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Financial statements

of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS

for the financial year from

1 January to 31 December 2021

 

 

 The above financial statements of Bank Gospodarstwa Krajowego is a translation from the original Polish version. In case of any discrepancies between the Polish and English version,

the Polish version shall prevail.

 

 

 

 

 

 

 

 

Warsaw, 14 April 2022

Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

Selected financial data on financial statements

The selected financial data specified below constitutes additional information to the financial statements of BGK for 2021.

 

in PLN thousand

in EUR thousand

 

For the period

For the period

For the period

For the period

 

from 1 Jan 2021 to 31 Dec 2021

from 1 Jan 2020 to 31 Dec 2020

from 1 Jan 2021 to 31 Dec 2021

from 1 Jan 2020 to 31 Dec 2020

 

Net interest income

1,021,691

947,685

223,198

211,811

Net fee and commission income

294,580

248,311

64,354

55,498

Operating result

841,452

369,922

183,823

82,679

Profit before tax

841,452

369,922

183,823

82,679

Net profit

695,596

315,655

151,960

70,550

Net comprehensive income

640,261

262,957

139,871

58,772

Net cash flows

15,911,153

7,877,138

3,475,948

1,760,569

 

in PLN thousand

in EUR thousand

 

As at

31 Dec 2021

As at

31 Dec 2020

As at

31 Dec 2021

As at

31 Dec 2020

 

Total assets

196,441,929

160,301,224

42,710,338

34,736,332

Total equity

24,514,281

23,874,020

5,329,887

5,173,360

Total capital ratio, excluding commissioned activities*

28.48%

33.88%

28.48%

33.88%

Total capital ratio, including commissioned activities*

28.36%

33.86%

28.36%

33.86%

Basic funds (Tier 1 capital)*

23,685,175

23,778,057

5,149,623

5,152,565

Supplementary funds (Tier 2 capital)*

0

0

0

0

* Change of presentation for 2020 – Information on the calculation of the capital adequacy ratio and own funds is presented in Note 50 “Capital adequacy” and in the Report on Risk Management and Capital Adequacy of Bank Gospodarstwa Krajowego as at 31 December 2021 (Pillar III).

 

Selected financial data on the financial statements was translated to EUR in line with the following rates:

 

31 Dec 2021

31 Dec 2020

§  items from the statement of profit or loss, statement of comprehensive income, and statement of cash flows at the mid-exchange rate quoted by the National Bank of Poland (NBP) calculated as an arithmetic mean of the exchange rates applicable on the last day of each month in a given period

4.5775

4.4742

§  items from the statement of financial position at the mid-exchange rate quoted by the NBP for the last day of the period

4.5994

4.6148



Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

Table of contents

Selected financial data on financial statements. 22

Statement of profit or loss. 44

Statement of comprehensive income. 44

Statement of financial position.. 55

Statement of changes in equity. 66

Statement of cash flows. 88

1.   General information on the Bank. 99

2.   Accounting policies. 1111

3.   Operating segments. 3333

Notes to the financial statements. 3434

4.   Interest income and expense. 3434

5.   Fee and commission income and expense. 3434

6.   Net gains (losses) on financial instruments at fair value through profit or loss and foreign exchange gains (losses) 3535

7.   Net gains (losses) on investments in financial assets. 3535

8.   Net gains (losses) on derecognition of financial assets. 3535

9.   Other operating income and expenses. 3636

10. General administrative expenses. 3636

11. Net impairment losses and provisions. 3737

12. Net impairment losses on investments in subsidiaries and associates. 3737

13. Income tax. 3737

14. Earnings per share. 3838

15. Contribution to the State Budget 3838

16. Cash in Central Bank. 3939

17. Amounts due from banks. 3939

18. Derivative financial instruments. 4040

19. Securities. 4040

20. Receivables and liabilities under reverse repurchase/repurchase agreements. 4444

21. Loans and advances to customers. 4444

22. Investments in subsidiaries. 4646

23. Investments in associates. 4747

24. Intangible assets. 5151

25. Property, plant and equipment 5252

26. Right-of-use assets. 5454

27. Investment property. 5656

28. Other assets. 5656

29. Amounts due to banks. 5757

30. Liabilities to customers. 5757

31. Debt securities issued. 5757

32. Lease liabilities. 5858

33. Other liabilities. 5858

34. Provisions. 5858

35. Equity. 6161

36. Proposed profit distribution. 6161

37. Contingent liabilities in respect of financial liabilities and guarantees granted and received. 6262

38. Additional information to the statement of cash flows. 6363

39. Transactions with the Treasury and The State Treasury related entities. 6565

40. Remuneration of the top executives. 6969

41. Fair value of financial assets and financial liabilities. 7171

42. Assets pledged as collateral for the payment of liabilities. 7575

43. Offsetting of financial assets and liabilities. 7676

Risk management objectives and principles. 7777

44. Risk management 7777

45. Credit risk management 7979

46. Liquidity risk management 9797

47. Market risk management 100100

48. Operational risk management 106106

49. Other risks. 107107

50. Capital adequacy. 112112

51. Impact of the COVID-19 pandemic on the Bank’s operations. 116116

Other notes. 123123

52. Custody business. 123123

53. Information on the entity authorised to audit the financial statements. 123123

54. Major events subsequent to the reporting date. 123123

Statements of funds  established under separate legislation  for the financial year from 1 January to 31 December 2021. 1126



Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

Statement of profit or loss

Continuing operations

Note

2021

2020

Interest income

4

1,449,819

1,505,496

Interest income calculated with the use of the effective interest rate method

 

1,356,602

1,379,348

Income of similar nature to interest income on instruments at fair value through profit or loss

 

93,217

126,148

Interest expense

4

-428,128

-557,811

Net interest income

 

1,021,691

947,685

Fee and commission income

5

310,837

260,876

Fee and commission expense

5

-16,257

-12,565

Net fee and commission income

 

294,580

248,311

Net gains (losses) on financial instruments at fair value through profit or loss and foreign exchange gains (losses)

6

171,923

130,374

Net gains (losses) on investments in financial assets

7

286,049

-9,707

Net gains (losses) on derecognition of financial assets

8

19,413

151,033

Other operating income

9

39,374

36,906

Other operating expenses

9

-62,209

-91,344

General administrative expenses

10

-537,358

-522,050

Net impairment losses and provisions

11

-327,110

-376,024

Net impairment losses on investments in subsidiaries and associates

12

-64,901

-145,262

Operating result

 

841,452

369,922

Profit before tax

 

841,452

369,922

Income tax

13

-145,856

-54,267

Net profit

 

695,596

315,655

Data for 2020 was restated. The changes in rules of presentation of financial data (comparative data) are presented in Note 2.3.

 

Statement of comprehensive income

 

Note

2021

2020

Net profit

 

695,596

315,655

Other comprehensive income

 

-55,335

-52,698

Items that may be reclassified subsequently to profit or loss

 

-378,525

76,272

Revaluation of financial assets at fair value through other comprehensive income, gross

 

-467,294

94,171

Deferred tax on financial assets at fair value through other  comprehensive income

13

88,769

-17,899

Items that cannot be reclassified subsequently to profit or loss

 

323,190

-128,970

Revaluation and gain or loss on sale of equity instruments designated as at fair value through other comprehensive income, gross

  

399,650

-156,943

Deferred tax on revaluation and gain or loss on sale of equity instruments designated as at fair value through other comprehensive income

13

-76,010

30,158

Investment property, gross

 

0

-1,476

Deferred tax on investment property

13

0

280

Gains and losses due to measurement of defined benefit plans, gross

34

-555

-1,221

Deferred tax on measurement of defined benefit plans

13

105

232

Total net comprehensive income

 

640,261

262,957

 

 

 

 

 

 

 

 

 

 

Notes to the financial statements on the pages to follow form their integral part.

Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

Statement of financial position

 

Note

31 Dec 2021

31 Dec 2020

Assets 

 

 

 

Cash and balances with the Central Bank

16

48,341,955

32,262,257

Amounts due from banks

17

5,085,848

5,551,014

Derivative financial instruments

18

468,457

997,397

Securities

19

93,956,937

76,883,760

- held for trading

8,685

19,675

- not held for trading measured at fair value through profit or loss

753,410

880,771

- measured at fair value through other comprehensive income

66,674,871

55,750,843

- measured at amortised cost

26,519,971

20,232,471

Reverse repurchase agreements

20

10,002,821

4,207,234

Loans and advances to customers

21

33,207,003

33,422,650

- measured at amortised cost

33,121,589

33,320,384

- obligatorily measured at fair value through profit or loss

85,414

102,266

Investments in subsidiaries

22

279,603

1,946,212

Investments in associates

23

4,364,601

4,285,522

Intangible assets

24

80,322

69,421

Property, plant and equipment

25

126,448

129,763

Right-of-use assets

26

105,232

104,779

Investment property

27

18,718

20,041

Current tax receivables

13

17,529

0

Deferred tax assets

13

325,024

336,796

Other assets

28

61,431

84,378

Total assets

 

196,441,929

160,301,224

Liabilities and equity

 

 

 

Liabilities

 

 

 

Amounts due to banks

29

3,575,636

3,907,897

Derivative financial instruments

18

895,480

1,324,800

Liabilities to customers

30

150,810,695

116,257,696

Repurchase agreements

20

10,454,376

5,817,989

Debt securities issued

31

3,859,528

4,859,446

Lease liabilities

32

112,637

113,162

Other liabilities

33

1,460,165

3,579,079

Current tax liabilities

13

0

47,073

Provisions 

34

759,131

520,062

Total liabilities

 

171,927,648

136,427,204

Equity

 

 

 

Statutory capital

35

21,982,618

21,692,215

Supplementary capital

1,552,668

1,525,644

Revaluation reserve 

51,069

106,404

Other capital reserves

232,330

232,330

Retained earnings (accumulated loss)

 

0

1,772

Net profit (loss) for the current year

 

695,596

315,655

Total equity

 

24,514,281

23,874,020

Total liabilities and equity

 

196,441,929

160,301,224

 

 

 

 

 

 

 

 

 

 

 

Notes to the financial statements on the pages to follow form their integral part.

