As part of the policies for securing collateral, Credit Support Annexes to ISDA (International Swaps and Derivatives Association) agreements (CSAs) are broadly used – or their Polish equivalents (binding in relations with domestic banks).
The Bank concludes derivative transactions with those counterparties on the inter-bank market, with whom it has signed ISDA (International Swaps and Derivatives Association) master agreements. According to current market practice and regulations, CSAs are signed along with ISDA agreements to cover matters related to the collateralization of exposures under concluded transactions. CSAs are signed bilaterally and establish mutual rights to receive a security deposit from a counterparty for whom the valuation of active derivative transactions is negative on a given day. All active CSAs in place between the Bank and its counterparties fulfil currently binding on the Bank requirements (including the ones related to Variation Margin) established by EMIR regulations.
The position concluded under derivative transactions with customers other than banks is immediately referred for management by inter-bank market dealers and is hedged by an inter-bank market transaction.
The rules for establishing credit impairment for credit risk are presented in the section entitled “Financial risk management – Credit risk” of the Yearly Financial Report.
Wrong way risk exposures (Article 439.c)
The Group does not identify its wrong-way risk exposures as material.
The impact of the amount of collateral the Bank would have to provide given a downgrade in its credit rating (Article 439.d)
The Bank is the Guarantor of the loan agreement signed between Millennium Leasing and European Investment Bank („Finance Contract”) on December 15, 2017. The initial amount s of the loan EUR 100 m was drawn in four tranches in 2018.
As on 31/12/2020 the loan amounted to EUR 41,7 m.
According to the provisions of the Finance Contract in case the credit rating:
- by Fitch is B+ or below;
- by Moody is B1 or below;
it will be necessary to establish additional security for the Guarantee in the form of guarantee on terms acceptable for EIB (cash collateral, financial collateral, or other security).
In First Demand Guarantee agreements Bank Millennium long term rating granted by Fitch is at level BBB - and by Moody’s at Baa2. The Bank is obliged to inform EIB about any change in its rating and deliver to EIB any other information on its financial position likely to have a detrimental effect on its ability to perform the obligations resulted from those agreements.