The liquidity risk is defined as the lack of possibility to pay the debts on time due to the lack of liquid assets. Lack of liquidity may arise from inappropriate structure of statement of financial position, misfit of cash flows, not received payments from contractors, sudden withdrawal of cash by clients or other market events.
The objective of liquidity risk management is to ensure the necessary level of funds to pay present and future debts (also potential) on time, taking into account the nature of performed activities and requirements which may occur due to changes in market environment, by shaping the structure of statement of financial position and off-balance sheet liabilities.
As a part of liquidity risk management the Bank manages the financing risk, which takes into account the risk of loss of financing sources and the lack of opportunities to renew matured funding, or loss of access to new financing sources.
Group policy concerning liquidity is based on keeping a portfolio of appropriate level of liquidity surplus through an increase in portfolio of liquid securities and stable sources of financing (stable deposit base, in particular). In liquidity risk management money market instruments, including NBP open market operations are also used.
59.1 Measurement of the liquidity risk
The Capital Group makes use of the following liquidity risk measures:
- the contractual and adjusted liquidity gap in real terms,
- liquidity reserve,
- liquidity surplus,
- ratio of stable funding to illiquid assets, liquidity coverage ratio (LCR),
- national supervisory liquidity measures (M1-M4),
- measure of stability of deposit and loan portfolios,
- stress-tests (liquidity stress-tests).
59.2 Forecasting and monitoring of liquidity risk
Liquidity gaps presented below include the sum of Bank’s adjusted liquidity gap (adjusted in terms of the following: permanent balances on deposits of non-financial sector and their maturity, permanent balances on loans in current accounts for non-financial entities and their maturity and liquid securities and their maturity) and contractual liquidity gap of the other Group entities.
a’vista | 0-1 month | 1-3 months | 3-6 months | 6-12 monts | 12-24 months | 24-60 months | over 60 months | |
31.12.2015 | ||||||||
The Group - Adjusted periodic gap |
13 974 617 | 19 405 644 | (346 858) | 3 590 950 | 7 972 011 | 8 034 672 | 12 600 252 | (65 231 288) |
The Group - Adjusted cumulative periodic gap |
13 974 617 | 33 380 261 | 33 033 403 | 36 624 353 | 44 596 364 | 52 631 036 | 65 231 288 | - |
31.12.2014 | ||||||||
The Group - Adjusted periodic gap |
12 733 729 | 13 357 476 | 536 836 | 1 309 410 | 1 088 394 | 11 977 076 | 13 281 695 | (54 284 616) |
The Group - Adjusted cumulative periodic gap |
12 733 729 | 26 091 205 | 26 628 041 | 27 937 451 | 29 025 845 | 41 002 921 | 54 284 616 | - |
In all time horizons, the Group’s cumulative adjusted liquidity gap in real terms , which has been determined as a sum of adjusted liquidity gap in real terms of the Bank and contractual liquidity gaps of the remaining Group entities, as at 31 December 2015 and as at 31 December 2014 was positive. This means a surplus of assets receivable over liabilities payable.
The table below presents liquidity reserve of the Bank as at 31 December 2015 and as at 31 December 2014:
Name of sensitivity measure | 31.12.2015 | 31.12.2014 |
Liquidity reserve up to 1 month* (in PLN million) | 30 186 | 21 075 |
*Liquidity reserve equals the gap between the most liquid assets and expected and potential liabilities which mature in a given period of time.
As at 31 December 2015 the minimum level of liquidity surplus in the horizon to 30 days amounted to PLN 14 411 million. A measure of liquidity surplus determines the ability of the Bank to cover liquidity needs in a given period of survival in an implementation-defined stress scenarios.
The following table shows the supervisory liquidity measures of the Bank as at 31 December 2015 and as at 31 December 2014.
Measure | 31.12.2015 | 31.12.2014 |
M1 | 18 907 | 15 859 |
M2 | 1,65 | 1,65 |
M3 | 9,87 | 7,01 |
M4 | 1,15 | 1,16 |
LCR | 131,5% | 125% |
In the period from 31 December 2014 to 31 December 2015 ratios supervisory measures remained above the supervisory limits. LCR indicator shows the value for the Group in the table above.
As at 31 December 2015 the level of permanent balances on deposits constituted approx. 93.6% of all deposits in the Bank (excluding interbank market), which means an decrease by approximately 1.1 pp. as compared to the end of 2014.
The table below presents the structure of the Group's sources of financing as at 31 December 2015 and as at 31 December 2014.
