generally applicable laws and with the Bank’s internal regulations and market standards adopted by the Bank, taking into account regulatory recommendations;
• the independent internal audit function to evaluate and assess, independently and objectively, the adequacy and effectiveness of the risk management system, the internal control system, and corporate governance, except for the aspects relating to the internal audit function itself.
The internal control system at the Bank is arranged on three independent levels:
• the first level consists of organizational structures that perform risk-generating operational tasks, which operate under the internal regulations;
• the second level comprises operations of the compliance function and the identification, measurement or estimation, controlling, monitoring and reporting the Bank’s material risks, and the recognized threats and irregularities – these tasks are performed by specialized organizational structures operating under applicable policies, methodologies and procedures. The purpose of such structures is to ensure that actions executed at the first level are properly designed and effectively mitigate risks, support risk measurement and analysis, and ensure the effectiveness of operations;
• the third level is internal audit, which carries out independent audits of elements of the Bank’s management system, including the risk management system and the internal control systems. Internal audit operates independently of the first and second levels.
The Bank’s Management Board ensures the continuity of operation of the internal control system and proper cooperation of all organizational units within the internal control system in place. The Management Board also identifies corrective actions to be taken to remedy any irregularities identified by the internal control system, including specific corrective and disciplinary measures. The Bank’s Management Board also approves the list of significant processes and their connection with the internal control system’s objectives based on the criteria specified in the internal regulation adopted by the Bank’s Management Board, taking into account the management strategy, the business model and the impact on the Bank’s financial performance and capital adequacy, as well as risk tolerance.
Supervision over the internal control system is exercised by the Supervisory Board with the support of the Audit and Finance Committee of the Bank’s Supervisory Board. The Supervisory Board approves, in particular, the principles of operation of the internal control system and assesses the adequacy and effectiveness of the system. The Audit and Finance Committee supports the Supervisory Board by monitoring and issuing opinions on the adequacy and effectiveness of the internal control system based on the reports obtained from compliance function, internal audit function and the control function coordinator, as well as by issuing opinions on draft resolutions of the Management Board in terms of the internal control system, the approval of which falls within the competence of the Supervisory Board.
The results of monitoring and testing the controls functioning under the internal control system and actions taken to improve its functioning showed that, in 2023, the internal control system in PKO Bank Hipoteczny SA was effective and commensurate with the business model and the scale of the Bank’s operations.
The risk management process is a key process in PKO Bank Hipoteczny SA. Its purpose is to ensure the Bank’s financial stability, protect the value and safety of the mortgage covered bonds issued and to ensure that the funds derived from the issue of bonds and the Bank’s other funding sources are secure by striving to maintain the risk level within the adopted tolerance level. The risk management system is also intended to ensure that information on the risk is appropriate and as comprehensive as possible when making decisions, and to effectively embed risk management in the Bank’s organizational culture. The assumed level of risk is an important element of the planning and decision-making processes.
Risk management in the Bank is based in particular on the following principles:
• the Bank manages all identified types of risk associated with its operations;
• the process of risk management is adequate to the scale of the Bank’s operations and to the materiality, scale and complexity of a given risk;
• the risk management process supports the execution of the Bank’s management strategy, while maintaining compliance with the risk management strategy, in particular with respect to the risk tolerance level;
• the process of risk management is continuously adjusted to new factors and sources of risk;
• the risk management methods and risk measurement systems are adjusted to the scale and complexity of the Bank’s operations and to the nature and size of the risk to which the Bank is exposed;
• the risk management methods are periodically reviewed and validated;
• risk management is integrated with planning and controlling processes;
• the risk level is regularly monitored and compared against the system of limits that apply in the Bank and the Bank’s management receives regular information on the level of risk;
• the risk management process is consistent with the risk management principles in the PKO Bank Polski SA Group.
PKO Bank Hipoteczny SA identifies and manages the following types of risk:
Material risks |
• Credit risk • Liquidity risk, including funding risk • Interest rate risk • Model risk • Business risk, including macroeconomic risk • Operational risk |
Monitored risks |
• Concentration risk • Residual risk • Foreign exchange risk • Derivative instruments risk • Compliance risk • Reputation risk • Capital adequacy risk, including excessive leverage risk |
While determining the criteria for considering a certain risk to be material, the impact of such risk on the Bank’s activities is taken into account, and three levels of risk are distinguished:
• material risks – which are subject to active management;
• monitored risks – which are monitored for materiality;
• other risks which have not been defined or do not arise in the Bank (immaterial and unmonitored).
For monitored risks, PKO Bank Hipoteczny SA performs periodic monitoring of whether they should be designated as material. The Bank has defined materiality criteria for monitored risks and these when these are exceeded, a risk will be recognized as material.
In its Risk Management Strategy, the Bank has defined a number of strategic limits which define its tolerance for different risks. The Bank monitors these limits on an ongoing basis. From July 2022 to June 2023, in connection with the introduction of the so-called loan repayment holidays, the strategic limit for the C/I ratio was exceeded. Exceeding the strategic limit was caused by a one-off event, following directly from the provisions of the Act, and had no negative impact on the Bank’s future ability to generate positive financial results. None of the other ratios was exceeded, either in 2023, or throughout the remaining period of the Bank’s operations.
A detailed description of the Bank’s risk management objectives and methods is provided in the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2023, in the chapter “Objectives and principles of risk management”. These financial statements also provide important information on the level of financial risk in the Bank’s operations, together with the methods of hedging significant types of planned transactions for which hedge accounting is applied.
PKO Bank Hipoteczny SA’s policy concerning loan collaterals and their measurement is based on the provisions of the following legal acts:
• the Polish Covered Bonds and Mortgage Banks Act;
• the Land and Mortgage Registers and Mortgage Act;
• the Banking Law.
Additionally, the question of loan collaterals is addressed by:
• the recommendations of the PFSA, including Recommendations F, S and J;
• the Bank’s internal regulations.
The Bank has in place and applies the Rules for Setting the MLV of Real Estate, approved by the PFSA. The Rules take into account the provisions of Recommendation F concerning the basic criteria applied by the Polish Financial Supervision Authority in approving rules for setting the mortgage lending value of real estate issued by mortgage banks.
The MLV of real estate is the value determined by the mortgage bank which, in the Bank’s opinion, reflects the level of risk associated with the real estate as the loan collateral. The MLV of real estate is used to determine the maximum amount of a loan that can be secured by a mortgage on a given real estate, and to make a decision on whether a receivable secured by a particular real estate can be acquired by the Bank. The mortgage lending value of real estate is determined in a prudent manner, taking into consideration long-term parameters.
PKO Bank Hipoteczny SA determines the MLV on the basis of expert valuations of the mortgage lending value of real estate. Such valuations are carried out with due diligence and prudence. They take into account only those real estate characteristics and expenditures necessary for its construction, which will be of a permanent nature and which any real estate holder will be able to obtain assuming rational exploitation. The expert valuation, made on a specified date, documents assumptions and parameters underlying the analysis, the process of determining the MLV and the resulting MLV proposal. The expert opinion takes into account analyses and forecasts concerning specific parameters for a given real estate, which influence the evaluation of credit risk, as well as factors of a general nature, e.g. population growth, the unemployment rate and urban development planning.
The process of determining the MLV is carried out in the Bank by a dedicated team of real estate valuation experts.
In the agency model, the process of setting the mortgage lending value of real estate comprises three stages:
Preparation of the MLV expert opinion |
Real estate appraiser with appropriate experience and the ability to estimate banking risk in the area of securing residential mortgage loans or a dedicated organizational unit of the Bank – the Collateral Valuation Team, based on the real estate inspection report prepared by real estate appraiser |
Verification of the MLV opinion |
An employee of PKO Bank Polski SA under the Outsourcing Agreement, or a dedicated organizational unit of the Bank: the Collateral Valuation Team |
Determining the mortgage lending value of the real estate |
A dedicated organizational unit of the Bank: the Collateral Valuation Team |
In the case of the purchase of a receivable, the process of setting the mortgage lending value of real estate comprises four stages:
Confirmation of the real estate’s legal status |
Employee of PKO Bank Polski SA, under the outsourcing agreement |
Preparation of real estate inspection report accompanied by market research |
Appraiser with appropriate experience and the ability to estimate banking risk in the area of securing residential mortgage loans |
Preparation of the MLV expert opinion |
A dedicated organizational unit of the Bank: the Collateral Valuation Team |
Determining the mortgage lending value of the real estate |
A dedicated organizational unit of the Bank: the Collateral Valuation Team |
The processes of preparing an MLV expert valuation and setting the mortgage lending value of real estate described above are executed by two independent individuals.
PKO Bank Hipoteczny SA maintains a cover pool for its mortgage covered bonds.
The manner of maintaining the cover pool is governed by:
• the Polish Covered Bonds and Mortgage Banks Act of 29 August 1997 (Journal of Laws of 2022, item 581, as amended) (hereinafter: the “Act”);
• Resolution No. 633/2015 of the Polish Financial Supervision Authority dated 1 December 2015 on defining the form of the cover pool;
• Recommendation K of the PFSA of 9 February 2016 concerning the principles for maintaining the cover pool by mortgage banks.
The Cover Pool Monitor and Deputy Cover Pool Monitor are supervising the cover pool on an ongoing basis.
The Bank includes in the cover pool residential loan receivables secured with the first mortgage entered in the Land and Mortgage Register, and rights and funds that constitute the basis for issuing mortgage covered bonds, as well as additional funds that constitute the excess to cover interest on outstanding mortgage covered bonds which is due in the following six months. The mortgage covered bonds are secured by receivables secured with the first mortgage on the real estate. The following Bank’s funds can also constitute the basis for issuing mortgage covered bonds:
• invested in securities issued or guaranteed by the National Bank of Poland, the European Central Bank, governments and central banks of EU Member States and/or the Organisation for Economic Cooperation and Development, excluding countries that are restructuring or have restructured their foreign debt in the past 5 years;
• deposited with the National Bank of Poland;
• deposited with domestic banks or credit institutions referred to in Article 18.3 (3) of the Act.
The nominal value of loans entered in the Bank’s cover pool representing collateral for the mortgage covered bonds issued totalled PLN 16,768.2 million at 31 December 2023. The nominal value of the over-collateralization in the form of securities issued by the State Treasury, denominated in PLN, stood at PLN 205 million. As at 31 December 2022, these figures were PLN 18,560.2 million and PLN 285 million, respectively. The Bank’s mortgage covered bonds cover pool also included CIRS transactions hedging foreign exchange risk and interest rate risk of the mortgage covered bonds denominated in EUR and IRS transactions hedging the interest rate risk of fixed rate mortgage covered bonds issued in PLN.
In 2023 and in the previous years the cover pool did not include asset-backed securities (ABS), which do not meet the requirements specified in paragraph 1 of Article 80 of the Guideline (EU) 2015/510 of the European Central Bank of 19 December 2014 on the implementation of the Eurosystem monetary policy framework (ECB/2014/60) (recast).
