TRANSLATORS’ EXPLANATORY NOTE
The English content of this report is a free translation of the registered auditor’s report of the below-mentioned Polish Company. In Poland statutory accounts as well as the auditor’s report should be prepared and presented in Polish and in accordance with Polish legislation and the accounting principles and practices generally adopted in Poland.
The accompanying translation has not been reclassified or adjusted in any way to conform to the accounting principles generally accepted in countries other than Poland, but certain terminology current in Anglo-Saxon countries has been adopted to the extent practicable. In the event of any discrepancies in interpreting the terminology, the Polish language version is binding.
PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k. , ul. Polna 11, 00-633 Warsaw, Poland, T: +48 (22) 746 4000, F:+48 (22) 742 4040 ,
www.pwc.pl
PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k. is entered into the National Court Register maintained by the District Court for the Capital City of Warsaw, under KRS number 0000741448, NIP 113-23-99-979. The seat of the Company is in Warsaw at Polna 11.
Independent Registered Auditor’s Report
To the General Shareholders’ Meeting and the Supervisory Board of Santander Bank Polska S.A.
Report on the audit of consolidated financial statements
Our opinion
In our opinion, the accompanying annual consolidated financial statements:
● give a true and fair view of the consolidated financial position of the Santander Bank Polska Group (the “Group”), in which Santander Bank Polska S.A. is the parent entity (the “Parent Company”) as at 31 December 2020 and the Group’s consolidated financial performance and the consolidated cash flows for the year then ended in accordance with the applicable International Financial Reporting Standards as adopted by the European Union and the adopted accounting policies;
● comply in terms of form and content with the laws applicable to the Group and with the Parent Company’s Articles of Association.
Our opinion is consistent with our additional report to the Audit Committee issued on the date of this report .
What we have audited
We have audited the annual consolidated financial statements of the Santander Bank Polska Group which comprise:
● the consolidated statement of financial position as at 31 December 2020;
and the following prepared for the financial year from 1 January to 31 December 2020:
● the consolidated income statement;
● the consolidated statement of comprehensive income;
● the consolidated statement of changes in equity;
● the consolidated statement of cash flows, and
● additional notes to the consolidated financial statements comprising a description of the significant adopted accounting policies and other explanations.
Basis for opinion
Basis for opinion
We conducted our audit in accordance with the National Standards on Auditing in the wording of the International Standards on Auditing as adopted by the resolution of the National Council of Statutory Auditors (“NSA”) and pursuant to the Law
of 11 May 2017 on Registered Auditors, Registered Audit Companies and Public Oversight (the “Law on Registered Auditors” – Journal of Laws of 2020, item 1415) and the Regulation (EU) No. 537/2014 of 16 April 2014 on specific
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requirements regarding the statutory audit of public-interest entities (the “EU Regulation” – Journal of Laws EU L158). Our responsibilities
under NSA are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International
Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) as adopted by resolution of the National Council of Statutory Auditors and other ethical requirements that are relevant to our audit of the financial statements in Poland. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. During the audit, the key registered auditor and the registered audit firm remained independent of the Group in accordance with the independence requirements set out in the Act on Registered Auditors and in the EU Regulation.
Our audit approach
Overview
● The overall materiality threshold adopted for the purposes of our audit was set at PLN 174,900 which represents approximately 5% of the profit before tax, adjusted by the tax on financial institutions and the costs of creating a restructuring provision . As the basis for determining the materiality level, we used the average for the last three years .
● We have audited the financial statements of the Parent entity and consolidation packages of the subsidiaries that have significant impact on the consolidated statements.
● The scope of our audit covered 92% of the revenue, 85% of the absolute value of gross profit or loss and 88% of total assets of all the consolidated Group companies before consolidation eliminations.
● Estimating the expected credit losses for loans and advances to customers
● Estimating the provision for legal risk related to the portfolio of mortgage loans in foreign currency
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the Parent Company’s Management Board made subjective judgements; for example, in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Materiality
Group scoping
Key audit matters
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We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operated.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the consolidated financial statements as a whole, as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually and in aggregate on the consolidated financial statements as a whole.
