Integrated Report 2020

Risk management


The risk management system is an integrated set of rules, mechanisms and tools (including, inter alia, policies and procedures) relating to risk processes. Risk management is part of the Bank's overall management system. The role of the risk management system is to continuously identify, measure or estimate and monitor the level of risk incurred by the Bank.

  • 102-11
  • 102-15

The Bank has developed comprehensive rules of risk identification and assessment in response to the requirements of the review and supervisory assessment process. The rules are aimed at identification and assessment of all risks to which the Bank is or may be exposed, taking into account regulatory requirements, best practices and use of existing risk management processes tested by the Bank. The Bank takes into account the specific nature, scale and degree of complexity of business activity and related risk, ensuring that all significant risks in the Bank’s activity are measured and mitigated. The Bank strives to identify and assess risks resulting from the internal and external environment that could have a significant impact on the Bank’s financial stability. The risk identification process is carried out at the Bank on an annual basis and is an element of the internal capital adequacy assessment process.

The Bank distinguishes the following types of risks in its business activity, which were assessed as material:

  • credit risk (including country risk, residual risk, settlement risk and concentration risk),
  • counterparty risk,
  • market risk,
  • interest rate risk and the Bank’s portfolio risk,
  • liquidity and financing risk,
  • operational risk (including legal risk, compliance risk, business continuity risk and IT risk),
  • business risk (including financial result risk and strategic risk),
  • reputation risk,
  • model risk,
  • insolvency risk (including leverage risk),
  • CSR/ESG risk.

For the identified risk types, the Bank defines the level of risk appetite. The risk appetite, within the limits set by risk tolerance, defines the way the Bank uses its capacity to take risk by defining for each risk type the degree of risk exposure that a given area may take. All methods and procedures are subject to periodical reviews for their adequacy and reliability. The Bank applies validation tests, stress tests, as well as scenario and historical (back testing) analysis, based on both theoretical changes in market, business parameters and Customer behaviour, as well as changes that actually took place in the market in the past.

The Bank monitors specific types of risks by means of a formal system of limits and reports, implemented as part of, among others, dedicated risk management policies, accepted at the level of the Management Board. The system of limits is set in such a way as to ensure that:

  • the Bank satisfies supervisory standards,
  • the desired risk profile defined in the Bank’s strategy is maintained,
  • the limits do not exceed the risk level acceptable to the BNP Paribas Group.

If a limit is exceeded, the unit responsible for maintaining the reported values below the limit is obliged to employ measures enabling reduction of the risk value in accordance with the procedures in place at the Bank. The information system used for purposes of risk management ensures collection of data concerning operations and transactions, along with their effect on the Bank’s risk profile.

The risk management policy of the Bank is aimed at ensuring that the employees in charge of risk management process supervision and handling have extensive practical experience and theoretical knowledge about the tasks performed, in addition to high morale. The procedures in place at the Bank enable control over correctness of realisation of their tasks.

The Bank’s policy is based on the principle that the functions of business (direct entry into transactions), operations (transaction booking and clearing) and control functions (risk measurement and monitoring) forming part of the currency, interest rate and liquidity risk management process are fulfilled by separate, organisationally independent units. The scope of their responsibilities is clearly defined to determine their role and accountability in the risk management process. This enabled separation of business, control, risk reporting and operational functions in order to guarantee appropriate quality of risk control and operational processes in addition to ensuring that the results of control indicating that the risk level is too high generate appropriate response of the Bank’s management.

The Bank has adopted risk control and management policies that determine the measures to be employed in crisis situations. The principles of crisis identification, the scope of measures to be employed as well as responsibilities necessary to mitigate the related risk and to implement corrective actions, were also defined.

The risk management system of the Bank comprises mainly the Supervisory Board, the Management Board, dedicated committees (Audit Committee and Risk Committee at the level of the Supervisory Board, ALCO, Risk Management Committee, Retail Banking Risk Committee, Personal Finance Risk Committee, Credit Committee, Problematic Loan Committee, Products Approval, Services, Transaction and Businesses Committee, as well as Internal Control Coordination Committee), Risk Area department, Compliance Division as well as Security and Continuity of Business Management Department.

The key role in the risk management system at the Bank is fulfilled by the Management Board, which defines the risk management strategy, risk appetite, and adopts the risk management policies as well as defines material risk limit policy and risk control procedures.

The risk management principles are derived from the document Risk Management Strategy in BNP Paribas Bank Polska S.A. defined by the Management Board and approved by the Supervisory Board.

