Management Board

Report on the activity of

Bank Millennium and

Capital Group of Bank

Millennium in 2021

 
 

 
Management Board Report on activity of Bank Millennium and Capital 
Group of Bank Millennium for 2021 
Table of contents 
 BRIEF DESCRIPTION OF BANK MILLENNIUM ................................................................. 5 
 HIGHLIGHTS OF RESULTS AND ACHIEVEMENTS IN 2021 ................................................... 8 
1. SUMMARY OF CONSOLIDATED GROUP RESULTS IN 2021 .............................................. 8 
2. MAIN AWARDS AND ACHIEVEMENTS IN 2021 ........................................................... 13 
 INFORMATION FOR INVESTORS ............................................................................. 18 
1. SHARE PRICE PERFORMANCE ............................................................................ 18 
2. BANK MILLENNIUM’S RATINGS .......................................................................... 19 
3. INVESTOR RELATIONS.................................................................................... 19 
4. DIVIDEND POLICY ......................................................................................... 20 
 MARKET CONDITIONS AND MACRO RISK FACTORS ........................................................ 21 
1. MACROECONOMIC ENVIRONMENT ...................................................................... 21 
2. FACTORS OF UNCERTAINTY FOR THE ECONOMY AND BANK MILLENNIUM GROUP................. 22 
3. POLISH BANKING SECTOR AND BM/BM GROUP’S POSITION .......................................... 23 
 STRATEGY AND BUSINESS DEVELOPMENT PROSPECTS ................................................... 25 
1. 2021 STRATEGY AND ITS DELIVERY..................................................................... 25 
2. 2022 – 2024 STRATEGY .................................................................................. 25 
3. 2022 OUTLOOK ........................................................................................... 27 
 FINANCIAL SITUATION ....................................................................................... 28 
1. PROFIT AND LOSS ACCOUNT ............................................................................ 28 
2. RESULTS OF BUSINESS SEGMENTS ...................................................................... 32 
3. BALANCE SHEET AND OFF - BALANCE SHEET ITEMS .................................................. 34 
 PRESENTATION OF BUSINESS ACTIVITY .................................................................... 43 
1. INNOVATION AND HIGHEST QUALITY OF POSITIVE CUSTOMER EXPERIENCE ....................... 43 
2. RETAIL BANKING ......................................................................................... 44 
3. CORPORATE BANKING ................................................................................... 51 
4. SUBSIDIARIES’ ACTIVITY ................................................................................. 57 
 RISK MANAGEMENT .......................................................................................... 61 
1. RISK MANAGEMENT ...................................................................................... 61 
2. CAPITAL MANAGEMENT .................................................................................. 64 
3. CREDIT RISK ............................................................................................... 69 
4. OTHER RISKS .............................................................................................. 71 
5. LEGAL RISK RELATED TO FX-MORTGAGE LOAN BOOK ................................................ 76 
6. FURTHER RISK FACTORS ................................................................................. 80 
 HUMAN RESOURCES MANAGEMENT ........................................................................ 82 
1. PERSONNEL POLICY ...................................................................................... 82 
2. EMPLOYMENT AND STAFF COSTS ....................................................................... 84 
3. REMUNERATION POLICY ................................................................................. 85 
 PRINCIPLES OF CORPORATE GOVERNANCE AT BANK MILLENNIUM ..................................... 90 
1.  STATEMENT ON THE PRINCIPLES OF CORPORATE GOVERNANCE APPLIED IN 2021 .............. 90 
2.  SHAREHOLDERS AND GENERAL MEETING OF SHAREHOLDERS ..................................... 92 
3.  SUPERVISORY BOARD .................................................................................. 94 
4.  MANAGEMENT BOARD ................................................................................ 106 
5.  INTERNAL CONTROL SYSTEM AND EXTERNAL AUDITOR .......................................... 111 
 ACTIVITIES IN THE ESG AREA: ENVIRONMENT, SOCIETY AND GOVERNANCE ........................ 116 
 ADDITIONAL INFORMATION ............................................................................... 118 
 STATEMENTS OF MANAGEMENT BOARD ................................................................. 119 

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Ladies and Gentlemen,

The year 2021 was another unusual and difficult period in our business. Although the economic outlook

after the end of the first waves of the pandemic was good, and vaccines gave hope for the

normalization of life, the second half of the year brought inflation, economic uncertainties and ...

new variants of the coronavirus. However, I close the year with a sense of fulfilment and satisfaction

with the effects we have achieved. This was possible thanks to the commitment and harmonious

cooperation of all employees of the Bank Millennium Group, whom I wholeheartedly thank for this.

In 2021, we achieved good operational and business results, while actively managing and mitigating

the different risks related to the banking activity. It was a year of high growth in retail lending, led

by record sales of new mortgage loans and a rebound in consumer loan sales. As befits a leader in

digital customer experience, the number of active digital customers exceeded 2.3 million (an increase

of 10% y/y) and mobile customers 1.9 million (an increase of 16% y/y). We increased our core revenues

(interest and commission revenues) and decreased operating costs. The quality of the loans portfolio

improved, which allowed a lower cost of credit risk. The financial loss in the amount of PLN 1,332

million was caused by the creation of provisions for legal risk related to the portfolio of foreign

currency mortgage loans (excluding Euro Bank) in the amount of PLN 2,086 million, additional costs

incurred with individual amicable settlements with FX mortgage borrowers and with legal costs.

Excluding these provisions and costs, the Group's net profit would amount to PLN 1,098 million net.

Undoubtedly, this year was important to speed up solving the issue of Swiss franc loans. As a result

of signing settlements with our customers, the number of active FX mortgage loans decreased by

8,449 in 2021 compared to over 57,800 active loan agreements at the end of 2020. The number of

amicable settlements was higher than the influx of new court cases.

The event of the year for the Bank was undoubtedly the announcement of our new Strategy for 2022-

2024 entitled "Inspired by people". The document is the result of the work of many teams and derives

directly from the knowledge and inspiration of employees. The strategy assumes smart growth, solid

business development and further technological progress. We want to maintain high operational

efficiency and strengthen customer acquisition based on the growth engines developed in recent years

– the sales of personal accounts, cash and mortgage loans, and selective growth in corporate. The key

values of our activities remain unchanged. These are customer centricity, offering high quality of

service, continuous innovation, accelerated digitalization, with the mobile app at its core, and a

commitment to society and the environment.

The Bank is a signatory to the partnership for the implementation of the UN Sustainable Development

Goals, which sets the direction for our activities. For 11 years, the Bank has been part of the index

of the Warsaw Stock Exchange, which brings together companies with the highest standards of

sustainable development. Bank Millennium Group does not provide financing for new coal mines and

investments in coal-based energy, with the exception of new investments related to the reduction of

pollution. A few years ago, the Bank decided to significantly reduce the exposures financing the coal

industry. As a result, the portfolio's exposures involved in coal and hydrocarbon mining are close to

zero. For the coming years, we have set ourselves specific climate goals. The Bank’s plans are to

reduce its own greenhouse gas emissions by 50% in 2022 compared to 2020 and to achieve climate

neutrality in terms of its own emissions by 2027. It will also actively support corporate clients in their

decarbonization activities, in developing their investment plans related to the package of the

European funds, especially green finance.

Following a long period of only virtual activity of the Bank Millennium Foundation due to the

pandemic, in 2021 its activity returned to real life. We continued the employee volunteering project

#słuchaMYwspieraMY and the educational program "Financial ABCs". We conducted 200 workshops in

kindergartens throughout Poland and over 2 600 people in a difficult life situation received help from

us. After the very popular 18th edition of the Millennium Docs Against Gravity festival, we have

extended our cooperation with its organizer for another three years.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

What lies ahead? In accordance with the new strategy for the years 2022-2024, the Bank plans to meet

the growing, post-pandemic expectations of customers and shareholders. By 2024, we intend to

achieve PLN 2 billion of net profit (excluding costs related to the portfolio of foreign currency

mortgage loans) and ROE (without the above-mentioned costs) at the level of approx. 14%. Ambitious

efficiencies and smart business growth will be made possible by further increasing the number of

active customers to over 3 million in 2024 and improving a cost-effective, scalable operating platform

allowing to achieve cost/income ratio of less than 37% in 2024.

We expect that in 2022 the Polish economy will remain on the positive path, although economic

growth will slow down when compared to 2021. The economy will continue to be supported by

household consumption, driven by the expected further decline in the unemployment rate and wage

growth. However, high inflation and interest rate hikes will limit the dynamics of consumer spending.

2022 may also be a year of rebuilding investments, especially if European funds start to flow into

Poland in a wider stream. The pandemic remains a factor of uncertainty, despite the fact that in 2021

the economy largely adapted to operate in its conditions. High inflation remains a risk, which may

force higher than expected interest rate increases, which could imply a stronger slowdown of the

economy.

Looking ahead to the coming year, I am optimistic. Bank Millennium is fully prepared for the

challenges of the future and poised to implement ambitious, strategic goals. I hope that working on

them will be a source of satisfaction for every employee. I cordially invite you to read the report.

Joao Bras Jorge

Chairman of the Management Board of Bank Millennium

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

1. BRIEF DESCRIPTION OF BANK MILLENNIUM

Bank Millennium S.A. (‘Bank Millennium’, ‘Bank’) was established in 1989 as one of the first Polish

commercial banks. It is now one of the top 7 commercial banks in Poland in terms of assets and offers

its services to all market segments via a network of branches, a network of personal advisors as well

as electronic and mobile banking.

Ever since the start of its activity it has been a trendsetter in Polish banking. For example it was the

first Bank to be listed on the Warsaw Stock Exchange and issued the first payment card on the Polish

market. The bank satisfies most stringent standards of corporate governance; it implements social

programmes to support culture development as well as education of the youth.

Bank Millennium is a market leader in the area of innovations understood to mean state-of-the-art

technology and process improvements. Innovation in Bank Millennium is part of its business strategy.

Bank Millennium, together with its subsidiaries, forms Bank Millennium Group (‘BM Group’, ‘Group’)

- one of the most innovative and comprehensively developing financial groups in Poland – employing

in total 6,942 persons (FTE).

Its most important companies are: Millennium Leasing (leasing business), Millennium Dom Maklerski

(brokerage business), Millennium TFI (mutual funds) and Millennium Bank Hipoteczny (obtaining long-

term financing through the issue of covered bonds). Since 2016, Millennium Goodie Sp. z o.o. together

with the Bank has been operating a smartshopping platform based on advanced technology. The

offering of the above-mentioned companies complements the services and products offered by the

Bank.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Business model

Bank Millennium operates on the basis of a business model which rests on five pillars:

1. CLIENT-CENTRICITY

We are the most client-centric bank, which keeps developing. We want to be the most

personalised bank on a mass scale.