The following table presents basic data on the cover pool as at 31 December 2023 and 31 December 2022:
|
31.12.2023 |
31.12.2022 |
Total cover pool, including (in PLN million) |
16,973.2 |
18,845.2 |
loans secured by mortgages (in PLN million) |
16,768.2 |
18,560.2 |
other assets[18] (in PLN million) |
205.0 |
285.0 |
Liquidity buffer[19] (in PLN million) |
232.9 |
268.1 |
Nominal value of hedging transactions[20] (in PLN million) |
6,685.9 |
9,551.2 |
Number of loans |
98,681 |
107,171 |
Average loan value (PLN’000) |
169.9 |
173.2 |
Average time since loan issuance (seasoning) (months) |
84.3 |
74.8 |
Average maturity (months) |
239.6 |
245.1 |
Average LtV (loan amount to market value) (%) |
34.0 |
36.9 |
Average loan to mortgage lending value of real estate (%) |
63.5% |
64.8 |
Over-collateralization[21] (%) |
63.0 |
62.8 |
The purpose of the Cover Pool Monitor is to ensure protection of the material interests of the holders of mortgage covered bonds. The Polish Covered Bonds and Mortgage Banks Act guarantees protecting the independence of the Monitor and Deputy Monitor. Monitors are appointed by the Polish Financial Supervision Authority, upon the request of the Bank’s Supervisory Board, for a period of six years.
Due to the lapse of the six-year period referred to above, on 5 March 2021 the PFSA appointed the Cover Pool Monitor and the Deputy Cover Pool Monitor for PKO Bank Hipoteczny SA, and the same persons were reappointed:
|
Function |
Appointment date |
Date of dismissal / resignation |
Tadeusz Swat |
Cover Pool Monitor |
05.03.2021 |
- |
Grzegorz Kędzia |
Deputy Monitor |
05.03.2021 |
- |
Acting under the Polish Covered Bonds and Mortgage Banks Act, PKO Bank Hipoteczny SA is obliged to monitor and comply with designated limits related to the operations of a mortgage bank.
On 8 July 2022, the amended Polish Covered Bonds and Mortgage Banks Act came into force. By that date, the Bank made the necessary changes to its internal regulations to ensure compliance with the amended act.
The statutory limits and their utilization as at 31 December 2023 and 31 December 2022 were as follows:
Limit |
Legal basis |
Limit level |
Actual level |
|
31.12.2023 |
31.12.2022 |
|||
Ratio of the value of funds received from the issue of mortgage covered bonds designated for refinancing loans secured by mortgages or receivables in respect of such loans acquired from other banks to 80% of the mortgage lending value of particular residential real estate that constitute the collateral |
Article 14 |
≤100% |
59.4% |
63.7% |
Ratio of the total value of acquired shares in other entities to the Bank’s own funds |
Article 15.1(5) |
≤10% |
0.0% |
0.0% |
Ratio of the total value of loans and advances taken out and bonds issued to the Bank’s own funds |
Article 15.2 |
≤1000% |
408.1% |
471.6% |
Ratio of the total amount of loans and advances taken out and bonds issued to the amount designated for refinancing of activities described in Article 12 of the Act, i.e. issue of loans secured and unsecured by mortgages, acquiring receivables from other banks on loans granted by them and secured or unsecured by mortgage |
Article 15.3 |
≤100% |
36.9% |
37.9% |
Ratio of the nominal value of mortgage covered bonds outstanding to the sum of the Bank’s own funds and the general risk provision |
Article 17 |
≤4000% |
642.1% |
791.3% |
Ratio of the sum of nominal amounts of mortgage-secured receivables and amounts of the Bank’s rights and additional funds entered to the cover pool which constitute the basis for issuing mortgage covered bonds to the total nominal value of outstanding mortgage covered bonds (including hedging instruments) |
Article 18.1 |
≤105% |
163.0% |
162.8% |
Ratio of the sum of nominal amounts of mortgage-secured receivables which constitute the basis for issuing mortgage covered bonds to the total nominal value of outstanding mortgage covered bonds |
Article 18.1 |
≤85% |
161.7% |
154.8% |
Ratio of interest expense on outstanding mortgage covered bonds (overnight interest as at the date of account transfer) to interest income on mortgage-secured receivables and amounts of the Bank’s rights and additional funds entered to the cover pool (overnight interest as at the date of transfer of the account), with the exception of assets in default within the meaning of Article18.2a of the Act |
Article 18.2 |
≤100% |
34.3%[22] |
30.2%22 |
Ratio of the Bank’s funds constituting the excess referred to in Article 18.3a and 18.3c of the Act to the maximum cumulative outflows of net liquidity over the following 180 days. Outflow of net liquidity constitutes outflows of payments maturing on a given payment date including payments of the nominal value of mortgage covered bonds plus interest and payments with respect to derivative instruments under the mortgage covered bonds programme, after deducting inflows of payments from assets securing the mortgage covered bonds maturing on the same date. To calculate the amount of payment of the nominal value of a mortgage covered bond, the period to maturity of the mortgage covered bonds extended by 12 months is used |
Article 18.3a, 3aa, 3b and 3d |
≤100% |
2839.5% |
5541.3% |
Ratio of the value of receivables secured on mortgages established during the execution of a construction project to the total value of mortgage-secured receivables constituting the basis for issuing mortgage covered bonds |
Article 23.1 sentence 1 |
≤10% |
1.4% |
1.6% |
Ratio of receivables secured on mortgages established on real estate earmarked for development in a local zoning plan to the value of receivables secured on mortgages established during the execution of a construction project constituting the basis for issuing mortgage covered bonds |
Article 23.1 sentence 2 |
≤10% |
0.0% |
0.0% |
The Bank obtained positive results of the liquidity tests and coverage balance tests conducted as at the end of 2023 and 2022.
Qualified staff
Organizational structure of PKO Bank Hipoteczny SA
Powers of the governing bodies and committees of PKO Bank Hipoteczny SA
The Management Board of PKO Bank Hipoteczny SA
The Supervisory Board of Bank Hipoteczny SA
Remuneration and Human Resources Management Policy
Benefits for Key Management of PKO Bank Hipoteczny SA
The Bank implements tools and procedures to guarantee that the Bank’s staff has the highest qualifications in its key areas of operation. The Bank systematically raises the qualifications of its staff and is committed to ensuring stability of its workforce. These factors have a significant impact on the pursuit of the Bank’s strategy and its business objectives, and therefore on its operations and performance.
PKO Bank Hipoteczny SA is managed on the basis of the organizational structure presented in the chart below and within the framework of the duties of the Bank’s Governing Bodies, described in the following section of this chapter.
The competences of the General Shareholders’ Meeting of the Bank include in particular:
• appointing and dismissing members of the Supervisory Board and determining the principles for remunerating them and covering the costs related to the performance of the function of a Supervisory Board member by the Bank;
• determining the procedures for redeeming shares, the compensation for such redeemed shares and granting consent for the purchase of the Bank’s treasury shares for redemption purposes;
• creating and dissolving special funds accumulated from net profit;
• adopting resolutions on the issue of bonds convertible into shares or other instruments entitling the holder to acquire or take up shares in the Bank;
• adopting resolutions on the liquidation, disposal or lease of the enterprise of the Bank or its organized part and establishing limited property rights over them;
• adopting resolutions on the settlement of claims for damage caused at the establishment of the Bank, or by the exercise of management or supervision;
• granting consent for the Bank taking up, acquiring – to the extent allowed by the Act – as well as for selling or encumbering shares in companies by the Bank, redeeming shares in companies held by the Bank, as well as making additional payments to such companies by the Bank, making contributions, investing and disinvesting in companies and granting consent for the purchase and sale of bonds or other securities convertible into shares;
• assessing whether the Bank’s remuneration policy Bank contributes to the development and safety of the Bank’s operations;
• granting consent to dispose of intangible fixed assets, property, plant and equipment, including making contributions to a company or cooperative if the market value of the assets exceeds 5% of total assets determined on the basis of the latest approved financial statements, and offering these assets for use to another entity, for a period longer than 180 days in a calendar year, based on a legal transaction, if the market value of the subject matter of the legal transaction exceeds 5% of total assets;
• granting consent to purchasing property, plant and equipment with a value exceeding PLN 100,000,000 or 5% of total assets determined on the basis of the latest approved financial statements;
• assessing the adequacy of internal regulations relating to the functioning of the Supervisory Board and assessing the effectiveness of the operations of the Supervisory Board.
The competences of the Bank’s Supervisory Board include in particular:
• approving the Bank’s annual financial plan and long-term development plans (in particular the Bank’s strategy);
• approving the compliance policies of the Bank;
• approving the Bank’s management strategy, the risk management strategy, including the general level of risk at the Bank, the policy for estimating internal capital and capital management and reviewing the internal capital assessment strategies and procedures and capital management procedures;
• approving the policies for creating and changing the Bank’s products;
• approving the audit charter, the internal audit function’s strategy, the annual and long-term internal audit plans and the principles for cooperation with the internal audit function at PKO Bank Polski SA and the statutory auditor;
• approving and periodically reviewing the general principles of the remuneration policy concerning persons whose professional activities significantly affect the Bank’s risk profile;
• approving the operating principles of internal controls, the criteria for assessing the adequacy and effectiveness of the internal control system and the principles for classifying irregularities discovered by the internal controls;
• approving the Management Board Rules;
• approving the Regulations for Setting the Mortgage Lending Value of real estate, which take effect after the approval by the PFSA;
• approving the Code of Ethics and the Rules for the Management of Conflicts of Interest;
• approving the framework organizational structure of the Bank, adjusted to the scale and profile of the risk taken on by the Bank;
• approving the results of reviews of the performance of the cooperation agreements concluded with PKO Bank Polski SA;
• adopting the Supervisory Board Rules;
• appointing and dismissing individual members of the Management Board, including specifying the detailed principles and procedures of conducting qualification procedures for Management Board members;
• suspending, if there are important reasons, individual or all members of the Management Board in their functions and delegating members of the Supervisory Board to temporarily perform the functions of the members of the Management Board who were suspended, resigned or cannot perform their functions for other reasons, for a period of no longer than three months;
• giving consent to a member of the Management Board to conduct competitive activities or participate in a competitive company as a partner in a civil law partnership or general partnership, or as a member of the authorities of a commercial company, or to participate in another competitive legal person as a member of its authorities;
• giving consent to creating and winding up the Bank’s branches and other organizational units of the Bank in Poland and abroad, granting prior permission to the Management Board to acquire, encumber or sell real estate, interest in real estate or the right of perpetual usufruct therein; the permit is not required if the acquisition of the real estate, interest in the real estate or its perpetual usufruct being sold is conducted under executory, bankruptcy, composition proceedings or another type of arrangement with the Bank’s debtor;
• giving opinions on entertainment expenses and expenses on legal, marketing, PR and social communication, and management advisory services;
• giving consent for the Bank to conclude a contract and for amending a contract concluded by the Bank for legal, marketing, public relations, social communication and management advisory services, if the amount of the total remuneration stipulated with respect to the provision of such services in the given contract or in other contracts concluded with the same entity exceeds PLN 500,000 net during one year and in which the maximum remuneration is not defined;
• giving consent for the conclusion of a donation agreement or another agreement with a similar effect exceeding PLN 20,000 or 0.1% of the value of total assets determined based on the latest approved financial statements;
• giving consent for the conclusion of a loan forgiveness agreement or another agreement with a similar effect exceeding PLN 50,000 or 0.1% of the value of total assets determined based on the latest approved financial statements;
• giving opinions on the application of good practices;
• representing the Bank in agreements with members of the Management Board;
• approving the policy and procedures for selecting an audit firm responsible for auditing the Bank’s financial statements and the policy for providing permitted non-audit services by the audit firm performing the audit, its related entities and members of its network;
• selecting an audit firm to conduct an audit or review of the Bank’s financial statements;
• assessing the Directors’ Report on the Bank’s activities and the financial statements for the previous financial year in terms of their consistency with the books of account and documents and the factual situation, and the proposals of the Management Board concerning the distribution of profit or the offsetting of losses and presenting a written annual report on the results of these assessments to the General Shareholders’ Meeting;
• assessing the adequacy and effectiveness of the internal governance, internal control system, including the control function of the compliance unit and the internal audit unit, as well as assessing the adequacy and effectiveness of the risk management system;
• assessing the effectiveness of managing the compliance risk by the Bank;
• assessing the adequacy and effectiveness of the whistleblowing procedure with respect to violations of the law and of the procedures and ethical standards in force at the Bank;
• supervising the implementation of the management system and assessing the adequacy and effectiveness of the system;
• applying to the PFSA for consent to appoint two members of the Management Board, including the President of the Management Board and the member of the Bank’s Management Board responsible for managing risks material to the Bank’s operations, and to entrust the function of the member of the Management Board responsible for supervising the management of risks material to the Bank’s operations to an appointed member of the Management Board;
• informing the PFSA about including on the agenda of a Supervisory Board meeting items concerning: (i) dismissing the President of the Management Board; (ii) dismissing the member of the Management Board supervising material risk management or entrusting his duties to another member of the Board;
• applying to the PFSA for consent to the appointment of the Bank’s Cover Pool Monitor and Deputy Cover Pool Monitor;
• granting consent to appointing and dismissing the person managing the compliance and internal audit unit;
• granting consent to changing the registered office or location (address) of the Bank;
• assessing the functioning of the Bank’s remuneration policy and submitting relevant reports to the General Shareholders’ Meeting;
• assessing the application of the Principles of Corporate Governance for Supervised Institutions by the Bank.