The Group’s core business activities focus on financial products offered to Customers: individuals, entrepreneurs and enterprises, public and budgetary entities, non-bank financial institutions. On the liabilities side, short-term fixed-rate deposits as well as current and savings accounts dominate. On the asset side, the Group offers the following credit products: housing loans, cash loans, credit cards, overdrafts, investment and working capital loans, preferential loans with subsidies, factoring, leasing, guarantees, foreign trade finance transactions (e.g. letters of credit) – the vast majority of credit products are medium and long-term instruments, bearing interest based on short-term market rates.

The Group uses financial market instruments primarily to manage liquidity, interest rate and currency risks arising in its core business, in line with its internally adopted risk appetite and medium and long-term market trends.

The Group also offers access to financial market instruments to its Customers to hedge market risks – currency, interest rate or commodity price – that exist in their core business activities.

Principal types of risk

Credit risk

Credit risk is the risk of the Bank incurring a loss on account of a failure to meet its obligations by the deadline specified in the agreement as a result of deterioration or loss of creditworthiness by the Customer.

The Bank’s credit risk management system has been defined in the Credit Policy of BNP Paribas Bank Polska S.A. adopted by the Management Board. Detailed financing principles and criteria applicable to the product offering of each business line, types of available loans, objectives, financing terms and limits have been defined in the credit policies of each business line. It is the Bank’s intention, in accordance with the criteria established in the credit policy, to cooperate with Customers enjoying good reputation and a good economic and financial condition.

Additionally, the aforementioned credit policies specify detailed principles applicable to risk identification, measurement and acceptance, collateral securing repayment of the loan as well as Customer monitoring during the term of the loan agreement.

The organisation of the credit risk management process aligned with the business line structure in the Bank. A central role in the credit risk management system is performed by the Risk Division, which is an organisationally separate unit managed by a member of the Management Board acting in the capacity of the Chief Risk Officer. Credit risk management activities are supported by the Risk Management Committee as well as the Retail Banking/Personal Finance Risk Committees.

The credit risk of the Customers is assessed using rating and scoring classification systems in addition to the risk classification standards defined in IFRS.

Credit decisions are made in accordance with the decision-making model approved by the Management Board of the Bank and aligned with the standards imposed by the BNP Paribas Group. The decision-making model takes into account the structure of the business lines, determines the number of decision levels, the scope of their competence as well as the principles, criteria and conditions to be satisfied in the credit decision-making process. The value thresholds for the decision-making competence depend on such criteria as the Customer segment, risk profile and the borrowing period. At each competence level, credit decisions are taken by two employees (four-eye principle), namely a representative of the business line and a representative of the organisational unit responsible for Customer and transaction risk assessment performed independently of the business line. For Customers whose credit risk assessment is performed in accordance with simplified risk assessment principles or models, including scoring models approved by the Risk Management Committee or the Retail Banking/Personal Finance Risk Committees, credit decisions may be taken by one representative of the business line.

The Bank follows the following credit risk management principles:

  • each credit transaction requires comprehensive credit risk assessment expressed in internal rating or scoring,
  • thorough and diligent financial analysis serves as the basis for regarding the Customer’s financial information and collateral-related data as reliable; prudential analyses performed by the Bank always take into account a necessary margin of safety,
  • as a rule, financing is provided to the Customers based on their ability to generate cash flows that ensure repayment the liabilities to the Bank,
  • the credit risk assessment is additionally verified by credit risk assessment personnel, independent of the business personnel,
  • the pricing terms of a credit transaction cover the risk involved in such a transaction,
  • credit risk is diversified in such dimensions as geographical regions, industries, products and Customers,
  • credit decisions may only be taken by authorised employees,
  • the Customer and the transactions made with the Customer are monitored transparently from the perspective of the Customer, in a manner that strengthens the relationship between the Bank and the Customer.

The principles of the Bank’s supervision over the credit risk generated by the activity of subsidiaries is specified in the Credit Policy of BNP Paribas Bank Polska S.A.

The Bank recommends, reviews and accepts policies, principles and methodologies applied by its subsidiaries in terms of credit risk management.

In the Bank and its subsidiaries, parallel credit risk management methods are applied, including:

  • a rating system for Corporate Banking Customers and Small and Medium Enterprises Banking;
  • risk classification system according to IFRS standards;
  • assessment of the creditworthiness of the Bank’s joint Clients and companies;
  • a model for making credit decisions;
  • the Bank’s internal limits system for concentration risk, including limits on the subsidiaries’ portfolios of receivables.

Due to the outbreak of the COVID-19 pandemic in 2020, the Bank has taken a number of actions regarding, i.a.

  • the possibility for Customers to request temporary deferrals of principal and interest payments on loans under non-statutory and statutory moratoria,
  • review of the credit portfolio with special attention paid to sensitive industries, particularly strongly affected by the consequences of the pandemic.

