The financial position and operations of the PKO Bank Polski S.A. Group were also affected by legal and regulatory solutions and supervisory recommendations that came into force in 2023, including in particular:
The Consumer Pawn Loan Act of 14 April 2023 amended, among other things, the Civil Code and the Consumer Credit Act as regards the issue concerning natural persons running an agricultural holding. As a result of the amendments, protection has been extended to all persons running an agricultural holding for the production of crops or animals, including horticulture, fruit growing, beekeeping and fishing. The Act came into force on 7 January 2024. The amendments extended the protection provided by the Consumer Credit Act to persons operating an agricultural holding. The Bank is required to offer lending products to farmers in accordance with the requirements arising from the Consumer Credit Act and extend consumer protection to farmers in cases where financing up to PLN 255,550 is granted.
In December 2023, the Court of Justice of the European Union issued three rulings:
- in its judgment of 7 December 2023 in Case C-140/22, the CJEU stated that: exercise by a consumer of the rights which that consumer draws from the directive may not be conditional on the lodging, by that consumer, before a court, of a declaration by which he or she states, first, not to consent to that unfair term remaining effective, secondly, to be aware of the fact that the nullity of that term entails the cancellation of that agreement and, moreover, of the consequences of that cancellation and, thirdly, to consent to the cancellation of that agreement; Furthermore, it stated that the compensation sought by the consumer in respect of the restitution of the sums paid by him or her in the performance of the agreement at issue may not be reduced by the equivalent of the interest which that banking institution would have received had the agreement remained in force,
- In its ruling of 11 December 2023 in Case C-756/22, the CJEU referred to the judgment in Case C-520/21 of 15 June 2023 and pointed out that a bank is not entitled to demand from a consumer the reimbursement of amounts other than the capital paid for the performance of that agreement and statutory default interest from the time of the demand for payment. In a subsequent ruling issued on 12 January 2024 in Case C-488/23, the CJEU definitively determined that banks are not able to claim adjustment from customers if the invalidity of the agreement is a consequence of the removal of abusive clauses from the agreement. The CJEU thus ruled that banks may not demand compensation from consumers consisting of a judicial adjustment of the payment corresponding to that capital, in the event of a substantial change in the purchasing power of the currency concerned after the transfer of that capital to the consumer
- In its judgment of 14 December 2023 in Case C-28/22, the CJEU addressed the issue of the limitation period for the parties’ claims arising from an agreement declared invalid and objected to the fact that this period should start to run earlier for consumers than for the entrepreneur. At the same time, the CJEU questioned the applicability of a retention plea to the extent that it results in a limitation of the consumer’s right to statutory interest for late payment.
The Act of 26 May 2023 on state aid in saving for residential purposes and amending the Act of 1 October 2021 on family housing loans (present name of the act: a family housing loan and a safe 2% loan), under which on 3 July 2023 the Bank introduced a product Safe 2% Loan. Safe 2% Loan is provided under the government’s First Home Programme. Its purpose is to help in the acquisition of the first apartment for people aged up to 45. The main assumption is a contribution from the Government Housing Fund to loan instalments during the first 10 years of loan repayment. The programme translated into a marked increase in mortgage sales in the market and in the Bank to record levels (in nominal terms) of more than PLN 9 billion in monthly sales for the entire market with an increase in the Bank’s share due to its dominant position in these loans.
Amendment to Recommendation S of the PFSA with regard to the calculation of creditworthiness of 19 June 2023, introducing countercyclical system for calculating the interest rate buffer. It led to a reduction in the buffer for loans with variable interest rates under the current macroeconomic conditions, as well as the reduction of the buffer for loans with a periodical fixed interest rate and the period of determination of this rate for more than 5 years. Higher creditworthiness of customers supports the sale of mortgage loans. A new approach to setting this buffer has also been introduced, having a positive impact on creditworthiness in the period of falling rates.
The Act of 6 October 2022 amending the acts to counteract predatory lending, obliging, inter alia, lending institutions to examine creditworthiness and make provision of financing subject to a positive assessment in this respect. Therefore, since 18 May 2023, these companies were obliged to submit and update information on the loan granted to the Credit Information Bureau. The new regulations contribute to less diversification of the bank’s and non-banking entities’ activities on the debt product market for retail customers.
