On 14 July 2022, the President of the Republic of Poland signed the Crowdfunding Act.
According to Article 73 of the act, the bank is obliged to suspend repayment of a mortgage loan granted in the Polish currency at the borrower’s request, except for loans indexed or denominated to a currency other than the Polish currency. Suspension of loan repayment is available only with respect to one contract, entered into for the purpose of satisfying one’s own housing needs.
Suspension of loan repayment is available in the following periods:
- from 1 August to 30 September 2022 – two months;
- from 1 October to 31 December 2022 – two months;
- from 1 January to 31 December 2023 – one month in each quarter.
During the suspension of the loan repayment the borrower is not obligated to make any payments under the loan agreement, except for the fees for insurance associated with such agreements.
In accordance with the provisions of IFRS 9, the right introduced by the act for clients to take advantage of suspension of loan repayments requires adjusting the gross carrying amount of such loans by determining and recognizing in the PZU Group’s financial result the estimated cost resulting from this entitlement as the difference between:
- the present value of expected cash flows from the loan portfolio that meets the criteria of the act (the gross carrying amount of that portfolio) and
- the present value of expected cash flows from this portfolio determined on the basis of modified cash flows taking into account the provisions of the act, discounted at the current effective interest rate, taking into account the estimate level of participation of eligible clients who, in the opinion of the PZU Group, will exercise this right.
An important assumption that requires judgment regarding the amount of this loss is the number of clients applying for a moratorium period. According to original estimates, the loss recognized on this account in the PZU Group’s financial result in Q3 2022 amounted to PLN 2,931 million and was recognized as a reduction of interest income calculated using the effective interest rate method.
As of 31 December 2022, the PZU Group has revisited its previous estimates (including the timeliness of the portfolio subject to loan suspension rights and the expected participation rate). The participation rate estimated for 2023 was 76% for the Pekao portfolio and 69% for the Alior Bank portfolio. As a result of this verification, the final amount charged to the consolidated profit and loss account for 2022 was PLN 2,460 million. Since this estimate represents the expected exercise of the right following from the act by clients, and the actual realization will take place during the effective term of the act, it will be necessary to update the estimate periodically and recognize the effects of these revaluations in the PZU Group’s current results.
The total gross carrying amount of loan receivables from clients under memorandum period was PLN 49,092 million as of 31 December 2022. Changing the assumed participation rates of clients under memorandum period by 10% would increase the cost on this account by PLN 215 million.