In 2023, the Supervisory Board committees which operated in the Bank had, in particular, the following competences:
Audit and Finance Committee
|
• monitoring and periodically expressing opinions on: (i) the adequacy and effectiveness of the internal control system, risk management system and internal audit, including financial reporting; (ii) the effectiveness of the Bank’s compliance risk management and the adequacy of the compliance unit; (iii) the application of the Principles of Corporate Governance for Supervised Institutions and implementation and application of internal governance, and its adequacy and effectiveness; (iv) the adequacy and effectiveness of the whistleblowing policy and the ethical procedures and standards in force at the Bank, using the information obtained from the Bank, the Risk Committee, independent statutory auditor and from other sources; • giving opinions on the proposed annual and tri-annual internal audit plans; • giving opinions on Management Board information relating to the operation of the internal control system, the manner of ensuring independence of the internal audit and the compliance units, and ensuring funds for the purpose of performing tasks and improving the qualifications and skills of the units’ staff; • monitoring the financial reporting process, including the review of the Bank’s interim and annual financial statements, and expressing opinions on them; • monitoring the performance of audit work, in particular the audits performed by external audit firms, in consideration of all the conclusions and findings of the Audit Supervision Committee from the inspection of the audit firm; • controlling and monitoring the independence of the statutory auditor and the audit firm, including an evaluation of independence risks and safeguards, in particular when other, non-audit services are provided to the Bank by the audit firm; • obtaining a representation confirming the independence of the audit firm and of the auditors performing the audit of the Bank’s financial statements annually; • developing a policy for selecting an audit firm to conduct the audit and providing the Supervisory Board with recommendations as to the policy adopted; • developing a procedure for selecting the audit firm and providing the Supervisory Board with recommendations as to the procedure adopted; • developing a policy for providing permitted non-audit services by the audit firm which conducts the audit, its related entities, and by a member of the audit firm’s network, and presenting recommendations on adopting the policy to the Supervisory Board; • providing the Supervisory Board with recommendations as to the appointment of the audit firm to conduct the audit of the Bank’s financial statements; • giving consent for the provision of permitted non-audit services by the auditor, the audit firm which conducts the audit, and in the event that the auditor or audit firm are part of a network – for every member of such a network; • assessing the reasons for terminating a contract with the audit firm conducting the audit; • agreeing the policies for conducting audit activities by the audit firm performing the audit, in consideration of the proposed audit plan; • informing the Supervisory Board of the audit results and explaining how the audit contributed to the fairness of the Bank’s financial reporting and what was the role of the Committee in the audit process; • analysing the effectiveness of functioning of the internal controls and credit risk management system with respect to the correct determination of the allowances for expected credit losses; • assuring compliance with all the requirements relating to the independence of a statutory auditor by external audit firms participating in the development of the IFRS 9 models and the processes of estimating allowances for expected credit losses; • submitting an additional audit report referred to in Article 11 of the Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 to the Management and Supervisory Boards; • submitting recommendations aimed at ensuring the fairness of the Bank’s financial reporting to the Supervisory Board; • giving opinions on the Bank’s strategic and financial plans; • giving opinions on Management Board resolutions with respect to the internal control system, the approval of which is the responsibility of the Supervisory Board; • analysing information and periodic reports in the area of particular internal control components; • meeting with the manager of the finance and accounting function at least once a year; • meeting with the manager of the internal audit unit and the manager of the compliance unit at least once a year – without the participation of members of the Bank’s Management Board; • giving opinions on appointing and dismissing, as well as on the remuneration of the manager of the internal audit unit and of the compliance unit. |
Risk Committee |
• giving opinions on the Bank’s overall current and future risk appetite; • giving opinions on the risk management strategy developed by the Management Board and the information on implementation of the said strategy submitted by the Management Board; • supporting the Supervisory Board in overseeing the implementation of the Bank’s operational risk management strategy by top management; • reviewing the prices of liabilities and assets offered to customers to check whether they are fully compliant with the Bank’s business model and its risk management strategy, and if they do not appropriately reflect the types of risk consistent with this model and strategy, presenting proposals to ensure the adequacy of the prices of liabilities and assets with respect to risk to the Bank’s Management Board; • monitoring conformity of the Bank’s risk-taking policy with the strategy and the financial plan; • analysing periodic risk reports, including the utilization of strategic risk tolerance limits and developing relevant guidelines on their basis; • issuing opinions about capital adequacy, the rules of evaluation of creditworthiness, the risk measurement models, the impairment model; • giving opinions on the disclosure policies regarding capital adequacy, the management of capital adequacy, liquidity risk, operational risk, model risk, and impairment measurement risk; • giving opinions on the draft Rules on setting the Mortgage Lending Value of real estate; • submitting information relevant for monitoring the effectiveness and adequacy of the Bank’s risk management system to the Audit and Finance Committee; • assessing the information received on potential non-compliance with the management strategy adopted by the Bank, its risk management strategy, adopted risk appetite and other policies approved by the Bank’s Management Board. |
Remuneration And Nomination Committee |
• annually assessing the structure, size, composition and effectiveness of the Bank’s Management Board and recommending potential changes in this respect to the Supervisory Board; • annually assessing the knowledge, competences and experience of the Management Board as a whole, and of particular members of the Board, and informing the Management Board of the results of the assessment; • periodically reviewing the Policy on assessing the suitability of candidates for members of the Management Board and key employees, and presenting respective recommendations to the Management Board; • recommending candidates for members of the Management Board and the scope of their responsibilities; • submitting proposals relating to appropriate forms of contracts with members of the Bank’s Management Board to the Supervisory Board; • preparing opinions on the Code of Ethics and the Principles for Management of Conflicts of Interest; • preparing opinions on requests concerning the consent for a member of the Management Board to engage in competitive activities or to participate in a competing company as a partner in a civil law company, a sole proprietorship or as a member of a governing body of a commercial company, or to participate in another competing legal person as a member of its governing body; • giving opinions on and performing periodic reviews, subject to the approval of the Supervisory Board, of the general principles of the policy for remunerating Material Risk Takers; • supporting the Supervisory Board in the process of giving opinions on the functioning of the Bank’s remuneration policy and respective reporting to the General Shareholders’ Meeting; • giving opinions on and monitoring the variable remuneration components of Material Risk Takers, second-level risk management, the compliance unit manager and the internal audit unit manager; • giving opinions on the amount of fixed remuneration for the manager of the internal audit unit and of the compliance unit; • giving opinions on the detailed rules and procedures for recruiting members of the Bank’s Management Board and assessing the suitability of members of the Bank’s Management Board; • preparing and carrying out, with potential support from external independent entities, the programme for raising the qualifications of members of the Supervisory Board. |
Commercial Committee |
• evaluating the results of reviews of the performance of the cooperation agreements concluded with PKO Bank Polski SA; • giving opinions on material changes to the criteria for qualifying products for the Bank; • giving opinions on products to be introduced to the Bank’s offer and the directions of changes in the Bank’s product offer; • monitoring and supervising the outsourcing of internal processes. |
The competences of the Bank’s Management Board include in particular:
• defining the Bank’s strategy, taking into account the operational risk and the principles of prudent and stable management of the Bank;
• determining the risk management strategy and the general level of the Bank’s risk tolerance;
• determining the annual financial plan of the Bank, including the conditions for its implementation;
• creating and dissolving the Bank’s standing committees and determining their responsibilities;
• adopting Regulations: (i) for managing special funds accumulated from net profit, (ii) organizational regulations and the principles for segregating duties, (iii) of the Management Board, (iv) for determining the Mortgage Lending Value of real estate;
• appointing proxies and determining the principles for their appointment in the Bank;
• approving the operating principles of the internal control system, the criteria for assessing the adequacy and effectiveness of the internal control system and the principles for classifying irregularities detected by the internal control system;
• approving the audit charter, the principles of cooperation between the internal audit unit and its counterpart in PKO BP and the statutory auditor, giving opinions on the operating strategy of the internal audit unit and on the annual and multi-annual internal audit plans;
• creating, transforming and winding up the Bank’s branches and other organizational units in Poland and abroad;
• deciding on issues of mortgage covered bonds;
• determining the operating principles of the management system, including in particular: (i) the principles of capital adequacy disclosure policy, (ii) the assumptions of the compliance risk management policy, (iii) the principles of managing capital adequacy and equity which relate to the estimation of internal capital, capital management, capital planning and dividend policy, (iv) the rules for managing particular risks;
• periodically assessing and verifying compliance with the Bank’s internal governance, including assessing the adequacy of the Bank’s internal regulations governing the operations of the Management Board and their effectiveness;
• determining accounting policies;
• approving the Bank’s annual financial statements;
• developing a remuneration policy;
• specifying banking products;
• determining the principles of the Bank’s participation in companies and other organizations;
• deciding on payment of interim dividend to the shareholders;
• deciding on the Bank’s conclusion of contracts with third parties the value of which on an annual basis equals or exceeds PLN 500,000.00 (in words: five hundred thousand zlotys) or the total value of which equals or exceeds PLN 2,000,000.00 (in words: two million zlotys);
• convening the General Shareholders’ Meetings, making the required announcements in the manner specified in legal regulations and notifying of circumstances which have to be entered to the National Court Register;
• making decisions on issues requested by a member of the Management Board or submitted for consideration by the Supervisory Board.
