80. Subsequent events

1. On 1 February 2023, as part of the inaugural issue under the EMTN programme, the Bank issued 3-year Senior Preferred Notes with a total value of EUR 750 million, with the option of early redemption two years after issue. The coupon of the issue is fixed, at 5.625%, payable annually until the early redemption date, and variable thereafter, with quarterly payments. Moody’s Investors Service has assigned a rating of A3 to the issue. The bonds were admitted to trading on a regulated market on the Luxembourg Stock Exchange.
2. On 9 February 2023, PKO Bank Hipoteczny S.A. (a subsidiary of PKO Bank Polski S.A.) issued, within the framework of the International Mortgage Covered Bond Issue Programme – mortgage bonds with a total nominal value of PLN 500 million maturing in February 2026.
3. On 16 February 2023, the Opinion of the Advocate General was published in Case C-520/21 concerning the possibility for consumers and banks to claim beyond the consideration provided under a loan agreement that has been declared invalid by the Court. The Advocate General concluded that:
   • as far as consumer claims are concerned – they do not conflict with the Directive, but the validity of such claims would have to result from national law, and it is for the national court to decide. The Advocate General emphasised that this does not mean that consumers’ claims must be upheld, and that national courts may also exercise their jurisdiction to dismiss such an action where it constitutes an abuse of rights.
   • as regards claims by banks – provisions of the Directive preclude the Bank from bringing such claims against consumers.

By contrast, the Advocate does not comment directly on other potential formulas for settling the time value of money, and in particular does not formulate a clear thesis on how to define the concept of 'principal’, subject to reimbursement.

In the Group’s view, the opinion of the Advocate General of the CJEU constitutes a post-reporting date event that does not require adjustment under IAS 10 Events subsequent to the reporting period, due to the fact that:

• the Advocate’s opinion is non-binding,
• the case in which the questions referred for a preliminary ruling in Case C-520/21 were raised does not concern the Bank’s claims. The Bank’s claims against the customer were raised in another case, which also raised preliminary questions of a similar content to Case C-520/21. This case is registered under reference C-756/22,
• the inability to predict the final outcome of the CJEU’s decision, in particular the uncertainty as to whether the CJEU’s decision will contain explicit instructions or merely general guidelines leaving the national courts to assess and decide on the details,
• uncertainty about the future practice of national courts in enforcing CJEU judgments.

In the Group’s view, the Advocate’s opinion cannot form the basis for recognising its effects in the cost of legal risk on mortgage loans in CHF in these financial statements.

However, in the opinion of the Group:

1. The level of additional legal risk costs recognised by the Group will depend primarily on customer behaviour, i.e. whether the number of lawsuits brought by customers is in line with current model assumptions or whether the opinion of the CJEU ombudsman will have a significant impact on increasing the number of lawsuits. The Ombudsman’s opinion and the subsequent ruling of the CJEU may result in negative trends affecting the level of estimated risk, resulting from an increased propensity of customers to file lawsuits.
2. At the date of publication of these financial statements, the Group is unable to estimate the potential impact of these factors beyond the sensitivity analysis presented in note 26 Cost of legal risk of foreign currency mortgage loans.
3. As at the date of publication of these financial statements, the Group is not able to estimate the impact of potential customers’ claims that exceed return of cash benefits.

In the opinion of the Bank’s Management Board, the information available to it as at 31 December 2022 does not indicate any risk of a breach of the legally required minimum levels of capital adequacy or a threat to the going concern assumption adopted in the consolidated financial statements.

On 27 February 2023, after obtaining the necessary corporate approvals, the Group concluded with the counterparty a guarantee agreement providing unfunded credit protection in respect of a portfolio of selected corporate credit receivables of the Group, in accordance with the CRR.

The total value of the Group’s debt portfolio covered by this guarantee is over PLN 12 292 million, and the portfolio consists of the bond portfolio of PLN 1 515 million (“Portfolio A”) and the portfolio of other receivables of PLN 10 777 million (“Portfolio B”). The coverage ratio is 100% for Portfolio A and 80% for Portfolio B, therefore the total Guarantee amount is PLN 10 137 million. The maximum duration of the guarantee is 60 months, provided that the Group is entitled to terminate it before the expiry of its term.