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 2022, including in particular:
Regulatory and legal environment
2022 Annual Report
Act of 7 April 2022 amending the act on mortgage covered bonds, mortgage banks and certain other acts (Journal of Laws of 2022, item 872).
The Act amended e.g. the Banking Law, allowing commercial banks operating in the form of joint-stock companies to create an institutional protection system. It also introduced related amendments to the Act on the Bank Guarantee Fund, the system of deposit guarantees and resolution, e.g. an option of decreasing the target level of funds of the bank deposit guarantee system by the Fund Council.
The Act of 5 August 2022 on the coal allowance (Journal of Laws 2022, item 1692) introduced further amendments to the Banking Law regarding the protection system.
The Act of 1 October 2021 on guaranteed housing loans (Journal of Laws of 2021, item 2133), which aims to eliminate the barrier to the granting of a mortgage loan in the form of the lack of own funds constituting the own contribution required by the bank.
The position of the Polish Financial Supervision Authority dated 7 March 2022 on actions aimed at mitigating credit risk. The recommendation concerns, among other things, the parameters applied by banks to assess creditworthiness, e.g. a minimum interest rate change of 5 p.p.
The Act of 7 July 2022 on the crowdfunding of business ventures and on assistance for borrowers. The Act contains a support package for mortgage borrowers, including loan repayment suspension, so-called statutory credit holidays, subsidies from the Borrowers’ Support Fund and a declaration of using another index in the place of WIBOR.
Act of 5 August 2022 on amending the Act on mortgage loans and on the supervision of mortgage brokers and agents (Journal of Laws of 2022, item 1719). The Act provides for reimbursement by banks of additional fees that the borrower incurred while waiting for the mortgage to be registered in the land and mortgage register.
Commission Delegated Regulation (EU) 2022/1214 of 9 March 2022 amending Delegated Regulation (EU) 2021/2139 as regards economic activities in certain energy sectors and Delegated Regulation (EU) 2021/2178 as regards specific public disclosures for those economic activities.
The regulation specifies the conditions under which selected nuclear and natural gas activities can be considered in line with the Taxonomy, on the basis of which disclosures for 2022 are prepared for the Bank Group’s key performance indicators in relation to two environmental goals: climate change adaptation and climate change mitigation.
Implementing Technical Standards – Commission Implementing Regulation (EU) 2022/2453 of 30 November 2022 amending the implementing technical standards laid down in Implementing Regulation (EU) 2021/637 as regards the disclosure of environmental, social and governance risks. The regulation specifies uniform formats for disclosing information on ESG risks, according to which disclosures must be made, starting from 2022, pursuant to Article 449a of Regulation (EU) No 575/2013.
Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive.
As of August 2022, investment firms are required to obtain information on a client’s ESG preferences through a suitability questionnaire, and to review their advisory service delivery and suitability assessment process to include the client’s ESG preferences.
Commission Delegated Directive (EU) 2017/593 of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits.
Transposition into national regulations by the Regulation of the Minister of Finance of 11 August 2022 amending the Regulation on the procedure and conditions for the conduct of investment companies, banks referred to in Article 70 (2) of the Act on trading in financial instruments, and custodian banks (Journal of Laws of 2022, item 1740).
As of 22 November 2022, an obligation was established to integrate sustainability factors into product management processes.
The Regulation of the Minister of Finance of 18 March 2022 amending the Regulation in respect of a higher risk weight for exposures secured with mortgages on real estate.
Impact: a decrease in capital requirements due to the application of preferential risk weights.
Recommendation Z of the Polish Financial Supervision Authority concerning corporate governance principles for banks, applied at PKO Bank Polski S.A. as of 1 January 2022. The recommendation provides guidance on: banks’ internal governance principles, rules of operation and interactions of the supervisory board and management board, management of conflicts of interest, outsourcing policies, remuneration and dividend policies, risk management and disclosure.
The Act amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other acts of 29 October 2021 (known as “the Polish Deal”; Journal of Laws of 2021, item 2105), and the subsequent regulations constituting the Polish Deal, which change, e.g. the principles for calculating personal income tax advances on wages and salaries and the principles for performing the obligations of WHT remitters, exempt residential buildings and units from tax depreciation, extend the CFC tax obligations (i.e. tax on income of controlled foreign corporations), amend documentation obligations with regard to so-called tax haven transactions, and provide the possibility for taxpayers to form VAT groups, which allow tax to be settled jointly for several entities that meet certain conditions.
The Act on aid for Ukrainian citizens in connection with the military conflict in the territory of Ukraine of 12 March 2022 (Journal of Laws of 2022, item 583) and other regulations which introduce tax preferences for providing aid to Ukrainian citizens.
The Regulations of the Minister of Finance of 30 June 2022 on withholding tax (Journal of Laws of 2022, item 1381 and item 1382) exclude, from July 1 to December 31, 2022, the application of regulations on mandatory tax withholding by the entity that maintains a securities account or omnibus account (so-called technical remitters), on distributions exceeding PLN 2 million, on receivables from securities recorded in these accounts.
At the same time, the business environment in which the Bank’s Group operates, including the economic standing of its customers, was affected by the Anti-Inflation Shields, which introduced in particular a temporary reduction in VAT and excise tax rates on selected products (mainly those having a strong effect on prices), including in particular electricity and motor fuels, and exempted electricity provided to households from excise tax.
Interest rate benchmarks reform
The Bank Group’s operations in 2022 were also affected by regulatory and legal changes to the EU benchmark reform, introduced by Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 of 8 June 2016 (BMR).
As of 1 January 2022, due to the EU benchmark reform and the decision of the UK Financial Conduct Authority (FCA), the LIBOR CHF benchmarks are no longer compiled and published. The European Commission, in Implementing Regulation (EU) 2021/1847 of 14 October 2021 on the designation of a statutory replacement for certain settings of CHF LIBOR, which is in force by operation of law and directly applicable in all Member States of the European Union as of 1 January 2022, has determined substitutes for the CHF LIBOR rates. These substitutes are the 1-month or 3-month SARON compound rate with an indicated value of the adjustment spread, respectively. The SARON rate replaced the CHF LIBOR rate in every contract and financial instrument within the European Union, so this also applied to Polish borrowers. LIBOR EUR, LIBOR GBP, LIBOR JPY, LIBOR USD for tenors of 1W and 2M have also been discontinued since the beginning of 2022. The FCA has begun publishing the so-called synthetic 1M, 3M and 6M rates for LIBOR GBP and JPY.
The Act of 7 July 2022 on the crowdfunding of business ventures and on assistance for borrowers initiated the reform of the WIBOR index. The WIBOR index will be discontinued and replaced by a replacement. The law contains a legal delegation to promulgate it by means of a regulation.
A National Working Group on Benchmark Reform (NWG) has been established to ensure the credibility, transparency and reliability of the development and application of the new benchmark interest rate. The Steering Committee of the National Working Group decided to select the WIRON index as an alternative interest rate benchmark and presented a Roadmap for the process of replacing the WIBOR and WIBID benchmarks with the WIRON index. The benchmark reform in Poland will be implemented by the end of 2024. At the same time, a new offer of financial products based on WIRON will be implemented in 2023-2024 and the full readiness to discontinue the development and publication of the WIBOR and WIBID benchmarks will be reached at the beginning of 2025.