The Bank’s Management Board appointed the following standing committees with the following competences as at 31 December 2023:
The Asset and Liability Committee |
• supporting the management of liquidity, interest rate and business risks – including macroeconomic, currency, capital risk – including leverage risk – and the related risk of models for their measurement; • managing of the Bank’s capital adequacy; • reviewing documents concerning capital adequacy, equity, internal capital, stress testing, the aforementioned risks and the tolerance limits for those risks; • making decisions concerning the Bank’s operations, particularly in relation to risk measures and limits, risk management, result of the validation of risk models, stress-test assumptions, hedging strategies under hedge accounting and recommendations for the Management Board with regard to launching emergency measures relating to capital and emergency measures relating to liquidity; • giving recommendations for the relevant governing bodies of the Bank, organizational units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences. |
Credit Committee |
• supporting the management of credit, concentration and residual risks, as well as the risk of the models measuring such risks; • reviewing documents concerning the risks mentioned above, the profile and quality structure of the loan portfolio, impairment allowances, acquisition of loan portfolios and the real estate market; • making decisions concerning the Bank’s operations, particularly in relation to risk measures and limits, results of the validation of risk models, methodologies for and models of calculation of impairment allowances in respect of credit assets, cut-offs used in the assessment of credit risk, loan receivables purchased by the Bank and individual loan transactions; • giving recommendations for the relevant governing bodies of the Bank, organizational units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences. |
Operational Risk and Data Quality Committee
|
• effective management of operational risk, improving the safety of the Bank’s operating activities; • outsourcing risk management; • determining the directions of development of operational risk management; • supervising the functioning of operational risk management, including tasks relating to ensuring the Bank’s business continuity and the security of the IT and info-communication environment; • setting tasks in the event of emergencies putting the Bank’s image at risk, which could lead to operating losses; • determining the directions of operations in the area of managing the quality of data and data architecture in the Bank, in the context of the Data Management System (DMS); • supervising the Data Management System, including assessing its effectiveness and actions of the Bank’s particular organizational units; • issuing recommendations for the relevant governing bodies of the Bank, organizational units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences. |
Strategy and Business Initiatives Committee |
• determining the directions of the strategic planning and managing the Bank’s strategy and the IT strategy; • determining the directions and monitoring the implementation of initiatives related to the pursuit of the Bank’s strategy and the IT strategy; • determining the directions of change in the product offer and in the lending process; • determining the directions of work on the products’ profitability; • managing the reputation risk and compliance risk; • issuing recommendations for the relevant governing bodies of the Bank, organizational units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences. |
Green Covered Bonds Committee |
• supervising the issue of Green Covered Bonds, including determining the directions of changes in the principles of issuing Green Covered Bonds and assessing and selecting assets eligible for funding with the Green Covered Bonds; • examining materials relating to the guidelines and principles set by the International Capital Markets Association (ICMA) for the Green Covered Bonds market, domestic regulations on the binding energy efficiency standards, reporting on the allocation of funds raised from issues and the impact on the funding environment gained by issuing the Green Covered Bonds, in accordance with the rules for issuing the Green Covered Bonds in force at the Bank and investor information with respect to the Green Covered Bonds; • making decisions relating to the Bank’s operations, among other things, in relation to assessing and selecting eligible loans according to the methodology adopted by the Bank and adopting the rules for issuing Green Covered Bonds by the Bank in line with the relevant guidelines; • giving recommendations for the relevant governing bodies of the Bank, organizational units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences. |
In 2023, the composition of the Management Board of PKO Bank Hipoteczny SA was as follows:
|
Function |
Position holding period |
Katarzyna Kurkowska-Szczechowicz |
President of the Management Board
Vice-President of the Management Board responsible for managing the work of the Management Board |
27.01.2023 – to date 01.10.2022 – 26.01.2023
|
Piotr Jaworski |
Vice-President of the Management Board |
01.07.2023 – to date |
Piotr Kochanek |
Vice-President of the Management Board |
01.01.2019 – to date |
Stanisław Skoczylas |
Vice-President of the Management Board |
06.10.2022 – to date |
Katarzyna Surdy |
Vice-President of the Management Board |
01.10.2021 – 31.08.2023 |
On 27 January 2023, the Polish Financial Supervision Authority granted its unanimous consent to the appointment of Ms Katarzyna Kurkowska-Szczechowicz as President of the Bank’s Management Board for the current joint four-year term of office.
On 19 May 2023 the Supervisory Board appointed the following people for a new joint term of office of the Bank’s Management Board – as of the day following the date of the General Shareholders’ Meeting which approved the financial statements for the financial year ended 31 December 2022: Ms Katarzyna Kurkowska-Szczechowicz as President of the Management Board and Mr Piotr Jaworski, Mr Piotr Kochanek, Mr Stanisław Skoczylas and Ms Katarzyna Surdy as Vice-Presidents of the Management Board.
On 30 June 2023, the Annual General Shareholders’ Meeting:
• approved the financial statements for the financial year ended 31 December 2022,
• gave a vote of approval to: (i) the President of the Management Board, Mr Daniel Goska; (ii) Vice-President of the Management Board, Mr Piotr Kochanek; (iii) Vice-President of the Management Board, Ms Katarzyna Surdy; (iv) Vice-President of the Management Board, Ms Katarzyna Kurkowska-Szczechowicz; (v) Vice- President of the Management Board, Mr Stanisław Skoczylas; and (iv) member of the Supervisory Board delegated to perform the tasks of a member of the Management Board, of Mr Jakub Niesłuchowski.
On 28 August 2023, Ms Katarzyna Surdy resigned from the Bank's Management Board and from her position as Vice-President of the Bank's Management Board with effect as of the end of day on 31 August 2023.
The Supervisory Board specified the following internal segregation of key competences within the Bank’s Management Board, which was as follows as at 31 December 2023:
Katarzyna Kurkowska-Szczechowicz |
President of the Management Board responsible for overseeing the internal audit function, compliance risk management, human resources management and AML/CFT matters, as well as security and legal services |
Other functions performed: |
Chairperson of the Strategy and Business Initiatives Committee Chairperson of the Asset and Liability Committee Chairperson of the Green Covered Bonds Committee Deputy Chairperson of the Operational Risk and Data Quality Committee |
Piotr Jaworski |
Vice-President of the Management Board responsible for overseeing the issuance of securities, raising funding, communication and the creation and development of the product offering, activities relating to coordination of the sale of products and the acquisition of loan receivables and the process of their further servicing, the functioning and efficiency of IT resources |
Other functions performed: |
Deputy Chairperson of the Strategy and Business Initiatives Committee Member of the Asset and Liability Committee Member of the Credit Committee Member of the Operational Risk and Data Quality Committee Member of the Green Covered Bonds Committee |
Piotr Kochanek |
Vice-President of the Management Board responsible for overseeing management of all risks relating to the Bank’s operations, with the exclusion of compliance and reputation risk, and supervision over the process of assessing creditworthiness and determining the Mortgage Lending Value of real estate, as well as restructuring and debt collection processes |
Other functions performed: |
Chairperson of the Credit Committee Chairperson of the Operational Risk and Data Quality Committee Deputy Chairperson of the Asset and Liability Committee Deputy Chairperson of the Green Mortgage Bonds Committee Member of the Strategy and Business Initiatives Committee |
Stanisław Skoczylas |
Vice-President of the Management Board responsible for overseeing financial planning and financial control matters, accounting and financial reporting matters and clearing and confirming treasury transactions |
Other functions performed: |
Member of the Asset and Liability Committee Member of the Strategy and Business Initiatives Committee |
Other management functions of the Management Board members
|
Function |
Position holding period |
Katarzyna Kurkowska-Szczechowicz |
Did not perform any additional functions as member of the Management Board or of the Supervisory Board and did not hold any other positions as director |
Throughout the reporting period |
Piotr Kochanek |
Did not perform any additional functions as member of the Management Board or of the Supervisory Board and did not hold any other positions as director |
Throughout the reporting period |
Stanisław Skoczylas |
Did not perform any additional functions as Member of the Management Board or of the Supervisory Board and did not hold any other positions as director |
Throughout the reporting period |
Piotr Jaworski |
Smartbeta Piotr Jaworski – owner Instytut Zrównoważonej Transformacji – Foundation – member of the Foundation’s Board |
During the period of holding the position |
Recruitment policy concerning the selection of Management Board members and evaluation of Management Board members
The process of selecting and evaluating candidates for members of the Management Board in PKO Bank Hipoteczny SA is carried out by the Remuneration and Nomination Committee of the Bank’s Supervisory Board. The Committee takes into consideration the guidelines of the European Banking Authority on the assessment of the suitability of members of the management body and key function holders (EBA Guidelines) and the Regulation of the Minister of Development and Finance of 10 March 2017 on information and documents concerning the founders and a bank's Management Board to be submitted to the PFSA, as well as the Methodology for assessing the suitability of members of the bodies of entities supervised by the PFSA. During the selection of candidates, the Committee also takes into consideration the profile, scope and scale of operations of PKO Bank Hipoteczny SA. In assessing a candidate the Committee also verifies whether the candidate’s experience and knowledge will strengthen the abilities of other members of the Bank’s Management Board, and complement them, so as to ensure the coverage of all areas managed in the Bank. The purpose of this criterion is to ensure variety in the selection of members of the managing body, its purposes, tasks and scope of operation.
Before their appointment, all members of the Management Board of PKO Bank Hipoteczny SA were subjected to an evaluation of their suitability, in accordance with the EBA and PFSA guidelines.
Members of the Management Board are subject to a continuous evaluation by the Supervisory Board’s Remuneration and Nomination Committee and the Supervisory Board, beginning from the moment of recruitment and continuing through their entire term of office. Moreover, pursuant to Article 395 § 2(3) of the Commercial Companies Code, each year the annual General Shareholders’ Meeting grants each individual member of the Management Board a vote of approval. The granting of this vote of approval constitutes an evaluation of the Management Board members, which is independent of the approval of the Bank’s Directors’ Report by the General Shareholders’ Meeting.
The process described above for appointments to perform functions on the Management Board and the positive evaluation of members of the Bank’s Management Board constitutes confirmation of the proper performance of their duties, based on adequate knowledge, abilities and experience, in accordance with the requirements of Article 22aa of the Banking Law.