31.12.2015 | 31.12.2014 | |
Total deposits (excluding interbank market) | 75,96% | 75,04% |
Interbank market deposits | 0,67% | 0,20% |
Equity | 11,99% | 10,57% |
Financing from the market | 11,38% | 14,19% |
Total | 100,00% | 100,00% |
59.3 The contractual cash flows of the Bank’s liabilities excluding derivative financial instruments as at 31 December 2015 and as at 31 December 2014 respectively, by maturity
The tables below show the contractual maturity analysis presenting the outstanding contractual maturity dates by individual categories of statement of financial position and off-balance sheet liabilities, excluding derivative financial instruments as at 31 December 2015 and as at 31 December 2014 respectively.
The amounts denominated in foreign currencies have been translated using the average NBP exchange rate as at 31 December 2015 and as at 31 December 2014. The amounts disclosed comprise non-discounted cash future flows, both in respect of principal and interest (if applicable), in accordance with the contract, for the entire period to the date of the liability's maturity. In situations where the party to whom the Group has a liability is able to select the settlement deadline, it has been assumed that the earliest date on which the Group is obliged to settle the liability shall be taken into account. In situations where the Group is obliged to settle the liabilities in instalments, each instalment is allocated to the earliest period in which the Group might be obligated to settle. In the case of liabilities where the instalment is not fixed, the terms binding as at the reporting date have been adopted.
Contractual flows of the Group’s liabilities as at 31 December 2015 by maturity
Up to 1 monnth | 1-3 months | 3 months- 1 year | 1-5 years | Over 5 years | Contractual value | Carrying amount | |
Liabilities: | |||||||
Amounts due to the central bank | 4 219 | - | - | - | - | 4 219 | 4 219 |
Amounts due to banks | 1 907 773 | 84 | 37 391 | 240 666 | 16 385 062 | 18 570 976 | 18 288 797 |
Amount due to customers | 126 532 268 | 21 867 506 | 34 840 333 | 10 564 580 | 6 191 736 | 199 996 423 | 195 758 461 |
Debt securities in issue | 50 604 | 152 260 | 2 771 573 | 3 058 729 | 4 492 463 | 10 525 629 | 9 432 973 |
Subordinated liabilities | - | 32 982 | 44 239 | 319 264 | 2 650 337 | 3 046 822 | 2 499 163 |
Other liabilities | 2 697 791 | 7 504 | 302 176 | 147 397 | 201 302 | 3 356 170 | 3 356 170 |
Off-balance sheet financial liabilities – granted | 28 675 009 | 814 785 | 3 898 211 | 3 102 454 | 6 269 702 | 42 760 161 | - |
Off-balance sheet guarantee liabilities – granted | 1 415 342 | 1 604 025 | 2 456 421 | 9 783 593 | 1 294 716 | 16 554 097 | - |
Contractual flows of the Group’s liabilities as at 31 December 2014 by maturity
Up to 1 monnth | 1-3 months | 3 months- 1 year | 1-5 years | Over 5 years | Contractual value | Carrying amount | |
Liabilities: | |||||||
Amounts due to the central bank | 4 427 | - | - | - | - | 4 427 | 4 427 |
Amounts due to banks | 2 044 255 | 178 596 | 1 847 485 | 1 208 177 | 15 113 128 | 20 391 641 | 19 394 482 |
Amount due to customers | 109 773 316 | 12 560 306 | 35 033 627 | 16 953 648 | 2 099 152 | 176 420 049 | 174 386 766 |
Debt securities in issue | 50 613 | 832 749 | 5 523 147 | 3 993 876 | 4 233 507 | 14 633 892 | 13 300 610 |
Subordinated liabilities | - | 39 123 | 48 666 | 327 788 | 2 648 527 | 3 064 104 | 2 413 985 |
Other liabilities | 2 228 619 | 86 910 | 475 902 | 98 546 | 64 626 | 2 954 603 | 2 954 603 |
Off-balance sheet financial liabilities – granted | 23 514 918 | 968 602 | 4 820 338 | 3 946 353 | 5 129 776 | 38 379 987 | - |
Off-balance sheet guarantee liabilities – granted | 225 396 | 1 336 294 | 2 557 886 | 9 124 116 | 2 074 309 | 15 318 001 | - |
59.4 The contractual cash flows related to derivative financial instruments as at 31 December 2015 and as at 31 December 2014 respectively, by maturity
Derivative financial instruments settled in net amounts
Derivative financial instruments settled by the Group on a net basis include:
- interest rate swaps (IRS),
- Forward Rate Agreements (FRA),
- Non Deliverable Forwards (NDF),
- options.
The tables below show the contractual maturity analysis presenting the outstanding contractual maturity dates by individual categories of derivative financial instruments in respect of which the balance sheet date valuation was negative (a liability) as at 31 December 2015 and as at 31 December 2014 respectively.
The amounts denominated in foreign currencies have been translated using the average NBP exchange rate as at 31 December 2015 and as at 31 December 2014. In case of IRS transactions, non-discounted future net cash flows in respect of interest have been presented and in case of the remaining derivative instruments settled on a net basis, the amount of the valuation as at 31 December 2015 and as at 31 December 2014 respectively was adopted as the value of a cash flow.
