Statement of compliance with the International Financial Reporting Standards

These financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (‘IFRS’), as adopted by the European Union and with respect to matters not regulated by the above standards, in accordance with the accounting principles as set out in the Accounting Act dated 29 September 1994 (unified text – Official Journal from 2021, item 217) and the respective bylaws and regulations and the requirements for issuers of securities admitted or sought to be admitted to trading on an official stock-exchange listing market. These financial statements meet the reporting requirements described in the Regulation of the Minister of Finance of March 29, 2018 regarding current and periodic information published by issuers of securities and conditions for recognizing as equivalent information required by the laws of a non-member state (Journal of Laws of 2018, item 757).

This financial report was approved for publication by the Management Board on 21 February 2022.

In 2021, the Bank (and in consequence – the Group) changed the accounting policy regarding the recognition of provisions for future claims related to active CHF mortgage loans in the balance sheet. As a result of changes in market conditions, such as the growing number of unfavourable court judgments declaring the entire agreement or certain provisions of these credits to be invalid, the Bank does not expect that all contractual cash flows related to these loans will be recovered. As a result, commencing from 2021, the Bank allocates provisions for future claims and recognizes them as a reduction of the gross carrying amount of loans for which a decrease in future cash flows is expected, in accordance with paragraph B5.4.6 of IFRS 9 „Financial Instruments” (previously provisions for future claims used to be recognized in accordance with IAS 37 „Provisions, Contingent Liabilities and Contingent Assets”). As a result of the above change, the approach applied in accordance with IAS 37 will be continued only with regard to claims relating to already repaid (or almost fully repaid) receivables not recognised in the Bank’s balance sheet.

In the opinion of the Bank, this way of presentation better reflects the risk related to FX mortgage loans and enables the users of the financial statements a better assessment of the Bank’s balance sheet. Additionally, it is a change adjusting the Bank’s accounting standards to the majority market practice applied by the banking sector in this area.

In order to ensure comparability, the Bank has made appropriate adjustments to comparable data in the balance sheet and cash flow as presented below, as well as in line with IAS1, point 39, an additional column was presented in the balance sheet as at the end of 2019, reflecting the effect of reclassification at the beginning of the earliest comparative period.

The Group changed the presentation of interest on derivatives not covered by formal hedge accounting. According to the Group’s verified assessment, these revenues, even though they are related with instruments included in the trading portfolio, but according to the economic sense of cash flows from these transactions, constitute interest income and should be an element of the interest margin, not one of the components of the financial instrument valuation, as it was previously the case. In view of the above, the Group, starting from 2021, presents the interest in the Income statement as part of the „Net interest income”, while previously this interest was included in the item “Results on financial assets and liabilities held for trading”. In order to ensure comparability, the Group has made appropriate adjustments to the comparable data in the Income statement as presented below.