In 2023, the composition of the Supervisory Board of PKO Bank Hipoteczny SA was as follows:
|
Function on the Supervisory Board |
Appointment date |
Date of dismissal / resignation |
||||||
Mieczysław Król |
Chairman |
27.08.2021 |
|
√ |
|
|
|
Ch |
D |
Maciej Brzozowski |
Deputy Chairman |
05.05.2022 |
|
√ |
|
|
D |
D |
|
Tomasz Baum |
Member of the Supervisory Board |
06.12.2022 |
|
√ |
√ |
M |
|
|
|
Lucyna Kopińska |
Member of the Supervisory Board |
01.09.2019 |
|
√ |
|
|
|
|
M |
Jadwiga Lesisz |
Member of the Supervisory Board |
01.09.2019 |
|
√ |
√ |
Ch |
M |
|
|
Paweł Metrycki |
Member of the Supervisory Board |
05.05.2022 |
|
√ |
|
D |
Ch |
|
M |
Jakub Niesłuchowski |
Member of the Supervisory Board
|
28.04.2022
|
|
√ |
|
|
|
|
Ch |
Ilona Wołyniec |
Member of the Supervisory Board |
30.03.2019 |
30.06.2023 |
|
|
|
|
|
|
Piotr Jaworski |
Member of the Supervisory Board |
13.02.2023 |
30.06.2023 |
|
|
|
|
|
|
Ch – Chairperson of the Committee, D – Deputy Chairperson of the Committee, M – member of the Committee
The composition of the Committees is presented as at 31 December 2023.
On 30 June 2023, the annual General Shareholders’ Meeting:
• gave a vote of approval to the following members of the Supervisory Board: (i) Mr Mieczysław Król, Chairman of the Supervisory Board; (ii) Mr Paweł Metrycki; (iii) Ms Lucyna Kopińska; (iv) Ms Jadwiga Lesisz; (v) Ms Ilona Wołyniec; (vi) Mr Maciej Brzozowski; (vii) Mr Jakub Niesłuchowski; (viii) Mr Piotr Kwiecień; (ix) Ms Elżbieta Bugaj; and (x) Mr Tomasz Baum;
• appointed the following people to the Supervisory Board for a new joint three-year term of office, commencing on the day following the date of this Annual General Shareholders' Meeting: i) Mr Tomasz Baum; (ii) Mr Maciej Brzozowski; (iii) Ms Lucyna Kopińska; (iv) Mr Mieczysław Król; (v) Ms Jadwiga Lesisz; (vi) Mr Paweł Metrycki; and (vii) Mr Jakub Niesłuchowski.
Pursuant to Article 395(2)(3) of the Commercial Companies Code, once a year the annual General Shareholders’ Meeting grants a vote of approval to each individual member of the Supervisory Board. The granting of a vote of approval constitutes an assessment of the members of the Supervisory Board, irrespective of the annual General shareholders’ Meeting's consideration of the Supervisory Board's report on its activities.
The above constitutes confirmation of the proper performance of the Supervisory Board members' duties, based on adequate knowledge, skills and experience, as required by Article 22aa of the Banking Act.
Information on the Audit and Finance Committee
In 2023, the composition of the Audit and Finance Committee of PKO Bank Hipoteczny SA was as follows:
|
Position on the Audit and Finance Committee |
Appointment date |
Date of dismissal / resignation |
|||
Paweł Metrycki |
Deputy Chairman of the Committee |
07.10.2019 |
|
|
√ |
√ |
Jadwiga Lesisz |
Chairperson of the Committee |
05.05.2022 |
|
√ |
√ |
|
Tomasz Baum |
Member of the Committee |
15.12.2022 |
|
√ |
√ |
√ |
Piotr Jaworski |
Member of the Committee |
23.03.2023 |
30.06.2023 |
|
|
|
In 2023, five meetings of the Audit and Finance Committee took place.
Employment
As at 31 December 2023, PKO Bank Hipoteczny SA employed 58 people. This means an increase of 1 employee compared with the end of 2022.
Remuneration Policy
The basic internal regulation with regard to the remuneration policy is the Remuneration Policy of PKO Bank Hipoteczny SA approved by the Supervisory Board. This policy specifies:
• the functions of particular structures and bodies within the Bank in the implementation and application of the Policy and the identification of Material Risk Takers (MRTs);
• the functioning of fixed and variable components of remuneration of the members of the Bank’s Management Board, MRTs and employees other than members of the Management Board and MRTs;
• benefits other than remuneration available to employees.
In addition, the Bank has in place the Remuneration Regulations of PKO Bank Hipoteczny SA implemented by Order of the President of the Management Board. According to the Regulations, the Bank’s employees are entitled to the following remuneration components:
• basic salary;
• bonuses and awards for special achievements in their work;
• additional remuneration for overtime work and night work.
The remuneration policy of PKO Bank Hipoteczny SA is consistent with the principles of proper and effective risk management.
The Bank has no employee share programme.
Basic salary
The Bank has a gender-neutral remuneration policy. Fixed remuneration is calculated with regard to the complexity of the tasks performed in a given organizational structure, the level of responsibility related to a given position, the results achieved and the appraisal of an employee’s competences.
Variable remuneration
The Bank has regulated the process of granting variable remuneration in the Bank Hipoteczny SA Remuneration Policy, the Policy for employing and remunerating members of the Bank’s Management Board and the Policy for remunerating persons whose professional have a material impact on the Bank’s risk profile – Material Risk Takers – and the Policy for granting bonuses to the Bank’s employees.
The targets assigned are aimed at ensuring that the risk associated with the Bank’s operations is taken into account. All targets result from target grids approved by the Bank’s Management Board, which are cascaded to the employees of the individual structures. MRTs are additionally responsible for special projects aimed at executing the Bank’s strategy.
MRTs, who have significant influence on the safety level and stable development of the Bank, are subject to additional remuneration restrictions. Variable remuneration components are granted to MRTs, including the Management Board members, for a particular appraisal year (calendar year) following the settlement of bonus targets, in non-deferred and deferred form. In order to ensure that the results are sustainable, deferred variable remuneration components can be reduced if the Bank’s financial results have deteriorated, the Bank incurred a loss or other variables deteriorated.
Moreover, part of the value of each component is payable in the form of a financial instrument linked to the carrying amount of the Bank’s net assets. Bonus parametrization takes into account the Bank’s situation and the market benchmarks of the financial sector.
With regard to the award and payment of variable remuneration components to members of the Management Board or MRTs, the provisions in the limited scope referred to in Article 9 ca(1b) of the Banking Law apply, i.e. variable remuneration components paid for a given bonus period are not subject to deferral and are paid in full in cash, in the event that the following conditions are cumulatively met:
1) the base amount of the variable remuneration does not exceed the PLN equivalent of EUR 50,000, calculated according to the mid EUR exchange rate announced by the National Bank of Poland on the last working day of the preceding year;
2) the base amount of variable remuneration does not exceed one-third of the total annual remuneration for the bonus period concerned.
The Supervisory Board had rights to approve bonus parameters for the Management Board, and the Management Board for MRTs and other employees.
Irrespective of the bonus system, there is an employee awards system in place in the Bank, as part of which an award fund is created, designated for individual discretionary awards for employees who achieve outstanding results in their professional work or for achievements which brought about which important outcomes for the Bank.
Employee benefits
Additional medical care |
The Bank provides its employees with extra additional care (in addition to occupational medical care provided in accordance with the Labour Code). Different medical packages are assigned to specific job categories. |
Group insurance |
The Bank’s employees have the possibility of joining group insurance, which is paid for by the employees through the Bank. |
MyBenefit cafeteria system |
Under this system, every employee of the Bank can manage the funds assigned to him/her from the Company Social Fund as he/she chooses via an internet platform. |
Employee Pension Scheme (PPE) |
Employees have the possibility of joining the Employee Pension Scheme where the base contribution is fully funded by the employer. |
“Training zone” platform |
Employees have the opportunity to use the Training Zone platform, where training is available in a number of categories including programming, website development, computer graphics, using office software (MS Office, Google), psychology, graphics-photography, managerial skills, etc. |
Principles for remunerating members of the Bank’s Management Board
On 17 May 2023, the Policy for employing and remunerating members of the Management Board of the Bank was adopted by Resolution of the Supervisory Board No. 39/2023. Based thereon, members of the Bank’s Management Board are entitled to:
• fixed remuneration, whose level is set by the Bank’s Supervisory Board in a resolution, separately for each of the members of the Management Board;
• variable remuneration – additional remuneration granted and payable after the appraisal period, in particular in the form of bonuses, awards for special achievements at work, severance pay (other than fixed remuneration and benefits granted based on the applicable law).
Information on the components of remuneration and other benefits for members of the Bank's Management Board during the reporting period is provided in Note 6.7.
Variable remuneration components for members of the Management Board and Material Risk Takers (MRT).
In accordance with the requirements of the CRD, i.e. Commission Delegated Regulation (EU) 2021/923 (as amended) supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile, referred to in Article 92 (3) of the Directive, as well as in connection with the Regulation of the Minister of Finance, Funds and Regional Policy of 8 June 2021 on the risk management system, the internal control system, and the remuneration policy in banks, the following regulations laying down the principles of determining variable remuneration components are in force in the Bank:
• Policy for employing and remunerating members of the Management Board of the Bank, adopted by a Resolution of the Supervisory Board;
• Policy for remunerating persons whose professional have a material impact on the Bank’s risk profile (MRTs);
• The list of positions where professional activities have a material impact on the institution’s risk profile and identification of key functions in the Bank (the list of MRTs).
As at 31 December 2023, the policy on variable remuneration components for Management Board members and MRTs was applicable to four Management Board members, four former Management Board members and 13 MRT positions.
Variable remuneration components are awarded based on the achievement of objectives assigned as part of the Management by Objectives (MbO) system. The maximum amount of variable remuneration cannot exceed 50% of the fixed remuneration for a given appraisal period.
Variable salary components are awarded and paid in the following forms:
• non-deferred;
• deferred.
In 2023 variable remuneration components were paid out based on resolutions adopted in previous periods. In connection with the continued state of the COVID-19 epidemic in Poland, in particular the temporary extraordinary administrative restrictions relating to business operations and the potential economic consequences of this state and their expected impact on the financial sector, taking into consideration the statement of the European Banking Authority dated 15 December 2020 and of the PFSA dated 17 April 2020 on the expectations with respect to banks’ actions relating to paying out variable remuneration components, the decision was taken to temporarily limit the amount of funds for the variable portion of remuneration of members of the Management Board and key managers for 2020.
Both non-deferred and deferred remuneration is granted in cash and in the form of financial instruments (i.e. phantom shares) converted into cash after the retention period, and in the case of deferred remuneration – after the period of deferral.
Each of the accrued components of variable remuneration may be reduced as a consequence of:
• material violations of duties following from the employment contract or contract for services;
• irregularities in the performance of the assigned professional duties;
• material non-compliance with the legal regulations or customer service standards;
• material violation of the principles of community life in relation to other employees and co-workers.
For members of the Management Board, variable remuneration may only be assigned and paid provided that the Directors’ Report and the financial statements for the previous financial year have been approved and the Management Board member has been granted a vote of approval in respect of his/her duties. Variable remuneration may be reduced by the Supervisory Board up to total deprivation of the right to such remuneration in the event that up to the date of payment (in particular within the last three years) a member of the Management Board was responsible for the irregularities referred to above.
