The provisions legal claims include disputes with business partners, customers and external institutions (e.g. UOKiK), and are created based on an evaluation of the probability of a court case being lost by the Group (litigation pending has been discussed in the detail in note “Legal claims”).
Provisions for legal claims are created in the amount of the expected outflow of economic benefits.
The provision for retirement and disability benefits resulting from the Labour Code is created individually for each employee on the basis of an actuarial valuation. The provision for employee benefits is determined on the basis of the Group’s internal regulations.
Provisions for employee benefits are measured using actuarial techniques and assumptions. The calculation of the provision includes all retirement and pension benefits expected to be paid in the future. The provision was created on the basis of a list of persons with all necessary employee information, in particular the length of their service, age and gender. The provisions calculated are equal to discounted future payments, taking into account staff turnover.
The provision for financial liabilities and guarantees is established at the amount of the expected credit losses (for details please see the note “Financial assets by stage of impairment and allowances for expected credit losses “).
In the portfolio analysis, when determining provisions, portfolio parameters estimated using statistical methods are used, based on historical observations of the exposure with the same characteristics, the parameters which define a marginal probability of evidence of impairment, the average utilization of an off-balance sheet liability and the level of anticipated loss in the event of impairment in subsequent months in the period from the reporting date to the horizon of the calculation of the anticipated loss.
With regard to exposures which are material on an individual basis, and are subject to assessment, the provision is determined on a case by case basis – as the difference between the expected amount of the balance sheet exposure which will arise as a result of an off-balance sheet liability at the date of overdue amounts arising treated as evidence of impairment, and the present value of the expected future cash flows obtained from the exposure.
The provision is described in note “Risk management of foreign currency risk associated with mortgage loans for households”
The amount of the provision for refunds of costs to customers on early repayment of consumer loans is affected by the percentage of prepaid consumer loans, expected amount of consumer claims referring to refunds of loan costs prepaid before the balance sheet data and the average amount of the refund.
Other provisions mainly include provisions for potential claims on the sale of receivables, described in detail in note “Information on securitization of the lease portfolio and portfolio sale of receivables”.
Provisions for future payments are measured at reliably estimated, justified amounts necessary to meet the present obligation as at the end of the reporting period. All provisions are recognized in the profit and loss account, excluding actuarial gain and losses recognized in other comprehensive income.
If the effect of the time value of money is material, the amount of the provision is determined by discounting the estimated future cash flows to their present value, using the discount rate before tax which reflects the current market assessments of the time value of money and the potential risk related to a given obligation.
Provisions | 2019 | 2018 |
---|---|---|
Provision for off-balance sheet liabilities and guarantees granted | 269 | 227 |
Other provisions | 313 | 219 |
Total | 582 | 446 |
FOR THE YEAR ENDED 31 DECEMBER 2019 |
Provisions for legal claims exluding legal claims relating to mortgage loans in convertible currencies |
Provision for pensions and other liabilities from defined-benefit postemployment plans |
Restructuring | Provision for refunds of costs to customers on early repayment of consumer loans and mortgage loans |
Provision for potential legal claims against the Bank relating to mortgage loans in convertible currencies |
Provision for offbalance sheet liabilities and guarantees granted |
Other provisions, including provisions for employee disputed claims |
Total |
As at 1 January 2019, including: | 54 | 50 | 24 | – | – | 227 | 91 | 446 |
Short-term provisions | 3 | 8 | 24 | – | – | 177 | 66 | 278 |
Long-term provisions | 51 | 42 | – | – | – | 50 | 25 | 168 |
Taking up control over subsidiaries | – | – | – | – | – | – | 2 | 2 |
Loss of control over subsidiaries | – | – | – | – | – | – | – | – |
Increase, of which increases of existing provisions | 8 | 4 | 33 | 127 | 29 | 289 | 4 | 494 |
Utilized | (3) | (1) | (15) | (23) | – | – | (4) | (46) |
Released during the period | (7) | (2) | (1) | – | – | (247) | (63) | (320) |
Other changes and reclassifications | – | 6 | – | – | – | – | – | 6 |
As at 31 December 2019, of which: | 52 | 57 | 41 | 104 | 29 | 269 | 30 | 582 |
Short-term provisions | 2 | 7 | 41 | 104 | – | 226 | 6 | 386 |
Long-term provisions | 50 | 50 | – | – | 29 | 43 | 24 | 196 |
As at 31 December 2019, the column “Provisions for potential legal claims against the Bank relating to mortgage loans in convertible currencies” contains the provision for potential legal claims against the Bank relating to mortgage loans in convertible currencies of PLN 29 million (for details, see note “Risk management of foreign currency risk associated with mortgage loans for households”). The column “Provision for refunds of costs to customers on early repayment of consumer loans” contains a provision recognized for the refund of costs to customers on early repayment of consumer and mortgage loans of PLN 104 million.