The Bank actively participated in the work of the banking sector, regulators and arrangers of government aid directed at entrepreneurs, launched a number of solutions allowing Customers to electronically apply to the Bank and benefit from aid programmes related to the consequences of the pandemic, and carried out ongoing monitoring of the number of Customers and credit exposures affected by the consequences of the pandemic, including ongoing decisions regarding individual Customers as to the type and structure of Customer financing adequate to their current situation and available aid programmes.

The Bank also cooperated with Bank Gospodarstwa Krajowego with regard to liquidity guarantees offered to the Bank’s Customers and loan interest subsidy programmes.

As a partner of the Polish Development Fund programme, the Bank provided Customers with the technical possibility to apply for financing from these programmes via electronic banking.

In the period until 30 September 2020 the Bank focused on making the fullest possible use of available assistance programmes for Customers (non-statutory/private and statutory moratoria), including granting temporary deferment of instalment payments on loans, processing Customer requests in this regard on an ongoing basis. After 30 September 2020 until the end of 2020, Customer requests for deferment of instalments could be submitted and processed, but only in case of statutory moratoria. Since mid-January 2021, the Bank again has offered Customers non-statutory moratoria.

The Bank has monitored the behaviour of exposures covered by moratorium support. Exposures subject to statutory credit holidays are transferred to Phase 3. For exposures subject to non-statutory credit holidays the Bank applies stricter criteria for classification into Phase 2. For this pool of exposures, overdue more than 3 days within a horizon of 3 months after the end of the moratorium is an indication of a significant increase in credit risk (Phase 2), which results in the calculation of write-downs over the life horizon of the exposure.

As at 31.12.2020, the total gross value of loans and advances covered by the Group’s ongoing and expired moratoria amounted to PLN 7,251,102 thousand of which statutory moratoria amounted to PLN 135,935 thousand. The balance of expired moratoria at the end of 2020 amounted to PLN 6,949,777 thousand and the balance of active moratoria amounted to PLN 301,325 thousand.

Details of moratoria granted by the Bank and the Group are presented in the Note on Credit Risk of the Standalone and Consolidated Financial Statements for the year ended 31 December 2020.

In 2020, a total of PLN 829.0 million of receivables were collected, of which:

  • PLN 287.7 million – as a result of collection activities (corporate entities PLN 26.2 million, SMEs PLN 21.4 million, micro-enterprises PLN 103.2 million, individual Customers PLN 104.3 million, mortgage loans PLN 32.6 million),
  • PLN 417.2 million – as a result of portfolio restructuring (corporate entities PLN 243.2 million, SME PLN 174.0 million),
  • PLN 124.1 million – as a result of sale of impaired portfolio.

Concentration risk and country risk

(additionally distinguished within the Bank's credit risk)

Concentration risk is an inherent risk taken by the Bank within the framework of its statutory activity and is subject to a specific management process and rules.


The Management Board assesses the adopted concentration risk management policy in terms of the way it is applied, in particular as regards its effectiveness and adequacy of rules implementation in the context of current and planned activities and taking into account the risk management strategy. In the event of significant changes in the Bank’s operating environment or risk management strategy, the review of the adequacy of the concentration risk management process is carried out immediately after the occurrence of such circumstances. Proper assessment of the concentration risk incurred by the Bank significantly depends on correct and complete identification of key risk factors that affect the concentration risk level. In justified cases, the Bank identifies the concentration risk in the process of planning a new business, including the introduction and development of new products, services and presence on the markets, and significant changes to the existing products, services and changes on the markets.

Diversification of the credit portfolio is one of the most important tools for credit risk management. Excessive credit concentration is undesirable for the Bank, as it increases risk. Potential losses related to a significant threat – thus, the degree of concentration should be monitored, controlled and reported to the Bank’s management. The basic tools of concentration risk mitigation are mechanisms of identification and measurement of concentration risk and limits of exposures in particular segments of the Bank’s portfolio and in subsidiaries. These tools enable diversification of the credit portfolio and reduction of negative effects related to unfavourable changes in particular areas of the economy.

One of the potential sources of credit risk is a high concentration of the Bank’s credit exposures in particular entities or groups of entities related by capital and organisation. In order to limit it, Regulation (EU) No. 575/2013 defines the maximum exposure limit for the Bank. Pursuant to Article 395 of Regulation (EU) No. 575/2013: An institution shall not incur an exposure, after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403, to a Client or group of connected Clients the value of which exceeds 25% of its eligible capital. Where that Client is an institution or where a group of connected Clients includes one or more institutions, that value shall not exceed 25% of the institution’s eligible capital or EUR 150 million, whichever the higher, provided that the sum of exposure values, after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403, to all connected Clients that are not institutions does not exceed 25% of the institution’s eligible capital.