A member of the Management Board is entitled to severance pay as a result of the termination of his/her contract for services if he/she ceases to perform the functions of a Management Board member, in an amount equal to three times the fixed portion of remuneration on condition that the function of Management Board member was performed for at least twelve months before the termination of the contract; the period of performing a function on the Management Board includes a period of uninterrupted performance of the function directly before the date of concluding the management contract. A member of the Management Board is entitled to compensation in respect of the ban to engage in competitive activities over a period of six months after termination of the management contract, in the amount of 100% of the fixed portion of remuneration for providing managerial services, following from the contract for services, as at the date of its termination. A member of the Management Board is entitled to contributions to the Employee Pension Scheme over a period of performing the duties of member of the Management Board, which are accrued on the fixed and variable components of remuneration and which are not included in the fixed and variable remuneration; the amount of the contributions is the same as for the Bank’s employees.
In 2023, none of the members of the Management Board and none of the employees at PKO Bank Hipoteczny SA received total remuneration of at least EUR 1 million.
The policy on variable remuneration components for members of the Management Board and MRTs is reviewed annually by the Internal Audit Office, the Remuneration and Nomination Committee of the Bank’s Supervisory Board and by the Supervisory Board of PKO Bank Hipoteczny SA.
In the reporting period, five meetings of the Remuneration and Nomination Committee of the Supervisory Board of PKO Bank Hipoteczny SA were held.
Contracts concluded by and between the Bank and its management
Within the meaning of the provisions of § 2.1 (30)(a) of the Regulation of the Minister of Finance of 29 March 2018 on current and periodical information to be reported by issuers of securities and the conditions for treating information required by the laws of a state other than a Member State as equivalent, the persons managing the Bank are the Management Board members.
In 2023 each of the members of the Bank’s Management Board performed their functions based on the contracts for providing management services concluded with the Bank, which determined – among other things – the terms and conditions relating to remuneration and the ban on performing competitive activities.
Benefits for members of the Supervisory Board
Pursuant to the Resolution of the Extraordinary General Shareholders' Meeting of the Bank of 22 August 2023, members of the Supervisory Board, with the exception of members of the Supervisory Board who are employed by PKO Bank Polski SA or a company of the PKO Bank Polski SA Group or who receive, upon termination of such employment, non-competition compensation from PKO Bank Polski SA or a company of the PKO Bank Polski SA Group, are entitled to a monthly remuneration for performing the function of member of the Supervisory Board in an amount equivalent to one time the basis of assessment referred to in Article 1.3(11) of the Act of 9 June 2016 on the principles of determining the salaries of persons managing certain companies. The remuneration is increased by 10% when an independent member of the Supervisory Board participates in at least one standing committee of the Supervisory Board.
Benefits for independent members of the Supervisory Board (PLN’000) |
01.01.2023 – 31.12.2023 |
01.01.2022 – 31.12.2022 |
Baum Tomasz |
90 |
6 |
Elżbieta Bugaj |
5 |
49 |
Piotr Jaworski |
34 |
- |
Mieczysław Król |
12 |
- |
Piotr Kwiecień |
- |
23 |
Jadwiga Lesisz |
91 |
80 |
Total |
232 |
158 |
Benefits for members of the Management Board received, receivable and potentially receivable
BENEFITS FOR MEMBERS OF THE MANAGEMENT BOARD (PLN’000) |
01.01.2023 - 31.12.2023 |
|||||
Short-term employee benefits |
Other long-term employee benefits – variable cash remuneration[25] |
Share-based payments settled in cash |
||||
Remuneration 01.01.2023-31.12.2023[26] |
Other received 01.01.2023-31.12.2023 |
Received 01.01.2023-31.12.2023 |
Potentially receivable as at 31.12.2023 |
Received 01.01.2023-31.12.2023 |
Potentially receivable as at 31.12.2023 |
|
Katarzyna Kurkowska-Szczechowicz |
596.4
|
|
74.6 |
- |
- |
- |
Piotr Jaworski |
210.0 |
|
- |
- |
- |
- |
Piotr Kochanek |
480.0 |
|
178.0 |
60.7 |
33.1 |
176.8 |
Stanisław Skoczylas |
412.3 |
|
49.7 |
|
- |
- |
Katarzyna Surdy |
280.0 |
|
245.4 |
|
- |
- |
Members of the Management Board who have not performed their functions in 2023 |
- |
|
443.1 |
67.8 |
86.8 |
259.4 |
Total benefits for members of the Management Board |
1978.7 |
|
990.7 |
128.5 |
119.9 |
436.1 |
BENEFITS FOR MEMBERS OF THE MANAGEMENT BOARD (PLN’000) |
01.01.2022 - 31.12.2022 |
|||||
Short-term employee benefits |
Other long-term employee benefits – variable cash remuneration25 |
Share-based payments settled in cash |
||||
Remuneration 01.01.2022-31.12.202226 |
Other received 01.01.2022- 31.12.2022 |
Received 01.01.2022-31.12.2022 |
Potentially receivable as at 31.12.2022 |
Received 01.01.2022-31.12.2022 |
Potentially receivable as at 31.12.2022 |
|
Katarzyna Kurkowska-Szczechowicz |
149.1 |
|
- |
- |
- |
- |
Piotr Kochanek |
480.0 |
|
101.3 |
93.1 |
85.2 |
121.0 |
Stanisław Skoczylas |
99.3 |
|
- |
- |
- |
- |
Katarzyna Surdy |
420.0 |
|
15.7 |
10.5 |
- |
13.6 |
Daniel Goska |
282.1 |
|
65.8 |
47.5 |
12.3 |
61.8 |
Members of the Management Board who have not performed their functions in 2022 |
- |
|
261.0 |
152.6 |
281.5 |
198.5 |
Total benefits for Members of the Management Board |
1,430.6 |
|
443.8 |
303.7 |
379 |
394.9 |
Benefits after the term of the contract for services
In 2023 post-employment benefits with respect to the ban on competition were paid to:
• Daniel Goska in the amount of PLN 82 thousand.
• Katarzyna Surdy in the amount of PLN 105 thousand.
Severance benefits
In the period from 1 January to 31 December 2023 severance benefits were paid to:
• Daniel Goska in the amount of PLN 123 thousand.
• Katarzyna Surdy in the amount of PLN 105 thousand.
• Paulina Strugała in the amount of PLN 38.3 thousand.
• Agnieszka Krawczyk in the amount of PLN 6.5 thousand.
Representation on compliance with the rules for corporate governance
Audit firm
Other information
The Bank’s general principles of corporate governance, i.e. the internal regulations for managing the Bank and controlling its operations, follow from generally binding legal regulations, in particular the Commercial Companies Code, the Banking Law and the principles issued by the Polish Financial Supervision Authority, i.e. the Principles of Corporate Governance for Supervised Institutions and Recommendation Z concerning internal governance in banks.
The Bank has adopted the Principles of Corporate Governance for Supervised Institutions, as issued by the Polish Financial Supervision Authority, on the basis of the following decisions by the Bank’s authorities:
• the Resolution of the Bank’s Management Board of 15 December 2014 – in relation to the powers and duties of the Management Board, i.e. conducting the Bank’s affairs and its representation, in accordance with the generally applicable laws and the Bank’s Articles of Association;
• the Resolution of the Bank’s Supervisory Board of 18 December 2014 – in relation to the powers and duties of the Supervisory Board, i.e. supervising the conduct of the Bank’s affairs, in accordance with the generally applicable laws and the Bank’s Articles of Association;
• the Resolution of the General Shareholders’ Meeting of 22 December 2015 – in relation to the powers reserved for the General Shareholders’ Meeting.
Pursuant to and to the extent arising from the aforementioned decisions, the Bank opted out of the following provisions of the Principles of Corporate Governance for Supervised Institutions:
• the provisions referring to the principles of cooperation and rights of multiple shareholders (§ 8 (4), § 9 (1) and (6), § 10 (3), § 11 (3) and § 31 (3)), which are not applied because the Bank only has a single shareholder;
• chapter 9, concerning the management of assets at the customer’s risk, because the Bank does not conduct operations in this area;
• the principle described in § 22 (1), concerning the independence of Supervisory Board members, manifesting itself primarily in the lack of direct and indirect ties to the supervised institution, members of the management and supervisory bodies, significant shareholders and related parties; however, two members meeting the independence requirements set out in the Act of 11 May 2017 on statutory auditors, audit firms and public supervision were appointed as members of the Bank’s Supervisory Board. (Journal of Laws, item 1089 as amended).
In accordance with the requirement arising from § 27 of the Principles of Corporate Governance for Supervised Institutions, on 1 March 2023, the Supervisory Board evaluated the application of the said Principles in the Bank in 2022. The Supervisory Board positively evaluated the application of the Principles in the Bank confirming that the Principles adopted by the Bank and its authorities were applied adequately to the scale, nature of operations and the specific character of the Bank.
The text of the Principles is available on the website of the Polish Financial Supervision Authority:
The Bank applies Recommendation Z relating to the principles of internal governance in banks, in accordance with the principle of proportionality and adequacy following from the scale, nature and specific character of the Bank.
The Bank represents that when the scope of Recommendation Z covers the same subjects as the Principles of Corporate Governance for Supervised Institutions, the provisions of Recommendation Z prevail. To the extent not governed by Recommendation Z, the Principles of Corporate Governance for Supervised Institutions apply.
The text of Recommendation Z on corporate governance in banks is available on the website of the Polish Financial Supervision Authority:
https://www.knf.gov.pl/knf/pl/komponenty/img/Rekomendacja_Z_70998.pdf
Diversity Policy
Diversity management at the Bank concerns all employees, key managers and the Bank’s authorities. Diversity-related activities affect many aspects of the Bank’s operations and are aimed at respecting each person, ensuring equal treatment of the employees and making use of their potential. Diversity means that people are important regardless of their gender, age, health, sexual orientation, religion, marital status or country of origin. Therefore, the following solutions were implemented in the form of regulations, processes and HR policies:
• The Code of Ethics, the Code of Ethics for suppliers, service providers and bidders cooperating with PKO Bank Hipoteczny in procurement procedures, and the Rules and regulations of the Bank’s operations concerning, among other things, preventing discrimination due to gender, age, disability, race, religion, nationality, political views, trade union membership, ethnicity, religion or sexual orientation, as well as due to employment for a specified or unspecified period or full- or part-time. In addition, the aforementioned documents identify the values, principles, standards of conducting and ethical attitudes in relationships with Customers, in the Bank’s business operations, and in the Bank’s relations with the environment;
• The Bank observes the principles of equal treatment during the recruitment process and at work; the candidate selection processes are based on objective criteria, and their individual stages follow the established procedures;
• The Bank responds to and prevents mobbing, harassment and discrimination, and other forms of unequal and inappropriate treatment without any exceptions.
Diversity policy concerning the management and supervisory staff as at 31 December 2023
Diversity management also concerns the PKO Bank Hipoteczny SA’s Supervisory Board and Management Board members and the key managers. The management and supervisory staff includes persons of different gender, age and experience.
