60. Forbearance practices

The Group treats as forbearance actions aimed at making changes in the contract terms agreed with a debtor or an issuer, forced by his difficult financial situation (restructuring activities introducing concessions that otherwise would not be granted). The aim of the forbearance activities is to restore a debtor or an issuer the ability to fulfil its liabilities to the Group and to maximize the efficiency of non-performing loans management, i.e. obtaining the highest recoveries while minimizing the incurred costs.

Forbearance activities include a change in payment terms which is individually agreed on each contract basis. Such changes may concern:

  • spreading the due debt into instalments,
  • change in a repayment schedule (annuity instalments, decreasing instalments),
  • extension of the lending period,
  • change in interest rates,
  • change in the credit margin,
  • loans reduction.

As a result of signing and a timely service of forbearance agreement, the loans becomes undue. Forbearance involves evaluation of the ability of a debtor to fulfil the forbearance agreement conditions (debt repayment according to the agreed schedule). Forbearance agreements are monitored on an on-going basis. If, as regards to the loan exposure the impairment is recognised, the impairment allowances are recognized to reflect identified loss. 

Exposures with the status of forbearance, classified as non-performing, are included in the portfolio of performing exposures if the following conditions are met simultaneously:

  • a debt does not meet individual impairment triggers and there is no impairment recognised,
  • at least 12 months have elapsed from the conclusion of a forbearance agreement,
  • forbearance agreement has covered the whole debt,
  • a debtor has demonstrated the ability to fulfil the terms of the forbearance agreement.

Exposures cease to be subject of reporting with the forbearance status if the following conditions are met simultaneously:

  • at least 24 months have elapsed from the date of including forborne exposition to the portfolio of performing loans (conditional period),
  • at the end of the conditional period, discussed above, client does not have a debt overdue more than 30 days,
  • timely repayment of at least 12 consecutive instalments occurred.

Loans and Advances to customers

Exposures subject to forbearance in the loan portfolio31.12.201631.12.2015
   
Loans and advances to customers gross, of which208 609.2198 700.9
subject to forbearance4 132.15 534.7
Impairment allowances on loans and advances to customers, of which:(8 002.7)(8 287.2)
subject to forbearance(987.5)(986.3)
   
Loans and advances to customers net, of which: 200 606.5 190 413.7
subject to forbearance 3 144.6 4 548.4

Loans and advances to customers subject to forbearance by product typeCarrying value
 31.12.201631.12.2015
   
corporate loans2 262.22 861.1
housing loans1 562.52 143.3
consumer loans307.4530.3
Impairment allowances on loans and advances to subject to forbearance (987.5) (986.3)
   
Loans and advances to customers net subject to forbearance 3 144.6 4 548.4

Loans and advances to customers subject to forbearance by geographical region (gross)31.12.201631.12.2015
   
Poland4 062.75 423.9
mazowiecki699.71 133.1
wielkopolski381.8499.1
śląsko-opolski497.1731.6
małopolsko-świętokrzyski323.1434.4
pomorski302.9334.0
podlaski277.8426.7
łódzki314.0474.5
dolnośląski308.4380.8
kujawsko-pomorski376.7302.2
zachodnio-pomorski336.9444.2
lubelsko-podkarpacki218.8236.2
warmińsko-mazurski25.527.1
Ukraine69.4110.8
   
Total 4 132.1 5 534.7

Loans and advances to customers subject to forbearance - the Group's exposure to credit riskExposure by gross carrying amount
 31.12.201631.12.2015
   
Loans and advances impaired2 250.32 418.0
Loans and advances not impaired, of which:1 881.83 116.7
not past due1 520.22 477.6
past due361.6639.1
   
Total gross4 132.15 534.7

Change in carrying amounts of loans and advances to customers subjected to forbearance at the beginning and at the end of the period

Change in the carrying values of loans and advances granted to customers which are subject to forbearance as at the beginning and end of the period31.12.201631.12.2015
   
Carrying amount at the beginning of the period, net4 548.45 488.1
Impairment allowance19.4(111.8)
Gross book value of loans and advances which ceased to satisfy the forbearance criterion in the period(1 989.6)(2 427.2)
Loans and advances recognised in the period, gross1 083.71 964.6
Other changes/repayment(514.5)(331.7)
Currency translation differences(2.8)(33.6)
   
Carrying amount at the end of the period, net 3 144.6 4 548.4

Loans and advances to customers gross subject to forbearance by applied changes in terms of repaymentGross carrying amount
 31.12.201631.12.2015
   
Converting due debt into instalments2 744.93 861.5
Change in repayment formula (annuity instalments, diminishing instalments)1 866.62 729.9
Extension of loan period1 431.01 663.3
Change in interest rate599.7721.2
Change in margin535.5187.7
Reduction114.1159.0
Other terms80.770.0
 

For a given loan exposure subject to forbearance more than one change in terms of repayment may be applied.

The amount of interest income recognised on loans and advances to customers which are subject to forbearance amounted to PLN 160.9 million as at 31 December 2016 (as at 31 December 2015 it amounted to PLN 414.1 million).

Investment securities available for sale subject to forbearance

Exposures subject to forbearance in the portfolio of investment securities available for sale31.12.201631.12.2015
   
Debt securities available for sale, including36 419.627 661.8
subject to forbearance1 302.6402.7
Impairment allowances on investment securities available for sale, including:(277.2)(56.9)
subject to forbearance(273.6)(53.1)
   
Net investment securities available for sale, including: 36 142.4 27 604.9
subject to forbearance 1 029.0 349.6

Investment securities available for sale subject to forbearance - the Bank's exposure to credit riskExposure by gross carrying amount
 31.12.201631.12.2015
   
Investment securities available for sale, impaired1 302.6402.7
   
Gross total 1 302.6 402.7

Change in carrying amounts of investment securities available for sale subject to forbearance as at the beginning and end of the period31.12.201631.12.2015
   
Carrying amount at the beginning of the period, net349.68.6
Impairment allowance (change in period)(220.5)(53.1)
Investment securities available for sale recognised in the period, gross899.9394.1
   
Carrying amount at the end of the period, net 1 029.0 349.6

Investment securities gross by applied changes in terms of repayment subject to forbearanceGross carrying amount
 31.12.201631.12.2015
   
Converting due debt into instalments1 203.9402.7
Change in repayment formula716.4402.7
Extension of loan period716.4402.7
Change in interest rate716.4402.7
Change in margin716.4402.7
Debt reduction129.4-