Moreover, the cash flows from IRS transactions which constitute cash flow hedges in respect of loans with variable interest rates are shown separately in the table.
31 December 2015 | Up to 1 monnth | 1-3 months | 3 months- 1 year | 1-5 years | Over 5 years | Contractual value |
Derivative financial instruments - liabilities: | ||||||
- Interest Rate Swap (IRS) transactions, of which:: |
(208 295) | (263 283) | (602 581) | (1 625 707) | (363 137) | (3 063 003) |
- derivative hedging instruments | - | - | - | - | - | - |
- other derivative hedging instruments: options, FRA, NDF | (153 840) | (122 865) | (507 263) | (886 046) | (378) | (1 670 392) |
31 December 2014 | Up to 1 monnth | 1-3 months | 3 months- 1 year | 1-5 years | Over 5 years | Contractual value |
Derivative financial instruments - liabilities: | ||||||
- Interest Rate Swap (IRS) transactions, of which:: |
(4 881) | 5 559 | 732 845 | (2 446 745) | (547 072) | (2 260 294) |
- derivative hedging instruments | - | - | - | - | - | - |
- other derivative hedging instruments: options, FRA, NDF | (179 655) | (464 273) | (425 585) | (291 679) | - | (1 361 192) |
Derivative financial instruments settled in gross amounts
Derivative financial instruments settled by the Group on a gross basis include:
- foreign currency swaps,
- foreign currency forwards,
- Cross Currency IRS (CIRS).
The tables below show the contractual maturity analysis, presenting the outstanding contractual maturity dates by individual categories of derivative financial instruments (inflows and outflows) in respect of which the balance sheet date valuation was negative (a liability) as at 31 December 2015 and as at 31 December 2014 respectively. The amounts denominated in foreign currencies have been translated using the average NBP exchange rate as at 31 December 2015 and as at 31 December 2014. The amounts disclosed comprise non-discounted future cash flows, both in respect of principal and interest (if applicable).
In the table cash flows from CIRS transactions which constitute cash flow hedges in respect of mortgage loans denominated in CHF, deposits negotiated in PLN and liabilities at a fixed rate in USD are shown separately.
31 December 2015 | Up to 1 monnth | 1-3 months | 3 months- 1 year | 1-5 years | Over 5 years | Contractual value |
Derivative financial instruments: | ||||||
- outflows, of which: | (6 078 096) | (1 991 900) | (2 657 157) | (3 522 829) | (507 563) | (14 757 545) |
- derivative hedging instruments | (150 112) | (1 223) | (103 682) | (1 457 241) | (300 000) | (2 012 258) |
- inflows, of which: | 6 027 821 | 1 676 483 | 2 983 153 | 9 679 829 | 1 336 019 | 21 703 305 |
- derivative hedging instruments | 488 385 | 18 211 | 426 621 | 5 554 128 | 1 074 968 | 7 562 313 |
31 December 2014 | Up to 1 monnth | 1-3 months | 3 months- 1 year | 1-5 years | Over 5 years | Contractual value |
Derivative financial instruments: | ||||||
- outflows, of which: | (5 566 617) | (4 810 958) | (6 306 363) | (3 288 097) | (793 347) | (20 765 382) |
- derivative hedging instruments | (350 815) | (274 035) | (3 427 633) | (1 260 840) | (777 279) | (6 090 602) |
- inflows, of which: | 5 811 258 | 1 627 944 | 7 801 094 | 7 415 672 | 2 796 292 | 25 452 260 |
- derivative hedging instruments | 552 181 | 18 010 | 4 792 330 | 4 623 608 | 2 738 845 | 12 724 974 |
59.5 Current and non-current assets and liabilities
The Group classifies an asset as current (short-term) when:
- It expects to realize the asset, or intenders to sell or consume it in the course of the normal operating cycle,
- Is in possession of the asset primarily for the purpose of trading,
- It expects that the asset will be realized within twelve months after the reporting period or
- The asset is cash or a cash equivalent (as defined in IAS 7) unless it is restricted from being exchanged or used to settle a liability for at least twelve months from the end of reporting period.
All other assets of the unit are classified as non-current assets (long-term)
The Group classifies a liability as current when:
- it expect that it will be settled in the normal operating cycle,
- it holds the liability for the purpose of trading ,
- it is due within twelve months after the reporting period or
- the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as long-term liabilities.
