Capital adequacy reports and stress tests

The Bank was subject to the 2023 EU-wide stress test conducted by the European Banking Authority (EBA) in cooperation with the Polish Financial Supervision Authority, the European Central Bank (ECB) and the European Systemic Risk Board (ESRB). The test involved 70 banks from 16 European Union (EU) and European Economic Area (EEC) countries, covering broadly 75% of total EU banking sector assets.

The 2023 EU-wide stress test does not contain a pass-fail threshold and instead is designed to be used as an important source of information for the purposes of the supervisory review and evaluation process (SREP). The results will assist competent authorities in assessing the Bank's ability to meet applicable prudential requirements under stress scenarios.

The adverse stress test scenario was set by the ECB/ESRB and covers a three-year time horizon 2023-2025. The stress test has been carried out applying a static balance sheet assumption as of December 2022, and therefore does not take into account future business strategies and management actions. It is not a forecast of Bank’s profits.

According to the 2023 EU-wide stress test results, the consolidated Common Equity Tier 1 (CET1) ratio of the Bank would be in 2025 at the level of 22.27% under the baseline scenario and at 13.26% under the adverse scenario, while the consolidated CET1 ratio as of 2022 was 17.67%. Without the application of transitional periods, the consolidated Tier 1 (CET1) ratio of the Bank would remain unchanged at the end of 2025 and would amount to 16.48% at the end of 2022.

The 2023 EU-wide stress test results reflect the Bank's prudential approach to simulations carried out for European and national supervision. When conducting stress tests, the Bank takes into account assumptions that reliably indicate threats and their potential impact on the Bank's operations.

The most important factor affecting the decrease in consolidated capital ratios at the end of 2025 in the adverse scenario was the recognition of the impact of legal risk costs related to mortgage loans denominated and indexed to CHF on the Bank's forecasted results in 2023-2025.

See more details about the scenarios, the underlying assumptions and the methodology on the EBA's dedicated EU-wide stress testing 2023 website, which also includes the individual results for PKO Bank Polski S.A. The announcement about EBA's 2023 EU-wide stress test is also available on the Polish Financial Supervision Authority's website.

PKO Bank Polski was subject to the 2021 EU-wide stress test conducted by the European Banking Authority (EBA) in cooperation with the Polish Financial Supervision Authority, the European Central Bank (ECB) and the European Systemic Risk Board (ESRB). The test involved 50 banks from 15 European Union (EU) and European Economic Area (EEC) countries, covering broadly 70% of total EU banking sector assets.

The 2021 EU-wide stress test does not contain a pass-fail threshold and instead is designed to be used as an important source of information for the purposes of the supervisory review and evaluation process (SREP). The results will assist competent authorities in assessing the Bank's ability to meet applicable prudential requirements under stress scenarios.

The adverse stress test scenario was set by the ECB/ESRB and covers a three-year time horizon 2021-2023. The stress test has been carried out applying a static balance sheet assumption as at December 2020, and therefore does not take into account future business strategies and management actions. It is not a forecast of Bank’s profits.

According to the 2021 EU-wide stress test results, the consolidated Common Equity Tier 1 (CET1) ratio of the Bank would be in 2023 at the level of 18.05% under the baseline scenario and at 15.37% under the adverse scenario, while the consolidated CET1 ratio as of 2020 was 16.99%. Restated consolidated CET1 ratio of the Bank reflecting the full IFRS9 effect would be in 2023 at the level of 17.98% and 15.19% respectively, while for 2020 at the level of 16.39%.

See more details about the scenarios, the underlying assumptions and the methodology on the EBA's dedicated EU-wide stress testing 2021 website, which also includes the individual results for PKO Bank Polski. The announcement about EBA's completion of the 2018 stress test is also available on the Polish Financial Supervision Authority's website.

PKO Bank Polski was included in the EU-wide transparency exercise concluded by the European Banking Authority (EBA) in December 2020.