The Bank monitors concentration limits in accordance with Article 387 of the EU Regulation No. 575/2013. As at the end of 2020, the limits specified in Article 395 of the EU Regulation No. 575/2013 were not exceeded. As at the end of 2020, the Bank’s exposure to financing ustomers / groups of Customers with capital or organisational links does not exceed the exposure concentration limit. The total of exposures equal to or exceeding 10% of the Bank’s own funds represented 15%.

The concentration risk tolerance is defined in the Bank through a system of internal limits, which take into account both the directions and dynamics of business development assumed by the Bank, the acceptable level of credit risk and liquidity, as well as external macroeconomic and sectoral conditions and prospects. Internal limits for credit concentration risk are set for, i.a.:

  • selected economic sectors/ industries,
  • exposures denominated in foreign currency,
  • Customer segment (the Bank’s internal segmentation),
  • loans secured by a given type of collateral,
  • geographical regions,
  • the average probability of default,
  • exposures with a specific rating (the Bank’s internal rating scale),
  • exposures with a specific debt-to-income ratio,
  • exposures with a specific loan-to-value ratio.

Actions reducing the Bank’s exposure to concentration risk may include systemic actions and case-by-case actions related to a single / specific decision or transaction. Systemic actions limiting the concentration risk include:

  • limiting the scope of lending to specific types of Customers by modifying the credit policy,
  • reducing the concentration risk limits,
  • diversification of asset types at the level of the Bank’s statement of financial position,
  • changing the business strategy in such a way that it prevents excessive concentration,
  • diversification in the types of collateral received.

Case-by-case actions (related to a single / specific decision or transaction) limiting the concentration risk include:

  • limiting new transactions with a given Customer or group of connected Customers,
  • sale of selected assets / loan portfolios,
  • securitisation of assets,
  • establishment of new collateral (e.g. credit derivatives, guarantees, subparticipation, insurance contracts) for existing or new credit exposures.

The Bank’s industry concentration analysis covers all the Bank’s credit exposures to institutional Customers. The Bank defines industries based on the Polish Classification of Activities (PKD 2007 code). The structure of the Bank’s exposure to industries analysed at the end of 2020, similarly as at the end of 2019, is characterised by concentration towards such industries as: Agriculture, Forestry, Hunting and Fishing (in accordance with the section defined in the PKD). As at the end of 2020, they accounted for 26% of the Bank’s exposure towards institutional Clients, while in at the analogical period-end of the previous year they constituted 28% of the Bank’s exposure.

As at the end of 2020, the largest share of non-performing loans was observed in the following industries: Entertainment and Recreation activities (21%), Accommodation and food service activities (20.5%).

Country risk comprises all risks related to conclusion of financial agreements with foreign parties, where it is possible that economic, social or political events will have an adverse effect on creditworthiness of the Bank’s obligors in a given country or where intervention of a foreign government could prevent the obligor (which could also be the government itself) from discharging its liabilities.


During 2020, the Bank continued its conservative policy concerning country risk. Country limits have been reviewed periodically and the limit level modified to match precisely the anticipated business needs and risk appetite of the Bank.

As at year-end 2020, transactions related to foreign credit activity of the Bank represented 54% of the Bank’s exposure toward countries, treasury transactions (including deposits and derivatives) represented 14%, while the remaining part, i.e. 32%, was related to international trade transactions (letters of credit and guarantees). France accounted for 33% of the exposure, the Netherlands and Luxembourg for 11% each, Czech Republic for 8% and Switzerland for 7%. The remaining exposures were concentrated in Belgium, Germany, Turkey and Austria.

Counterparty risk

Counterparty risk is the credit risk concerning the counterparty, with whom the transactions are concluded, and in case of which the amount of liability may change in time depending on market parameters.

Thus, counterparty risk is related to transactions involving instruments the value of which may change in time depending on such factors as interest rates or foreign exchange rates. The varying exposure may affect the Customer’s solvency and is of crucial importance to the Customer’s ability to settle liabilities when the transaction matures. The exposure is determined by the Bank on the basis of the current contract valuation as well as the potential future changes in the exposure, depending on the transaction type, Customer type and settlement dates.

As at the end of December 2020, the counterparty risk was calculated for the following types of transactions in the Bank’s trading book: foreign exchange transactions, interest rate swap transactions, FX options, interest rate options and commodity derivatives.

Counterparty credit risk for transactions which generate counterparty risk is assessed using the same methodology as the one applied to loans. This means that in the credit process these transactions are subject to limits, the value of which results directly from the assessment of Customer creditworthiness performed in the same way as in the process of credit product offering. However, the assessment also takes into account the specific nature of transactions, in particular their varying value in time or direct dependence on market parameters.