Statement of changes in equity

Changes from 1 January

to 31 December 2021

Note

Statutory capital

Supplementary capital

Revaluation reserve

Other capital reserves

Retained earnings

Total equity

Financial assets at fair value through other comprehensive income

Actuarial gains and losses

Investment property revaluation reserve

Reserve capital

General banking risk reserve

1 January 2021

 

21,692,215

1,525,644

112,282

-6,208

330

76,830

155,500

317,427

23,874,020

Total comprehensive income, including:

 

0

0

-54,885

-450

0

0

0

695,596

640,261

net profit for the current year

 

0

0

0

0

0

0

0

695,596

695,596

other comprehensive income for the period

 

0

0

-54,885

-450

0

0

0

0

-55,335

Retained earnings distribution, including:

35

290,403

27,024

0

0

0

0

0

-317,427

0

allocation to capital

 

290,403

27,024

0

0

0

0

0

-317,427

0

31 December 2021

 

21,982,618

1,552,668

57,397

-6,658

330

76,830

155,500

695,596

24,514,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the financial statements on the pages to follow form their integral part.

Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

Changes from 1 January

to 31 December 2020

Note

Statutory capital

Supplementary capital

Revaluation reserve

Other capital reserves

Retained earnings

Total equity

Financial assets at fair value through other comprehensive income

Actuarial gains and losses

Investment property revaluation reserve

Reserve capital

General banking risk reserve

1 January 2020

 

16,646,945

1,125,577

162,795

-5,219

1,526

76,830

155,500

511,252

18,675,206

Total comprehensive income, including:

 

0

0

-50,513

-989

-1,196

0

0

315,655

262,957

net profit for the current year

 

0

0

0

0

0

0

0

315,655

315,655

other comprehensive income for the period

 

0

0

-50,513

-989

-1,196

0

0

0

-52,698

Allocation of investment property revaluation surplus to retained earnings

 

0

0

0

0

0

0

0

1,772

1,772

Retained earnings distribution, including:

35

110,770

400,067

0

0

0

0

0

-511,252

-415

allocation to capital

 

110,770

400,067

0

0

0

0

0

-510,837

0

appropriation of profit to the Inland Waterways Fund (IWF)

 

0

0

0

0

0

0

0

-415

-415

Statutory capital increase

35

4,934,500

0

0

0

0

0

0

0

4,934,500

31 December 2020

 

21,692,215

1,525,644

112,282

-6,208

330

76,830

155,500

317,427

23,874,020

 

 

 

 

 

 

 

 

 

 

 

Notes to the financial statements on the pages to follow form their integral part.

Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

Statement of cash flows

Statement of cash flows

Note

2021

2020

A. Cash flows from operating activities 

 

 

 

Net profit/loss

 

695,596

315,655

Total adjustments:

 

14,991,734

11,068,816

Income tax recognised in profit or loss

13

145,856

54,267

Depreciation and amortisation

10

56,448

48,770

Profit/loss on investing activities

 

-234,159

9,575

Interest and dividends

38

2,585

124,814

Foreign exchange gain/loss

 

-4,005

11,384

Change in amounts due from banks

38

296,620

-360,691

Change in assets under derivative financial instruments

528,940

-422,490

Change in securities

-17,134,591

-43,728,343

- held for trading

10,990

-18,009

- not held for trading measured at fair value through profit or loss

127,361

-66,857

- measured at fair value through other comprehensive income

-10,985,442

-30,808,940

- measured at amortised cost

-6,287,500

-12,834,537

Change in reverse repurchase agreements

-5,795,587

1,094,303

Change in loans and advances to customers

215,647

-2,535,656

- measured at amortised cost

198,795

-2,558,260

- obligatorily measured at fair value through profit or loss

16,852

22,604

Change in other assets

23,004

7,109

Change in amounts due to banks

124,663

-273,762

Change in liabilities under derivative financial instruments

-429,320

713,470

Change in liabilities to customers

34,552,999

56,436,434

Change in repurchase agreements

4,636,387

-3,295,399

Change in provisions

238,514

77,051

Change in accumulated loss allowance for non-financial assets

64,821

149,244

Change in other liabilities

-2,118,914

3,131,815

Income tax paid

 