2. DIGITALITY AND NEW TECHNOLOGIES

We are a digital banking leader, offering a combination of broad outreach and high quality of

services.

3. ORGANIC GROWTH CAPABILITY

We are growing fastest among banks as regards acquisition of customer with a main

relationship.

4. COST-EFFECTIVENESS

We have a cutting-edge cost-effective model built on state-of-the-art technology and flexible

in changing to follow growth of the Bank’s scale.

5. FLEXIBILITY IN RESPONDING TO CHANGES

We have a flexible operating model; an organisational culture, which allows short reaction

times as well as digital and data analysis skills.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The business model is founded on key values: building relationships based on trust, a passion for

quality and innovation, people development and promoting cooperation as well as the ambition to

always aim higher.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

2. HIGHLIGHTS OF RESULTS AND ACHIEVEMENTS IN 2021

2.1. SUMMARY OF CONSOLIDATED GROUP RESULTS IN 2021

In 2021, Bank Millennium S.A. Capital Group’s (the ‘Bank’, the ‘BM Group’) posted a consolidated net

loss of PLN1,332 million. This followed net profit of PLN23 million in the preceding year. Year 2021

was to some extent a mirror image of the year 2020, when due to direct and indirect impact of COVID-

19 pandemic and increasingly challenging economic background, operating results of the BM Group

and its peers were deteriorating as the year progressed. In contrast, after a slow start, 2021 brought

a gradual recovery of the business and as a result record high operating (ex-FX mortgage related costs)

quarterly profit of BM Group in 4Q21.

BM Group’s annual results (management accounting approach)

*NII/other income on pro-forma basis with interest in derivatives presented in NII; ** w/o result on FV portfolio, amicable

conversions and netting-off EB's FX-mortgage provisions; *** w/o BFG and legal costs

FX-mortgage related costs were an even heavier burden to our core-business

Having said that, it is important to stress that it was again costs related to FX-mortgage portfolio

originated by Bank Millennium (provisions related to legal risk, costs of conversions to PLN mortgages

or early conversions both agreed on negotiated terms with FX-mortgage borrowers - ‘amicable

conversions’ - and legal costs among others) that were the main burdens on bottom line and the main

reasons for the BM Group’s net loss in 2021. Totalling PLN2,430 million post tax (legal risk provisions

alone: PLN2,082 million) these compared to PLN673 million (PLN614 million) in 2020. Adjusted for

these, BM Group would in 2021 report record high net profit of PLN1,098 million, compared to

adjusted net profit of PLN695 million in 2020.

Full year 2021 net profit adjusted for all extraordinary items (above mentioned FX-mortgage related

costs, revaluation of Visa shares and provision against a corporate court case) stood at PLN1,123

million, up 46% y/y. Adjusted ROE of 13.8% compared to 8.4% in 2020.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

* adjusted for provisions against legal risk, legal costs related to FX-mortgages and costs of amicable conversions

The significant increase in the above-mentioned FX-mortgage related costs resulted from more

conservative inputs into the Bank’s provisioning methodology, reflecting, inter alia, a more

challenging environment, significantly higher number of amicable conversions and finally higher legal

costs, due counterclaims, among others.

2021 overall brought a significant increase of the number of individual lawsuits related to loan

agreements originated by the Bank. These reached 11,070 at end of December 2021 compared to

5,018 at YE20. The inflow of new cases against the Bank was not linear during the year with 3Q21

bringing the thus far highest number (1,762) and inflow in 4Q21 remaining high but lower than in the

two preceding quarters. At the same time, negative court verdicts for banks continued (details

regarding litigations against the BM Group can be found further in the report).

At the end of December 2021, the balance of provisions for the portfolio originated by the Bank stood

at PLN3,079 million (end of December 2020: PLN924 million), an equivalent of 25.7% of the

outstanding FX-mortgage grossed-up book (YE20: 6.9%).

* Legal risk provisions/gross FX mortgage book (ex-EB portfolio in case of BM), ** average of nine largest banks listed at WSE w/o PKO BP’s 4Q20

provisions for ‘KNF conversions’

At the same time, the Bank continued to be open to its customers in order to reach amicable solutions

regarding FX-mortgages on negotiated terms. As a result of these negotiations and other natural

drivers, in 2021 the number of active FX-mortgage loans decreased by over 10,000, compared to over

57,800 active loans agreements at the end of 2020. In recent quarters (and in 2021 overall), the

reduction of the number of active FX-mortgage loans was higher than the inflow of new individual

court cases against the Bank.

-109

-311

-200

-311

-509

-1,332

174

202

242

202

320

271

306

695

1,098

-1,500

-1,000

-500

500

1,000

1,500

1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 2020 2021

Net profit: reported and w/o FX-mortgage related costs* (PLNmn)

Net profit reported Net profit w/o FX-mortgage related costs

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Quarterly trends/operating dynamics

It is worth to highlight that 2021 was another ‘non-linear’ year for both BM Group and Poland’s banking

sector overall. Similarly to the previous year, year 2021 brought significant swings in Poland’s

macroeconomic background and as a result volatility in our business. Early part of the year remained

under the influence ultra-low interest rates, was marred by the second wave of the pandemic and

negative macroeconomic background. Summer months saw wave of coronavirus tapering out,

relaxation of pandemic restrictions and fast recovery of economic activity. Finally, the second part

of the year was chiefly under the influence of soaring inflation (and the resulting late albeit vigorous

start of the rate tightening cycle) with the third wave of pandemic taking only small (if any) some toll

on the bank’s operating activity and business.

As result of these factors and trends, 4Q21 was the strongest quarter in the year as far as operating

results are concerned. The improvement of our operating results in the quarter was of such a high

magnitude that, in many metrics, full year 2021 results finished above the respective levels in 2020.

Reported quarterly revenues were up 4% y/y in 4Q21 (2021: up 2% y/y), while opex (excluding charges

for Banking Guarantee Fund (‘BFG’) and legal costs) was flat y/y (2021: down 7% y/y). Core income

was particularly strong in the period with the 13% q/q increase taking the y/y growth of full year 2021

core revenues to 6% from 2% in 9M21 and -1% in 1H21. NII, the main driver, increased 15% q/q to

above pre-pandemic levels, while full year 2021 NII grew 5% y/y following the 1% y/y contraction in

9M21. This strong performance was driven by a combination of higher interest rates (average 3M

WIBOR of 1.53% in 4Q21 compared to 0.22% in 3Q21) and solid 3% q/q growth of loans (ex-FX mortgage

portfolio). Record high disbursements of PLN mortgages (4Q21: PLN2.8 billion, up 33% y/y, 2021:

PLN9.8bn, up 46% y/y) and much accelerated originations in leasing (4Q21: PLN1.1 billion, up 39%

y/y, 2021: PLN3.9 billion, up 57% y/y) were the key contributors. In 2021 overall, the Bank’s market

share in originations of mortgages reached 12.5% (2020: 12.2%), putting us at #3 position on the market

(2020: #4).

Key points of Group BM results in 2021

The key developments in the last twelve months that drove the y/y improvement of the results and

which, we believe, are particularly worth highlighting are as follows:

much accelerated recovery of NII with 4Q21 bringing 15% q/q growth to 108% of the previous

record high NII of 4Q19; in 2021 overall NII grew 5% y/y;

accelerated improvement of quarterly NIM (298bps in 4Q21 from 261bps in 3Q21, to just 1bp

below the 3Q19 peak of 299bps and 49bps up from the low of 249bps in 3Q20); full year 2021 NIM

stood at 270bps compared to 261bps in 2020;

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

above-market loan growth (net loans +7% y/y in 2021) despite strong reduction of the FX-

mortgage portfolio; solid originations of retail loans played a key role but the 4% y/y growth of

the corporate book overall (leasing portfolio up by noteworthy 7% y/y) also had a positive

contribution; disbursements of mortgages in 4Q21 reached a new all time high of PLN2.8bn, up

33% y/y (2021: PLN9.8bn, up 46% y/y) with market share in originations of 13.3% vs. 12.2% in 4Q20

(2021: 12.5% vs. 12.2% in 2020); 4Q21 origination of cash loans of PLN1.3bn, though down q/q,

remained well above this in the respective period of last year (2021: PLN5.6bn, up 21% y/y); on

a separate count our gross FX-mortgage book contracted 28% y/y due to a combination of

repayments, provisioning (in line with IFRS9 most of legal risk provisions are booked against gross

value of loans under court proceedings) and amicable conversions (pure gross FX-mortgages ex-

EB in CHF down 17% y/y); as a result, the share of FX-mortgages in total gross loans decreased to

12.4% (BM originated: 11.4%) from 18.3% (17.0%) at YE20;

improving cost efficiency owing to a combination of a steady increase in the digitalisation of our

business and relations with clients with strong cost response to revenue pressures earlier in the

year; falling headcount (number of active employees down 357 or 5% since YE20), ongoing

optimisation of our physical distribution network (own branches down by 37 units or 8% in the last

twelve months) complemented the increasing share of digital services (digital customers: nearly

2.3 million, up 10% y/y, number of active mobile customers: 1.9 million, up 16% y/y); cost

optimisation initiatives not only resulted nominal reduction of opex but also translated into much

improved cost efficiency; reported C/I ratio in 2021 dropped to 46.2% from 49.0% in 2020, C/I

adjusted excluding BFG, FV portfolio, costs of amicable conversions offered to FX-mortgage

borrowers and netting-off of FX-mortgage provisions on f.EB book dropped y/y to 39.4% from

43.5% in 2020;

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

stable loan book quality resulting in a low cost of risk (2021: 37bps vs. 2020: 83bps) with positive

underlying trends in quality of both retail and corporate books and continued NPL disposals

(PLN56mn in 2021 overall vs. PLN19mn in 2020); NPL ratio eased to below 4.4% at the end of

December 2021 from nearly 5.0% the year before;

customer deposits were up significantly (12%) up in the year with corporate ones up 29% y/y

and retail ones up 6%; the liquidity of the Bank remained very comfortable with L/D ratio at 86.0%

compared to 90% at YE20;

capital ratios fell during the year (Group TCR: 17.1%/T1: 14.0% vs. 19.5%/16.5% respectively at

YE20) as the drop of T1 capital (net loss in the year and part of unrealised losses on securities)

outweighed the drop of RWAs;

AuM of Millennium TFI and third party funds combined increased 6% y/y to just over PLN8.9

billion.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

2.2. MAIN AWARDS AND ACHIEVEMENTS IN 2021

The Best Bank in Poland for 2021

Bank Millennium was hailed The Best Bank in Poland

for 2021 in the annual Best Bank Awards

competition organised by the renowned Global

Finance Magazine. All selections were made by the

editors of Global Finance after extensive

consultations with corporate financial executives,

bankers and banking consultants, and analysts

throughout the world.

