63. Forbearance practices

 

Forbearance is defined by the Group as actions aimed at amending the contractual terms agreed with a debtor or an issuer, forced by the debtor’s or issuer’s difficult financial situation (restructuring activities introducing concessions that otherwise would not have been granted). The aim of forbearance activities is to restore a debtor’s or an issuer’s ability to settle their liabilities towards the Group and to maximize the efficiency of managing non-performing loans, i.e. obtaining the highest possible recoveries while minimizing the costs incurred.

Annual report
2018

Forbearance changes in repayment terms may consist in:

  • dividing the debt due into instalments;
  • changing the repayment scheme (fixed payments, degressive payments),
  • extending the loan period,
  • changing interest rate,
  • changing the margin,
  • reducing the debt.

As a result of signing and repaying the amounts due under the forbearance agreement on a timely basis, a non-performing loan becomes performing.

The granting of forbearance concessions recognized as impairment triggers results in the recognition of a default event and the classification of the credit exposure in the non-performing portfolio.

The inclusion of such exposures in the portfolio of performing exposures (discontinuation of recognition of the forbearance agreement as an impairment trigger) takes place at least 12 months after the introduction of forbearance, provided that all payments in arrears and at least 6 scheduled payments have been made by the customer and, in the Bank’s opinion, the current situation of the customer does not pose a threat to their compliance with the terms of the restructuring agreement.

Exposures cease to meet the criteria of a forborne exposure when all of the following conditions are met:

  • at least 24 months have passed from the date of including the exposure in the portfolio of performing exposures (conditional period),
  • as at the end of the conditional period referred to above, the customer has no debt towards the Group overdue for more than 30 days,
  • at least 12 instalments have been repaid on a timely basis and in the amounts agreed.

Forborne exposures are monitored on an on-going basis. Due to the impairment trigger or a significant increase in credit risk identified in connection therewith, throughout the whole period of their recognition, allowances are recognized for these exposures in the amount of expected losses over the life horizon of the exposure.

Loans and advances to customers

31.12.2018 Performing exposures subject to forbearance Non-performing exposures subject to forbearance Exposures subject to forbearance, gross Exposures subject to forbearance, net
Instruments with modified terms and conditions Refinancing Total, gross Impairment allowances Total, net Instruments with modified terms and conditions Refinancing Total, gross Impairment allowances Total, net
Not held for trading, measured at fair value through profit or loss: 1 1 1 1 1
Loans 1 1 1 1 1
consumer 1 1 1 1 1
Measured at amortized cost: 1 116 2 1 118 (79) 1 039 3 026 183 3 209 (1 205) 2 004 4 327 3 043
Loans 1 101 2 1 103 (79) 1 024 2 935 183 3 118 (1 193) 1 925 4 221 2 949
housing 556 556 (36) 520 689 689 (375) 314 1 245 834
business 462 2 464 (37) 427 2 050 180 2 230 (732) 1 498 2 694 1 925
consumer 83 83 (6) 77 196 3 199 (86) 113 282 190
Receivables from finance lease agreements 15 15 15 91 91 (12) 79 106 94
Total 1 116 2 1 118 (79) 1 039 3 027 183 3 210 (1 205) 2 005 4 328 3 044

01.01.2018 Performing exposures subject to forbearance Non-performing exposures subject to forbearance Exposures subject to forbearance, gross Exposures subject to forbearance, net
Instruments with modified terms and conditions Refinancing Total, gross Impairment allowances Total, net Instruments with modified terms and conditions Refinancing Total, gross Impairment allowances Total, net
Not held for trading, measured at fair value through profit or loss: 1 1 1 1 1
Loans 1 1 1 1 1
consumer 1 1 1 1 1
Measured at amortized cost: 1 532 3 1 535 (95) 1 440 2 560 201 2 761 (1 215) 1 546 4 296 2 986
Loans 1 504 3 1 507 (95) 1 412 2 398 201 2 599 (1 160) 1 439 4 106 2 851
housing 562 562 (32) 530 894 894 (431) 463 1 456 993
business 867 3 870 (57) 813 1 263 196 1 459 (619) 840 2 329 1 653
consumer 75 75 (6) 69 241 5 246 (110) 136 321 205
Receivables in respect of repurchase agreements
Finance lease receivables 28 28 28 162 162 (55) 107 190 135
Total 1 532 3 1 535 (95) 1 440 2 561 201 2 762 (1 215) 1 547 4 297 2 987

31.12.2017 Performing exposures subject to forbearance Non-performing exposures subject to forbearance Exposures subject to forbearance, gross Exposures subject to forbearance, net
Instruments with modified terms and conditions Refinancing Total, gross Impairment allowances Total, net Instruments with modified terms and conditions Refinancing Total, gross Impairment allowances Total, net
Loans 1 433 2 1 435 (54) 1 381 2 298 213 2 511 (968) 1 543 3 946 2 924
housing 544 544 (13) 531 872 11 883 (439) 444 1 427 975
business 819 2 821 (39) 782 1 211 187 1 398 (433) 965 2 219 1 747
consumer 70 70 (2) 68 215 15 230 (96) 134 300 202
Receivables from finance lease agreements 31 31 (3) 28 160 160 (58) 102 191 130
Total 1 464 2 1 466 (57) 1 409 2 458 213 2 671 (1 026) 1 645 4 137 3 054