Gender |
Female |
Male |
Supervisory Board |
2 |
5 |
Management Board |
1 |
3 |
Key managers |
7 |
6 |
Age |
30 – 40 years |
41 – 50 years |
51 – 60 years |
Over 60 years |
Supervisory Board |
1 |
4 |
1 |
1 |
Management Board |
1 |
2 |
1 |
- |
Key managers |
4 |
7 |
2 |
- |
Period of employment with PKO Bank Hipoteczny SA |
Up to 1 year |
1 – 5 years |
Over 5 years |
Supervisory Board |
- |
7 |
- |
Management Board |
1 |
2 |
1 |
Key managers |
2 |
4 |
7 |
Main characteristics of the internal control and risk management systems in relation to the process of preparing the financial statements
To ensure the reliability and accuracy of the financial reporting process, the Bank designed and introduced a number of controls embedded in the reporting systems and the internal regulation of these processes. Such controls involve, among other things, continued verification and reconciliation of the reporting data with the books of account, subsidiary ledgers and other documents underlying the financial statements.
The process of preparing the financial statements is verified regularly, in particular with regard to arithmetical correctness, technical analysis and reliability of information. In accordance with internal regulations, the financial statements are approved by the Management Board of PKO Bank Hipoteczny SA. An opinion on them is issued by the Audit and Finance Committee of the Supervisory Board of PKO Bank Hipoteczny SA. Moreover, the annual financial statements are assessed by the Supervisory Board of PKO Bank Hipoteczny SA.
The Director of the Finance and Accounting Office is responsible for ensuring compliance with controls in the area of financial reporting, while the internal audit function reviews and independently evaluates the adequacy and effectiveness of controls over the risk management system and the internal control system at the first and second level, respectively.
List of direct or indirect holders of significant blocks of shares with an indication of the number of shares held and the number of votes attached to these shares
As at 31 December 2023, the share capital of PKO Bank Hipoteczny SA amounted to PLN 1,611.3 million and comprised 1,611,300,000 shares, each with PLN 1 nominal value. The shares are fully paid up. The share capital did not change compared to the end of 2022. The PKO Bank Hipoteczny SA shares are non-preferred shares. The holders of PKO Bank Hipoteczny SA shares do not have any special control rights due to holding such shares. 100% of the shares of PKO Bank Hipoteczny SA are held by Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna.
Structure of the share capital of PKO Bank Hipoteczny SA:
Series |
Type of shares |
Number of shares |
Nominal value per share |
Number of votes at GSM |
Amount paid in for the shares |
A |
Ordinary registered shares |
300,000,000 |
PLN 1 |
300,000,000 |
PLN 300,000,000.00 |
B |
Ordinary registered shares |
200,000,000 |
PLN 1 |
200,000,000 |
PLN 200,000,000.00 |
C |
Ordinary registered shares |
200,000,000 |
PLN 1 |
200,000,000 |
PLN 200,000,000.00 |
D |
Ordinary registered shares |
100,000,000 |
PLN 1 |
100,000,000 |
PLN 100,000,000.00 |
E |
Ordinary registered shares |
150,000,000 |
PLN 1 |
150,000,000 |
PLN 150,000,000.00 |
F |
Ordinary registered shares |
150,000,000 |
PLN 1 |
150,000,000 |
PLN 150,000,000.00 |
G |
Ordinary registered shares |
100,000,000 |
PLN 1 |
100,000,000 |
PLN 100,000,000.00 |
H |
Ordinary registered shares |
95,000,000 |
PLN 1 |
95,000,000 |
PLN 95,000,000.00 |
I |
Ordinary registered shares |
100,000,000 |
PLN 1 |
100,000,000 |
PLN 100,000,000.00 |
J |
Ordinary registered shares |
131,500 000 |
PLN 1 |
131,500,000 |
PLN 131,500,000.00 |
K |
Ordinary registered shares |
84,800,000 |
PLN 1 |
84,800,000 |
PLN 84,800,000.00 |
|
TOTAL |
1,611,300,000 |
|
1,611,300,000 |
PLN 1,611,300,000.00 |
Shareholder |
31.12.2023 |
31.12.2022 |
||
Number of shares |
Number of votes at GSM |
Number of shares |
Number of votes at GSM |
|
Powszechna Kasa Oszczędności |
1,611,300,000 |
100% |
1,611,300,000 |
100% |
Description of the rules for appointing and dismissing managers
Members of the Management Board are appointed and dismissed by resolution of the Supervisory Board. When appointing Management Board members, the Supervisory Board determines their number. The appointment of two members of the Management Board, including the President and the member responsible for risk, requires the consent of the Polish Financial Supervision Authority. The terms of office of members of the Management Board expire on the date on which the General Shareholders’ Meeting approves the financial statements for the last full financial year during which a member served, at the latest. Additionally, the term of office of a Management Board member also expires as a result of his/her death, resignation or dismissal from the Management Board, as of the date of the event causing the expiration, unless the resolution on dismissal provides a different date of expiration. Management Board members may be dismissed before the end of their term of office at any time.
The Supervisory Board notifies the Polish Financial Supervision Authority of the composition of the Management Board and of any changes in the composition thereof immediately after its appointment or after any changes in the composition thereof. The Supervisory Board also notifies the Polish Financial Supervision Authority of the members of the Management Board who, as a result of the segregation of duties, are in charge of the risk management and the internal audit unit. The Supervisory Board notifies the Polish Financial Supervision Authority of its intention to dismiss, and the reasons for dismissal of, a member of the Management Board who, as a result of the segregation of duties, is in charge of risk management and the internal audit unit, immediately after the relevant item has been placed on the agenda of the Supervisory Board meeting.
Additional information on the powers of the managers are provided in chapter 6. Structure and governing bodies of PKO Bank Hipoteczny SA.
Description of powers to decide on share issues or redemptions
The powers of the General Shareholders’ Meeting include adopting resolutions on establishing the share redemption procedures and the level of compensation for redeemed shares, approving the acquisition of the Bank’s treasury shares for redemption, and approving the issue of bonds convertible into shares or other instruments giving the right to purchase or take up shares in the Bank.
Indication of any limitations on the transfer of ownership rights to the issuer’s securities
There are no limitations on the transfer of ownership rights to the issuer’s securities.
Principles for amending the Bank’s Articles of Association
Amendments to the Bank’s Articles of Association require a resolution of the General Shareholders’ Meeting and must be entered in the Register of Businesses of the National Court Register. To the extent defined by Article 34.2 of the Banking Law, an amendment to the Articles of Association requires the consent of the Polish Financial Supervision Authority.
Composition and changes during the last financial year, and a description of the operations of the management, supervisory and administrative bodies of the issuer, and of their committees
Information concerning the description of the management, supervisory and administrative bodies of the issuer, their committees and their composition and changes during the last financial year is presented in Chapter 6. Structure and governing bodies of PKO Bank Hipoteczny SA.
The General Shareholders’ Meeting and relations with shareholders
The method of operation of the General Shareholders’ Meeting and its key powers as well as a description of the shareholder rights and the method of their execution follow directly from the applicable laws and the Bank’s Articles of Association. In consideration of the fact that all shares in the Bank’s share capital are held by a single shareholder, i.e. PKO Bank Polski SA, the resolutions of the General Shareholders’ Meeting are adopted without formally convening a General Shareholders’ Meeting, in accordance with the principles arising from Article 405 of the Polish Commercial Companies Code.
In accordance with the policy for selecting an audit firm to perform an audit of the Bank’s financial statements, the Supervisory Board conducts an open tender procedure to commission an audit of the financial statements. The Audit and Finance Committee of the Bank’s Supervisory Board makes a recommendation concerning the audit firm selection to the Supervisory Board. Unless it concerns renewing an existing audit contract, the recommendation contains at least two suggestions with justifications and indicates the preferred firm. The Bank’s Supervisory Board selects an audit firm based on the recommendation of the Audit and Finance Committee of the Bank’s Supervisory Board. The proposals submitted by audit firms are assessed based on transparent and non-discriminatory selection criteria.
In accordance with the policy for providing permitted non-audit services to the Bank by the audit firm conducting the audit, its related entities and members of its network, the provision of non-audit services by the audit firm conducting the audit, its related entities and members of its network to the Bank requires the consent of the Audit and Finance Committee of the Bank’s Supervisory Board and of the Audit Committee of the Supervisory Board of PKO Bank Polski SA.
In accordance with the provisions of the Policy and Procedures for selecting an audit firm to conduct an audit of the Bank’s financial statements, on 29 October 2021 the Supervisory Board of PKO Bank Hipoteczny SA, based on § 18 (1)(4) of the Bank’s Articles of Association and the recommendation of the Audit and Finance Committee of the Bank’s Supervisory Board, appointed PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. K. (hereinafter: “PwC”) as the audit firm to conduct the audit and review of the Bank’s financial statements for the years 2022–2023.
On 22 December 2021 a contract for conducting audits and reviews of the Bank’s financial statements for the years 2022 – 2023 was concluded by and between PKO Bank Hipoteczny SA and PwC (hereinafter: the “Contract”) Therefore, PwC was appointed to continue to audit and review the Bank’s financial statements over the next two years.
Following a request by PwC to the Audit and Finance Committee of the Bank's Supervisory Board and the Bank's Management Board to increase the fees for services relating to 2023 and selected services relating to 2022 under the Contract entered into by the parties, having considered all the circumstances presented by PwC, in particular with regard to changes in the regulatory environment and, consequently, the increased time-consumption of audit and review services, as well as significant changes in macroeconomic conditions, including the occurrence of high inflation, having obtained a recommendation of the Audit and Finance Committee of the Supervisory Board and the approval of the Supervisory Board, the parties entered into Annex 1 to the Contract on 19 September 2023. PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k. with its registered office in Warsaw, ul. Polna 11, is entered on the list of audit firms maintained by the Polish Agency for Audit Oversight with the number 144.
The following table presents the services provided by audit firm and the fees for such services, as specified in the Contract and Annex 1 concluded with PwC:
Net fee of the audit firm (PLN’000) |
2023 |
2022 |
Audit of the financial statements |
213.3 |
152.0 |
Review of the financial statements, audit and review of group packages |
132.8 |
88.6 |
In accordance with the provisions of the Policy and Procedures for selecting an audit firm to conduct an audit of the Bank’s financial statements, on 1 March 2023 the Supervisory Board of PKO Bank Hipoteczny SA, based on § 18 (1)(4) of the Bank’s Articles of Association and the recommendation of the Audit and Finance Committee of the Bank’s Supervisory Board, appointed KPMG Audyt Sp. z ograniczoną odpowiedzialnością sp.k. as the audit firm to conduct audits and reviews of the Bank’s financial statements for the years 2024–2026. KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp. k. with its registered office in Warsaw at ul. Inflancka 4A, is entered on the list of audit firms maintained by the Polish Agency for Audit Oversight with the number 3546.
Changes in the holding of shares and rights to shares in PKO Bank Hipoteczny SA by individuals in management and supervisory roles
In 2023 there were no changes in the holding of shares and rights to shares in PKO Bank Hipoteczny SA by individuals in management and supervisory roles. 100% of the shares are held by PKO Bank Polski SA.
Significant and material agreements with the Central Bank and/or supervisory bodies
In 2023 PKO Bank Hipoteczny SA did not conclude any significant or material agreements with the Central Bank or with supervisory bodies.
Financial and guarantee commitments granted
Financial liabilities under loans granted and not disbursed as at 31 December 2023 stood at PLN 90.9 million, up by PLN 53.6 million compared to 31 December 2022.
In 2023 PKO Bank Hipoteczny SA did not issue any guarantees.