On 29 September 2023, most of the provisions of the Act on amending certain acts in connection with ensuring the development of the financial market and the protection of investors in this market entered into force. Under this Act, dozens of legal acts regulating, inter alia, the functioning of the financial market and the banking sector have been amended. In addition, the Act introduces new regulations on outsourcing and sub-outsourcing in the banking sector, which aim to streamline existing procedures and bring them in line with the Guidelines of the European Banking Authority. The Act aims to organise and streamline the functioning of financial market institutions, in particular with regard to the elimination of barriers to access the financial market, the improvement of oversight of the financial market, the protection of customers of financial institutions, the protection of minority shareholders in public companies and the increase of the level of digitisation in the implementation of supervisory duties by the NSC and the PFSA Office.
One of the key amendments is the restriction of the sale of corporate bonds to retail clients outside the regulated market or alternative trading system and crowdfunding platforms. The Act modifies and extends the existing rules regarding the blocking of accounts when, based on available information, there is a suspicion that a transaction made or planned may be linked to the commitment of a specific offence. In addition, the Act enables the exchange of information covered by secrecy (e.g. banking secrecy) where this is necessary to take action to counter threats to the security of ICT systems. Another new solution is the introduction of the option to use electronic service during the activities carried out by the PFSA, which represents a clear shift towards electronic communication between the PFSA and supervised entities.
International Financial Reporting Standard 17 Insurance Contracts (IFRS 17) published by the International Accounting Standards Board in May 2017 and amended in June 2020 and on 9 December 2021.
IFRS 17 was endorsed for use in European Union countries on 19 November 2021 by Regulation 2021/2036 of the European Union. The aim of the new standard is to introduce new uniform rules for the measurement of insurance and reinsurance contracts, ensuring greater comparability of reporting between providers of insurance products, and to provide a number of new disclosures for the use of financial statement users.
This standard is mandatory as of 1 January 2023. IFRS 17 changed the recognition, measurement, presentation and disclosure of insurance contracts distributed by Group companies, both as products linked to, among others, mortgage loans, cash loans and leasing products, and as stand-alone products. The implementation of IFRS 17 as of 1 January 2022 resulted in an increase in the Group’s assets by PLN 581 million, liabilities by PLN 295 million and equity by PLN 286 million. For a detailed description of the impact of the implementation of IFRS 17, see Note 14 „IFRS 17 Insurance Contracts” of the Bank Group’s consolidated financial statements for the year ended 31 December 2023.
On 26 June 2023, the PFSA issued Recommendation U. Banks must bring their operations into compliance by 1 July 2024. The primary objective of the new Recommendation U is to ensure that customers get value for money from the insurance products offered through bancassurance, including loan or credit repayment insurance (so-called CPI products), the manner in which insurance products are offered through bancassurance, the relationship between the bancassurance bank and the insurance provider. This institution, on the basis of an agreement with the bank, is obliged to bear the costs of insurance cover for the bank and to monitor the processes related to the offering of insurance products by banks, as part of the internal control system, the risk management system and through the audit committee.
Commission Delegated Regulation (EU) 2023/2485 of 27 June 2023 amending Delegated Regulation (EU) 2021/2139 establishing additional technical screening criteria for determining the conditions under which certain economic activities qualify as contributing substantially to climate change mitigation or climate change adaptation and for determining whether those activities cause no significant harm to any of the other environmental objectives.
The delegated act adds or introduces technical screening criteria for new economic activities contributing to Environmental Objective I and II and revises the existing technical screening criteria for Environmental Objective I and II.
Commission Delegated Regulation (EU) 2023/2486 of 27 June 2023 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to the sustainable use and protection of water and marine resources, to the transition to a circular economy, to pollution prevention and control, or to the protection and restoration of biodiversity and ecosystems and for determining whether that economic activity causes no significant harm to any of the other environmental objectives and amending Commission Delegated Regulation (EU) 2021/2178 as regards specific public disclosures for those economic activities.
Rulings of the Court of Justice of the European Union in Cases C-520/21 and C-287/22 increasing costs related to ongoing and possible lost proceedings in cases concerning foreign currency mortgage loans, necessitating an increase in legal risk provisions.
The Regulation of the Minister of Finance of 22 September 2023 amending the Regulation in respect of a higher risk weight for exposures secured with mortgages on real estate, extending the application of preferential risk weights until 30 September 2025, resulting in the maintenance of lower capital requirements.
