42. Contingent commitments

The Group enters into transactions which are not recognized in the statement of financial position as assets or liabilities, but which result in contingent liabilities and commitments. Contingent liabilities are characterized as:

• a potential obligation the existence of which will be confirmed upon occurrence or non-occurrence of uncertain future events that are beyond the control of the Group (e.g. litigations),
• a current obligation which arises as a result of past events but is not recognized in the statement of financial position as it is improbable that it will result in an outflow of benefits to settle the obligation or the amount of the obligation cannot be reliably measured (mainly: unused credit lines and guarantees and letters of credit issued).

Financial guarantees are contracts that the Group is required as issuer to make specified payments to reimburse the holder for a loss it to be incurred because a specified debtor fails to make when due under the original or modified terms of a debt instrument.

Financial guarantees are measured at the higher of:

• the amount of the loss allowance or
• the amount initially recognised less the cumulative amount of income recognised in accordance with the principles of IFRS 15.

As of 31 December 2021 the following court cases for payment are pending with involvement of the Group, that are important in view of the value of the object of litigation:

• in the group of liabilities (against the Group):
  • brought by the receiver for a joint stock company in liquidation bankruptcy – lawsuit for payment of compensation for a damage incurred as a result of the Bank’s demanding immediate payment of the amounts due in virtue of payment of the price from the credit receivables transfer agreement and conducting debt enforcement collection of the portion of the price remaining for payment by a court enforcement officer, value of the object of litigation PLN 57,450,130 litigation initiation date – 30 April 2015, in the present factual and legal circumstances the Bank assesses the funds outflow risk as possible,
  • brought by a natural person – lawsuit for payment by the Bank of an amount charged by virtue of settlement of financial future or forward transactions, value of the object of litigation PLN 38,916,555.18, litigation initiation date – 2 October 2016, on 6 May 2019 the Regional Court in Warsaw issued a sentence ordering the Bank to pay the amount of PLN 3,392,349.18 and as to the remainder the Court dismissed the suit, the sentence is not legally valid, the Bank and the plaintiff appealed against the judgment. On the 16 December 2020 the Court of Appeal in Warsaw quashed the sentence of the Regional Court in its entirety and remitted the case to that Court. The Bank maintains it is current assessment of the risk of outflow of found and, in terms of the amount awarded by the Regional Court, the Bank assesses the funds outflow risk as probable and in the remaining scope as possible,
  • brought by a beneficiary of warranty – lawsuit for payment of a claim by virtue of the warranty issued by the Bank, value of the object of litigation PLN 32 750 000 litigation initiation date – 14 January 2014, due to the withdrawal of the claim, the Regional Court in Wrocław, by a decision of 26 November 26 2021, discontinued the proceedings, the decision is not final; in the present factual and legal circumstances the Bank assesses the funds outflow risk as minor,
  • brought by a legal person – lawsuit for payment of compensation for the loss of value of the leased assets; value of the object of litigation PLN 21 001 551, litigation initiation date – 10 March 2011, in the present factual and legal circumstances the Bank assesses the funds outflow risk as minor;
• in the group of receivables (brought by the Group):
  • Bank’s main intervention lawsuit against the parties of the main lawsuit – the object of the intervention is the demand for payment by virtue of the assignment of receivables securing Bank’s liabilities, value of the object of litigation is PLN 321,979,666.87, litigation initiation date – 26 October 2018, as a result of the settlement concluded in 2021 and the withdrawal of the claim by the Bank, the Regional Court in Warsaw, by a decision of 18 January 2022, discontinued the proceedings, the decision is not final;
  • Bank’s lawsuit for payment against limited debtor by virtue of mortgage collateralizing repayment of the granted credit, value of the object of litigation PLN 132,877,901, litigation initiation date – 21 January 2016,
  • Bank’s main intervention lawsuit against the parties of the main lawsuit – the object of the intervention is the demand for payment by virtue of the assignment of receivables securing Bank’s liabilities, value of the object of litigation PLN 119,020,334, litigation initiation date – 26 October 2018, as a result of the settlement concluded in 2021 and the withdrawal of the claim by the Bank, the Regional Court in Rzeszów, by a decision of 13 January 2022, discontinued the proceedings, the decision is not final;
  • Bank’s mutual lawsuit for payment of amounts due by virtue of the transfer of receivables, value of the object of litigation PLN 89,977,886, litigation initiation date – 28 February 2013, as a result of the settlement concluded in 2021 and the withdrawal of the cassation appeal by the Bank, the Supreme Court, by a decision of 25 January 2022, discontinued the cassation proceedings, the decision is not final;
  • Bank’s main intervention lawsuit against the parties of the main lawsuit – the object of the intervention is the demand to execute (pay) the liabilities purchased by the Bank from one of the defendants against the other defendant, value of the object of litigation PLN 67,432,617.21 , litigation initiation date – 23 January 2006; as a result of the sale of receivables, the Bank was replaced by the buyer of the receivables pursuant to article 192 point 3 of the Code of Civil Procedure. The case was finally closed in the fourth quarter of 2021.

None of the litigations pending in 2021 before the court, authority competent for arbitrary proceedings or a body of public administration posed a threat for financial liquidity of the Group.

The Group created provisions for litigations against the Group entities which, according to the legal opinion, are connected with a risk of the funds outflow resulting from the fulfillment of the obligation. The value of the provisions as at 31 December 2021 is PLN 211,909 thousand (PLN 178,589 thousand as at 31 December 2020).

In addition, as at 31 December 2021 the Group assessed the legal risk of foreign currency mortgage loans in CHF and created a provision related to this risk. Details are presented in Note 47.3.

Financial commitments granted by entity

Guarantees issued by entity

Off-balance sheet commitments received by entity

Moreover, the Group has the ability to obtain financing from National Bank of Poland secured securities.