Złoty Bankier 2021 - Millennium with the best

mortgage

• 1st place in the Mortgage loan category

• 2nd place in the Socially Sensitive Bank category

for supporting the project as part of corporate

social responsibility

• 3rd place in the Best Multichannel Service Quality

category

Millennium second in the ranking of the best

banking and financial services employers 2021

in the Forbes and Statista ranking

Poland's Best Employers 2021 is a list of 300

companies operating in Poland, whose

achievements in the field of HR have been

honoured with the title of the best employer. In the

category of banks and financial services,

Millennium came second. Ranking, prepared and

published by Forbes magazine. The content partner

of the project is Statista.

"Best Bank 2021" competition

Bank Millennium took second place in the "Best

Bank 2021" competition in the group of small and

medium-sized commercial banks. The competition

is organized by "Gazeta Bankowa". Statuettes in the

competition were awarded in the following

categories: cooperative banks, small and medium-

sized commercial banks and large commercial

banks.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Golden CSR Leaf

As in the previous year, the Bank was awarded the

Golden CSR Leaf of the Polityka weekly, received

by companies whose activities in the field of

corporate social responsibility and sustainable

development are rated the highest. In the previous

years, the Bank won the Silver Leaf five times.

Celent Model Bank in Open Banking

Bank Millennium won the Celent Model Bank award

for its open banking services, implemented

systematically in 2020. The bank's solutions were

assessed as an excellent example of good practices

in project implementation, having a significant

impact on business results and the entire industry.

Bank Millennium is the Innovator of 2021

according to Global Finance magazine

Bank Millennium in the poll conducted by Global

Finance magazine was recognized as an outstanding

innovator in retail banking for its open banking

services - 2021 Outstanding Innovator in Retail

Banking for “Bank Millennium Open Banking

Services” (Special Honours). This is yet another

international award this year for the bank's

innovative solutions.

Dźwigacz Kultury (Culture Elevator) for Bank

Millennium

For the sixth time now Bank Millennium was

awarded Dźwigacz Kultury (Culture Elevator) by the

Cracow Festival Office for sponsoring the Sacrum

Profanum festival. This is yet another award this

year for the bank for supporting cultural events

despite the pandemic.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Institution of the Year 2021 - Millennium is the

best bank in mortgage services and the winner

in most other categories

In this year’s Institution of the Year Bank

Millennium has been recognised as the best bank in

mortgage service. The Bank was also among the

winners in most categories: Best Bank in Poland,

Best Service in Branch, Best Service in Remote

Channels. Best Mobile Application and Best Account

Opening Process and 11 bank branches were on the

list of bank banking branches in Poland. Bank

Millennium Foundation projects have been given

special recognition in the Corporate Social

Responsibility category.

Contact Center teams are winners in the

competitions of the Golden Handset and

Telemarketer of the Year

The Golden Handset was awarded to: the Mortgage

Product Service Team, Quality Department of the

Direct Banking Dept., Justyna Witkowska and

EasyBanKing project. Contact Center employees

also won the Telemarketer of the Year

competition. The competition for the best

Customer Care projects in Poland is organized by

the Direct Marketing Association.

Banking Stars - 3rd place in the category "Star of

customer relations"

The bank was among the banks distinguished in the

Banking Stars ranking organized by Dziennik Gazeta

Prawna and PwC. In the "Star of customer relations"

competition, in which the assessment is made by

bank customers Bank Millennium came third (in the

second edition of the previous edition).

Bank Millennium is the best digital bank in Poland

according to Global Finance Magazine

Bank Millennium was hailed The Best Consumer Digital

Bank in Poland for 2021 in the World’s Best Digital Banks

competition organised by the renowned Global Finance

Magazine. This is yet another international award for the

bank’s achievements this year.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Bank Millennium comes third in the TOP 200 Best

Polish Brands ranking.

In the “Forbes” magazine TOP 200 ranking of Best Polish

Brands Bank Millennium took the high third place (top

scoring bank on the list). The TOP 200 Best Polish Brands

ranking shows the position and value of brands from the

perspective of their strength in the minds of customers

and their role in generating revenue.

Winning this year’s edition of “Newsweek’s Friendly

Bank” ranking

1st in the “Bank for Mr. Kowalski” category

1st place in the “Remote Banking” category

Bank Millennium became the winner of this year’s

Newsweek Friendly Bank ranking. This is the Bank’s

comeback to rating peaks in great style. Millennium was

ranked strictly at the top in all aspects of services

evaluation, especially mobile banking evaluation. It is

precisely mobile banking, awarding a big number of

points in both rankings, that decided about the victories

in the jubilee edition of the competition.

Bank Millennium is in the “European Diversity Leaders

2022” ranking

The most recent Financial Times listing out of 15000

companies selected 850 employers who support and

promote diversity in their organisations. Bank

Millennium is one of them. The ranking was prepared on

the basis of the opinions of 100000 employees and

experts dealing with human resources and recruitment.

The substantive partner of the project is the Statista

research company.

Mój Biznes account is the number one for

microbusinesses

In the Bankier ranking out of 11 banks it was our

company account which came first. Mój Biznes account

is an ideal solution for persons who conduct a single

person business activity and modern, multifunction tool

to manage a company’s finance. We have recently

worked a lot on the offer for business.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

CSR Bank Millennium among the top three in the

developers’ ranking

For the 15th time, developers associated in the Polish

Union of Development Companies evaluated banks in

terms of their financing relationship and services

provided to housing development projects - Bank

Millennium made it to the podium, coming third.

The Bank wins the “Wrocław without barriers”

plebiscite

in the Corporate Social Responsibility category

The certificate was awarded for facilities in the use of

digital banking and the implementation of architectural

adaptations for people with disabilities as well as for

providing training for staff in the service of people with

special needs. The organizers also appreciated our

activities to shape a socially responsible brand.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

3. INFORMATION FOR INVESTORS

3.1. SHARE PRICE PERFORMANCE

In 2021, investors’ sentiment towards banking stocks improved markedly. Rotation into ‘value’

companies at the start of the year, improving macro forecasts, accelerating pace of vaccinations

against the coronavirus as well as higher than expected inflation readouts and ensuing expectations

about imminent interest rate hikes were supporting banking share prices throughout Europe in the

early part of the year. In the second half of May, just after the Poland’s Supreme Court postponed

the verdict regarding Swiss francs to an indefinite future, share prices of Polish banks improved

further. In the second half of June, news of the rapidly spreading new delta variant of the coronavirus

as well as lower than expected inflation readout undermined banking share prices in Poland .

In subsequent months, stubbornly higher than expected inflation readouts and ensuing expectations

about imminent interest rate hikes put banking share prices back en vogue.

Finally in 4Q21, the long-awaited increases of interest rates took place with the reference rate

increased in three steps to 1.75% from 0.1%. While the hikes were positive from the bank sector

perspective, yet some investors had discounted these earlier (since the start of 2021 WIG-Banki, the

banking index, was one of the strongest performing sector indices) and as a result banking shares lost

part of their lustre.

During the twelve months ending 31 December 2021, WIG broad market index grew 22%, WIG20 index

of largest companies grew 14% while WIG Banks index gained 81%. At the same time, the share price

of Bank Millennium increased 151%, making it the 2

best performing banking stock on the WSE.

In 2021, daily turnover of Bank Millennium shares averaged at PLN8.2 million and was 20% higher than

in the preceding year.

Market ratios

30.12.2021*

39.12.2020*

Change y/y

Number of Bank’s shares (‘000)

1 213 117

0.00%

Average daily turnover in annual terms

(in PLN’000)

8 177

6 832

19.7%

Bank’s share price (PLN)

8.195

3.27

150.6%

Market capitalisation of the Bank (PLNmn)

9 941

3 967

150.6%

WIG Banki

8 640

4 765

81.3%

WIG20

2 267

1 984

14.3%

WIG30

2 765

2 313

19.6%

WIG - main index

69 296

57 026

21.5%

(*) last day of listing in 2021 and 2020

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Bank Millennium’s shares are included in following indexes on the Warsaw Stock Exchange: WIG, WIG

Banks, WIG 30, mWIG 40, WIG Poland and WIG-ESG.

3.2. BANK MILLENNIUM’S RATINGS

On 16 March 2021, Fitch Ratings placed the Bank’s ratings: IDRs (issuer default rating), Viability Rating

and national ratings on Rating Watch Negative / RWN (details in CR 8/2021, Current reports - Investor

relations - Bank Millennium).

On 10 September 2021, rating agency Fitch Ratings removed rating of Bank Millennium from Negative

Rating Watch list with negative outlook and affirmed Long-term Issuer Default Rating at 'BBB-‘ with a

negative outlook (details in CR 29/2021, Current reports - Investor relations - Bank Millennium).

On 27 January 2022, Moody’s affirmed Bank Millennium’s rating with stable outlook.

The Bank’s ratings, as at 31 December 2021, please find in the table below.

3.3. INVESTOR RELATIONS

Communicating with the investors’ community the Bank assures a high level of transparency and

proper access to information for all its recipients. Accurate and up-to-date information is provided in

keeping with relevant legal regulations. The list of information published by the Bank, defining the

frequency and place of publication, is available on the Bank’s website in the Investor Relations section

– in section of Information Policy Information policy of Bank Millennium - Bank Millennium

The investor relations website Investor relations - About the Bank - Bank Millennium always provides

up-to-date information, including Bank Millennium share prices on the WSE, shareholding structure,

details of General Meetings, dividend payment history or credit ratings. There are also current and

periodic reports, financial results presentations, .xlsx sheets with key financial information and other

important information about the Bank. It is worth noting that the website is responsive, which means

that it is adapted to mobile devices - tablets and smartphones.

The Bank makes use of diverse communication channels to reach current and potential Shareholders,

primarily such channels as:

▪ Periodic conferences with the Management Board about quarterly results of the Bank’s Capital

Group (4 during 2021),

▪ Participation in conferences organised for Investors in Poland and abroad (8),

▪ Face-to-face and group meetings with capital market participants (431 persons),

▪ Current reports (36) and press releases,

▪ Dedicated website in the Bank’s portal on investor relations,

▪ Encouraging participation in annual General Meetings of the Bank,

▪ Day-to-day contacts with market participants (via e-mail or phone).

Rating

MOODY’S

FITCH

Long-term deposit rating/IDR

Baa1

(stable outlook)

BBB-

(negative outlook)

National long-term IDR

A(pol)

(negative outlook)

Short-term deposit rating

Prime-2

F-3

Viability / standalone BCA rating

baa3

bbb-

Counterparty Risk Rating (CRR)

A3/Prime-2

Support Rating

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

In keeping with best practice on equal access to information from 2006 the Bank has been assuring

unrestricted access to results conferences online with the Management Board (video streaming in

Polish and in English) and by phone. A recording of each conference is available on the Bank’s website.