31 December 2015
Short-term | Long-term | Impairment allowances |
Total carrying amount |
|
Cash and balances with the central bank | 13 743 864 | - | - | 13 743 864 |
Amounts due from banks | 4 553 377 | - | (405) | 4 552 972 |
Trading assets | 783 199 | - | - | 783 199 |
Derivative financial instruments | 1 400 127 | 2 947 142 | - | 4 347 269 |
Financial instruments designated upon initial recognition at fair value through profit and loss |
12 268 151 | 2 885 949 | - | 15 154 100 |
Loans and advances to customers | 49 020 379 | 149 680 538 | (8 287 209) | 190 413 708 |
Investment securities available for sale | 1 154 566 | 27 287 439 | (132 490) | 28 309 515 |
Securities held to maturity | 185 331 | 24 999 | - | 210 330 |
Inventories | 172 632 | 265 568 | (37 252) | 400 948 |
Other assets | 3 866 869 | 5 760 556 | (603 411) | 9 024 014 |
Total assets | 87 148 495 | 188 852 191 | (9 060 767) | 266 939 919 |
Amounts due to the central bank | 4 219 | - | - | 4 219 |
Amounts due to banks | 4 062 803 | 14 225 994 | - | 18 288 797 |
Derivative financial instruments | 1 185 033 | 3 439 734 | - | 4 624 767 |
Amounts due to customers | 182 754 339 | 13 004 122 | - | 195 758 461 |
Liabilities due to insurance operations | 120 433 | 2 280 060 | - | 2 400 493 |
Debt securities in issue | 3 107 121 | 6 325 852 | - | 9 432 973 |
Subordinated liabilities | - | 2 499 163 | - | 2 499 163 |
Other liabilities | 3 254 968 | 411 165 | - | 3 666 133 |
Total liabilities | 194 488 916 | 42 186 090 | - | 236 675 006 |
Equity | - | 30 264 913 | - | 30 264 913 |
Total liabilities and equity | 194 488 916 | 72 451 003 | - | 266 939 919 |
31 December 2014
Short-term | Long-term | Impairment allowances |
Total carrying amount |
|
Cash and balances with the central bank | 11 738 371 | - | - | 11 738 371 |
Amounts due from banks | 2 280 467 | 206 330 | (111) | 2 486 686 |
Trading assets | 1 924 426 | - | - | 1 924 426 |
Derivative financial instruments | 1 139 752 | 4 355 070 | - | 5 494 822 |
Financial instruments designated upon initial recognition at fair value through profit and loss |
13 540 447 | 2 182 701 | - | 15 723 148 |
Loans and advances to customers | 40 440 580 | 147 079 281 | (8 022 477) | 179 497 384 |
Investment securities available for sale | 2 124 032 | 20 284 562 | (129 369) | 22 279 225 |
Securities held to maturity | 141 157 | 92 201 | - | 233 358 |
Inventories | 167 880 | - | (29 164) | 138 716 |
Other assets | 3 568 896 | 6 122 405 | (506 848) | 9 184 453 |
Total assets | 77 066 008 | 180 322 550 | (8 687 969) | 248 700 589 |
Amounts due to the central bank | 4 427 | - | - | 4 427 |
Amounts due to banks | 4 831 387 | 14 563 095 | - | 19 394 482 |
Derivative financial instruments | 1 307 642 | 4 237 499 | - | 5 545 141 |
Amounts due to customers | 161 167 443 | 13 219 323 | - | 174 386 766 |
Liabilities due to insurance operations | 175 936 | 2 503 786 | - | 2 679 722 |
Debt securities in issue | 6 506 131 | 6 794 479 | - | 13 300 610 |
Subordinated liabilities | - | 2 413 985 | - | 2 413 985 |
Other liabilities | 3 162 267 | 197 638 | - | 3 359 905 |
Total liabilities | 177 155 233 | 43 929 805 | - | 221 085 038 |
Equity | - | 27 615 551 | - | 27 615 551 |
Total liabilities and equity | 177 155 233 | 71 545 356 | - | 248 700 589 |
59.6 Reporting of the liquidity risk
The Bank prepares daily, weekly, monthly, and quarterly reports addressing liquidity risk. The quarterly reports are also applicable to the Group. Reports present the information on liquidity risk exposure and usages of available limits regarding the risk.
59.7 Management decisions concerning liquidity risk
The main tools for liquidity risk management in the PKO Bank Polski SA Group are as follows
- procedures for liquidity risk management, in particular emergency plans,
- limits and thresholds mitigating liquidity risk,
- deposit, investment and derivative transactions, including structural currency transactions and transactions for sale or purchase of securities,
- transactions ensuring long-term financing of Bank’s lending activities.
To ensure an adequate liquidity level, the Bank and subsidiaries of the PKO Bank Polski SA Group have accepted limits and thresholds for liquidity risk. The limits and thresholds were set for current liquidity measures , medium and long-term liquidity measures.
Methods of liquidity risk management in subsidiaries of the Group are defined by internal regulations implemented by the Group entities which are characterised by high levels of liquidity risk measure outcomes.
These regulations are developed after consultation with the Bank and take into account recommendations issued by the Bank to the entities.