41. Contingent commitments

Contingent liabilities and 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

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. 

Court cases

As of 31 December 2022 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:

1. in the group of liabilities (against the Group):
   • brought by the association – a claim for payment of damages against the Bank and 3 other legal person for damages incurred in connection with irregularities committed by the defendants, acording to the association, when offering the purchase of premises and financing the construction of a condohotel; value of the object of litigation PLN 86 703 762, litigation initiation date – 14 November 2022, in the present factual and legal circumstances the Bank assesses the funds outflow risk as possible,
   • 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 legal person – lawsuit for payment of damages for a tort and improper performance of a bank account agreement in connection with the execution of pament instructions from the plaintiff’s bank accounts, value of the object of litigation PLN 14 579 152.50, litigation initiation date – 17 August 2015, in the present factual and legal circumstances, the Bank assesses the funds outflow risk as possible; 
2.  in the group of receivables (brought by the Group):
   • Bank’s lawsuit for payment against the quarantors for surety securing the repayment of the loan granted, value of the object of litigation PLN 136 495 075, litigation initiation date – 18 July 2022,
   • 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 lawsuit for payment against limited debtor by virtue of mortage collateralizing repyment of the Bank’s receivables resulting from bnking activities, value of the object of litigation PLN 46 695 088, litigation initiation date – 15 September 2010, invalid sentence of the Regional Court in Warsaw of 13 January 2015 awarding for the benefit of the Bank the amount of PLN 40 425 047, 
   • proceedings on the Bank’s appeal against the decision of the President of the Office of Competition and Consumer Protection of 16 October 2020, pursuant to which the provisions on the rules for determining exchange rates in the exchange rate table, used by the Bank in annexes to currency-denominated mortage loan agreements, value of the object of litigation PLN 21 088 807, litigation initiation date – 16 November 2020, on 14 July 2022 the Regional Court in Warsaw issued a sentence revoking the contested decision, the sentence is not final, the President of the Office of Competition and Consumer Protection and the Prosecutor of the District Prosecutor’s Office in Warsaw appeled against the sentence; the Court of Appeal in Warsaw on 22 February 2023 issued the sentence: 1) partially changed the sentence of the District Court in Warsaw by dismissing the Bank’s appeal with regard to point 1 of the Decision of the President of the Office of Competition and Consumer Protection (pursuant to which the provisions concerning the rules for determining exchange rates in table of exchange rates, used by the Bank in annexes to mortgage loan agreements denominated in a currency); 2) annulled the sentence of the Regional Court in Warsaw in the remaining scope and remanded the case for re-examination by the Regional Court in Warsaw (with regard to the imposed penalty and costs); in the scope of point 1), the sentence of the Court of Appeal in Warsaw is final, the Bank is entitled to a cassation complaint;
   • Bank’s lawsuit for payment against a legal person for improper performance of the agreement on the term and procedure of assigning receivables form leasing transactions and their redemption, value of the object litigation PLN 20 485 32, litigation initiation date – 12 June 2002.

None of the litigations pending in year 2022 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 2022 is PLN 586 884 thousand (PLN 211 909 thousand as at 31 December 2021).

In addition, as at 31 December 2022 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 46.3.

Financial commitments granted

Guarantees issued

Off-balance sheet commitments received

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