The principles applicable to foreign exchange transactions, derivative transactions as well as credit limit granting, use and monitoring for transactions subject to counterparty risk limits have been regulated in dedicated procedures. According to the policy adopted by the Bank, all transactions are entered into considering individual limits and knowledge of the Customer.

The Bank has defined groups of products offered to Customers depending on their knowledge and experience. The Bank has transparent principles for collaterallising the counterparty risk exposures.

Market risk

(including: interest rate risk in the trading book and currency risk)

is the risk of adverse changes in the Bank’s financial result or equity, driven by any of the following factors:

  • differences in the repricing dates of the Bank’s assets and the liabilities used for purposes of their financing (mismatch risk);
  • difference in reference rates used for purposes of determining the interest rate for items with the same repricing dates (basis risk);
  • changes in market interest rates which affect the fair value of the Bank’s open positions (interest rate volatility risk).

The global crisis triggered by COVID-19 and the ensuing turmoil in the financial instruments market forced a significant reduction in open interest rate positions. However, the result from trading activities did not deviate from the assumptions adopted in budget 2020.

Exposure to interest rate risk was the main source of risk in the trading book (the prevailing exposure are interest rate swaps). The Bank assesses the level of this risk as moderate.

is the risk of adverse changes in the Bank’s financial result, driven by changes in market foreign exchange rates.

The Bank engages in activities resulting in the creation of foreign currency positions sensitive to exchange rate fluctuations. At the same time, it strives to limit its exposure to foreign currency risk related to offering its Customers products in foreign currencies. The Bank undertakes limited activity on the foreign exchange market in order to generate financial results from short-term arbitrage positions.

The Bank’s exposure to market currency risk is limited by a system of limits. In accordance with the Bank’s policy, the level of market currency risk is managed by the Financial Markets Line by managing the intraday and end-of-day currency position. In order to manage the currency position in an effective and precise manner, an information system is used, providing up-to-date information about:

  • currency position,
  • the global currency position,
  • Value at Risk (VaR) levels,
  • the daily result on currency position management.

The values of the currency position in specific currencies, global currency position and VaR are limited and reported by the Financial Risk and Counterparty Risk Division.

For measuring foreign exchange risk, the Bank uses the Value at Risk (VaR) method. It represents a change in the market value of an asset or portfolio of assets with specific assumptions regarding market parameters, over a specified period of time and with a specified probability. It is assumed that VaR for the purpose of currency risk monitoring is determined with 99% confidence level. The calculation of VaR for currency risk takes into account the one-day holding period of currency positions. The VaR methodology is subject to quarterly quality assessment by conducting a test involving comparison of the forecast values and values determined on the basis of actual foreign exchange rate changes, assuming that a given currency position is maintained (historical verification or so-called „back testing”). The comparison period is the last 250 business days.

Exposures to foreign currency risk had a negligible impact on the Group’s market risk because end of day positions in individual currencies were limited to minimum levels.

Interest rate risk in the banking book

The core business of the Bank, i.e. lending and deposit-taking, results in the occurrence of open interest rate risk positions, which are transferred from the business lines to a portfolio managed by ALM Treasury using a transfer pricing system.

When determining the interest rate risk profile, the Bank takes into account not only contractual parameters, but also the actual characteristics of the products resulting from Customer behaviour and built-in options, applying models e.g. for current accounts, savings accounts, fixed rate loans, credit cards.

Modelling the behaviour of products divided into business lines allows to select their stable and unstable part, reacting in different ways to changes in interest rates.

  • a mismatch between the repricing dates of assets and liabilities („gapping”), for the banking book;
  • sensitivity of interest income to defined – expected and crisis (stressed) – scenarios for shifting interest rate curves, assuming various interest rate curve scenario (EaR);
  • the amount of interest income under defined scenarios for the change of interest rate curves (NII);
  • sensitivity due to different reference rates (basic risk);
  • average investment length of capital and non-interest bearing current accounts (structural elements);
  • sensitivity of fair value to a parallel shift of interest rate curves by 1 basis point, and to a shift of interest rate curves by 1 basis point at a selected nodal point of the curve;
  • sensitivity of fair value measured as the nominal value of the annual transaction (item) with identical sensitivity – One Year Equivalent (OYE);
  • change in fair value of capital with defined scenarios for changing interest rate curves.

The aforementioned analyses are the essential component of the system used for mitigating the interest rate risk in the banking book. The analyses are performed for the relevant portfolios on a daily, monthly or quarterly basis, depending on the type of analysis and the portfolio. Additionally, the Bank conducts sensitivity analyses for its banking book, where the changes in interest rates are more considerable than those typically observed (stress tests).

