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.
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 |