51. Assets pledged as collateral for liabilities and transferred financial assets

The mortgage covered bonds are secured by loans secured by the highest priority mortgage. Additionally, the basis for the issue of mortgage covered bonds may also be PKO Bank Hipoteczny SA’s own funds:

• invested in securities issued or guaranteed by the National Bank of Poland, the European Central Bank, governments and central banks of members of the European Union and/or the Organization for Economic Cooperation and Development, excluding countries that are restructuring or have restructured their foreign debt in the past 5 years;
• invested in the National Bank of Poland;
• held in cash.

The nominal value of loans entered in the register of collaterals for mortgage-covered bonds and constituting the Group’s cover pool representing collateral for the mortgage-covered bonds issued totalled PLN 20 273 million as at 30 September 2019, and the nominal value of the additional collateral in the form of securities issued by the State Treasury and denominated in PLN amounted to PLN 250 million. As at 31 December 2018 it amounted to PLN 16 948 million and PLN 251 million respectively. The CIRS and FX-Forward transactions which hedge the foreign exchange and interest-rate risk of the issued EUR mortgage covered bonds, and the IRS transactions hedging interest rate risk of the issued PLN fixed-interest-rate mortgage covered bonds were also recognized in the register of collaterals for mortgage covered bonds.

In the nine months ended 30 September 2019 and in the previous years the mortgage covered bonds cover pool did not include asset-backed securities (ABS), that do not meet the requirements described 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).

For detailed information see the Note “Information on securitization of the lease portfolio and package sale of receivables”.

Cash deposits with banks include assets held as collateral for own liabilities, including settlements relating to negative valuation of derivative instruments.

Biuro Maklerskie PKO BP holds bonds with the National Depository for Securities as collateral for the settlement of transactions with the Clearing House.

The assets that constitute security for the fund are Treasury bonds which mature in the period that ensures securing the carrying amount over the period specified in the Act of 10 June 2016 on the Bank Guarantee Fund, Deposit Guarantee Scheme and Resolution. The Fund is increased or decreased on 1 July of each year, in proportion to the amount representing the basis for calculation of the mandatory reserve deposits. These assets are treated as assets pledged as collateral for own liabilities.

Starting from 2017, the value of contributions in the form of payment obligations represents 30% of the contributions to the Bank Guarantee Fund (the “BGF”) for the Deposit Guarantee Fund or the Bank Resolution Fund. Assets securing payment commitments include Treasury bonds pledged for BGF in the amount which ensures maintaining the ratio of the value of property rights securing payment commitments to the amount of payment commitments of no less than 110%. For purposes of establishing the minimum ratio of assets to the amount of payment commitment, the value of property rights securing payment commitments is determined at the amount specified based on the last fixing rate of the day in the electronic market for Treasury securities organized by the minister responsible for the budgetary matters, plus interest due as at the valuation date, unless interest has already been included in the fixing rate.

Such assets funds are treated as assets pledged as collateral for own liabilities, they cannot be pledged or encumbered in any way, are excluded from judicial or administrative enforcement proceedings and do not form part of the estate in bankruptcy. The amount of funds securing payment commitments relating to contributions to the BGF will be increased on payment dates of contributions to the Deposit Guarantee Fund (quarterly) and the Bank Resolution Fund (in the third quarter of a given year) representing not more than 30% of the contribution established by the BGF.

The amount of these funds may decrease if the Bank is called by the BGF to transfer the amount corresponding to the value of payment commitments in cash.

In the years ended 31 December 2019 and 31 December 2018, respectively, there were no intangible assets or property, plant and equipment items to which the Group’s legal title would be limited and pledged as collateral for the Bank’s liabilities.