The 2020 transparency exercise covered 129 banks from 26 countries of the European Union (EU) and the European Economic Area (EEA) and 6 banks from the United Kingdom. The disclosure includes data on their capital positions, risk exposure amounts, leverage exposures and asset quality. Data was disclosed at the highest level of consolidation for two reference dates of March and June 2020, and exclusively based on supervisory reporting. Despite the COVID-19 shock, banks have maintained solid capital and liquidity ratios and have increased their lending. However, economic uncertainty persists, profitability is at record low levels, and there are several early signs for a deterioration in asset quality.

PKO Bank Polski outperformed its European peers in the banking sector in terms of its Common Equity Tier 1 ratio that stood at 16.98% in June 2020 compared to 15.0% for the banks included in the exercise.

See more details about the 2020 transparency exercise on the EBA website, including an individual report for PKO Bank Polski.

PKO Bank Polski was included in the EU-wide transparency exercise completed by the European Banking Authority (EBA) in November 2019 and conducted in cooperation with the Polish Financial Supervisory Authority (KNF).

The 2019 transparency exercise covered 131 banks from 27 countries of the European Union (EU) and the European Economic Area (EEA), for which data on capital positions, risk exposure amounts, leverage exposures and asset quality have been reported. Data was disclosed at the highest level of consolidation for four reference dates of September and December 2018, and March and June 2019, and exclusively based on supervisory reporting.

PKO Bank Polski outperformed its European peers in the banking sector in terms of its Common Equity Tier 1 ratio that stood at 17.26% in June 2019 compared to 14.6% for the banks included in the exercise.

See more details about the 2019 transparency exercise on the EBA website, including an individual report for PKO Bank Polski.

PKO Bank Polski was subject to the EU-wide stress test conducted by the European Banking Authority (EBA) in November 2018, in close cooperation with the Polish Financial Supervision Authority (KNF). The test involved 48 banks from 15 European Union (EU) and European Economic Area (EEC) countries, covering broadly 70% of total EU banking sector assets.

The exercise was based on common macroeconomic baseline and adverse scenarios covering a three‐year horizon taking the end‐2017 data as the starting point. The adverse scenario identified a set of systemic risks that may pose a threat to the financial stability of the EU banking sector and trigger specific shocks, including a growth in gross domestic product (GDP) in the EU of ‐1.2%, ‐2.2% and 0.7% as of 2018, 2019 and 2020 respectively, with a deviation of ‐8.3% from its baseline level as of end‐2020. The main changes compared to the 2016 exercise were the revision of the credit risk methodology due to IFRS 9 implementation and the revision of the market risk methodology.

The stress test proved PKO Bank Polski’s resistance to negative macroeconomic scenarios, with capital levels meeting the required supervisory norms, mainly due to strong capital base, consisting of accumulated profits, as well as positive impact of the Bank’s business model and balance sheet dominated by traditional financial instruments (credits, deposits). Even under the adverse scenario, predicted Common Equity Tier 1 ratio for PKO Bank Polski remains at a relatively high level of 15.93% in 2020 compared to an average of 10.3% for all banks subject to the test.

See more details about the scenarios, the underlying assumptions and the methodology on the EBA's dedicated EU-wide stress testing 2018 website, which also includes the individual results for PKO Bank Polski. The announcement about EBA's completion of the 2018 stress test is also available on the Polish Financial Supervisory Authority's website.

PKO Bank Polski participated in the annual EU-wide transparency exercise completed by the European Banking Authority (EBA) in December 2018.

As part of the exercise, EBA has monitored capital positions, risk exposure amounts, leverage exposures and asset quality for 130 banks across 25 countries of the European Union (EU) and the European Economic Area (EEA). The data was published for two reference dates of 31 December 2017 and 30 June 2018. Overall, the EU banking sector has continued to benefit from the positive macroeconomic developments in most European countries, which contributed to the increase in lending, further strengthening of banks' capital ratios and improvements in asset quality. Profitability remains low on average and has not yet reached sustainable levels.