Overall Group materiality
PLN 174,900 thousand (last year PLN 195,000 thousand)
How we determined it
Approximately 5% of the profit before tax, adjusted by the tax on financial institutions and the costs of creating a restructuring provision. As the basis for determining the materiality level, we used the average for the last three years.
Rationale for the materiality benchmark applied
We have adopted profit before tax as the basis for determining materiality because, in our opinion, it is an indicator commonly used by the users of financial statements to evaluate the Group’s operations and it is a key benchmark for Management and Supervisory Board. We have adjusted profit before tax by the tax on financial institutions because it is treated by the Bank and users of financial statements as a specific tax burden and by the costs of creating a restructuring provision, which we considered as a one-off event. Taking into account the significant fluctuations in the level of gross profit due to the COVID-19 pandemic, and at the same time no changes to the scale of the Group's operations, we used the average for the last three years as the basis for determining the level of materiality.
We have adopted the materiality threshold of 5% because it is within the quantitative materiality thresholds acceptable for the auditing of profit-oriented entities in the financial sector.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above PLN 8,740 thousand, as
well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. They include the most significant identified risks of material misstatements, including the identified
risks of material misstatement resulting from fraud. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters.
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Key audit matter
How our audit addressed the key audit matter
Estimating the expected credit losses for loans and advances to customers
In accordance with the provisions of International Financial Reporting Standard 9, Financial Instruments, (“IFRS 9”) the Management is required to determine expected credit loss (“ECL”) that may occur over either a 12 month period or the remaining life of a financial asset, depending on the classification of individual assets into risk categories ("stages"), taking into account the impact of future macroeconomic conditions on the level of credit risk allowances.
The Group’s loan portfolio consists of exposures assessed for expected credit losses:
● on an individual basis for individually significant credit exposures; and
● with the use of statistical models which estimate allowances for credit losses for each of the homogenous portfolios identified by the Group.
Estimating the level of allowances for expected credit losses requires the application of a significant degree of judgment with regard to the identification of impaired loans and significant increase in credit risk, the assessment of the customer's credit quality, the value of collateral and expected recoveries.
The management monitors the accuracy of performance of the models, by comparing the estimated results of the models to actual credit losses (‘back-testing procedures’) to ensure that the level of allowances for the expected credit losses for loans and advances to customers is adequate.
In the models of expected credit losses the Group uses the large volumes of data, therefore the completeness and reliability of data can significantly impact accuracy of the allowances for credit losses.
COVID-19 global pandemic significantly impacted management’s determination of the allowances for expected credit losses and required the application of additional level of judgment. In order to address the uncertainties inherent in the current and future macroeconomic environment and to reflect all relevant risk factors not captured in the Group’s modelled results, the management applied expert judgment and recognized allowance for the impact of the COVID-19 pandemic on the forecasted deterioration in the quality of the loan portfolio.
We determined that the level of allowance for expected credit losses is a key audit matter due to:
● the significant judgment applied by management when designing future
We have started our audit procedures with updating our understanding of the Group’s policies and procedures relating to the estimation of allowances for expected credit losses, especially the changes applied to address the uncertainties resulting from the COVID-19 global pandemic.
We tested the effectiveness of controls applied by the management related to the recognition and measurement of credit losses including, among others, controls over:
● the completeness and accuracy of input data used;
● verification of the models of probability of default (PD), loss given default (LGD) and other parameters;
● the design of future macroeconomic scenarios, forecasted macroeconomic variables, and the probability-weighting of these scenarios;
● the application of expert judgements.
In the area of statistical models, we performed the following procedures, for which we involved our internal specialists in the area of credit risk modelling:
● the assessment whether the Group’s methodology related to the estimation of expected credit losses is in line with the requirements of IFRS 9, in particular verification of the Group’s approach to applying the criteria to identify significant increase in credit risk, default definition, PD and LGD parameters and including forward-looking information when calculating expected credit losses;
● evaluating the appropriateness of the Group’s assumptions and expert credit judgment used in the model;
● critical analysis of key judgments and assumptions, including macroeconomic scenarios and the probability-weightings assigned to particular scenarios;
● analysis of the model’s stability and adaptation to current conditions;
● independent tests of the credit risk parameters.