Loans and advances to customers subject to forbearance, gross
by geographical region
31.12.2018 31.12.2017
Poland 4 289 4 085
mazowiecki 1 573 1 040
wielkopolski 279 346
śląsko-opolski 377 441
małopolsko-świętokrzyski 239 289
pomorski 411 269
podlaski 165 197
łódzki 263 321
dolnośląski 258 299
kujawsko-pomorski 354 386
zachodnio-pomorski 217 257
lubelsko-podkarpacki 144 230
warmińsko-mazurski 9 9
Ukraine 39 52
Total 4 328 4 137

The change in carrying amounts of loans and advances to customers subject to forbearance at the beginning and end of the period is presented in the table below:

Change in carrying amounts of loans and advances to customers subject to forbearance at the beginning and end of the period, net 2018 2017
     
As at the beginning of the period 3 054 3 144
Changes due to IFRS 9 implementation (67)
As at the beginning of the period (restated) 2 987 3 144
impairment allowance 26 (95)
Gross book value of loans and advances which ceased to meet the forbearance criteria during the period (693) (700)
New loans and advances recognized in the period, gross 1 469 1 380
Other changes/repayment (750) (662)
Foreign exchange differences 5 (13)
Carrying amount as at the end of the period, net  3 044 3 054

Loans and advances to customers subject to forbearance by type of changes in terms of repayment, gross 31.12.2018 31.12.2017
Dividing the debt due into instalments 2 038 2 365
Change in the repayment scheme (fixed payments, degressive) 1 703 1 671
Extension of the loan period 2 013 1 700
Change in interest rate 727 772
Change in margin 705 896
Debt reduction 122 150
Other terms 401 72

More than one change in the terms and condition of repayment may be applied to a forborne exposure.
The amount of recognized interest income on forborne loans and advances to customers for the period ended 31 December 2018 amounted to PLN 141 million (PLN 161 million for the period ended 31 December 2017).

Securities subject to forbearance

31.12.2018 Performing exposures subject to forbearance Non-performing exposures subject to forbearance Exposures subject to forbearance, gross Exposures subject to forbearance, net
Instruments with modified terms and conditions Total, gross Impairment allowances Total, net Instruments with modified terms and conditions Total, gross Impairment allowances Total, net
Not held for trading, measured at fair value through profit or loss 115 115 115 115 115
corporate bonds (in PLN) 115 115 115 115 115
Not held for trading, measured at fair value through profit or loss 37 37 37 471 471 (10) 461 508 498
corporate bonds (in PLN) 12 12 12 471 471 (10) 461 483 473
corporate bonds (in foreign currencies) 25 25 25 25 25
Total 37 37 37 586 586 (10) 576 623 613

01.01.2018 Performing exposures subject to forbearance Non-performing exposures subject to forbearance Exposures subject to forbearance, gross Exposures subject to forbearance, net
Instruments with modified terms and conditions Total, gross Impairment allowances Total, net Instruments with modified terms and conditions Total, gross Impairment allowances Total, net
Not held for trading, measured at fair value through profit or loss 137 137 137 137 137
corporate bonds (in PLN) 137 137 137 137 137
Not held for trading, measured at fair value through profit or loss 231 231 (3) 228 473 473 (15) 458 704 686
corporate bonds (in PLN) 81 81 (1) 80 81 80
corporate bonds (in foreign currencies) 150 150 (2) 148 473 473 (15) 458 623 606
Total 368 368 (3) 365 473 473 (15) 458 841 823

31.12.2017 Performing exposures subject to forbearance Non-performing exposures subject to forbearance Exposures subject to forbearance, gross Exposures subject to forbearance, net
Instruments with modified terms and conditions Total, gross Total, net Instruments with modified terms and conditions Total, gross Impairment allowances Total, net
Available-for-sale investment securities
corporate bonds (in PLN) 81 81 81 819 819 (246) 573 900 654
corporate bonds (in foreign currencies) 150 150 150 150 150
Total 231 231 231 819 819 (246) 573 1 050 804

Change in carrying amounts of loans and advances to customers subject to forbearance at the beginning and end of the period.

Change in carrying amounts of debt securities subject to forbearance at the beginning and end of the period, net 2018 2017
As at the beginning of the period 804 1 029
Changes due to IFRS 9 implementation 19
As at the beginning of the period (restated) 823 1 029
Impairment allowance (change during the period) 8 28
Other changes/repayment (218) (253)
Net carrying amount as at the end of the period 613 804

Debt securities subject to forbearance by type of changes in terms of repayment, gross 31.12.2018 31.12.2017
Dividing the debt due into instalments 622 1 050
Change in the repayment scheme (fixed payments, degressive) 622 1 050
Extension of the loan period 622 1 050
Change in interest rate 585 819
Change in margin 585 819
Debt reduction 585 133

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