The Bank also provides video streaming of General Meetings. A recording of the deliberations and the

resolutions adopted are also available on the website.

Bank Millennium is analysed by 12 analysts representing local and international brokerage houses who

publish their reports and recommendations for Bank Millennium shares. The full list can be found on

the Bank's website Analysts - Investor relations - Bank Millennium

In 2020, 14 analysts representing local and foreign brokerage houses published reports and

recommendations regarding the Bank’s shares (their list can be found on the Bank's website in the

Investor Relations – in Analysts section Analysts - Investor relations - Bank Millennium

In 2021, brokerage houses issued, to the knowledge of the Bank, 49 recommendations regarding Bank

Millennium shares, of which 16 were "Buy", 17 "Hold", 4 "Neutral" and 12 "Sell". As at 31 December

2021, the structure of recommendations (not older than 6 months) was as follows:

Buy

Hold

Sell

3.4. DIVIDEND POLICY

Bank Millennium’s dividend policy assumes distribution of between 35% to 50% of its net profit,

provided that recommendations of the PFSA regarding the payment of dividends are met.

On December 16, 2020, the PFSA published its recommendation on the dividend policy of commercial

banks in 2021. Taking into consideration significant uncertainty related to further developments in

conjunction with COVID-19 pandemic, temporary character of solutions adopted by banks to improve

their capital positions during the pandemic, EU’s maintained cautious regulatory stance with regards

to dividend payments and the change of EBA’s recommendations extending credit moratoria, PFSA

found necessary to withhold dividend payments by commercial banks in the first half of 2021. On

January 13, 2021, the Bank received from the PFSA an analogous individual recommendation on

withholding a dividend payment in the first half of 2021.

On June 24, 2021 PFSA published a set of new relaxed dividend recommendations, allowing banks,

upon meeting certain criteria, pay-outs from 2020 profits, among others. The Bank’s Management

Board did not revisit the merits of a dividend pay-out given, among others, fairly symbolic net profit

posted in 2020, and the Bank’s AGM on March 23, 2020, unanimously voted for a 100% retention of

2020 profit.

The Bank posted a net loss in 2021, hence there are no grounds for a dividend pay-out. Consequently,

the Management Board does not intend to recommend shareholders a dividend pay-out in 2022.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

4. MARKET CONDITIONS AND MACRO RISK FACTORS

4.1. MACROECONOMIC ENVIRONMENT

The year 2021 was a period when economies were rebuilding after pandemic shock of 2020 and

adapting to situation of epidemic as supported by progress in vaccination programme against SARS-

CoV-2. The Poland’s GDP already in mid-2021 made up for COVID-19 pandemic related losses and in

2H21 dynamic economic recovery continued. Household consumption was the main factor responsible

for GDP growth, increasing by 6.2% after drop by 3.0% in 2020. Its recovery was supported by

expansionary fiscal and monetary policy, low unemployment rate, fast wage increase and savings

accumulated in the period of severe restrictions. Reconstruction of inventories by enterprises had a

strong impact upon the GDP growth, specifically in 2H20, in response to problems with supply of

materials and intermediate production goods under conditions of a strong, synchronised demand

growth worldwide. Despite those difficulties, the industrial sector supported by exports largely

contributed into recovery of the Polish economy in 2021. Furthermore, investments in fixed assets

increased in 2021, although had not reached the level of 2019, the year prior to the outbreak of the

pandemic, mainly due to limited activity of the public sector. This was an effect of the initial phase

of the new European Union budget perspective. With recovery of inventories, the foreign trade

balance generated a strong negative impact upon the GDP growth. Finally, in 2021 GDP calculated in

constant prices increased by 5.7% after decrease by 2.5% a year before and was higher by 3.0% than

2019 level, thereby distinguishing Poland in a positive way from among the EU member states.

Evolution of GDP growth in Poland

F-forecast, E-estimate

Growing demand was a factor driving increase in prices worldwide. Furthermore, in Poland, with low

unemployment and favourable income situation of households, enterprises were able to transfer some

increase of business operation costs upon consumers thereby strongly increasing inflation. In 2021

inflation rate, on average, increased to 5.1% y/y from 3.4% y/y in preceding year, while in Dec’21

alone it reached 8.6% y/y, the highest value in the last 20 years. In view of high demand for work,

fast economic growth, high inflation and its unfavourable outlook, the Monetary Policy Council, in

4Q21 increased interest rates of the National Bank of Poland. Reference rate, from historical low at

0.10% in Sep’21 increased to 1.75% at the end of 2021. Tightening of monetary policy is continued in

2022.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Evolution of CPI inflation

F-forecast

Fast economic growth and high inflation supported significant growth of deposits in the banking sector

in 2021. For households it reached 6.7% y/y, and for non-financial enterprises it reached 10.4% y/y.

In the environment of record low interest rate, the banking sector lending activity increased. In 2021

the total value of newly granted housing loans for households increased by 49.0% compared to the

level in 2020, and that of consumer loans - by 26.7%. Recovery was also clearly noted in corporate

loans albeit it was limited to overdrafts. With very good results of companies, the demand for

investment loans remained subdued. In 4Q21, together with increasing interest rates, demand for

loans in the household segment slightly decreased.

Available data indicate that GDP growth in 4Q21 slowed down to ca. 1.0% q/q from 2.3% q/q in 3Q21

(seasonally adjusted data), mainly in effect of slowdown, under conditions of high inflation and

interest rate increases, earlier pent-up consumer demand as well as supply limitations in industry.

According to the Bank, Polish economy in 2022 will remain on growth path, although high inflation,

extended tensions in supply chain, tightening of monetary policy as well as delays in acceptance of

the National Recovery Plan by the European Commission will slow GDP growth down to 4.5%. The

deceleration should be limited by consumption-oriented changes in the “Polish Deal” programme after

proper structuring of its implementation. In the Bank’s view, unemployment will continue to decrease

albeit at a slower pace due to insufficient number of candidates for jobs having desired qualifications.

International trade, despite the favourable export perspectives, will most probably contribute

negatively to GDP growth due to imports growing stronger.

The inflation 2022 outlook remains unfavourable. The Government’s anti-inflation shields i.e. a set

of tax changes including, i.a. temporary decrease of VAT rates on electrical energy, gas and fuels will

reduce only the peak of CPI in 2022 but will increase price growth rate after those solutions expire.

Labour market will support strong and continuing pressure on wages. In this environment, according

to the Bank, average annual CPI inflation in 2022 will increase to 7.3% y/y, and monetary policy will

continue to be tightened. In the baseline scenario of the Bank, the NBP reference rate will increase

at the end of 2022 to 4.00%, however the slowdown of economic growth expected in 2H22 will restrict

higher scale of increases. The course of the pandemic remains a factor of uncertainty for these

expectations, but the data so far point to an increasing resilience of the economy to successive waves

of disease and their lower impact on social mobility. Consumer reaction to high inflation and

accompanying increases of interest rates are becoming more and more important risk factors.

4.2. FACTORS OF UNCERTAINTY FOR THE ECONOMY AND BANK

MILLENNIUM GROUP

The summary list below presents the most important, in the Bank’s opinion, negative macroeconomic

factors constituting risks for the economy and the Bank Millennium Group.

• Higher than expected growth in prices, which could result from inflation-wages spiral drive-

up, worsening of relation between labour costs and productivity, increase of food and energy

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

prices and continuing, longer than expected, supply difficulties in industry. In the face of

inflation higher than projected inflationary expectations of households and companies could

increase stronger, household purchasing power would deteriorate (thus increasing the level

of credit risk), and demand growing slower would increase pressure on margins and financial

performance of companies thereby hampering payment of liabilities and investment growth.

• Strong and fast tightening of monetary conditions resulting in decrease of demand for credit,

deterioration of quality of the loans portfolio of BM Group as well as deterioration of valuation

of the Group’s portfolio of Treasury securities.

• Rapid expansion of COVID-19 pandemic (e.g. vaccine-resistant mutations of the SARS-CoV-2

virus) and new anti-epidemic restrictions hampering demand growth in the economy and

increasing credit risk exposure of the Group.

• Delay or lack of European Commission’s acceptance of the National Recovery Plan in result of

increasing legal dispute between the Polish government and the European Union, which would

lead to investments growth being slower than in the baseline scenario.

• Military activities between Russia and Ukraine significantly increasing the level of uncertainty

on financial markets, which could result in parts of portfolio capital flowing out of Poland and

worsening of outlook for companies having exposure to Eastern European markets.

Nevertheless, there is the likelihood of better economic performance in Poland, which could result

i.a. from faster than assumed implementation of the National Recovery Plan, stronger than assumed

impact of tax changes announced in the ‘Polish Deal’ programme, or faster elimination of gridlocks

in supply chains. According to the Bank, the balance of risk factors for the GDP forecast is assessed

to be slightly skewed to the downside while inflation expectations to the upside.

4.3. POLISH BANKING SECTOR AND BM/BM GROUP’S POSITION

Polish banking sector

The year 2020 was inseparably connected with the Covid-19 pandemic. A combination of the so called

Covid-provisions with low interest rates (and pressure on NII/NIM as a result) and moderated economic

activity substantially undermined banking sector’s profitability. High provisions against legal risk

related to FX-mortgage portfolios were an additional significant burden. Following the unprecedented

nearly PLN6bn net loss in 4Q20 (above-mentioned legal charges were the main reason), the

commercial banks ended the full year 2020 with a combined net loss of nearly PLN0.7bn.

Year 2021, although still disrupted and influenced by next waves of the pandemic, was more about

recovery and adaption to ‘new pandemic’ reality. The first two quarters of the year were

characterised by continued contraction of NII which in 3Q21 reached a multi-year low (c90% of the

pre-pandemic peak from 3Q19). However, simultaneously other sources of income, fees in particular,

started to gradually improve. Combined with broadly stable opex (lower BFG charges and cost savings)

and, most of all, lower risk charges, these translated into significant improvement of the banking

sector’s net profit in 1Q21 and 2Q21. 9M21 saw net profit growing nearly 60% y/y, but 4Q21 again

brought a significant growth of FX-mortgage related legal risk provisions. The latter more than

outweighed the strong recovery of NII, an early impact of 165 bps increase of base interest rates by

Poland Central Bank. As a result, the sector overall again posted a net loss in the quarter (PLN0.2bn)

undermining somewhat the otherwise strong y/y growth. In 2021 overall, commercial banks combined

earned PLN8.7bn (PFSA’s preliminary data) following the PLN0.7bn net loss in 2020 and PLN13.2bn

net profit in 2019.