-185,823

-174,822

Other adjustments

38

7,649

1,743

Net cash from operating activities

 

15,687,330

11,384,471

B. Cash flows from investing activities 

 

 

 

Inflows

 

2,645,037

130,196

Sale of property, plant and equipment

 

0

2

Sale of investment property

 

0

220

Sale of shares in subsidiaries

22

2,243,639

1

Sale of shares in associates

23

353,251

120,384

Sale of investments in financial assets

 

0

9,544

Dividends received

38

48,147

45

Outflows

 

886,057

1,127,213

Purchase of property, plant and equipment

25

21,304

20,050

Purchase of intangible assets

24

24,896

25,208

Purchase of shares in subsidiaries

22

339,102

239,828

Purchase of shares in associates

23

494,525

842,127

Purchase of investments in financial assets

 

6,230

0

Net cash from investing activities

 

1,758,980

-997,017

C. Cash flows from financing activities

 

 

 

Inflows

 

0

460,000

Long-term loans received

 

0

460,000

Outflows

 

1,535,157

2,970,316

Repayment of long-term loans and advances

 

457,917

432,375

Redemption of debt securities issued

 

1,000,000

2,358,600

Repayment of interest

 

47,229

159,139

Repayment of lease liabilities

 

30,011

20,202

Net cash from financing activities

 

-1,535,157

-2,510,316

D. Net cash flows

 

15,911,153

7,877,138

E. Cash and cash equivalents at the beginning of the period

 

36,915,625

29,038,487

F. Cash and cash equivalents at the end of the period

38

52,826,778

36,915,625

 

 

Notes to the financial statements on the pages to follow form their integral part.

Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

1.      General information on the Bank

Bank Gospodarstwa Krajowego (“Bank”, “BGK”) is a state-owned bank as defined by the Banking Law of 29 August 1997 (“Banking Law”), the Act on Bank Gospodarstwa Krajowego of 14 March 2003, along with the Articles of Association adopted by the Regulation of the Minister of Development on the adoption of the Articles of Association of Bank Gospodarstwa Krajowego of 16 September 2016 and the Regulation of the Minister of Development, Labour and Technology of 31 December 2020 amending the Regulation on the adoption of the Articles of Association of Bank Gospodarstwa Krajowego. The Bank operates within the territory of the Republic of Poland. Its Head Office is located at Al. Jerozolimskie 7, 00-955 Warsaw, with address for correspondence: Varso 2 Building, ul. Chmielna 73, 00-801 Warsaw. The Bank’s REGON statistical number is 000017319 and NIP tax identification number is 525-00-12-372. Apart from the Head Office, BGK operates 16 Regions located in all province capitals and representative offices based in Brussels, Frankfurt, London and Amsterdam. The Bank is the parent of the Bank Gospodarstwa Krajowego Group and a significant investor for associates held by the Bank and its subsidiaries.

Under Article 4 of the Act on Bank Gospodarstwa Krajowego, the key objectives of BGK’s activities include supporting the economic policy of the Council of Ministers, social and economic government programmes, including surety and guarantee programmes, as well as local government and regional development programmes, in particular:

§  projects financed with EU funds and international financial institutions, as defined by Article 4.1.3 of the Banking Law,

§  infrastructure projects,

§  projects related to the development of micro, small and medium-sized enterprise sector,

- including those financed with public funds.

Tasks fulfilled by the Bank under Articles 5 and 6 of the Act on Bank Gospodarstwa Krajowego include, in particular:

§  performance of activities specified in the Banking Law,

§  administration of funds created by, entrusted with or transferred to BGK under separate legislation,

§  management of export transactions with the use of export support instruments, and supporting exports of Polish goods and services under separate legislation or in performance of government programmes;

§  offering, whether directly or indirectly, guarantee and/or surety services under government surety and guarantee programmes or on behalf of and for the account of the State Treasury in accordance with the Act on Sureties and Guarantees Granted by the State Treasury and Certain Legal Persons, dated 8 May 1997, in particular to the micro, small and medium-sized enterprise sector,

§  supporting the development of residential construction, in particular development of residential property for rent, under separate legislation or government programmes,

§  providing bank account services to the State budget,

§  providing bank account services to the local government budget administration,

§  providing bank account services to the accounts of state or local government legal persons established under separate legislation to carry out public functions,

§  other functions carried out with the use of public funds, as specified in agreements entered into with public administration bodies.

BGK may also fulfil the function of a body implementing a financial instrument or a fund of funds as referred to in Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006.

Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

For nearly 100 years, Bank Gospodarstwa Krajowego has pursued its mission of supporting the Polish economy. In 2021, the Bank’s strategy for 2021–2025 was adopted, in which its mission was supplemented with an additional aspect related to sustainable development activities. The Strategy for 2021–2025 also updates the Bank’s vision to become the Leading institution in sustainable development programmes. The unique role of BGK as a development bank is to support social and economic development of Poland by ensuring a relevant stimulus and supplementing the banking sector. What is of particular importance in this context is that BGK undertakes initiatives and activates partners without competing with the market. It fills the gap and targets areas where the development offer for other economic operators is insufficient. BGK’s Strategy for 2021–2025 is a response to the changing economic environment, it takes account of the changing needs in society and in the technological and regulatory environment. In subsequent years, efforts will be continued to strengthen the position of the Bank and the Polish economy on the international market. BGK’s strategy for 2021–2025 defines three key external pillars (strategic directions, based on which BGK wants to develop and shape the market):

§  Sustainable Development, where the ambition is to support the socio-economic development of the country at least so as not to deteriorate living conditions for the future generations;

§  Social Commitment, thanks to which modern Polish statehood is built through social capital development in the area of education, culture, sport and ecology;

§  International Business and Cooperation, aimed at improving the competitiveness of Polish economy by increasing the internationalisation of Polish enterprises and building awareness of Poland’s attractiveness among foreign investors as a country with high intellectual capital;

as well as two internal pillars (i.e. the manner of organisation and operation aimed at maximising the efficacy of activities in the business pillars):

§  Digital and process transformation, which creates optimum conditions for dynamic development determined by the Strategy through process excellence and digitisation;

§  Effective Management Model, which ensures an increased scale of tasks completed with a view to meeting the ever more complex needs of the growing number of stakeholders.

The scope of the Bank’s operations are is defined by its business model programmes, which support the implementation of the strategic pillars. Eight dedicated programmes offer an insight into the way, in which the Bank wants to reach the market, react to needs and adapt its solutions. Programmes represent a collection of consistent activities and carefully selected products that satisfy the needs of key stakeholders. Their goals result from the state policy, the Bank’s strategy and the need to bridge the identified market gaps.

Composition of the Bank’s Supervisory Board

Compared to 31 December 2020, the composition of the Bank’s Supervisory Board changed.

Mr Grzegorz Dostatni tendered his resignation from the Supervisory Board as of 1 October 2021.

The Prime Minister removed from office Mr Jacek Hecht and Mr Robert Nowicki, both members of the BGK Supervisory Board, respectively as of 27 October 2021 and 1 December 2021, and appointed Mr Wojciech Maj and Mr Robert Zima as members of the BGK Supervisory Board respectively as of 28 October 2021 and 2 December 2021.

As at 31 December 2021, the composition of the Bank’s Supervisory Board was as follows:

§  Paweł Borys – Chairman of the Supervisory Board,

§  Beata Gorajek – Deputy Chairwoman of the Supervisory Board,

§  Marek Niedużak – Secretary of the Supervisory Board,

§  Zbigniew Krysiak – Member of the Supervisory Board,

§  Honorata Krysiewicz – Member of the Supervisory Board,

§  Wojciech Maj – Member of the Supervisory Board,

§  Adam Rudzewicz – Member of the Supervisory Board,

§  Jerzy Szmit – Member of the Supervisory Board,

§  Łukasz Śmigasiewicz – Member of the Supervisory Board,

§  Magdalena Tarczewska-Szymańska – Member of the Supervisory Board,

§  Robert Zima – Member of the Supervisory Board.

From 31 December 2021 to the date on which these financial statements were signed, the composition of the Bank’s Supervisory Board was changed. The Prime Minister appointed Mr Piotr Pawliczak as member of the Supervisory Board of BGK as of 12 January 2022.

Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

Composition of the Bank’s Management Board

Compared to 31 December 2020, the composition of the Bank’s Management Board changed.

The Prime Minister removed Mr Przemysław Cieszyński as member of the Management Board as of 30 November 2021 and appointed Mr Dariusz Szwed as member of the Management Board as of 1 December 2021.

Composition of the Bank’s Management Board as at 31 December 2021 was as follows:

§  Beata Daszyńska-Muzyczka – President of the Management Board,

§  Paweł Nierada – First Vice-President of the Management Board,

§  Włodzimierz Kocon – Vice-President of the Management Board,

§  Radosław Kwiecień – Member of the Management Board,

§  Tomasz Robaczyński – Member of the Management Board,

§  Dariusz Szwed – Member of the Management Board.

Composition of the Bank’s Management Board did not change from 31 December 2021 until the date on which these financial statements were signed.A

2.      Accounting policies

2.1.    Basis of preparation of the financial statements and statement of compliance

These financial statements of Bank Gospodarstwa Krajowego contain data for the financial year from 1 January to 31 December 2021 as well as comparative financial data for the financial year from 1 January to 31 December 2020.