Off-balance-sheet liabilities granted to related parties
In 2023, PKO Bank Hipoteczny SA did not grant any off-balance sheet liabilities to related parties.
Loans taken out and loan and guarantee agreements unrelated to the Bank’s operations
In 2023, Bank Hipoteczny SA did not take out any loans or enter into any loan, guarantee or warranty agreements unrelated to the Bank’s operations.
Underwriting agreements
In 2023 PKO Bank Hipoteczny SA did not conclude any underwriting agreements.
Identification of proceedings pending before courts, arbitration bodies or public-administration authorities
As at 31 December 2023, no material proceedings were pending before courts, arbitration bodies or public administration bodies concerning liabilities or receivables of PKO Bank Hipoteczny SA.
Factors which will influence future financial performance over the horizon of at least one quarter
PKO Bank Hipoteczny SA recognizes the growing risks arising from macroeconomic and regulatory changes.
The following external conditions may affect the Bank's operations and future performance.
In the global economy:
• the war in Ukraine and its economic consequences;
• a likely shift in the policies of the world's major central banks towards monetary easing;
• the persistence of relatively low global growth rates, including a slowdown of the US economy and recessionary developments in Germany;
• changes in the climate policy, including an accelerating energy transformation and increasingly restrictive and significant environmental requirements;
• increased geopolitical risk, including the risk of escalating conflicts in Ukraine, around Taiwan and in the Middle East, and heightened political uncertainty ahead of the US presidential election.
In the Polish economy:
• the likely entry into force of the amendment to the “Aid Act” extending the loan repayment holidays to 2024;
• the expected economic recovery, the main source of which will be the recovery of private consumption;
• the scale and pace of inflow of EU funds, mainly under the National Recovery Plan, and the possibility of their rapid utilization in consideration of the risk of supply constraints;
• the direction of further changes in the NBP interest rates and in the level of the mandatory reserve;
• the expected recovery in demand for loans, especially from households, in view of the prospective interest rate cuts, programmes to reduce the cost of mortgage loans (Mieszkanie na start) and improved consumer sentiment;
• the intensity and permanency of the factors contributing to inflation and regulatory actions directed at limiting the scale of inflation growth;
• developments on the financial markets which may reflect an increased geopolitical risk related to the potential escalation in the armed conflict in Ukraine;
• the shape of new fiscal programmes, including solutions to support vulnerable borrowers, increasing access to the residential market or reducing the burden on businesses from social security contributions;
• possible further court decisions on PLN-denominated loans based on WIBOR rates;
Published forecasts of financial performance for 2023
PKO Bank Hipoteczny SA has not published any forecasts of its financial results for 2023. The Bank provides information on significant events that affect the Bank's performance in current reports.
Information on loan guarantees or other guarantees issued by the Bank or its subsidiary – in aggregate to a single entity or its subsidiary, if the total amount of the existing guarantees is equivalent to at least 10% of the issuer’s equity
In 2023, PKO Bank Hipoteczny SA did not grant any loan or advance or any guarantees to a single entity or a subsidiary of such an entity with a total value equivalent to at least 10% of the Bank’s equity.
Information on loan and advance agreements concluded or terminated during the financial year
On 3 January 2023 PKO, Bank Hipoteczny SA and PKO Bank Polski SA concluded an annex to the Agreement for a Non-Revolving Working Capital Loan in PLN of 11 February 2022, as amended, decreasing the maximum amount of the facility from PLN 2,000 million to PLN 1,700 million.
On 3 January 2023 PKO Bank Hipoteczny SA and PKO Bank Polski SA concluded an Agreement for a Non-Revolving Working Capital Loan in PLN of PLN 300 million for a period of seven years. The loan will be disbursed over a period of two years from the date of conclusion, in tranches, each of which is repayable within five years of its drawing. The tranches bear a fixed interest rate determined separately for each drawing.
On 17 January 2023, PKO Bank Hipoteczny SA and PKO Bank Polski SA concluded an annex to Agreement for a Revolving Overdraft Facility of 10 July 2019, as amended, under which the amount of the limit was reduced from PLN 5,000 million to PLN 4,478 million from 11 February 2023.
On 30 August 2023 PKO Bank Hipoteczny SA and PKO Bank Polski SA concluded an Annex to the Agreement for a Non-Revolving Working Capital Loan in PLN of 3 January 2023, increasing the maximum amount of the limit from PLN 300 million to PLN 600 million.
On 31 August 2023 PKO Bank Hipoteczny SA and PKO Bank Polski SA concluded an Annex to the Agreement for a Revolving Overdraft Facility of 10 July 2019, as amended, decreasing the maximum amount of the limit to PLN 4,178 million.
Information on transaction(s) with related parties concluded by the issuer or its subsidiary, if material and not concluded on an arm’s length basis
PKO Bank Polski SA and the PKO Bank Polski SA Group entities are the Bank’s related parties.
In 2023, PKO Bank Hipoteczny SA did not conclude any material non-arm’s length transactions with related parties.
Information on changes in the key principles of managing the Bank’s enterprise
In 2023 there were no changes to the key principles of managing the Bank’s enterprise in PKO Bank Hipoteczny SA.
Funding support agreements
PKO Bank Hipoteczny SA did not conclude funding support agreements with other entities subject to consolidated supervision operating within the same holding, or with closely related parties.
Deposits, and guarantees and sureties issued
PKO Bank Hipoteczny SA does not accept any deposits or issue any guarantees or sureties.
Information on the value of security established on the accounts or assets of borrowers
In 2023 PKO Bank Hipoteczny SA did not set up any security on the borrowers’ accounts.
As at 31 December 2023, the value of collateral in respect of residential mortgage loans secured with real estate was PLN 66.2 billion compared with PLN 64.9 billion as at 31 December 2022.
Statement on non-financial information
PKO Bank Polski SA with its registered office in Warsaw at Puławska 15 is the parent company preparing the statement on non-financial information covering PKO Bank Hipoteczny SA.
Events after the end of the reporting period
On 14 February 2024 Mr. Maciej Brzozowski submitted his resignation letter from the function of the Member of the Supervisory Board of the Bank effective 14 February 2024.
On 22 February 2024 Mr. Mieczysław Król submitted his resignation letter from the function of the Member of the Supervisory Board of the Bank effective at the end 22 February 2024.
On 23 February 2024 Mr. Stanisław Skoczylas resigned from the membership in the Bank’s Management Board and from the function of the Vice President of the Management Board of the Bank effective 29 February 2024.
The Management Board of PKO Bank Hipoteczny SA represents that, to the best of their knowledge:
• the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2023 have been prepared in accordance with the applicable accounting principles, and give a true, fair and clear view of the economic and financial position of PKO Bank Hipoteczny SA, and of its financial result;
• the Directors’ Report on the activities of PKO Bank Hipoteczny SA in the year ended 31 December 2023 presents a true reflection of the development and achievements, and of the position of PKO Bank Hipoteczny SA, including a description of the basic risks and threats.
The Management Board of PKO Bank Hipoteczny SA represents that the audit firm which conducted the audit of the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2023 was selected in compliance with the applicable laws, and that both the entity and the statutory auditor who conducted the audit fulfilled all the criteria for providing an unbiased and independent audit report on the financial statements, in compliance with the applicable laws and professional standards.
This Directors’ Report on the activities of PKO Bank Hipoteczny SA for the year ended 31 December 2023 comprises 62 sequentially numbered pages.
Signatures of all Members of the Bank’s Management Board
28.02.2024 |
Katarzyna Kurkowska-Szczechowicz |
President of the Management Board |
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Signed on Polish original ...................................................... (signature) |
28.02.2024 |
Piotr Jaworski |
Vice-President of the Management Board |
|
Signed on Polish original ...................................................... (signature) |
28.02.2024 |
Piotr Kochanek |
Vice-President of the Management Board |
|
Signed on Polish original ...................................................... (signature) |
28.02.2024 |
Stanisław Skoczylas |
Vice-President of the Management Board |
|
Signed on Polish original ...................................................... (signature) |
[1] Covering the following items of the statement of financial position: intangible assets, property, plant and equipment, current income tax receivable, deferred tax asset and other assets.
[2] Covering the following items of the statement of financial position: amounts due to customers; other liabilities, deferred tax provision, and provisions.
[3] Maximum country rating.
[4] Warsaw, Kraków, Poznań, Wrocław, Tricity, Łódź
[5] Bydgoszcz, Białystok, Katowice, Kielce, Lublin, Olsztyn, Opole, Rzeszów, Szczecin, Zielona Góra
[6] The ratio calculated as the quotient of the net profit/(loss) for a given period and the average balance of assets as at the beginning and end of the reporting period and interim monthly periods. The Bank has not presented the ratio for 2022 because of the net loss incurred.
[7] The ratio calculated as the quotient of the net profit/(loss) for a given period and the average balance of assets as at the beginning and end of the reporting period and interim monthly periods. The Bank has not presented the ratio for 2022 because of the net loss incurred.
[8] The ratio does not take into account the tax on other financial institutions. The Bank has not presented the ratio for 2022 because of the net loss incurred.
[9] Covering the following items of the statement of financial position: intangible assets, property, plant and equipment, current income tax receivable, deferred tax asset and other assets.
[10] Covering the following items of the statement of financial position: amounts due to customers; other liabilities, deferred tax provision, and provisions.
[11] The value of balance-sheet exposures and the balance-sheet equivalent of contingent liabilities and transactions, taking into account specific credit risk adjustments and the CCF (Credit Conversion Factor).
[12] These result from that part of the exposure which is not fully and completely secured, i.e. which exceeds an MLV of 80% or is in a transitional period, i.e. until collateral has been put up.
[13] The value of balance-sheet exposures and the balance-sheet equivalent of contingent liabilities and transactions, taking into account specific credit risk adjustments and the CCF (Credit Conversion Factor).
[14] These result from that part of the exposure which is not fully and completely secured, i.e. which exceeds an MLV of 80% or is in a transitional period, i.e. until collateral has been put up.
[15]In accordance with the Disclosure Policy of PKO Bank Hipoteczny SA concerning capital adequacy and other reportable information, the disclosure requirements specified in Recommendation R and Z are binding as of 1 January 2022.
[16] In the event that the required down payment is insured, the Bank allows granting a loan where the ratio does not exceed 90%.
[17] The current level of LtV calculated based on the value of the real estate as at the moment of granting the loan, updated using statistical methods based on an analysis of the real estate market.
[18] Article 18.3 of the Polish Covered Bonds and Mortgage Banks Act.
[19] Article 18.3a of the Polish Covered Bonds and Mortgage Banks Act.
[20] The nominal value of the hedging transaction corresponds to the issue price of a mortgage covered bond.
[21] Includes the net value of hedging transactions and excludes non-performing loans (NPL).
[22] Calculation of overnight interest on mortgage-secured receivables based on the average interest flows in a 12-month horizon. In the interest-based calculation at a given date the utilization of the limit was 48.8% as at 31 December 2023 and 69.3% as at 31 December 2022, respectively.
[23] In accordance with the definition in the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Oversight.
[24] In accordance with the definition in the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Oversight.
[25] Deferred portion of variable remuneration (in cash).
[26] Benefits include base salaries.