Operating trends of the banking sectors improved markedly during the year. The pace of y/y revenue

growth accelerated to 10% from -2% in 1H21. Interest income, the main source of revenue growth in

pre-pandemic years, contracted 1% y/y following the 3% drop in the previous year (4Q21 NII already

up 16% y/y), while NIM recovered to 2,07% (last twelve months to end of December) from the low of

2.02% in September 2021 and compared to 2.26% in 2020. Net fee income grew 16% y/y after 12%

growth in the preceding year while its share in total income increased to 26% from 23% in 2020. Banks

continued to respond to revenue challenges with cost containing initiatives (additional tailwind from

lower BFG charges) but increasing inflation and wage pressure translated into 1% y/y growth of opex

in 2021 overall, following 1% contraction in 2020. The cost/income ratio for the whole sector improved

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

to 59% from 63% in the previous year. The pandemic continued to accelerate sector digitalisation

which, among others, resulted further branch closures and staff reduction. At the end of December

2021, the number of banking branches was 6% lower than at YE20 (9% drop in 2020 overall) while the

number of staff decreased by 4% (5%). Decreasing risk charges (-48% y/y) were one of the main reasons

behind the substantial improvement the results of the sector. Risk charges were equivalent of less

than 20% of operating profit compared to over 30% the year before. The share of stage 3 loans

decreased well below 6% from nearly 7% at YE20, while the coverage ratio increased to 60% from

below 59% respectively. Sector’s ROE for the 12-months trailing to December 2021 improved to over

4% from a negative value in 2020 and 6.7% in 2019. According to PFSA’s data, in 2021, nine commercial

banks posted combined net loss of nearly PLN4.0bn (PLN1.5bn in 2020) while their share in total

sector’s assets nearly doubled to ca. 16%.

Banking balance sheets grew considerably during 2021 (+10% y/y), though slower than in 2020 (+18%)

with inflow of deposits being the main driver. The latter largely came from the corporate sector but

the gap between the growth of corporate deposits (+12% y/y) and retail ones (7%) narrowed from

18%/11% y/y in respectively in the preceding year. Since the start of the year, receivables from the

non-financial sector (gross) grew by a 5% (2020: +1%) with these of households and corporates growth

at the same pace (+5%). Total deposits increased 8% (2020: 13%) and as a result the over-liquidity of

the sector increased further. This was evidenced, i.a., by a drop of loan/deposit ratio to 74% from

76% at YE20 or increase of NSFR ratios to 150% (end of September 2021 data) from 125% at YE20.

The Polish banking sector maintained a very strong capital position. At end of September 2021, the

equity of Polish banks reached PLN228bn while capital ratios were not that far off from YE20 levels

(TCR at 20.0% at the end of September vs. 19.1% while Tier 1 ratio at 18.1% from 17.0%). In December

2021, PFSA published its recommendation on dividend policy of commercial banks in 2022 in which it

allowed dividend pay-outs on terms similar to these in the pre-pandemic period.

2021 brought a continuation of concentration and sector consolidation processes. At end of December

2021, the share of top five largest banks in total sector’s assets was 57% vs. 48% at YE20, while their

share in full year net profit was 122% vs. 67% respectively. The number of commercial banks remained

unchanged at 30 units.

The Bank’s and BM Group’ position on the market

At end of 2021 Bank Millennium ranked 7

among top commercial banks in Poland by total assets and

deposits. The Bank’s market share in deposits was 5.5% (5.3% at end of 2020) and 6.1% (6.1%) in loans.

Bank Millennium Group had a relatively stronger position in the household segment (loans at 8.2% vs.

8.0% at YE20, deposits at 6.8% and 6.7% respectively, in particular in mortgage loans segment (8.7%

vs. 8.6%), non-mortgage loans (8.6%+ vs. 8.6%) or transactions made with cards (8.0% vs. 7.8% at

YE20). In the companies’ segment, where the Group has a lower share than in the retail segment

(3.7% in deposits and 4.2% in loans), the Group maintains a traditionally above-average position in

factoring products (c.7.3% at YE21). Also in 2021, the Group’s subsidiary significantly increased its

market share in origination of leasing with its market in December at 5.4% compared to 4.5% in the

respective period of the previous year. The Group continues to distribute its products and services

via a network of 655 branches (own and franchise ones), as well as through electronic channels,

including cash machines, the Internet, phone and mobile apps.

BM’s market share in key segments/products

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

5. STRATEGY AND BUSINESS DEVELOPMENT PROSPECTS

5.1. 2021 STRATEGY AND ITS DELIVERY

The unprecedented scale of change of the business environment caused by the outbreak of COVID-19

pandemic in early 2020, combined with dynamic changes of customers’ behavioural patterns have

dramatically increased the challenges that banks face, limited the visibility and increased uncertainty

to an exceptional level. As a result, the BM Group decided to extend its 2018-20 strategy by additional

year and prepare a new one for the years 2022-2024.

The vast majority of the targets set for 2021 was achieved, many actually overachieved as the graphics

below shows.

Additionally, Millennium Bank Hipoteczny, a mortgage bank, commenced its operating activity in 2021

as planned, allowing a start of preparations to transfer mortgage loans.

5.2. 2022 – 2024 STRATEGY

In the 2022 - 2024 strategy (‘Strategy’) announced by the BM Group on December 6, 2021 (details

here:2022-24 Strategy_outline and 2022-2014 Strategy_presentation), the BM Group concentrates on

its response to growing post-pandemic expectations of customers and shareholders. By 2024, we

aspire to reach PLN2 billion net profit (excluding costs related to FX mortgage loans portfolio) and

ROE before such costs of around 14%. The improvement of efficiency ratios and business growth are

to be driven by a continued increase of the number of active customers (to more than 3 million in

2024) as well as enhancements to cost-effective and scalable operational platform (cost-to-income

ratio below 37% in 2024).

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The strategy assumes a solid business growth, leading to growing profitability, incorporating

customers’ preferences changed or intensified by Covid-19. The new mid-term strategic goals are

grouped in three development pillars:

1. Strong growth of the number of active customers

The Bank plans further significant increase of the number of active customers to the level of over 3

million in 2024. This means approximately 100,000 net growth per year and an expected market share

in new personal accounts at ca. 9%. Due to the growing customer base and digital focus Bank aims at:

• 90% of active customers will be using digital channels (83% in late 2021) - 500,000

growth from 2.2 million in 2021 to 2.7 million in 2024;

• 99% of all transactions continued to be digital/remote;

• 80% of several main product sales to be fully or partly digital/self-service;

• maintain the leading position in NPS, offering to customers the service level they

expect - convenience of transactions and simple sales; the latter constitute the

majority of daily interactions with the bank as well as high quality of services

supported with advice during onboarding of customers and with complex transactions

(e.g. selling mortgage loans).

2. Strong, selective growth of the entire business, supported by innovative solutions, aiming to match

the Bank’s customers` needs.

The Bank plans to further digitalise sales and service model tapping on Covid-induced shift of customer

preference. This is to be achieved by development of digital capabilities across the Bank to exceed

clients’ expectations (in daily banking, consumer finance, mortgage, family banking, bancassurance,

investments). Mobile will be primary channel for sales of ‘easy’ products and customer service. At

branches, the Bank will focus on customers acquisition, more sophisticated products, education of

customers & onboarding them to digital. The Bank intends to stronger personalise its products and

services. In retail banking, the Bank plans to significantly improve customers’ experience: in

mortgage, with new end-to-end digital/hybrid process that is to ensure robust, but also faster

verifications and decision; in cash loans, leveraging PSD2 new capabilities; and savings investment,

offering new compelling self-service digital tools and remote services. In micro business, the Bank

plans to develop a new self-service lending solution for customers, as well as new services related to

companies’ registration and daily banking. In corporate banking, the Bank highlights the objective of

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

active support of customers in their investment programs, namely within their green transformations

supported by public programs.

3. Increase of profitability and efficiency

The Bank aims to significantly increase its recurrent profitability and efficiency. Taking advantage of

the expected market growth (all business segments are expected to grow by more than 10% annually)

and higher interest rate environment, the Bank aims at 2024 total revenues (the sum of revenues from

main business segments before consolidation adjustments) ca. 50% higher than in 2021 with retail

business to be the main driver.

Within the Strategy horizon, the Bank will continue to address the FX-mortgage related challenges.

The Bank aims to cut its exposure to the FX mortgages to ca. 7% of total loan book from 14.6% at

YE21. The Bank intends to solve this challenge jointly with clients. This is well illustrated by the

amicable settlements which, in 2021, have outnumbered new lawsuits. In the next 12 months, the

Bank is aspiring to keep the pace of successful negotiations with its clients.

For years the Bank has been actively involved in support of environment, including financing of energy

saving projects. The Bank Millennium Group does not grant financing to new coal mines and capital

projects in coal source based power sector, excluding new projects connected with pollution

reduction. Several years ago the Bank decided to significantly reduce exposures in financing of coal

sector. In effect, exposures in mining of coal and hydrocarbons in the portfolio are close to zero while

industries directly connected with mining are, today, marginal (at the end of 3Q21 the Bank

Millennium Group’s exposure accounted for 0.96% of the corporate portfolio and 0.27% of the entire

portfolio of the Group). The Bank plans to reduce in 2022 own CO2e emissions by 50% compared to

the 2020 level; to achieve climate neutrality in the area of own emissions (at the level 1 and 2) by

2027, and full neutrality (range 3) by 2050. The Bank will actively support corporate clients in

undertaking decarbonisation actions mainly in developing their investment plans connected with

European funds’ package, specifically green finance.

5.3. 2022 OUTLOOK

While the 2021 results were in some metrics below our aspirations, we are convinced that the

initiatives started and positive trends already observed in the year, will positively contribute to

operating results going forward. In particular, subsequent quarters are likely to bring a continuation

of the positive trends in NII/NIM as the full impact of higher interest rates will start to feed through.

This is likely to substantially outweigh the less positive dynamics expected in opex where inflationary

pressures on costs and as, media report, likely substantial increase of BFG charges in 2022, are likely

to add some burden. Having said that, we believe, that while at this juncture it is difficult to precisely

predict the level of FX-mortgage related costs going forward, the core business results (for data

related to new segment reporting please refer to further parts of this report and Annual Financial

Consolidated Report of the BM Group for 2021) should improve considerably, increasing our capacity

to absorb the FX-mortgage portfolio related costs.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

6. FINANCIAL SITUATION

6.1. PROFIT AND LOSS ACCOUNT

Group's operating income

(PLNmn)

2021

2020

Change

y/y

Net interest income *

2 713.1

2 583.1

5.0%

Net commission income

830.6

746.1

11.3%

Core income

3 543.8

3 329.1

6.4%

Other non-interest income *

14.4

248.7

-94.2%

Total operating income *

3 558.1

3 577.8

-0.5%

(*) Without fair value adjustment of credit portfolio (PLN39.9mn in 2021 and PLN-42.9mn in 2020), which is included in the cost of risk line

Net interest income in 2021 reached PLN2,713mn and increased by 5% y/y supported by accelerated

quarterly growth (PLN767mn in 4Q21, +15% q/q) and strengthening the already positive quarterly

trend in 2021.