These financial statements of Bank Gospodarstwa Krajowego for 2021 (the “financial statements”) have been prepared in accordance with the International Financial Reporting Standards approved by the European Union as at 31 December 2021 and the related interpretations published as Commission Regulations (IFRS), and to the extent not regulated by the aforesaid standards in accordance with the requirements of the Accounting Act of 29 September 1994 (Polish Accounting Standards, PAS) and secondary legislation thereto.

These financial statements of the Bank were prepared based on the following measurement principles:

§  at fair value for financial assets and liabilities measured at fair value through profit or loss, including financial assets held for trading, and for financial assets measured at fair value through other comprehensive income,

§  at amortised cost for other financial assets, including loans and advances and other financial liabilities,

§  at cost less impairment allowances, for associates and subsidiaries,

§  at cost less accumulated depreciation and amortisation and impairment, for property, plant and equipment, intangible assets and right-of-use assets,

§  at fair value for investment property.

Unless otherwise stated, the financial data in the financial statements is presented in Polish zloty, rounded to PLN 1 thousand.

These financial statements were approved for issue by the Management Board of Bank Gospodarstwa Krajowego on 14 April 2022. These financial statements of Bank Gospodarstwa Krajowego are published on the same date as the consolidated financial statements of the Bank Gospodarstwa Krajowego Group for 2021.

2.2.    Going concern

These financial statements have been prepared on the assumption that the Bank will continue as a going concern for at least twelve months after the reporting date. As at the date of approval of these financial statements, the Management Board of the Bank did not identify any facts or circumstances that would pose a risk for the Bank to continue as a going concern as a result of intended or forced discontinuation or material limitation of its operations.

2.3.    Change in presentation of financial data (comparative data)

In the full-year financial statements for the period from 1 January 2021 to 31 December 2021, relative to the full-year financial statements for the period from 1 January 2020 to 31 December 2020, the Bank restated items of the statement of profit or loss.

In the Bank’s opinion, the presentation change is organisational in nature. The introduction of the changes resulted in the need to ensure comparability with the current period of comparable data disclosed in these financial statements.



Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

Below are presented the statement of profit or loss as disclosed in the financial statements for the period from 1 January 2020 to 31 December 2020 and after restatement. From the item “Net gains (losses) on investments in financial assets” the item “Net gains (losses) on derecognition of financial assets” was separated and shown as an individual item. “Net gains (losses) on modifications” were moved to “Interest income calculated with the use of the effective interest rate method”.

Continuing operations

2020

restatement

2020

restated

Interest income

1,501,974

3,522

1,505,496

Interest income calculated with the use of the effective interest rate method

1,375,826

3,522

1,379,348

Income of similar nature to interest income on instruments at fair value through profit or loss

126,148

 

126,148

Interest expense

-557,811

 

-557,811

Net interest income

944,163

3,522

947,685

Fee and commission income

260,876

 

260,876

Fee and commission expense

-12,565

 

-12,565

Net fee and commission income

248,311

 

248,311

Net gains (losses) on financial instruments at fair value through profit or loss and foreign exchange gains (losses)

130,374

 

130,374

Net gains (losses) on investments in financial assets

141,652

-151,359

-9,707

Net gains (losses) on modifications

3,522

-3,522

0

Net gains (losses) on derecognition of financial assets

0

151,033

151,033

Other operating income

36,906

 

36,906

Other operating expenses

-91,344

 

-91,344

General administrative expenses

-522,050

 

-522,050

Net impairment losses and provisions

-376,350

326

-376,024

Net impairment losses on investments in subsidiaries and associates

-145,262

 

-145,262

Operating result

369,922

 

369,922

Profit before tax

369,922

 

369,922

Income tax

-54,267

 

-54,267

Net profit

315,655

 

315,655

2.4.    Amendments to accounting standards

The accounting policies applied in preparing these financial statements for 2021 are consistent with the policies applied in preparing the Bank’s full-year financial statements for the year ended 31 December 2020, save for the effect of application of new or amended standards and interpretations effective for periods beginning on or after 1 January 2021.

Amendments to the existing standards adopted for the first time in the financial statements for 2021

Standards/Interpretations

Issue/publication date

Date of entry into force in EU/approval by EU

Description of changes

Amendment to IFRS 16: COVID-19-Related Rent Concessions beyond 30 June 2021

31 Mar 2021

1 Apr 2021 / 31 Aug 2021

The changes extend the scope of amendments to IFRS 16: COVID-19-Related Rent Concessions, which was issued on 28 May 2020, permit lessees, as a practical expedient, not to assess whether particular rent concessions occurring as a direct consequence of the COVID-19 pandemic and meet certain conditions are lease modifications and, instead, to account for those rent concessions as if they were not lease modifications. The amendment to IFRS 16 extends the time period over which the practical expedient is available for use by 12 months, from 30 June 2021 to 30 June 2022.