The table below presents the cumulative interest rate gap for the banking portfolio as at 31 December 2020. Utilisation of set limits is below the maximum values.

Term Gap
1M (6,822)
3M 13,296
6M 3,598
1Y (1,219)
2Y (7,215)
3Y (10,296)
5Y (9,465)
10Y (369)

The average length of capital investment and non-interest bearing current accounts as at 31 December 2020 was exceeding 5.8 years.

The sensitivity of interest income at interest rate curves shifts by + 50bp as at 31 December 2020 is presented in the table below:

1st year 2nd year 3rd year
41.2 35.7 49.5

The supervisory test of the Bank’s equity economic sensitivity (change in the fair value of the Bank’s assets and liabilities, excluding own funds, under the assumed changes in interest rate curves) is presented in the table below (in terms of amounts and percentages):

Scenario PLN million % of own funds
+200bp -591.2 -3.77%
-200bp +253.7 +1.62%

At 31 December 2020, the Group applies fair value hedge accounting (macro fair value hedge). The hedged risk is interest rate risk, and in particular changes in the fair value of fixed-rate assets and liabilities caused by changes in a specific reference rate. The hedged items are fixed rate current accounts in PLN, EUR and USD. Hedging instruments are plain vanilla interest rate swaps (IRS) in PLN, EUR and USD under which the Bank receives a fixed interest rate and pays a variable rate based on WIBOR 6M, WIBOR 3M, EURIBOR 3M, EURIBOR 1M, USD LIBOR 1M, USD LIBOR 6M.

In addition, the Group applies fair value hedge accounting (micro fair value hedge) as at 31 December 2020. The hedged risk is interest rate risk, in particular changes in the fair value of fixed-rate assets and liabilities caused by changes in a specific reference rate. The hedged items are: fixed coupon bonds PS0422, DS1029, WS0428, FPC0427, PFR0925. Hedging instruments are plain vanilla interest rate swaps (IRS) in PLN, under which the Bank pays a fixed interest rate and receives a variable rate based on WIBOR 6M.

Liquidity risk

Liquidity risk is defined as the risk of the Bank losing the ability to meet its financial obligations, where liquidity is defined as the ability to:

finance assets and meet the Bank’s obligations on a timely basis in the course of its daily operations or in other conditions, without the necessity to incur loss, whereas, as maintenance of liquidity is the Bank’s top priority, optimization of liquidity costs is considered in the last place;

obtain alternative funds and supplementary funds to those held at present if they are withdrawn early and/or not renewed, so as to meet the current or potential demand for funds from the current depositors, ensure sufficient resources for purposes of lending and discharging other potential obligations related to processing derivative transactions or collateral put up by the Bank;

generate a positive balance of cash flows over a specified time horizon, regardless of macroeconomic developments, achievement of business plans and changes in the regulatory environment.

The Bank operates in a free-market environment and is a financial markets participant, specifically in the retail, corporate and interbank markets, which offers a wide range of opportunities to control the liquidity level, but, at the same time, makes the Bank sensitive to crises in each of these environments. There is an automated risk monitoring system in the Bank which enables the Bank to obtain information on the current level of future liquidity risk on a daily basis and on-line information on the level of the daily liquidity risk.

  • immediate liquidity (intraday) – during the present day,
  • future liquidity – beyond the present day, additionally divided into:
    • current liquidity – within 7 days;
    • short-term liquidity – more than 7 days to 1 month;
    • medium- and long-term liquidity – over 1 month.
  • meet its payment obligations on a timely basis;
  • secure alternative funds and supplementary funds to those currently held;
  • generate a positive balance of cash flows within a defined time horizon.
  • sustainable, organic growth of the balance sheet (an increase in the value of assets has to be linked with a corresponding rise in the level of financing with the use of stable equity and liabilities) as well as off-balance sheet transactions and liabilities;
  • limitation of the Bank’s dependence on changes in external conditions and ensuring that in a local crisis, global crisis or a crisis directly affecting the Bank, the Bank will be able to quickly meet its obligations without reducing the range of its services or initiating changes in its core business profile. If a crisis situation lasts longer, the Bank’s policy focuses on maintenance of liquidity with possible changes in growth directions and introduction of costly business profile change processes;
  • active limitation of the probability of adverse events which may affect the Bank’s liquidity. In particular, this concerns events which may affect reputation risk. In such case, the Bank will undertake actions aimed at restoring confidence of both Customers and financial institutions as soon as possible;
  • ensuring high quality of liquidity management standards. Actions aimed at improving the quality of liquidity management at the Bank are its top priority.