The three interest rate hikes by Monetary Policy Council in October, November and December 2021

(base rate increased from 0.1% to 1.75%, i.e. by 165 bps) was an additional help for the Group to

partly offset the negative impact of interest rates cuts in 2020 (down 140 basis points in March through

May 2020) after the Group managed to minimise this impact during the first three quarters of the

reported year.

Net interest margin (over average interest earning assets) (NIM) in 2021 reached 2.70% and was 9

basis points higher compared to 2020. Similarly to net interest income, the quarterly improvement of

NIM can be observed year to date. 4Q21 NIM jumped to 2.98%, i.e. was higher by 37 basis points

compared to 3Q21 (2.61%) and 49bps above the lowest level (3Q20) after rates cuts by the MPC.

Net commission income in 2021 amounted to PLN831mn, growing 11% vs. 2020 financial year. The

main source of the improvement was growing commissions from banking transactions (accounts, loans

and cards) supported by change in fee levels and fee mix. Fees on mutual funds also increased year-

on-year.

Core income, defined as a combination of net interest and net commission income, reached

PLN3,544mn in 2021 showing 6% growth compared to the previous year.

Other non-interest income, which comprises FX result, results on financial assets and liabilities

(without interest margin on derivatives and fair value adjustment on credit portfolio) and net other

operating income and costs, amounted to PLN14mn in 2021 and decreased strongly vs. the previous

year. The negative items were first of all the costs related to amicable settlements negotiated with

FX mortgage borrowers (PLN-356mn), but also the cost resulting from a negative for the Bank court

decision regarding a corporate client claim in the material amount of PLN103mn reported in 4Q21.

On the other hand, in 2021 other operating income was supported by some compensation of provisions

for FX mortgage book, resulting from indemnity and guarantees clauses referring to the portfolio of

former Euro Bank and positive valuation of shares in VISA.

Total operating income of the Group reached PLN3,558mn in 2021 and was slightly lower (-1%) than

in 2020 due to lower ‘other non-interest income’ result.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Operating costs

(PLNmn)

2021

2020

Change

y/y

Personnel costs

(815.3)

(856.3)

-4.8%

Other administrative costs *

(827.0)

(896.5)

-7.8%

of which Banking Guarantee Fund (BFG)

fees

(118.2)

(167.2)

-29.3%

Total operating costs

(1 642.3)

(1 752.8)

-6.3%

of which Euro Bank integration costs **

0.0

(66.1)

Total costs without BFG

(1 524.1)

(1 585.6)

-3.9%

Total costs without integration costs **

(1 642.3)

(1 685.0)

-2.5%

Total costs without integrat. costs and BFG

(1 524.1)

(1 517.8)

0.4%

Cost/income – reported

46.2%

49.0%

-2.8 pp

Cost/income – adjusted ***

42.2%

45.8%

-3.6 pp

(*) including depreciation

(**) additional administrative costs directly related to Euro Bank acquisition, merger and integration processes

(***) with equal distribution of BFG resolution fee through the year, without, one-off income and without integration costs

Total costs amounted to PLN1,642mn in 2021 translating into 6% decrease vs. 2020 financial year,

mainly due to administrative costs directly related to Euro Bank acquisition, merger and integration

process incurred in 2020 (PLN66mn in 2020, of which PLN41.4mn for staff restructuring) and lower

contribution to Banking Guarantee Fund (BFG) funds. Total costs excluding BFG fees and integration

stayed flat vs. the previous year.

Personnel costs amounted to PLN815mn and decreased by 5% y/y. After incorporating employees

coming from Euro Bank (2.4 thousand FTEs in May 2019) and growing the total number of FTEs above

8.5 thousand the Group gradually reduced its personnel to 6,942 FTEs at the end of December 2021

and in annual terms it reduced 550 FTEs (-7% y/y). Without employees absent due to long leaves

(‘active FTEs’), the headcount was much lower, i.e. at 6,245 staff. Without allocated costs resulting

from integration and restructuring in 2020, the personnel costs stayed at similar level as in 2020.

Employment

(FTEs)

31.12.2021

31.12.2020

Change y/y

Bank Millennium (with Euro Bank)

6 598

7 164

-7.9%

Subsidiaries

345

329

4.8%

Total BM Group

6 942

7 493

-7.3%

Total BM Group (active* FTEs)

6 245

6 602

-5.4%

(*) active FTEs denote employees not on long-term leaves

Other administrative costs (including depreciation) reached PLN827mn in 2021 and decreased by 8%

y/y with some higher level in 4Q21 due to visibly higher costs of marketing and promotion as well as

legal and advisory services. The costs without BFG and integration costs increased by 1% y/y. Euro

Bank acquisition resulted in an initial very strong increase in the number of outlets which subsequently

saw a reduction in line with the Bank’s branch network optimization policy accelerated by the changes

resulting from the pandemic. At the end of December 2019, the total number of branches (including

Euro Bank) was 830 and has since been reduced (mostly Bank’s own branches) to 655 outlets at the

end of December 2021 (annual reduction of 47 outlets).

Cost-to-income ratio for 2021 amounted to 46.2% and was lower by 2.8 percentage points vs. the

level for 2020 (49%). Cost-to-income ratio without extraordinary items mentioned above, reached

42.2% in 2021 and was 3.6 percentage points lower compared to the 2020 level.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Net profit

(PLNmn)

2021

2020

Change

y/y

Operating income

3 558.1

3 577.8

-0.5%

Operating costs *

(1 642.3)

(1 752.8)

-6.3%

Impairment provisions and other cost of risk **

(299.0)

(621.3)

-51.9%

- of which COVID-19 risk related provision

0.0

(133.3)

FX legal risk related provision

(2 305.2)

(713.6)

223.0%

Banking tax

(312.6)

(279.1)

12.0%

Pre-tax profit

(1 000.9)

210.9

Income tax

(330.9)

(188.1)

75.9%

Net profit – reported

(1 331.9)

22.8

Net profit – adjusted***

1 123.0

768.1

46.2%

(*) without impairment provisions for financial and non-financial assets

(**) including fair value adjustment on loans (PLN39.9mn in 2021 and PLN-42.9mn in 2020) and loans modification effect (PLN-

12.8mn in 2021 and PLN-13.6mn in 2020)

(***) without extraordinary items, i.e. provisions for FX mortgage legal risk, costs of amicable settlements with FX-mortgage

borrowers, legal costs related to FX-mortgages; in 2020 additionally without Euro Bank integration costs and provisions for

the return of commissions from loans repaid earlier

Total cost of risk, which comprised net impairment provisions, fair value adjustment (of a part of

credit portfolio) and result on modifications, bore by the Group amounted to PLN299mn in 2021 and

was 52% lower than in 2020. The higher base level of provisions from 2020 had resulted from additional

provisions for risk related to COVID-19 impact in 2020 (amounting to PLN133mn) as well as changes in

the risk model in the retail segment with introduction of more conservative default definition.

Risk charges for retail segment in 2021 stood at PLN290mn, while for the corporate segment and other

they amounted to PLN9mn. In relative terms, the cost of risk (i.e. net charges to average gross loans)

for 2021 reached 37 basis points compared to 83 basis points in 2020.

In 2021, the Bank sold portfolios of consumer NPLs. The transactions generated PLN57mn positive pre-

tax result.

Additionally, in 2021 the Bank continued to create provisions for legal risk related to FX-mortgage

portfolio. These were a significant item in P&L statement, reaching PLN2,305mn (PLN2,086mn

excluding loans generated by former Euro Bank as they are subject to indemnity clauses and

guarantees from Societe Generale). The balance of provisions increased to PLN3,333mn or

PLN3,079mn excluding loans originated by Euro Bank, the latter being an equivalent of 25.7% of the

FX-mortgage outstanding portfolio originated by Bank Millennium.

Pre-income tax result in 2021 was negative and amounted to PLN1,001mn (PLN407mn loss in 4Q21).

This was mostly the result of the above-mentioned high FX-mortgage provisions as the pre-provision

profit amounted to PLN1,916mn and was up 5% y/y. In addition to provisions, banking tax had

significant impact on the value of losses decreasing the operating result by PLN313mn.

In 2021 the Group reported net loss of PLN1,332mn (PLN509mn loss in 4Q21). The net loss was

substantially higher that the pre-tax loss due to negative impact of corporate income tax in the

amount of PLN 331mn. Adjusted for the abovementioned extraordinary items (i.a. FX-mortgage

related costs) the Group would achieve the net profit of PLN1,123mn in 2021, which is 46% higher

compared to adjusted 2020 net profit of PLN768mn.

Reported 2021 return on equity (ROE) stood at -16.3% but when adjusted for extraordinary items it

reached 13.8% compared to 8.4% in 2020. Reported Return on Assets (ROA) was -1.3%

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The breakdown of Group's Net Profit by the Group's companies is presented in the table below:

Group's profit structure

(PLN million)

2021

Bank Millennium

(1 357.5)

Millennium Bank Hipoteczny (mortgage bank)

(5.2)

Millennium Leasing

26.1

Millennium Dom Maklerski (brokerage house)

13.7

Millennium TFI (mutual fund)

24.8

Other consolidated companies

31.3

Summarised profits

(1 266.8)

Consolidation adjustments

(65.1)

Consolidated Net Profit of the Group

(1331.9)

Bank's Profit and Loss Account

Changes of particular key items of the Bank’s Profit and Loss Account in 2021 are shown in the table

below.

Bank's Operating Income

(PLN million)

2021

2020

Change

y/y

Net interest income

2 614.2

2 490.3

5.0%

Net commission income

716.1

639.7

11.9%

Core Income

3 330.3

3 130.1

6.4%

Other non-interest income

70.4

291.4

-75.8%

of which dividends

52.4

39.3

33.2%

Total operating income

3 400.7

3 421.5

-0.6%

(*) Without fair value adjustment of credit portfolio (PLN39.9mn in 2021 and PLN-42.9mn in 2020), which is included in the cost of risk line

The Bank’s 2021 net interest income amounted to PLN2,614mn and increased by 5% y/y, similar scale

as in the Group’s case. Net commission income grew 12% y/y, slightly more than for the Group. In

view of the above, core income grew 6% year-on-year to reach PLN3,330mn in 2021.