Act of 7 July 2023 amending certain acts to mitigate certain effects of identity theft. The Act aims to increase protection against fraud resulting from data theft and to reduce the scale of fraudulent financial transfers by incurring financial obligations in the name of another person (e.g. credit agreements, loan agreements, real estate sale agreements) without the owner’s knowledge and consent, as well as the phenomenon of so-called SIM swapping, i.e. making a duplicate SIM card, which can then be used to illegally authorise transactions. Due to the imposition of a new verification obligation on the Bank – the blocking of the PESEL number in the blocking database and the imposition of sanctions for non-compliance with the obligation, the Bank must implement changes (including system changes) in the processes of selling accounts, loans, credits, etc. and making withdrawals from accounts at Bank branches by 1 June 2024.
The Act of 26 May 2023 on the mObywatel app introduced, among other things, a new type of document establishing identity in the physical presence of the parties – the mObywatel document. It is a mobile document stating the identity and Polish citizenship of a user of the mObywatel app in the territory of the Republic of Poland. The aforementioned Act entered into force on 14 July 2023. The entry into force of the aforementioned Act entailed the need to introduce the mObywatel document into the catalogue of identity documents recognised by the Bank, as well as the adaptation of the Bank’s systems and processes.
The Act of 12 December 2023 amended the provisions of the Act of 18 November 2020 on electronic delivery. The date of entry into force of the obligation to apply the amended law has been postponed. The deadline for the implementation of electronic delivery cannot be earlier than 30 March 2024 and later than 1 January 2025. In a communication from the Minister of Digitalisation dated 21 December 2023, the implementation deadline was changed from 30 December 2023 to 1 October 2024. Therefore, taking into account Article 155(1) of the abovementioned Act, starting from 1 January 2025, banks are obliged to have an address for electronic delivery entered in the database of electronic addresses.
Amendments to the Act of 20 May 2021 on the protection of the rights of the purchaser of a residential unit or a detached house and the Developer Guarantee Fund (the „Development Act”) introduced by two Acts of 7 July 2023:
- on a pan-European individual pension product,
- on amending the Act on spatial planning and development and certain other acts.
The Acts have a direct impact on, among other things, the revision of the content of the investment prospectus prepared by developers and, by extension, on the conditions under which banks provide services in respect of maintaining closed and open residential trust accounts.
Act of 16 November 2022 amending the Act on tax on selected financial institutions and certain other acts, which introduces, for selected taxpayers of a tax on certain financial institutions, including domestic banks, the right to reduce, as of 1 January 2023, the tax base by the value of assets in the form of securities covered by the statutory guarantee of the State Treasury and by the value of assets resulting from repo/reverse repo transactions specified in the regulations. The Bank uses the regulation, reducing the tax base for tax on certain financial institutions, among others by the value of assets (i) in the form of securities lawfully covered by the State Treasury guarantee and (ii) resulting from reverse repo transactions.
Regulation of the Minister of Finance of 28 December 2022 on the exclusion of the obligation to collect flat-rate CIT and PIT, which in 2023 excludes the application of the mandatory collection of flat-rate income tax by entities keeping securities accounts or collective accounts (the so-called technical payers) in the case of making payments by them in excess of PLN 2 million to non-residents on amounts due from securities recorded on those accounts. The effect of the regulation is the possibility for the Bank to apply, as an entity keeping securities accounts, preferential, i.e. resulting from double taxation agreements, the principles of taxation of receivables paid to non-residents, regardless of their amount.
On 19 October 2022, the PFSA adopted Recommendation A (replacing the previous one from 2010) concerning the management by banks of the risks associated with the execution of derivative market transactions by banks. Recommendation A provides a set of best practices concerning the duties and responsibilities of management and supervisory boards, the identification and assessment of risks, monitoring, internal control systems, and the control and reporting of risks in the area covered by the Recommendation. In the Recommendation, the PFSA has adopted an approach based on the principle of proportionality, understood as the adaptation of solutions to the individual specificity and profile of a bank’s activities and the scale of risk incurred by the bank. This means that a bank, when dealing in derivatives, should comply with regulations and the extent of policies and procedures should be appropriate to the scale and complexity of the activity.