Prospects

The following external factors may have an impact on the operations of the Bank’s Group in 2019:

• expected moderate slowing down in the global economy, in particular in the Euro Area and in China;
• probable slowing down in the US economy and concerns about the revaluation of global assets;
• slow normalization of the policy of the European Central Bank and potentially, very careful continuation of the cycle of interest rate increases in the USA;
• uncertainty related to the ultimate form of Brexit (potential risk that the European Union and the United Kingdom do not reach an agreement as to their mutual relations before 29 March 2019);
• potential escalation of tensions in the area of commercial policy (protectionist moves on the part of the USA vis a vis China, and maybe also the European Union);
• potential growing geopolitical tensions (Iran, Russia, USA);
• political and economic conditions in Ukraine.

• expected growing absorption of EU funds and peak of capital investment activity;
• probable normalization of consumer sentiments, of the rate of growth of real disposable income and consumption;
• possible maintenance of the high level of wages and salaries, and simultaneous turnaround of the falling trend in unemployment rates;
• potential limitation of demand for Polish exports related to the slowing of the German economy;
• possible low inflation (below or around 2% y/y) throughout the year;
• expected stabilization of NBP interest rates, growing expectations concerning the maintenance of current NBP interest rates without any changes over the next 3 years;
• potential stabilization of deposit dynamics and an insignificant drop in demand for loans; a drop in the rate of growth in consumer loans is expected and a slight slowing of housing loan dynamics. In respect of loans extended to entities, the slower increase in loans to non-financial business entities should be partly offset by an increase in financing central and local government entities; The good financial condition of households in connection with the risk aversion which is higher than in 2018 will keep deposit dynamics at a level close to 2018. Stabilization of cost pressures accompanied by the continued strong internal demand means that the dynamics of deposits by non-financial business entities as at the end of 2019 will be comparable to that from 2018.

• IFRS 16 which becomes binding on 1 January 2019, which introduces new principles for identifying and recognizing leases in books of account; in effect the division between operating and finance leases will disappear, total assets will increase, debt ratios will increase, and capital ratios will drop;
• the Act on Employee Capital Funds of 4 October 2018 (Journal of Laws of 2018, item 2215), which – among other things – introduces the duty to establish Employee Capital Funds as of 1 July 2019 and regulates the principles for making payments;
• Act of 9 November 2018 on amendments to certain acts in connection with reinforcing supervision over the financial market and on protecting investors on that market (Journal of Laws of U.2018, item 2243), which introduces – among other things – changes to the scope of dematerialization of mortgage bonds and bonds, and to the registration of those securities;
• Act on macroprudential supervision over the financial system and on crisis management (Journal of Laws of 2017, item 1934, as amended), which among other things increases the security buffer to 2.5% as of 1 January 2019;
• Regulation (EU 2017/1131) of the European Parliament and of the Council of 14 June 2017 on money market funds, which introduces standardized regulations for Money Market Fund investment policies; In accordance with the regulation as of 21 January 2019 a fund wishing to transact as a money market fund will have to have an appropriate permit from the supervisory authority, otherwise it will not be able to use the names and terms which could suggest that it has the features of such a fund;
• Regulation of the Minister of Finance dated 13 December 2018 on the maximum amount of the investment fund company’s fixed fee for managing an open-ended investment fund or a specialist open investment fund (Journal of Laws of 2018, item 2380),
• potential statutory solutions in respect of housing loans in foreign currencies extended to households;

• potential legal solutions relating to reference rates due to the near end of the temporary period for some entities, with reference to the application of Regulation (EU) No. 2016/1011 of the European Parliament and Council of 8 June 2016 on indices used as benchmarks;
• draft amendments to Recommendation G and S of the PFSA;
• Act of 23 October 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act, the Tax Ordinance and certain other acts (Journal of Laws from 23 November 2018), which introduces, among other things:
  • new duties for identifying and reporting information on tax plans to the Chief of the National Revenue Administration(mandatory disclosure rules – MDR),
  • new principles for charging withholding tax – WHT of certain income paid to non-residents;
  • new principles for performing duties related to documenting transactions between related entities;
  • amendments to the general anti-avoidance rule – GAAR;
• Act of 23 October 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act, the Tax Ordinance and certain other acts (Journal of Laws from 19 November 2018), which modifies regulations on tax-deductible costs on the use of passenger cars, which may have an impact on:
  • increasing the CIT charge due to introducing restrictions to include expenses related to the use, insurance and lease of passenger cars in tax-deductible costs;
  • reducing CIT charges due to the increase in the tax amortization and depreciation limit, and in respect of lease firms, abolition of the tax depreciation limit.

• establishing a tax group

On 5 November 2018 PKO Bank Polski SA, jointly with its two subsidiaries: PKO Bank Hipoteczny SA and PKO Leasing SA, signed a contract to establish a tax group: Podatkowa Grupa Kapitałowa Powszechnej Kasy Oszczędności Banku Polskiego Spółki Akcyjnej (“PGK PKO Banku Polskiego SA”). The respective contract was registered by the Head of the Second Mazovian Tax Office in Warsaw. PKO Bank Polski SA is the parent of PGK PKO Banku Polskiego SA. PGK PKO Banku Polskiego SA was established for three tax years. The first tax year began on 1 January 2019.