Other non-interest income of the Bank in 2020 stood at PLN70.4mn and decreased strongly by 76%

y/y, first of all due to the impact of similar extraordinary items as it was described above for the

Group (mostly costs and FX losses related to FX mortgage loans and settlements with the borrowers).

This item includes dividends, largely from the Capital Group’s subsidiaries (eliminated in reports on

the Group level). Dividend income in 2021 reached PLN52mn, which means a significant increase by

33% y/y.

As a result of the evolution of the abovementioned items the Bank’s total operating income in 2021

amounted to PLN 3,400mn and fell slightly by 1% y/y.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Bank's net profit

(PLN million)

2021

2020

Change

y/y

Operating income

3 400.7

3 421.5

-0.6%

Operating costs *

(1 573.7)

(1 693.5)

-7.1%

Impairment provisions and other cost of risk **

(257.2)

(541.5)

-52.5%

Provision for legal risk related to FX mortgage

loans

(2 305.2)

(713.6)

Banking tax

(312.6)

(279.1)

12.0%

Pre-income tax profit

(1 047.9)

193.7

Income tax

(309.5)

(175.1)

76.7%

Net profit

(1 357.5)

18.6

(*) without impairment provisions for financial and non-financial assets

(**) including fair value adjustment on loans (PLN39.9mn in 2021 and PLN-42.9mn in 2020) and loans modification effect (PLN-

12.8mn in 2021 and PLN-13.6mn in 2020)

The Bank’s operating costs reached the total amount of PLN1,574mn in 2021 and was 7% lower

compared to 2020. The reasons for the annual decrease of costs are the same as in case of the

consolidated data for the whole Capital Group. Cost/income ratio for the Bank in 2021 was 46.3%, so

it dropped visibly (by 3.2 p.p.) vs. 2020.

Impairment write-offs and other costs of risk of the Bank were PLN257mn in 2021, which means -52%

decrease y/y – the same scale as in the Group’s case.

Besides provisions for credit risk, in 2020 the Bank created a provision for legal risk related to FX

mortgage loans in the amount of PLN2,305mn, which was explained above in the part referring to the

whole Group.

The Bank reported pre-tax loss for 2021 of PLN 1,048mn and net loss of PLN1,357mn.

Return on the Bank’s assets (ROA) reached -1.4%.

6.2. RESULTS OF BUSINESS SEGMENTS

Bank Millennium recent financial performance is significantly influenced by the costs related to

managing legacy FX mortgage portfolio of loans. To isolate these costs and other financial results

related to this portfolio Bank decided to isolate a new segment from Retail and present it in financial

statements as “FX mortgage”. Such change impacts only results presentation and is not triggering any

organizational changes in the Bank. New segment includes loans separated based on active FX

mortgage contracts for a given period and is applying to portfolios of retail mortgages originated in

Bank Millennium and Eurobank in foreign currencies. This portfolio is expected to run-off in line with

repayments of FX loans and conversions to PLN loans.

Presented below are data regarding the Profit and Loss Account for the Group’s four business

segments: retail segment, corporate segment, FX mortgage loans segment and treasury operations,

assets/liabilities management and the other segment. The retail segment comprises services provided

to individual customers on the mass market, affluent customers, sole traders as well as services to

small companies (with annual turnover below PLN5mn). The corporate segment involves services to

medium and large companies as well as public sector entities. The treasury operations,

assets/liabilities management and other business comprises the Group’s treasury investments,

interbank market transactions, taking positions in debt securities, brokerage activity as well as other

transactions not classified in the first three segments.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Retail segment

(PLN million)

2021

2020

Change

y/y

Net interest income *

1 847.1

1 534.9

20.3%

Net commission income

640.0

588.7

8.7%

Other income**

91.7

30.2

203.2%

Total operating income

2 578.7

2 153.8

19.7%

Total operating costs

(1 246.4)

(1 385.2)

-10.0%

Pre-provision income

1 332.4

768.6

73.4%

Impairment provisions and other cost of risk**

(298.0)

(449.4)

-33.7%

Operating profit

1 034.4

319.2

224.1%

(*) Part of interest income generated by this segment (so called liquidity premium) has been recognized in the third segment

of “Treasury, ALM and other” in accordance to Recommendation P of the Polish regulator (KNF)

(**) Fair value adjustment of credit portfolio (PLN 39.9mn in 2021 and PLN-42.9mn in 2020) has been moved to pro-forma cost

of risk. Cost of risk includes also result from modification.

Total operating income of the retail segment in 2021 was PLN2,579mn million, which represents a

strong increase of 20% y/y. Net interest income of the retail segment grew materially by 20% y/y as

a result of higher business volumes and improvement in spreads, partly supported by interest rate

hikes in 4Q21 mentioned earlier in the text. Net commission income presented considerable growth

of 9% y/y. Operating costs of the retail segment fell by 10% y/y pointing to improving efficiency of

the segment.

As a result of the abovementioned evolution of operation income and costs, total retail segment pre-

provision income increased very strongly by 73% vs. the level of 2020. The cost of risk of the segment

presented a material decrease by 34%.

Operating profit of the retail segment for 2021 - after consideration of the provisions – amounted to

PLN1,034mn and showed a high growth of 224% y/y.

Corporate segment

(PLN million)

2021

2020

Change

y/y

Net interest income *

335.3

305.7

9.7%

Net commission income

186.4

154.2

20.8%

Other income

70.0

60.1

16.5%

Total operating income

591.8

520.0

13.8%

Total operating costs

(235.4)

(223.9)

5.1%

Pre-provision income

356.4

296.1

20.3%

Impairment provisions and other cost of risk**

(1.2)

(123.0)

-99.0%

Operating profit

355.1

173.1

105.1%

(*) Part of the interest income generated by this segment (so called liquidity premium) has been recognized in the segment

of “Treasury, ALM and other” in accordance to Recommendation P of the Polish regulator (KNF)

(**) Cost of risk includes also result from modification.

Total operating income for the corporate segment in 2021 stood at PLN 592 million, i.e. 14% higher

compared to the level of 2020. This was the result of much higher all the income items presented

above, of which net interest income: +10% y/y and net commission income: + 21% y/y. Operating costs

of the corporate segment saw a 5% increase y/y.

As a result of the above pre-provision income grew strongly by 20% y/y. Value of net impairment

write-offs regarding loans to companies presented a material decrease as additional provisions for

COVID-19 impact in 2020 could be partly released after the situation of many corporate clients

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

improved. Taking all above factors together, the operating profit of the corporate segment saw a very

strong increase of +105% y/y to the level of PLN355mn in 2021.

Treasury, ALM and other segment

(PLN million)

2021

2020

Change

y/y

Net interest income*

431.0

642.0

-32.9%

Net commission income

4.2

3.9

7.7%

Other income

(1.1)

164.6

-100.7%

Total operating income

434.1

810.5

-46.4%

Total operating costs

(110.9)

(118.4)

-6.4%

Pre-provision income

323.3

692.1

-53.3%

Impairment provisions and other cost of risk

(7.7)

(7.8)

-2.2%

Operating profit

315.6

684.3

-53.9%

(*) Part of the interest income generated by other segments (so called liquidity premium) has been recognized in the segment

of “Treasury, ALM and other” in accordance to Recommendation P of the Polish regulator (KNF)

Total operating income of the Treasury, ALM and other segments in 2021 was PLN434mn, which

represents a drop by 46% y/y growth. The main reason for the drop was the decrease of net interest

income by 33% as a result of lower income from ALM operations including from the bond portfolio.

Operating costs decreased -6% y/y. Operating profit of the entire segment fell by 54% y/y and reached

PLN316mn for 2021.

FX Mortgage

(PLN million)

2021

2020

Change

y/y

Net interest income*

99.7

100.5

-0.8%

Net commission income

0.0

(0.8)

Other income

(146.2)

(6.3)

2236.1%

Total operating income

(46.5)

93.5

-149.7%

Total operating costs

(49.7)

(25.3)

96.4%

Pre-provision income

(96.1)

68.2

Impairment provisions and other cost of risk

(2 297.3)

(754.7)

204.4%

Operating profit

(2 393.5)

(686.5)

(*) Part of the interest income generated by other segments (so called liquidity premium) has been recognized in the segment

of “Treasury, ALM and other” in accordance to Recommendation P of the Polish regulator (KNF)

Total operating loss of the newly separated FX Mortgage segment in 2021 was PLN2,393mn, which is

significantly higher compared to the previous year due to high provisions for legal risk related to the

loan book of PLN2,305mn.

6.3. BALANCE SHEET AND OFF - BALANCE SHEET ITEMS

Assets

The Group’s assets as at 31 December 2021, amounted to PLN, and were higher by 7% vs. the end of

2020. Structure of the Group’s assets as well as changes of their particular components have been

presented in the table below:

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Group's Assets

(PLN million)

31.12.2021

31.12.2020

Change

y/y

Value

Structure

Value

Structure

(%)

Cash and operations with the Central

Bank

3 179.7

3.1%

1 460.3

1.5%

117.7%

Loans and advances to banks

770.5

0.7%

625.4

0.6%

23.2%

Loans and advances to clients

78 603.3

75.6%

73 639.3

75.7%

6.7%

Receivables from securities bought with

sell-back clause

268.8

0.3%

66.4

0.1%

305.2%

Debt securities

18 220.0

17.5%

18 971.6

19.5%

-4.0%

Derivatives (for hedging and trading)

100.3

0.1%

176.0

0.2%

-43.0%

Shares and other financial instruments*

167.3

0.2%

230.6

0.2%

-27.4%

Tangible and intangible fixed assets**

942.2

0.9%

956.6

1.0%

-1.5%

Other assets

1 661.7

1.6%

1 196.6

1.2%

38.9%

Total assets

103 913.9

100.0%

97 322.8

100.0%

6.8%

(*) including investments in associates

(**) excluding fixed assets for sale

The most visible moves within assets in 2021 were growth of loans by almost PLN5bn.

Loans and advances to Clients

Total net loans of Bank Millennium Group reached PLN78,603mn as at the end of December 2021 and

grew 7% y/y. The growth of loans without foreign currency mortgage portfolio was visibly higher, at

15% y/y. FX mortgage loans net of provisions decreased visibly during the last twelve months (down

28%) and the share of FX mortgage loans (excluding these taken over with Euro Bank) in total gross

loans has dropped substantially during the year to 11.4% on 31 December 2021 from 17% a year ago.

The net value of loans to households amounted to PLN59,546mn as at the end of December 2021,

showing a growth of 8% y/y. Within this line PLN mortgages grew strongly by 29% y/y while growth

rate of consumer loans slowed down to 4% y/y.

In 4Q21 disbursements of mortgage loans reached PLN2.8bn (the record quarterly value) and

PLN9.75bn in the whole 2021, translating into an exceptionally high annual growth of 46%.