In the area of the individually assessed exposures, we performed the following procedures:
● we selected a sample taking into account various risk criteria based on our professional judgment,
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macroeconomic scenarios and forecasting macroeconomic variables, adopting probability-weighting scenarios and applying expert credit judgment to reflect characteristics not already considered in the models;
● a high degree of estimation uncertainty due to the economic impacts of COVID-19 pandemic which led to a high degree of auditor judgment;
● complexity of audit procedures and audit evidence obtained due to the complexity of the calculations and the amount of data used to estimate the allowances for expected credit losses.
Note 2.6 Use of estimates, Note 2.9 Accounting policies , Note 4 Risk management and Note 22 Loans and advances to customers provide detailed information on the methods and models used and on the level of allowances for the expected credit losses for loans and advances to customers.
● for selected loans and advances we checked the stage classification as at the balance sheet date;
● for selected impaired loans and advances (stage 3) we tested the assumptions used in the expected credit loss allowances’ calculation, particularly expected scenarios and probabilities assigned to them and the timing and amount of expected cash flows, including cash flows from repayments and realisation of collaterals.
Moreover, we performed the following procedures:
● We reconciled selected input data used for determining default parameters and estimating expected credit losses;
● We verified the allocation of exposures to appropriate stages and assessed the impact of granted payment moratoria on classification of loan exposures and level of expected credit losses;
● We verified the assumptions adopted in the macroeconomic scenarios used to calculate the post-model adjustment created to reflect the impact of COVID-19 pandemic.
● For the selected portfolios of loans we recalculated the level of expected credit losses;
● We performed analytical procedures over provision coverage of the credit portfolio, its changes in 2020 and transfers between stages in 2020;
● We analysed the results of the management's sensitivity analysis of the level of allowances for expected credit losses due to deterioration or improvement of risk parameters;
We also verified accuracy and completeness of the disclosures in the consolidated financial statements in accordance with applicable accounting standards.
Estimating the provision for legal risk related to the portfolio of mortgage loans in foreign currency
As at the balance sheet date, the Group has a portfolio of mortgage loans denominated in and indexed to foreign currencies, mainly to the Swiss franc, in the total amount of PLN 9,853,480 thousand. The loan agreements based on which these loans were granted contain clauses questioned by customers in courts due to abusiveness.
On 3 October 2019, the Court of Justice of the European Union (CJEU) issued a ruling which affected the jurisprudence of the Polish courts and confirmed the increased legal risk of this portfolio,
As part of our audit procedures, we assessed whether the accounting approach applied by the Group is in line with IFRS. Our audit procedures were mainly aimed at assessing the model and the particular assumptions adopted by the Management Board that had a significant impact on the level of estimated provisions. In particular, we carried out the following procedures:
● We conducted inquiries with the Management Board and specialists involved in the estimation of provision, including the Group's lawyers, on the assumptions made taking into account historical observations, including information
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which is reflected in the continuous increase of the number of court cases.
The Group decided that this may affect the level of recoverability of cash flows from the portfolio of mortgage loans denominated in and indexed to foreign currencies, estimated based on existing contracts, and/or give rise to a liability resulting in future cash outflow.
Therefore, the Group estimates the portfolio provision to cover the aforementioned risk, both in relation to the outstanding portfolio and to the loans repaid before the balance sheet date, and creates provisions in relation to the loan agreements currently questioned by the customers in courts.
The estimation of the provisions created by the Group to cover the legal risk of this portfolio is complex and requires a significant degree of judgment in establishing and quantifying possible scenarios and in respect of the assumptions made regarding the number of expected lawsuits against the banks in the Group, the probabilities of courts’ decisions and the amount of the loss if the Group loses a court case. The Group's estimates in this respect are based on historical observations, which show high uncertainty about the number of claims which will be submitted to the court in the future and the lack of a uniform ruling line in existing court decisions. In addition, as described in note 48, when estimating the scenarios and their probabilities, the management has not included the possible effects of the resolution of the Civil Chamber of the Supreme Court, whose meeting is scheduled for 25 March 2021, due to the inability to predict the actual resolutions of particular issues by the Supreme Court. Furthermore, due to the fact that, as described in note 48, the management has not made a decision as to potential out-of-court solutions, including settlements with customers, it has not been included in the adopted scenarios used to estimate the level of provisions as at 31 December 2020.
