48. Subsequent events

On 24 February 2022, there was an armed attack by Russia and Belarus on Ukraine. On the day the conflict broke out, the Bank launched increased monitoring of the situation. In particular, the daytime meetings of the Crisis Committee were activated with the participation of Members of the Bank’s Management Board, which monitors the impact of the conflict on the Group and takes key decisions. Additionally, where it was justified, appropriate emergency plans were activated and  operational bodies managing their implementation were launched In terms of potential risks, the Group identifies short-term and medium / long-term threats, i.e. in particular:

1. in the area of short-term threats:

• threats to cash liquidity, i.e. the Bank is observing increased cash withdrawals from branches and ATMs. However, a similar situation was already observed at the beginning of the COVID-19 pandemic. This made it possible to test and optimize the Bank’s procedures in this regard. At present, there are no restrictions on the international transportation of cash (unlike during a pandemic). In view of the factors discussed, the Group assumes that disruptions in cash transactions do not pose a significant risk for it and will expire in the time horizon from a few days to several weeks,
• financial market disturbances affecting the value of the portfolio of financial instruments in which the Bank’s liquidity surplus is stored. A significant fall in the value of government bonds could reduce their liquidity. However, due to the fact that the Bank currently has a high excess of liquidity and the disturbances in the Treasury bond market are not significant, the Bank assesses the risk in question as insignificant at the moment.
• operational disturbances (continuity of operations of departments, systems, etc.). These risks are constantly monitored and secured by responsible units of the Bank.

2. in the area of medium-term and long-term threats:

• credit loss risk for exposures to entities from Russia (with an off-balance sheet exposure in the amount of PLN 161.5 million as at 31 December 2021), Belarus (with a net carrying amount of PLN 201 million and an off-balance sheet exposure in the amount of PLN 128 million as at 31 December 2021) and Ukraine (with a net carrying amount of PLN 55 million as at 31 December 2021), with the Group’s exposure in this regard mostly covered KUKE policies,
• the risk that the conflict will translate into deterioration of the economic and credit conditions for the rest of the portfolio (through the raw material price growth channel, disruption of economic relations, deterioration of consumer sentiment, etc.). This risk is reflected in the allowances for expected credit losses for working loans, the calculation of which takes into account the risk of an armed conflict.

In the Group’s opinion, as at the date of approval of these financial statements for publication, the situation does not affect the numerical values presented in these financial statements and does not threaten the assumption that the Group will continue as a going concern for a period not shorter than one year from the balance sheet date.

However, depending on the further development of the situation, it may have a negative impact on the future financial results of the Group. Due to the unprecedented nature of the current situation, it results in the possibility of materialization of other risks in the future, not indicated above, and all assessments and forecasts in this respect are subject to uncertainty and will be monitored and analyzed by the Group.