PKO Bank Polski retained its favourable capital position compared to the European peers in the banking sector. The Bank's Common Equity Tier 1 ratio of 16.12% in June 2018 stood significantly above an average of 14.5% for the banks included in the exercise.

See more details about the 2018 transparency exercise on the EBA website, including an individual report for PKO Bank Polski.

PKO Bank Polski was included in the EU-wide transparency exercise completed by the European Banking Authority (EBA) in November 2017 and conducted in cooperation with the Polish Financial Supervisory Authority (KNF).

The 2017 transparency exercise covered 132 banks from 25 countries of the European Union (EU) and the European Economic Area (EEA), for which data on capital positions, risk exposure amounts, leverage exposures and asset quality have been reported. Data was disclosed at the highest level of consolidation as of December 2016 and June 2017, and exclusively based on supervisory reporting.

PKO Bank Polski outperformed its European peers in the banking sector in terms of its Common Equity Tier 1 ratio that stood at 16% in June 2017 compared to 14.3% for the banks included in the exercise.

See more details about the 2017 transparency exercise on the EBA website, including an individual report for PKO Bank Polski.

PKO Bank Polski was included in the 2016 EU-wide stress test conducted by the European Banking Authority (EBA) in July 2016, in strict cooperation with the Polish Financial Supervisory Authority (KNF). 

The aim of the exercise was to provide the supervisory authorities and market participants with consistent data on the banks’ resistance to adverse market scenarios, under a common methodology prepared by the EBA. The stress test was carried out on a sample of 51 banks from 15 EU and European Economic Area (EEA) countries, covering around 70% of assets of the European banking sector, and was performed on the top consolidation level. PKO Bank Polski was the only Polish bank covered by the exercise.

See more details about the scenarios, the underlying assumptions and the methodology on the EBA's dedicated EU-wide stress testing 2016 website, which also includes the individual results for PKO Bank Polski. The announcement about EBA's completion of the 2016 stress test is also available on the Polish Financial Supervisory Authority's website.

PKO Bank Polski was subject to the 2016 edition of the EU-wide transparency exercise conducted by the European Banking Authority (EBA) in December 2016, in close cooperation with the Polish Financial Supervision Authority (KNF). 

The latest edition of the series of exercises carried out by EBA, in which PKO Bank Polski participated, seeks to enhance the transparency of the EU banking sector and support market discipline by providing a wide range of consolidated data concerning the banks' profit and loss account, own funds and capital adequacy. The exercise covered information from 131 institutions from 24 EU countries and the European Economic Area as at 31 December 2015 and 30 June 2016. 

PKO Bank Polski's capital position remains strong relative to other banks. Its Common Equity Tier 1 ratio stood at 13.86% as of June 2016 compared to an average of 13.6% for all banks taking part in the exercise.

See more details about the 2016 transparency exercise on the EBA website, including an individual report for PKO Bank Polski. The announcement about EBA's completion of the 2016 transparency exercise is also available on the Polish Financial Supervisory Authority's website.

PKO Bank Polski featured in the 2015 transparency exercise conducted by the European Banking Authority (EBA) and completed in November 2015.

Detailed bank-by-bank data on capital positions, risk exposure amounts and asset quality on 105 banks from 21 countries of the European Economic Area (EEA) have been publicly disclosed by EBA, as part of its ongoing commitment to enhancing transparency in the EU banking sector. The data covered around 70% of total EU banking assets for the reference dates of 31 December 2014 and 30 June 2015.

For the first time, the 2015 transparency exercise was mainly based on existing supervisory reporting data which is submitted to the EBA on a regular basis, with the exception of data on sovereign exposures and leverage ratio which have been provided by banks ad hoc. This way, banks' reporting burden is minimised significantly, using already available data inputs that have undergone rigorous quality checks.

PKO Bank Polski has been the only Polish bank taking part in the test. The Bank confirmed its stable capital position presented in the financial statements.

See more details about the 2015 transparency exercise on the EBA website, including an individual report for PKO Bank Polski. 

