Transactions with the State Treasury
The State Treasury has control over the Group as it holds a 29.43% interest in the Bank’s share capital. The Bank’s shareholding structure is described in detail in the note ‘Equity and shareholding structure of the Bank’ to these financial statements.
Receivables, securities and liabilities arising from transactions conducted with the State Treasury, budgetary units and entities in which the State Treasury is the shareholder are disclosed in the Group’s statement of financial position.
In accordance with the 30 November 1995 Act in relation to State support in the repayment of certain housing loans, reimbursement of guarantee premium paid and amendments of several acts, PKO Bank Polski SA receives payments from the State budget in respect of redemption interest receivable on housing loans.
|Income due to temporary redemption by the state budget of interest on housing loans from the "old" portfolio||2016||2015|
|Income recognised for this period||65.3||85.0|
|Income received in cash||24.8||34.8|
|Difference - "Loans and advances to customers"||40.5||50.2|
The Act on the coverage of repayment of certain housing loans by State Treasury guarantees was passed on 29 November 2000 and came into force on 1 January 2001. In execution of the provisions of the Act, on 3 August 2001 PKO Bank Polski SA signed an agreement with the Minister of Finance acting on behalf of the State Treasury under which the Bank was granted a pledge of repayment of debt arising from housing loans in the so-called ‘old’ portfolio. On 29 December 2011, the validity period of the agreement (originally until 31 December 2011) was extended until 31 December 2017. The coverage of the so-called ‘old’ portfolio housing loan receivables by the guarantees of the State Treasury results in the neutralization of the default risk on these loans.
The State Treasury guarantees are executed when a borrower fails to repay the loan on the dates specified in the loan agreement. The responsibility of the State Treasury is of an auxiliary nature and is effective if the recovery of the unpaid part of principal and interest which the Bank is obliged to commence, before the Group lays claims to the State Treasury, becomes ineffective. The above-mentioned law covers 90% of unpaid loans taken out by housing cooperatives. As a consequence of the realization of the State Treasury’s responsibilities as guarantor, the State Treasury itself enters into the rights of the satisfied creditor (the Group) and thus becomes a creditor towards the borrower, in line with the concept of guarantee.
PKO Bank Polski SA receives commission for settlements relating to redemption of interest by the State Treasury on housing loans – in 2016 PLN: 3.1 million, in 2015 PLN 3.1 million.
As of 1 January 1996 the Bank became the general distributor of court fee stamps. The Bank receives commissions in this respect from the State Treasury – in 2016 PLN 12.4 million, in 2015 PLN 12.3 million.
The Brokerage House of PKO Bank Polski SA performs the role of an agent for the issue of retail treasury bonds under the agreement signed with the Ministry of Finance on 11 February 2003. Under this agreement, the Brokerage House of PKO Bank Polski SA receives a fee for providing the services of an agent for the issue of bonds- in 2016 PLN 37.2 million, in 2015 PLN 23.2 million.
Significant transactions with the State Treasury’s related entities
The transactions were concluded at arm’s length terms. The Group’s exposure and the value of the Group’s liabilities to 10 entities related to the State Treasury are presented below.
|Balance sheet exposure, including the exposure due to loans and debt instruments||Off-balance sheet exposure||Liabilities due to deposits|
|counterparty 1||-||-||2 450.0||2 080.0||-||-|
|counterparty 2||385.6||250.0||1 676.6||2 471.0||270.7||240.5|
|counterparty 3||332.4||-||1 205.9||1 549.0||533.5||1 046.5|
|counterparty 4||1 327.1||1 504.0||1 529.4||2 569.0||3.3||19.2|
|counterparty 5||46.5||250.0||1 521.4||559.0||350.4||0.4|
|counterparty 6||-||-||1 069.3||1 811.0||1 085.3||501.0|
|counterparty 8||1 502.6||1 146.0||868.6||696.0||126.2||606.3|
In 2016, interest and commission income on the transactions with the 10 counterparties referred to above amounted to PLN 7.3 million (in 2015: PLN 27 million), and the respective interest expense amounted to PLN 11.5 million (in 2015: PLN 68 million). As at 31 December 2016 and as at 31 December 2015 respectively, no impairment allowances were recognised on an individual basis for the above-mentioned receivables.