Due to the significant value of the portfolio underlying the estimation of existing and potential future claims against the Group, as well as the complexity and uncertainty regarding the assumptions used to estimate the provisions to cover that risk, we considered this area as a key audit matter.
Note 2.6 Use of estimates in the financial statements and Note 48 Contingent liabilities contain detailed information on the assumptions used to calculate provisions for the mortgage loan portfolio in foreign currencies and possible alternative results presented as part of the estimation sensitivity analysis.
about the court verdicts, settled court cases and the current number of new claims;
● We verified the different scenarios applied by the Group regarding the expected number of court actions against the Group in the perspective of the adopted time horizon, prepared, among others, on the basis of historical data on reported actions against the Group;
● We obtained directly from the Group’s external legal experts their assessment of the expected scenarios of the resolution of court cases together with an assessment of the probability of these scenarios and other parameters used in the model;
● In cooperation with our internal legal experts, we analysed the documentation and legal opinions received directly from the Group’s external legal experts for the purposes of assessing the risk of losing the court proceedings, as well as the probabilities of particular scenarios of the court verdicts;
● We analysed the method of calculating the value of potential losses for each scenario assumed by the Group based on the historical data;
● We verified the model used by the Group to estimate the provisions, we checked the correctness and completeness of the input data to the model, we verified the mathematical accuracy of the calculation;
We also verified accuracy and completeness of disclosures in the financial statements in accordance with applicable accounting standards.
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Responsibility of the Management and Supervisory Board for the consolidated financial statements
The Management Board of the Parent Company is responsible for the preparation of the annual consolidated financial statements that give a true and fair view of the Group’s financial position and results of operations, in accordance with International Financial Reporting Standards as adopted by the European Union, the adopted accounting policies, the applicable laws and the Parent Company’s Articles of Association, and for such internal control as the Management Board determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Parent Company’s Management Board is
responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The Parent Company’s Management Board and members of the Supervisory Board are obliged to ensure that the consolidated financial statements comply with the requirements specified in the Accounting Act of 29 September 1994 (“the Accounting Act” – Consolidated text: Journal of Laws of 2021, item 217, as amended). Members of the Supervisory Board are responsible for overseeing the financial reporting process.
Auditor’s responsibility for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the NSA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence economic decisions of users taken on the basis of these consolidated financial statements.
The scope of the audit does not include an assurance on the Group’s future profitability nor the efficiency and effectiveness of the Parent Company’s Management Board conducting its affairs, now or in future.
As part of an audit in accordance with NSA, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
● Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control;
● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Parent Company’s Management Board.
● Conclude on the appropriateness of the Parent Company’s Management Board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
● Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and
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events in a manner that achieves fair presentation.
● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and
to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated to the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other information, including the Report on the operations
Other information
Other information comprises the Management Board Report on Santander Bank Polska Group Performance in 2020 including Management Board Report on Santander Bank Polska S.A. Performance (“the Report on the Group’s operations”) and the corporate governance statement and the statement on non-financial information referred to in Article 55(2b) of the Accounting Act which are separate parts of the Report on the Group’s operations (together “Other Information”). Other information does not include the consolidated financial statements and our auditor’s report thereon.
Responsibility of the Management and Supervisory Board
The Management Board of the Parent Company is responsible for the preparation of the Other Information in accordance with the law.
The Parent Company’s Management Board and the members of the Supervisory Board are obliged to ensure that the Report on the Group’s operations including its separate parts complies with the requirements of the Accounting Act.
Registered auditor’s responsibility
Our opinion on the consolidated financial statements does not cover the Other Information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the Other Information and, in doing so, consider
whether the Other Information is materially inconsistent with the information in the consolidated financial statements, our knowledge obtained in our audit, or otherwise appears to be materially misstated. If, based on the work performed, we identified a material misstatement in the Other Information, we are obliged to inform about it in our audit report. In accordance with the requirements of the Law on the Registered Auditors, we are also obliged to issue an opinion on whether the Report on the Group’s operations has been prepared in accordance with the law and is consistent with information included in annual consolidated financial statements.
