50. Transactions with the State Treasury and related parties

Receivables, securities and liabilities arising from transactions conducted with the State Treasury, budgetary units and entities in which the State Treasury is the shareholder are disclosed in the Group’s consolidated statement of financial position.

Pursuant to the Act of 30 November 1995 on state support in the repayment of certain housing loans, reimbursement of guarantee bonuses paid, and amendments to certain Acts, PKO Bank Polski SA receives payments from the State budget as the repurchase of interest receivable on housing loans.

As of 1 January 2018 based on the provisions of the Act of 30 November 1995 on state support in the repayment of certain housing loans, and reimbursement of guarantee bonuses paid, the borrowers acquired the right to be forgiven the remaining debt by the State Treasury, which will result in gradual (until 2026) full settlement of the housing loan indebtedness from the so-called “old” portfolio. The Bank conducts settlements related to the partial purchase of interest on housing loans by the State Treasury and in 2018 it received commission of PLN 1 million, and in 2017 of PLN 3 million in this respect.

As of 1 January 1996 the Bank is the general distributor of revenue stamps, and in this respect it receives commission from the State Budget – in 2018 the Bank received commission of PLN 1 million in this respect, and in 2017 it received PLN 5 million.

Dom Maklerski PKO Banku Polskiego SA plays the role of an agent for the issue of retail treasury bonds under the agreement signed with the Ministry of Finance on 11 February 2003. Under this agreement, the Brokerage House of PKO Bank Polski SA receives a fee for providing the services of an agent for the issue of bonds, which in 2018 amounted to PLN 59 million and PLN 56 million in 2017.

The Group’s exposure and the value of the Group’s liabilities to 10 entities related to the State Treasury with the highest total exposure are presented below. The transactions were concluded on arm’s length terms.

In 2018, interest and commission income on the transactions with the 10 counterparties referred to above amounted to PLN 158 million (PLN 79 million in 2017), and the respective interest expense amounted to PLN 33 million (PLN 10 million in 2017). As at 31 December 2018 and as at 31 December 2017, respectively, no impairment allowances were recognized on an individual basis for the above-mentioned receivables.

In the Bank’s opinion, all transactions with entities related to the State Treasury are at arm’s length.

Transactions of the parent company with associates and joint ventures are presented in the table below. All transactions with subsidiaries, joint ventures and associates referred to below were arm’s length transactions. Repayment terms are within a range of from one month to seventeen years.

As at 31 December 2018 and 31 December 2017, six entities were related to the Group through the key management personnel of PKO Bank Polski SA or close family members of the key management personnel (three entities as at 31 December 2017). In 2018 and in 2017, no transactions were conducted between the Group and those entities.