In addition, on 7 December 2016, the Group issued to its customer a promise based on which the Group is obliged to grant the customer a loan of up to PLN 3 200 million intended for financing the customer’s investment activities. The promise agreed by the Group and the customer provides that the loan will be granted on the basis of a loan agreement whose contents will be finally negotiated by 30 April 2017. The framework terms of the loan agreement were set out in an appendix to the promise and provide for, i.a., securing the Group’s receivables in the form of financial and registered pledges, as well as the Group receiving a declaration of submission to enforcement proceedings from the customer.
The principles for issuing the promise and the terms of the loan agreement do not differ from the standard ones used in the Group or from the arm’s length terms used in financing with a comparable credit risk profile. The promise is the Group’s first exposure to the customer and its subsidiaries in respect of agreements concluded over the past 12 months.
Other transactions with entities related to the State Treasury in 2016 and in 2015 comprised loans and advances granted, credit lines, guarantees granted and deposits placed.
Equity related party transactions
Transactions of the parent company with associates and joint ventures accounted for under the equity method.
All transactions with subsidiaries, joint ventures and associates presented below were arm’s length transactions. Repayment terms are within a range from one month to fifteen years.
|As of 31 December 2016/Entity||Receivables||of which loans||Liabilities||Off-balance sheet liabilities granted|
|Centrum Elektronicznych Usług Płatniczych eService Sp. z o.o.||10.4||10.4||18.4||20.5|
|'Centrum Obsługi Biznesu' Sp z o.o.||27.6||27.6||9.7||-|
|Bank Pocztowy SA||-||-||0.8||1.1|
|'Poznański Fundusz Poręczeń Kredytowych' Sp. z o.o.||-||-||8.0||-|
|Walcownia Blach Grubych Batory Sp. z o.o.||-||-||2.1||-|
|Total joint ventures and associates||38.0||38.0||39.0||21.6|
|For the year ended 31 December 2016 / Entity||Total income||of which interest and fee and commission||Total expense||of which interest and fee and commission|
|Centrum Elektronicznych Usług Płatniczych eService Sp. z o.o.||40.6||0.3||0.4||0.1|
|'Centrum Obsługi Biznesu' Sp z o.o.||0.8||0.8||-||-|
|Total joint ventures and associates||41.4||1.1||0.4||0.1|
|As of 31 December 2015 / Entity||Receivables||of which loans||Liabilities||Off-balance sheet liabilities granted|
|Centrum Elektronicznych Usług Płatniczych eService Sp. z o.o.||6.0||-||31.1||2.0|
|'Centrum Obsługi Biznesu' Sp. z o.o.||27.4||27.4||8.6||-|
|Bank Pocztowy SA||14.1||-||0.9||1.1|
|'Poznański Fundusz Poręczeń Kredytowych' Sp. z o.o.||-||-||2.8||-|
|Total joint ventures and associates||47.5||27.4||43.4||3.1|
|For the year ended 31 December 2015 / Entity||Total income||of whichinterestand fee andcommission||Totalexpense||of whichinterestand fee andcommission|
|Centrum Elektronicznych Usług Płatniczych eService Sp. z o.o.||189.5||189.3||107.6||105.5|
|'Centrum Obsługi Biznesu' Sp. z o.o.||0.8||0.8||0.1||0.1|
|Bank Pocztowy SA||0.2||0.2||0.2||-|
|Total joint ventures and associates||190.5||190.3||107.9||105.6|
Personal related party transactions
As at 31 December 2016 and 31 December 2015, one entity was related to the Group through the key management personnel of PKO Bank Polski SA or close family members of the key management personnel. In 2016 and in 2015, no transactions were conducted between the Group and that entity.