Moreover, we are obliged to issue an opinion on whether the Parent Company provided the required information in its corporate governance statement and to inform whether the Company prepared a statement on non-financial information.
In addition, we are required to audit the financial information included in the Report on the Group’s operations in accordance with the scope described in this audit report and the requirements of the Banking Law of 29 August 1997 (“the Banking Law” – Journal of Laws of 2020, item 1896, as amended).
Opinion on the Report on the operations
Based on the work we carried out during our audit, in our opinion, the Report on the Group’s operations:
● has been prepared in accordance with the requirements of Article 49 of the Accounting
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Act and para. 71 of the Regulation of the Minister of Finance dated 29 March 2018 on current and periodical information submitted by issuers of securities and conditions for considering as equivalent the information required under the legislation of a non-Member State (“Regulation on current information” – Journal of Laws 2018, item 757) and Article 111a(1–2) of the Banking Law;
● is consistent with the information in the consolidated financial statements.
Moreover, based on the knowledge of the Group and its environment obtained during our audit, we have not identified any material misstatements in the Report on the Group’s operations.
Opinion on the corporate governance statement
In our opinion, in its corporate governance statement, the Group included information set out in para. 70.6 (5) of the Regulation on current information.
In addition, in our opinion, information specified in paragraph 70.6 (5)(c)–(f), (h) and (i) of the said Regulation included in the corporate governance statement are consistent with the applicable provisions of the law and with information included in the consolidated financial statements.
Information on non-financial information
In accordance with the requirements of the Act on the Registered Auditors, we confirm that the Group has prepared a statement on non-financial information referred to in Article 55(2b) of the Accounting Act as a separate section of the Report on the Group’s operations.
We have not performed any assurance work relating to the statement on non-financial information and we do not provide any assurance with regard to it.
Report on other legal and regulatory requirements
Report on the compliance of the format of consolidated financial statements with the requirements of the European Single Electronic Format (“ESEF”)
As a part of our audit engagement letter we have been engaged by the Management Board of the Parent Company to conduct a reasonable assurance engagement for the verification of compliance with the applicable requirements of the electronic reporting format of the consolidated financial statements of Santander Bank Polska S.A. Group for the year ended 31 December 2020 (the “Electronic Reporting Format of the Consolidated Financial Statements”).
Description of a subject matter and applicable criteria
The Electronic Reporting Format of the Consolidated Financial Statements has been applied by the Management Board of the Parent Company to comply with the requirements of art. 3 and 4 of the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the specification of a single electronic reporting format (the “ESEF Regulation”). The applicable requirements regarding the Electronic Reporting
Format of the Consolidated Financial Statements are contained in the ESEF Regulation.
The requirements described in the preceding sentence determine the basis for application of the Electronic Reporting Format of the Consolidated Financial Statements and, in our opinion, constitute appropriate criteria to form a reasonable assurance conclusion.
We have been engaged by the Management Board of the Parent Company to report on the compliance of the format of the consolidated financial statements with the requirements of the ESEF Regulation. This report is intended to be published together with the consolidated financial statements of the Group.
Responsibility of the Management Board and the Supervisory Board
The Management Board of the Parent Company is responsible for the application of the Electronic Reporting Format of the Consolidated Financial Statements that complies with the requirements of the ESEF Regulation.
This responsibility includes the selection and application of appropriate markups in iXBRL using ESEF taxonomy and designing, implementing and maintaining internal controls relevant for the
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preparation of the Electronic Reporting Format of the Consolidated Financial Statements which is free from material non-compliance with the requirements of the ESEF Regulation.
Members of the Supervisory Board are responsible for overseeing the financial reporting process.
Our responsibility
Our responsibility was to form a reasonable assurance conclusion whether the Electronic Reporting Format of the Consolidated Financial Statements complies with the ESEF Regulation.
We conducted our engagement in accordance with National Standard on Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits and Reviews of Historical Financial Information’, in the wording of the International Standard on Assurance Services 3000 (Revised) as issued by the National Council of Statutory Auditors (KSUA 3000 (Z)). This standard requires that we comply with ethical requirements, plan and perform procedures to obtain reasonable assurance whether the Electronic Reporting Format of the Consolidated Financial Statements is prepared, in all material aspects, in accordance with the applicable requirements.