FOR THE YEAR ENDED 31 DECEMBER 2018 |
Provisions for legal claims exluding legal claims relating to mortgage loans in convertible currencies |
Provision for pensions and other liabilities from defined-benefit postemployment plans |
Restructuring | Provision for refunds of costs to customers on early repayment of consumer loans and mortgage loans |
Provision for potential legal claims against the Bank relating to mortgage loans in convertible currencies |
Provision for offbalance sheet liabilities and guarantees granted |
Other provisions, including provisions for employee disputed claims |
Total |
As at 31 December 2017, of which | 21 | 46 | – | – | – | 86 | 62 | 215 |
Short-term provisions | 21 | 7 | – | – | – | 61 | 62 | 151 |
Long-term provisions | – | 39 | – | – | – | 25 | – | 64 |
Changes due to reclassification | – | 15 | 21 | – | – | – | (36) | – |
Short-term provisions | – | 15 | 21 | – | – | – | (36) | – |
Changes due to IFRS 9 implementation, of which | – | – | – | – | – | 71 | – | 71 |
Short-term provisions | – | – | – | – | – | 47 | – | 47 |
Long-term provisions | – | – | – | – | – | 24 | – | 24 |
As at 1 January 2018 (restated), of which: | 21 | 61 | 21 | – | – | 157 | 26 | 286 |
Short-term provisions | 22 | 21 | – | – | 108 | 26 | 177 | |
Long-term provisions | 21 | 39 | – | – | – | 49 | – | 109 |
Increase, of which increases of existing provisions | 43 | 4 | 45 | – | – | 232 | 93 | 417 |
Utilized | (6) | (3) | (23) | – | – | – | – | (32) |
Released during the period | (4) | (13) | (19) | – | – | (162) | (28) | (226) |
Other changes and reclassifications | – | 1 | – | – | – | – | – | 1 |
As at 31 December 2018, of which: | 54 | 50 | 24 | – | – | 227 | 91 | 446 |
Short-term provisions | 3 | 8 | 24 | – | – | 177 | 66 | 278 |
Long-term provisions | 51 | 42 | – | – | – | 50 | 25 | 168 |
A provision of PLN 62 million (which was released in 2019 – for details please see the note “Legal claims”) was recognized for potential returns of commissions and fees to customers as well as costs of meeting obligations resulting from the provision of free of charge services to customers in the item “Other provisions, including provisions for employee disputes” specified in the line “Increases, including increases in existing provisions”.
The Group updated its estimates of provisions for pensions and other liabilities from defined benefit post-employment plans as at 31 December 2019 using an external independent actuary’s calculations. The calculated provisions are equal to the discounted payments that will be made in the future, taking into account the employment turnover.
FACTORS CONTRIBUTING TO THE PROVISION AMOUNT | 2019 | 2 018 |
---|---|---|
adopted discount rate | 2.00% | 3.00% |
weighted average labour mobility ratio | 9.36% | 8.48% |
average remaining employment period in years | 7.80 | 7.89 |
10-year average assumed annual increase in the basis for calculation of retirement and disability benefits |
2.26% | 2.30% |
The impact of the increase/decrease in the financial discount rate and of the planned increases of 1 p.p. in the provision base on the decrease/increase in the value of the provision for retirement and other defined benefit postemployment plans as at 31 December 2019 and as at 31 December 2018 is presented in the tables below:
ESTIMATED CHANGE IN PROVISIONS 31.12.2019 |
Discount rate | Planned increases in base amounts |
||
scenario +1pp | scenario -1pp | scenario +1pp | scenario -1pp | |
Provision for pensions and other liabilities from defined-benefit post-employment plans | (4) | 5 | 6 | (4) |
ESTIMATED CHANGE IN PROVISIONS 31.12.2018 |
Discount rate | Planned increases in base amounts |
||
scenario +1pp | scenario -1pp | scenario +1pp | scenario -1pp | |
Provision for pensions and other liabilities from defined-benefit post-employment plans | (3) | 5 | 4 | (3) |
The Group performed sensitivity analysis for estimated provision for reimbursement for clients on early repayments of consumer and mortgage loans before 31 December 2019 due to changes in the number of claims and average value of refund.
ESTIMATED CHANGE IN PROVISIONS | Change in the amount of consumer claims |
Change in the average amount of the refund |
||
---|---|---|---|---|
-10% | 10% | -10% | 10% | |
Provision for refunds of costs to customers on early repayment of consumer and mortgage loans | (10) | 10 | (10) | 10 |