62. Credit risk – financial information

Exposures covered by statutory non-statutory moratoria are presented in the tables below:

a) Carrying amount, gross active and expired exposures

b) gross carrying amount of active exposures

c) accumulated impairment of active exposures

d) gross carrying amount and maximum recognizable amount of guarantees for newly granted loans covered by guarantees

The Group assessed the impact of macroeconomic variables in the aftermath of the COVID-19 on the deterioration in the quality of its loan portfolio and other financial assets as PLN 1 233 million, of which PLN 1 175 million was related to the impact on the result of allowances for expected credit losses, and PLN 48 million in respect of the result on financial operations.

When the recognizing impact of the COVID–19 pandemic on the loan portfolio, the Group took into account three scenarios in respect of the main develops of the macroeconomic parameters. An assessment of the pandemic’s impact is performed based on the correlation between an expected loss and a change in the macroeconomic parameters under each of the three scenarios developed based on the Group’s internal forecasts. The range of the forecast ratios comprises, among other things, the GDP rate indicators and unemployment rate, because these parameters have the major impact on the level of recognized changes in the valuation of the Group’s assets. In order to adequately account for the high quarterly variability of macroeconomic ratios in the risk parameter models (in particular in the probability of default (PD) model), the average values of the said indices over a 2-year period were adopted. The additional write-down due to COVID-19 is the result of the significant deterioration in the macroeconomic forecasts in all three scenarios considered, and from the determination of a significant increase in the credit risk for exposures subject to moratoria with the highest PD values. The COVID-19 write-off results from a significant deterioration of macroeconomic forecasts in all three adopted scenarios and would amount to PLN 570 million.

The applied approach to the impact of macroeconomic forecasts on risk parameters describes the situation in all sectors of the economy at the same time and may not take into account the problems of individual industries caused by the pandemic, therefore the Capital Group conducted additional analyzes of the loan portfolio. These analyzes carried out by risk experts mainly included an assessment of the impact of specific macroeconomic conditions not included in the portfolio approach and allowed for the identification of customers and industries particularly affected by the current economic situation. Exposures with the highest PD values, which were granted moratoria or belong to identified industries, were marked with the indication of a „significant increase in credit risk” and were subject to an increased write-off. Additional write-offs created in this way amounted to PLN 653 million.

The table below presents the outstanding amounts of financial assets to be repaid, which were written down during the reporting period and which are still subject to debt recovery activities.

The Group adopted the following criteria for writing off receivables:

• the receivable has fully matured and is in particular the consequence of a loan, advance, contractual overdraft, guarantee or warranty of loan, advance or bond repayment;
• in accordance with IAS and IFRS the allowance for expected credit losses:
  • covers 100% of the gross carrying amount of the asset; or
  • exceeds 90% of the gross carrying amount of the asset and: actions have been or are still being taken in respect of the receivable which did not lead to its recovery, and the assessment of the probability of recovering the receivable (which, in particular, accounts for the decisions of the bailiff or the receiver) transferability of collateral, level of satisfaction, record in the land and mortgage register indicate that the entire receivable will not be recovered, or that the repayments of the receivable did not cover interest accrued on a current basis over the past 12 calendar months.

The Group takes into account the minimum levels of matured amounts of PLN 500 for credit exposures to individuals and PLN 3 000 for other credit exposures to specify whether a loan is overdue.

Loans and advances to customers were secured by the following collateral established for the Group: mortgages, registered pledges, transfer of ownership, restrictions on a deposit account, insurance of the credit exposure, as well as guarantees and sureties.