PKO Bank Polski participated in the EU-wide stress test coordinated by the European Banking Authority (EBA) in October 2014 and covering a period of three years for the first time.

The 2014 stress test included 123 banking groups across the EU and including Norway, which together covered more than 70% of total EU banking assets. The EU-wide stress test is coordinated by the EBA across the EU and is carried out in cooperation with the ESRB, the European Commission, the ECB as well as competent authorities from all relevant national jurisdictions. The EBA developed the common methodology and ensure a consistent and comprehensive disclosure of results; the ESRB and the European Commission provided the underlying macroeconomic scenarios.

Following a review of the methodology applied in the 2011 edition, a number of significant changes have been introduced in 2014, including a broader time horizon of the stress test of three years. Full responsibility of quality assurance and credibility of outcomes was passed to competent authorities, including the ECB.

See more details about the scenarios, the underlying assumptions and the methodology on the EBA's dedicated EU-wide stress testing 2014 website, which also includes the individual results for PKO Bank Polski.

PKO Bank Polski has successfully passed another capital adequacy test carried out by the European Banking Authority (EBA), in close cooperation with the Polish Financial Supervision Authority (KNF), and completed in December 2013.

PKO Bank Polski has confirmed its strong capital position by sustaining – in both periods under review December 2012 and June 2013 – its Tier 1 capital adequacy ratio at the level exceeding 12 percent, significantly above 9 percent recommended by the EBA. This was yet another test in a series of reviews carried out by the EBA, in which PKO Bank Polski participates. It has been aimed at strengthening investors' confidence in the European banking sector by providing access to a wide range of uniformed data from the largest banks in Europe. The test has been carried out on a sample of 64 banks with significant position in the EU member countries.   

The transparency exercise is part of the EBA's efforts to foster transparency and market discipline and is a complement to banks' own ongoing efforts to improve disclosures under to the Basel Pillar 3 requirements, as set out in the EU Capital Requirements Directive (CRD).

PKO Bank Polski has been the only Polish bank taking part in the test. In the last year's capital adequacy test carried out by the EBA, in close cooperation with the KNF and related to the European supervision recommendations of December 2011 on creating temporary capital buffers by banks, PKO Bank Polski's result also proved to be above the requested level.

See more details about the 2013 transparency exercise on the EBA website, including an individual report for PKO Bank Polski.

PKO Bank Polski was subject to the latest edition of stress tests conducted by the European Banking Authority (EBA) in July 2011, in cooperation with the Komisja Nadzoru Finansowego (Polish Financial Supervision Authority), the European Central Bank (ECB), the European Commission (EC) and the European Systemic Risk Board (ESRB).

The EU-wide stress test, carried out across 91 banks covering over 65% of the EU banking system total assets, seeks to assess the resilience of European banks to severe shocks and their specific solvency to hypothetical stress events under certain restrictive conditions. The assumptions and methodology were established to assess banks’ capital adequacy against a 5% Core Tier 1 capital benchmark and are intended to restore confidence in the resilience of the banks tested. The tests were carried out on the basis of restrictive macroeconomic assumptions (covering GDP growth, unemployment rate, inflation, interest rates, exchange rates and changes in real-estate prices) prepared by the ECB for each of the EU countries. The stress test has been carried out using a static balance sheet assumption as of December 2010. The stress test does not take into account future business strategies and management actions. The baseline scenario established for the tests was based on economic forecasts of the European Commission of autumn 2010, while the adverse scenario assumed the following economic events in the years 2011-2012: a series of internal shocks in the European Union (connected with, among others, the ongoing sovereign debt crisis of the eurozone states), worldwide negative demand shock, originating in the United States, and the depreciation of the US dollar against other currencies. As a result of the assumed shock, the estimated consolidated Core Tier 1 capital ratio of PKO Bank Polski would change to 12.2% under the adverse scenario in 2012 compared to 11.8% as of end of 2010 (including retained profit for 2010). At the same time, the minimum benchmark of 5% established by the organisers of the stress tests would be exceeded considerably. 