Customers’ deposits supplemented by medium- and long-term lines of credit and equity are the major sources of funding used by the Bank. Medium- and long-term lines of credit, including subordinated loans and the funds obtained in the process of loan portfolio securitization, are provided mainly by the BNP Paribas Group, but also by the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the Council of Europe Development Bank (CEB) Bank and other financial institutions. The policy adopted by the Bank allows the use of other funding sources, such as: issuing own debt securities or entering into structured transactions.

At the end of December 2020, the Bank financed a portfolio of mortgage loans in CHF with funds in EUR and USD by concluding medium- and long-term foreign exchange transactions.

The Bank limits the risk of financing, which is associated with the risk of having insufficient stable sources of financing in the medium- and long-term and with the necessityto incur an unacceptable level of losses.

The Bank’s loans are financed mainly with the use of Customers’ current and term deposits and it is the Bank’s intention to maintain a stable relationship between these items and the funds deposited in the accounts of non-banking institutions, which is presented in the table below:

Structure of loan portfolio financing

in PLN million 31.12.2020
Net loans and advances 71,987
Total sources of funding 103,615
Customer deposits, including: 91,467
– retail customers 53,982
– corporate 30,153
– non-banking financial institutions 2,703
– public sector institutions 4,629
Amounts due to banks 2,916
Debt securities issued 0


As at the end of 2020, compared to December 2019, the amount of wholesale funding received from the BNP Paribas Group remained at the same level. The Bank finances its foreign currency loans with deposits accepted from Customers using, if necessary, foreign exchange transactions. In case of a necessity, the Bank may use funds from medium and long-term loans from the BNP Paribas Group, which provides stable financing to cover currency shortages in EUR, USD or CHF. At the end of 2020, the Bank has raised a 2.3 PLN billion subordinated loan to meet the MREL requirement.

As at 31 December 2020, the structure of open long-term lines of credit was as follows:

Structure of loans from the BNP Paribas Group

in million 31.12.2020
CHF 150
EUR 200
PLN 2,740


Structure of loans from the EBRD, EIB and CEB

in milion 31.12.2020
PLN 161


The net liquidity coverage ratio (LCR) for the Bank at the end of 2020 equaled 181%, which constitutes an increase of 19 p.p. as compared to the end of 2019 (162%).

In addition, in the process of securitisation of the loan portfolio, the Bank received financing of the total amount of PLN 1,390 million.

Operational risk

The Bank defines operational risk in accordance with the requirements of the Polish Financial Supervision Authority included in Recommendation M as the possibility of incurring a loss or an unjustified cost through the fault of inappropriate or unreliable internal processes, people, technical systems or as a result of external factors. It incorporates legal risk, but does not include strategic risk. Operational risk is inherent in any type of banking operations.

The Bank maintains and develops an operational risk management system that comprehensively integrates the management of individual types of operational risk in all areas of the Bank’s operations. The objective of the operational risk management system is to ensure the safety of the Bank’s operations by implementing effective mechanisms for identification, assessment and quantification, monitoring, control, reporting and taking actions aimed at reducing operational risk. Such measures take into account the structures, processes, resources and scopes of responsibilities for the aforementioned processes at various organisational levels within the Bank.

The operational risk management strategy is described in the “Operational Risk Management Strategy of BNP Paribas Bank Polska S.A.”, approved by the Management Board of the Bank and endorsed by the Supervisory Board. “The Operational Risk Policy BNP Paribas Bank Polska S.A.”, adopted by the Management Board of the Bank, includes the organisational framework and standards for operational risk management. These documents address all areas of the Bank’s operations as well as define the Bank’s objectives and methods achieving them with regard to the quality of operational risk management and compliance with legal requirements set out in the recommendations and resolutions issued by local banking supervision authorities.

The Bank’s operational risk management objectives include, in particular, compliance with high operational risk management standards that guarantee security of Customer deposits, the Bank’s equity, stability of its financial result as well as maintenance of the operational risk level within the range of the operational risk appetite and tolerance defined by the Bank. While developing the operational risk management system, the Bank complies with the applicable legal requirements, in particular the recommendations and resolutions of the national financial supervision authorities and the standards adopted by the BNP Paribas Group.

In accordance with the “The Operational Risk Policy BNP Paribas Bank Polska S.A.”, the Bank’s operational risk management instruments include:

  • tools used to record operational events, together with the principles of their recording, allocation and reporting;
  • operational risk analysis, its monitoring and ongoing control;
  • counteracting elevated operational risk levels, including risk transfer;
  • calculation of the capital requirement related to operational risk.