Reasonable assurance is a high level of assurance, but it does not guarantee that the service performed in accordance with KSUA 3000 (Z) will always detect the existing material misstatement.
Summary of the work performed
Our planned and performed procedures were aimed at obtaining reasonable assurance that the Electronic Reporting Format of the Consolidated Financial Statements was applied, in all material aspects, in accordance with the applicable requirements and such application is free from material errors or omissions. Our procedures included mainly:
● obtaining an understanding of the internal control system and processes relevant to the application of the Electronic Reporting Format of the Consolidated Financial Statements, including the preparation of the XHTML format, marking up the consolidated financial statements;
● verification that the XHTML format was applied properly;
● obtaining sufficient appropriate evidence as to the operating effectiveness of relevant controls over the marking up process when the assessment of the risks of material
misstatement include an expectation that such internal controls are operating effectively or procedures other than testing controls cannot alone provide sufficient appropriate evidence;
● evaluating the completeness of marking up the consolidated financial statements using the iXBRL markup language according to the requirements of the implementation of electronic format as described in the ESEF Regulation;
● evaluating the appropriateness of the Group’s' use of XBRL markups selected from the ESEF taxonomy and the creation of extension markups where no suitable element in the ESEF taxonomy has been identified; and
● evaluating the appropriateness of anchoring of the extension elements to the ESEF taxonomy.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.
Conclusion
In our opinion, based on the procedures performed, the Electronic Reporting Format of the Consolidated Financial Statements complies, in all material respects, with the ESEF Regulation.
Information on compliance with prudential regulations
The Management Board of the Parent Company is responsible for complying with the applicable prudential regulations set out in separate legislation, and in particular, for correct determination of the capital ratios.
The capital ratios as at 31 December 2020 have been presented in Note 5 of the consolidated financial statements and include Tier 1 capital ratio and the total capital ratio.
We are obliged to inform in our report on the audit of the consolidated financial statements whether the Group has complied with the applicable prudential regulations set out in separate legislation, and in particular, whether the Group has correctly determined its capital ratios. For the purposes of the said information, the following legal acts are understood as separate legislation: Regulation (EU) no. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, as amended (“CRR”), the Banking Law and the Act of 5 August 2015 on macro-
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prudential supervision over the financial system and on crisis management in the financial system (“the Act on macro-prudential supervision” – Journal of Laws of 2019, item 483, as amended).
It is not the purpose of an audit of the consolidated financial statements to present an opinion on compliance with the applicable prudential regulations specified in the separate legislation specified above, and in particular, on the correct determination of the capital ratios, and therefore, we do not express such an opinion.
Based on the work performed by us, we inform you that we have not identified:
● any cases of non-compliance by the Group with the applicable prudential regulations set out in separate legislation referred to above, in the period from 1 January to 31 December 2020;
● any irregularities in the determination by the Group of the capital ratios as at 31 December 2020 in accordance with the separate legislation referred to above;
which would have a material impact on the consolidated financial statements.
Statement on the provision of non-audit services
To the best of our knowledge and belief, we declare that the non-audit services we have provided to the Parent Company and its subsidiaries are in accordance with the laws and regulations applicable in Poland and that we have not provided any non-audit services prohibited under Article 5(1) of the EU regulation and Article 136 of the Act on Registered Auditors.
The non-audit services which we have provided to the Parent entity and its subsidiaries in the audited period are disclosed in Chapter XIII, Section 11 in the Report on the Group’s operations.
Appointment
We were first appointed to audit the annual consolidated financial statements of the Group by resolution of the Supervisory Board dated 22 March 2016 and re-appointed by resolution dated 11 December 2019. We have been auditing the Group’s consolidated financial statements without interruption since the financial year ended 31 December 2016, i.e. for 5 consecutive years.
The Key Registered Auditor responsible for the audit on behalf of PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp.k., a company entered on the list of Registered Audit Companies with the number 144., is Agnieszka Accordi.
Agnieszka Accordi
Key Registered Auditor
No. 11665
Warsaw, 22 February 2021