"Both last year's and this year's edition of the tests confirm that PKO Bank Polski is one of the most resilient institutions to shocks among those participating in the test. It shows a profit in every scenario. At the same time it should be remembered that this type of analysis is only a supplement to the risk management procedures and periodic stress tests conducted internally by the Bank" – said Zbigniew Jagiełło, the President and CEO of PKO Bank Polski.

The high resilience of PKO Bank Polski to the adverse macroeconomic scenario confirmed by the results of the tests, is due to, among others, the concentration of the Bank's activities on the territory of Poland (characterised by a stable macro-economic situation), strong capitals, mainly based on accumulated profits, and the domination of traditional financial instruments (loans and deposits) in the Bank's balance sheet.

Additional information

The detailed results of the stress test under the baseline and adverse scenarios as well as information on PKO Bank Polski credit exposures and exposures to central and local governments are provided in the accompanying disclosure tables based on the common format provided by the EBA.

The stress test was carried out on the basis of the EBA common methodology and key common assumptions (e.g. constant balance sheet, uniform treatment of securitisation exposures) as published in the EBA Methodological note. Therefore, the information relative to the baseline scenarios is provided only for comparison purposes. Neither the baseline scenario nor the adverse scenario should in any way be construed as a bank's forecast or directly compared to bank's other published information.

See more details about the scenarios, the underlying assumptions and the methodology on the EBA's dedicated EU-wide stress testing 2011 website, which also includes the individual results for PKO Bank Polski.

PKO Bank Polski as the only Polish bank directly participated in the stress test, conducted in July 2010 on a bank-by-bank basis for a sample of 91 EU banks from 20 EU Members States. The results of PKO Bank Polski significantly exceeded capital adequacy ratio set up for the exercise as a minimum. 

The stress test exercise was conducted under the mandate from the EU Council of Ministers of Finance (ECOFIN) and coordinated by the Committee of European Banking Supervisors (CEBS) in cooperation with the European Central Bank (ECB), national supervisory authorities (for Poland - the Polish Financial Supervision Authority) and the EU Commission. The objective of the exercise was to assess the overall resilience of the EU banking sector and the banks’ ability to absorb further possible shocks on credit and market risks, including sovereign risks. Commonly agreed, for all banks participating in the stress test, macro-economic scenarios (benchmark and adverse) for 2010 and 2011 were used in this exercise. 

As a result of the assumed shock under the adverse scenario, the estimated consolidated Tier 1 capital ratio for PKO Bank Polski would change to 15.7% in 2011 compared to 13.3% as of end of 2009. An additional sovereign risk scenario would have a further impact of 0.3 percentage point on the estimated Tier 1 capital ratio, bringing it to 15.4% at the end of 2011, compared with the regulatory minimum of 4%. 

The results of the stress indicate a buffer of 2 825 mln EUR of the Tier 1 capital against the threshold of 6% of Tier 1 capital adequacy ratio for PKO Bank Polski, agreed exclusively for the purposes of this exercise. PKO Bank Polski acknowledges the outcomes of the EU-wide stress tests. The Polish Financial Supervision Authority has held rigorous discussions of the results of the stress test with PKO Bank Polski. 

This stress test complements the risk management procedures and regular stress testing programmes set up in PKO Bank Polski according to the Basel Committee on Banking Supervision (under the Pillar 2 framework of the Basel II) and the Capital Requirements Directive (CRD) requirements as well as Polish legislation. 

Given that the stress test was carried out under a number of key common simplifying assumptions (e.g. constant balance sheet) the information on benchmark scenarios is provided only for comparison purposes and should in no way be construed as a forecast. The results of the adverse scenario should not be considered as representative of the current situation or possible present capital needs. A stress testing exercise does not provide forecasts of expected outcomes since it includes plausible but extreme assumptions, which are therefore not very likely to materialise.

See more details about the scenarios, the underlying assumptions and methodology on the EBA's dedicated EU-wide stress testing 2010 website.