Compliance with the operational risk policy is verified by the Bank’s Management Board periodically and, if necessary, the required adjustments are made in order to improve the system. To that purpose, the Management Board of the Bank is regularly provided with information concerning the scale and types of operational risk to which the Bank is exposed, its effects and management methods.

The Bank precisely defines the roles and responsibilities in the operational risk management process, considering its organisational structure. The Operational Risk Department is responsible for day-to-day operational risk analysis in addition to development of appropriate risk control and mitigation techniques and their improvement. Development and implementation of the Bank’s strategy with respect to insurance as a risk mitigation technique is the responsibility of the Real Estate and Administration Department, while the Security and Continuity of Business Management (CoB) Department focuses on management of continuity of business.

As part of the legal risk management process, the Legal Division monitors, identifies and performs analyses of changes to laws of general application and their effect on the Bank’s operations, in addition to court and administrative proceedings which affect the Bank. The Compliance Department is responsible for day-to-day compliance risk analysis as well as development of appropriate risk control techniques and their improvement.

Considering the elevated level of external and internal risks related to fraud and offence against the assets of the Bank and its Customers, the Bank has extended the scope of and improved its processes aimed at counteracting, detecting and examining such cases, which is the responsibility of the Fraud Management Department.

The Bank places a strong focus on identification and assessment of the factors that trigger its present exposure to operational risk in relation to banking products. It is the Bank’s objective to reduce the operational risk level through improvement of its internal processes as well as mitigating the risk inherent in the process of launching new products and services and outsourcing operations to third parties.

In accordance with the “The Operational Risk Policy BNP Paribas Bank Polska S.A.”, operational risk analysis is aimed at acquiring an understanding of the interdependence between the risk generating factors and operational event types, and it is performed primarily with the objective to define the operational risk profile.

The operational risk profile is the assessment of materiality of the risk, which is understood as the scale and structure of the operational risk exposure, defining the degree of exposure to the operational risk (operational losses), within the structural dimensions selected by the Bank (key process areas) and the scale dimensions. Periodic assessment and review of the Bank’s operational risk profile is based on an analysis of the Bank’s current risk parameters, changes and risks occurring in the Bank’s environment, implementation of the business strategy, as well as the adequacy of the organisational structure and the effectiveness of the risk management and internal control system.

Keeping a track record of operational events enables efficient operational risk analysis and monitoring. The process of operational event recording is overseen by the Operational Risk Department, which is responsible for verification of the quality and completeness of data concerning operational events recorded in dedicated tools available to all organisational units of the Bank.

The purpose of internal control is effective risk control, including risk prevention or early detection. The role of the internal control system is to achieve general and specific objectives of the internal control system, which should be considered at the design stage of control mechanisms. The principles of the internal control system are described in the „Policy on internal control at BNP Paribas Bank Polska S.A.”, approved by the Bank’s Management Board. This document describes the main principles, organisational framework and standards for the functioning of the control environment in the Bank, complying with the PFSA’s requirements provided in Recommendation H. Detailed internal regulations concerning specific areas of the Bank’s activity are adapted to the specifics of the Bank’s operations. The appropriate organisational units of the Bank, in accordance with the scope of the tasks assigned to them, are responsible for developing detailed regulations relating to the area of internal control.

The internal control system in the Bank is based on the 3 lines of defence model, which consists of:

  • 1st line of defence, which are organisational units from particular areas of banking and support areas,
  • 2nd line of defence, which are organisational units responsible for risk management, regardless of the risk management related to the first line of defence, and the compliance unit,
  • 3rd line of defence, which is the independent and impartial internal audit unit.

The Bank ensures internal control through independent monitoring of compliance with control mechanisms, including ongoing verification and testing.

The Bank periodically monitors the efficiency of the operational risk management system and its appropriateness for its current risk profile. The organisation of the operational risk management system is reviewed as part of periodic control exercised by the Internal Audit Division, which is not directly involved in the operational risk management process but provides professional and independent opinions supporting achievement of the Bank’s objectives. The Supervisory Board oversees the control of the operational risk management system and assesses its adequacy and effectiveness.

In accordance with the applicable regulations, the Bank determines regulatory capital to cover the operational risk. The Bank uses the standardised approach (STA) for calculation of the capital requirement. Subsidiaries of the Bank, on a consolidated basis, determine the capital requirements according to the basic indicator approach (BIA).

In accordance with supervisory regulations, the Bank supervises the operational risk related to the operations of its subsidiaries. Operational risk management in subsidiaries is carried out within dedicated units / persons appointed for this purpose. The manner and methods of operational risk management in subsidiaries are organised adequately to the scope of operations of the entity and its business profile, in accordance with the principles in force at the Bank.

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