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 15 – IBOR reform – Phase 2

27 Aug 2020

1 Jan 2021 / 13 Jan 2021

The provisions published as part of Phase 2 of the IBOR reform relate to:

- changes in contractual cash flows – addition to IFRS 9 of a solution that permits the recognition of a modification of contractual cash flows as a result of IBOR reform by revising the effective interest rate of a contract to reflect the transition to an alternative reference rate (it will not be required to discontinue recognition or adjust the carrying amount of financial instruments); a similar solution is provided for under IFRS 16 with respect to recognition by lessees of lease modifications;

- hedge accounting – there will be no requirement to discontinue hedge accounting solely because of changes required by the reform, if the hedge meets other hedge accounting criteria;

- disclosures – entities will be required to provide disclosures about new risks arising from the reform and how the entity manages the transition to alternative reference rate.

For detailed information on the impact of the IBOR reform on BGK see Note 47.4 Interest rate benchmark reform.

Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

Amendments to IFRS 4 Insurance contracts – deferral of IFRS 17

25 Jun 2020

1 Jan 2021 / 16 Dec 2020

The amendments provide for two optional solutions reducing the impact of differing effective dates of IFRS 9 and IFRS 17.

The above amendments to existing standards have no material effect on the Bank’s financial statements for 2021 or do not apply to the Bank.

New standards and amendments to existing standards issued by the IASB and approved by the EU, but which have not yet become effective

Standards/Interpretations

Issue/publication date

Date of entry into force in EU/approval by EU

Description of changes

IFRS 17 Insurance Contracts, amendments to IFRS 17

18 May 2017,

amendments issued on 25 Jun 2020

amendments published on 23 Nov 2021

1 Jan 2023 / 19 Nov 2021

IFRS 17 Insurance Contracts will replace IFRS 4 Insurance Contracts, which enables continued accounting for insurance contracts in accordance with accounting principles applicable in national standards, which effectively makes it possible to apply many different solutions. IFRS 17 introduces a requirement of consistent accounting for all insurance contracts. Contract liabilities will be accounted for based on current value, instead of historical cost. The standard will be applied using the full retrospective method (if it cannot be applied, an entity should apply a modified retrospective approach or the fair value approach).

The amendments are intended to:

- reduce costs by simplifying some requirements in the standard;

- make financial performance easier to explain; and

- ease transition to the new standard by deferring the effective date of the standard to 2023 and by providing additional relief to reduce the effort required when applying IFRS 17 for the first time.

Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets; Annual Improvements to IFRSs 2018-2020 Cycle

14 May 2021

1 Jan 2022 / 28 Jun 2021

Amendments to IFRS 3 Business Combinations update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations.

Amendments to IAS 16 Property, Plant and Equipment prohibit an entity from deducting from the cost of property, plant and equipment amounts received from selling items produced while the entity is preparing the asset for its intended use. Instead, an entity should recognise such sales proceeds and related cost in profit or loss.

Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets specify which costs an entity includes when assessing whether a contract will be loss-making.

Annual Improvements also introduce minor amendments to IFRS 1 First-time Adoption of IFRSs, IFRS 9 Financial Instruments, IAS 41 Agriculture and the illustrative examples accompanying IFRS 16 Leases.

The Bank estimates that the above new standards and amendments to existing standards would not have had a material effect on these financial statements if they had been applied by the Bank as at 31 December 2021.



Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

New standards and amendments to existing standards published by the IASB, but have not yet been approved for use in the EU

Standards/Interpretations

Issue/publication date

Effective date

Effective date (approval by EU)

Description of changes

IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information

9 Dec 2021

1 Jan 2023

No data

The amendment is a transition option relating to comparative information about financial assets presented on initial application of IFRS 17. The amendment is aimed at helping entities to avoid temporary accounting mismatches between financial assets and insurance contract liabilities, and therefore improve the usefulness of comparative information for users of financial statements.

IFRS 17 incorporating the amendment is effective for annual reporting periods beginning on or after 1 January 2023.

Amendments to IAS 1 Presentation of Financial Statements – Classification of Liabilities

23 Jan 2020/

15 Jul 2020

1 Jan 2023

No data

The amendments affect the presentation of liabilities in the statement of financial position. In particular, they clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period. The amendments will be applied prospectively.

Amendments to IAS 8 Definition of Accounting Estimates

12 Feb 2021

1 Jan 2023

No data

In the amendment to IAS 8 Definition of Accounting Estimates the definition of a change in accounting estimates is replaced with a definition of accounting estimates. Under the new definition, accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty. The Board also explained the new definition using additional guidelines and examples on how accounting policies and accounting estimates are related and how a change of a valuation technique represents a change of accounting estimates. The introduction of a definition of accounting estimates and other amendments to IAS 8 was intended to help entities distinguish changes in accounting policies from changes in accounting estimates.

Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies

12 Feb 2021

1 Jan 2023

No data

Amendments to IAS 1 and IFRS Practice Statement 2 are aimed at helping financial statement preparers decide what accounting policy information should be disclosed in the financial statements. The amendments require entities to disclose their material accounting policy information rather than their significant accounting policies. Clarifications and examples were added about how an entity can identify material accounting policy information. The amendments clarify that accounting policy information may be material because of its nature, even if the related amounts are immaterial, if users of an entity’s financial statements would need it to understand other material information in the financial statements.

Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction

7 May 2021

1 Jan 2023

No data

The amendments aim to clarify how companies should account for deferred tax on transactions such as leases and decommissioning obligations.

The Bank estimates that the above new standards and amendments to existing standards would not have had a material effect on these financial statements if they had been applied by the Bank as at 31 December 2021.



Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

2.5.    Estimates and assumptions

The Bank makes certain estimates and assumptions that affect both the financial statements and the accompanying notes. The estimates and assumptions made by the Bank for purposes of recognition of the respective amounts of assets and liabilities as well as revenue and costs are based on historical data and other factors which are available and considered appropriate under given circumstances.

The assumptions concerning the future and the available data are used for purposes of estimating the carrying amounts of assets and liabilities that cannot be measured reliably using other sources. While making such assumptions, the Bank takes into account the causes and sources of uncertainty that it is able to foresee at the end of the reporting period. Actual performance may differ from estimates.

The estimates and assumptions made by the Bank are reviewed on a regular basis. Estimation adjustments are recognised in the period when the estimates are modified, if they pertain to that period only. If the adjustments affect both the period of the modification and future periods, they are recognised in the period of the modification and in future periods.

Allowances for expected credit losses taking account of the situation resulting from the COVID-19 pandemic

The Bank applies the requirements of IFRS 9 regarding impairment for the recognition and measurement of a loss allowance for financial assets that are measured at amortised cost or at fair value through other comprehensive income. The methods for impairment assessment and calculation of expected credit losses are described in Note 51 “Impact of the COVID-19 pandemic on the Bank’s operations”.

As regards expected credit losses, the Bank continued to analyse the situation related to COVID-19 and took appropriate measures on an ongoing basis. Regardless of the impact on customers’ standing and BGK’s performance, the pandemic of COVID-19 has a significant impact on the entire lending process. The Bank took steps to facilitate the lending process during the pandemic, which involved the simplification of rules applied to changing the existing financing terms, including deferral of repayments.

The Bank did not change the methods of IFRS 9 valuation models, but the updated parameters of the models and actual monitoring data reflect expectations regarding the potential increase in credit risk following the COVID-19 pandemic. The following changes were made, which was reflected in the amount of expected credit losses (for definitions of parameters see Note “Credit risk management process”):

§  adjustment of LGD parameters (to reflect the estimated changes in recovery of collateral),

§  update of the LtPD curve to reflect current data,

§  update of macroeconomic forecast based on which expected credit losses are determined,

§  update of the assessment of the situation of individual clients as part of the monitoring process, reflected in the rating and the PD parameter.

The tables below present the estimated effect of changes in the present value of cash flows as well as PD and LGD on the amount of allowances for expected credit losses – for three impairment stages.

Effect of an increase/decrease in the present value of cash flows on impairment allowances/provisions for impaired exposures – tested on an individual basis – Stage 3

31 Dec 2021

31 Dec 2020

Increase/decrease in the present value of cash flows

10%

-10%

10%

-10%

Estimated change in impairment allowances on on-balance-sheet exposures tested on an individual basis

-110,064

135,403

-232,801

26,793

Estimated change in provisions for off-balance-sheet liabilities tested on an individual basis

-15,704

21,781

-26,299

35,032

 

Effect of an increase/decrease in LGD on impairment allowances/provisions for impaired exposures – tested on a collective basis – Stage 3 

31 Dec 2021

31 Dec 2020

Increase/decrease in LGD

10%

-10%

10%

-10%

Estimated change in impairment allowances on on-balance-sheet exposures tested on a collective basis

19,320

-21,013

11,736

-30,450

Estimated change in provisions for off-balance-sheet liabilities tested on a collective basis

358

-358

160

-173

 

Financial statements of Bank Gospodarstwa Krajowego

prepared in accordance with IFRS for the financial year from 1 January to 31 December 2021

(in PLN thousand)

 

Effect of an increase/decrease in PD and LGD on impairment allowances/provisions for non-impaired exposures – Stage 1 and 2 

31 Dec 2021

31 Dec 2020

Increase/decrease in PD

10%

-10%

10%

-10%

Estimated change in impairment allowances on non-impaired on-balance-sheet exposures

41,828

-43,357

35,709

-37,802

Estimated change in provisions for non-impaired off-balance-sheet liabilities

38,216

-38,209

23,074

-23,074

Increase/decrease in LGD

10%

-10%

10%

-10%

Estimated change in impairment allowances on non-impaired on-balance-sheet exposures

41,830