The net value of consumer loans reached PLN15,833mn growing by 4% y/y. Origination of cash loans

rebounded in 2021 reaching the value of PLN5.6bn. The annual growth was high and reached +21%

y/y.

Net value of loans to companies amounted to PLN19,058mn as at the end of December 2021 and

increased by 4% y/y supported by rebound in leasing business (+8% y/y), after a period of deceleration

due to adverse effect of the COVID-19 pandemic on new lending to companies.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The structure and evolution of loans to clients of the Group is presented in the table below:

Loans and advances to clients

(PLN million)

31.12.2021

31.12.2020

Change

y/y

Loans to households

59 545.8

55 248.4

7.8%

- PLN mortgage loans

33 915.8

26 273.9

29.1%

- FX mortgage loans

9 797.1

13 678.9

-28.4%

- of which Bank Millennium loans

9 046.6

12 690.8

-28.7%

- of which ex-Euro Bank loans

750.6

988.1

-24.0%

- consumer loans

15 832.8

15 295.6

3.5%

Loans to companies and public sector

19 057.5

18 390.9

3.6%

- leasing

6 805.5

6 303.5

8.0%

- other loans to companies and

factoring

12 252.0

12 087.4

1.4%

Net loans & advances to clients

78 603.3

73 639.3

6.7%

Net loans and advances to clients excluding

FX mortgage loans

68 806.2

59 960.4

14.8%

Impairment write-offs

2 440.6

2 489.4

-2.0%

Gross* loans and advances to clients

81 043.9

76 128.7

6.5%

(*) Including, besides provisions for credit risk, also fair value adjustment of loan portfolio presented in fair value as well as

modification. Includes also IFRS9 initial adjustment. Gross loan portfolio in this case presents value of loans and advances

before mentioned provisions and adjustments.

Average interest rate on the Bank’s portfolio in 2021 was 3.4%. This rate reflects net interest income

on hedging derivatives (mainly FX and interest rate SWAPs) regarding loans granted in foreign

currencies, which offsets the nominally lower interest rate on these loans.

Debt securities

Value of debt securities reached PLN18,220mn at the end of December 2021, which means a decrease

of 4% y/y. An overwhelming part of the debt securities portfolio (99.6%) were bonds and bills issued

by the Polish State Treasury and National Bank of Poland (Central Bank). The decrease of debt

securities portfolio was a consequence of assets/liabilities and interest margin management policy

and was correlated with the changes of loans and deposits. The share of this group of debt securities

in the Group’s total assets was at 17.5% at end of December 2021 reflecting a satisfactory liquidity

position of the Group.

Derivative instruments

The value of derivatives (for trading and hedging) totalled PLN100mn at end of December 2021, which

constitutes an decrease of 43% vs 31 December 2020, due to higher CHF/PLN rate.

Loans and advances to banks

Loans and advances to banks (including interbank deposits) stood at PLN771mn at the end of

December 2021, which means an increase by 23% y/y as a result of higher of balances on current

accounts and higher balances of term deposits.

Shares/equities and other financial instruments

Value of equities/shares and other financial instruments amounted to PLN167mn at the end of

December 2021 and decreased by 27% y/y chiefly due to partial sale of Visa shares.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Tangible fixed assets and intangibles and goodwill (investment outlays)

Tangible fixed assets and intangibles and goodwill of the Group amounted to PLN942mn at the end of

December 2021 and declined slightly by 2% y/y, mainly as a result of lower value of tangible fixed

assets.

Total investment of the Group in 2021 amounted to PLN114.0mn. Outlays for the Bank’s physical

infrastructure (branches, ATMs, security etc.) amounted to PLN18.7mn and PLN94.2mn for software

and IT infrastructure. Value of other outlays i.e. PLN1.1mn, relates to Bank’s subsidiaries.

The Bank Millennium Group plans investment capital expenditures in 2022 in the amount of

PLN187.9mn, out of which ca. 63% will be allocated to IT projects (i.e. further internet and mobile

banking developments and capacity extensions).

Bank’s unconsolidated assets, as on 31 December 2021 reached the value of PLN103,388mn and were

7% higher compared to the level as at the end of 2020. Structure of the Bank’s assets and changes of

individual components are presented in table below:

Bank's Assets

(PLN million)

31.12.2021

31.12.2020

Change

y/y

Value

Structure

Value

Structure

(%)

Cash and operations with the Central Bank

3 179.7

3.1%

1 460.3

1.5%

117.7%

Loans and advances to banks

943.3

0.9%

625.4

0.6%

50.8%

Loans and advances to clients

78 237.6

75.7%

73 052.4

75.6%

7.1%

Receivables from securities bought with

sell-back clause

268.8

0.3%

66.4

0.1%

305.2%

Debt securities

18 175.1

17.6%

18 955.7

19.6%

-4.1%

Derivatives (for hedging and trading)

101.0

0.1%

177.2

0.2%

-43.0%

Shares and other financial instruments

375.7

0.4%

438.9

0.5%

-14.4%

Tangible and intangible fixed assets*

913.8

0.9%

915.0

0.9%

-0.1%

Other assets

1 193.0

1.2%

875.4

0.9%

36.3%

Total assets

103 388.1

100.0%

96 566.6

100.0%

7.1%

* excluding fixed assets for sale

The key difference between the level of assets of Bank standalone and the consolidated Group is the

value of loans to customers. In the first place it relates to receivables due from leasing company

customers in the amount of PLN6,805mn (although significant part of the said receivables was

acquired by the Bank) and relates to elimination of mutual transactions between the Bank and other

companies from the Capital Group in consolidated financial statements.

Total Loans to customers in the Bank amounted to PLN78,238mn at the end of December 2021,

representing the growth of 7% y/y (similar growth as for the Group). Except for leasing receivables,

values and annual changes of other key components of Bank credits are similar or exactly the same

as for the Capital Group.

Value of debt securities in the Bank’s assets reached PLN18,175mn at the end of December 2021. Both

the portfolio dynamics and structure remained similar as in the case of the Group (as described

above).

Equities/shares and other financial instruments presented in the Bank’s financial statements, unlike

in the case of Group reports, incorporated valuation of shares in subsidiaries. The value of this item,

as on 31 December 2021, amounted to PLN376mn, recording a decrease by 14% y/y.

The Bank’s fixed assets and intangibles amounted to PLN914mn at the end of December 2021 and

stayed on similar level as in the previous year.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Values and annual changes to other asset groups presented in the table above are similar to the

corresponding items of consolidated Group, as described earlier in this document.

Liabilities

The structure of Group’s liabilities and equity and the changes of their particular components are

presented in the table below:

Group's Liabilities and Equity

(PLN million)

31.12.2021

31.12.2020

Change

y/y

Value

Structure

Value

Structure

(%)

Deposits from banks

539.4

0.6%

1 057.7

1.2%

-49.0%

Deposits from customers

91 447.5

94.1%

81 510.5

92.4%

12.2%

Liabilities from securities sold with

buy-back clause

18.0

0.0%

248.6

0.3%

-92.7%

Financial liabilities valued at fair

value through P&L and hedging

derivatives

757.6

0.8%

907.4

1.0%

-16.5%

Liabilities from issue of debt

securities

39.6

0.0%

558.6

0.6%

-92.9%

Provisions

595.5

0.6%

158.7

0.2%

275.4%

Subordinated debt

1 541.1

1.6%

1 540.2

1.7%

0.1%

Other liabilities*

2 277.9

2.3%

2 250.2

2.6%

1.2%

Total liabilities

97 216.7

100.0%

88 231.8

100.0%

10.2%

Total equity

6 697.2

9 091.0

-26.3%

Total liabilities and equity

103 913.9

97 322.8

6.8%

* including tax liabilities

At the end of December 2021 liabilities accounted for 93.6%, while equity of the Group - for 6.4% of

total liabilities and equity capitals.

As on 31 December 2021 Group’s total liabilities amounted to PLN97,217mn and were higher by 10%

relative to their value as on 31 December 2020. The main change to liabilities resulted from material

increase of deposits by PLN9,937mn during the reported year.

Customers’ deposits

Customer deposits constituted the main line item under the Group’s accounting for, as on 31

December 2020, 94.1% of total liabilities. Customer deposits constitute the main source of financing

of Group’s activities and incorporate, primarily, customer funds on current and saving accounts

as well as on term deposit accounts.

The evolution of Clients Deposits is presented in the table below:

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Customer deposits

(PLN million)

31.12.2021

31.12.2020

Change

y/y

Deposits of individuals

66 022.1

61 874.9

6.7%

Deposits of companies and public sector

25 425.4

19 635.6

29.5%

Total deposits

91 447.5

81 510.5

12.2%

Total deposits amounted to PLN91,448mn as at 31 December 2021 and presented a robust increase

by 12% y/y (+1% q/q). Deposits on current and saving accounts increased by PLN8.2bn vs. 31 December

2020 (or by 12%).

Deposits of individuals reached PLN66,022mn as on 31 December 2021, growing 7% y/y and 2% q/q.

Current and saving accounts of individuals continued to grow at a considerable pace (up 11% y/y)

whereas term deposits dropped 11% y/y. The share of current accounts and saving accounts in total

deposits of individuals increased to 85% as at the end of December 2021 from 81% as at the end of

2020.

Total deposits of companies and public sector reached PLN25,425mn as at the end of December 2021

and grew strongly by 29% y/y. This considerable growth was partly due to a low base effect as term

Average interest rate on all deposits in the Bank in 2021 amounted to 0.08%

Deposits from banks

Deposits of banks, including credits received, as on 31 December 2021, amounted to PLN539mn. Value

of this item declined by PLN518mn (or by 49%) relative to the balance as on 31 December 2020, mainly

in effect of lower, by PLN375mn, term deposits and lower balance of credits received from financial

institutions by PLN149mn. The said credits include funds received from the European Investment Bank

and the European Bank for Reconstruction and Development (in EUR, CHF and PLN) with original

maturities of up to 7 years, constituting an important line item within long-term and medium-term

wholesale financing obtained by the Group.

Financial liabilities valued at fair value through Profit and Loss Account and derivative instruments

included, primarily, negative valuation of derivatives for trading or hedging and liabilities resulting

from securities subject to short sale. Value of this item, as on 31 December 2021, amounted to

PLN758mn, recording a decrease by 17% relative to the balance as on 31 December 2020, mainly due

to decreasing negative valuation of hedging derivatives by PLN 124mn y/y. The above was caused by

maturing CIRS instruments replaced by FX swaps, but also by changing FX rates and interest rates on

the Polish market.

Provisions

The value of provisions as on 31 December 2021 was PLN596mn which signifies strong growth by

PLN437mn or 275% y/y. The reason for the increase was creating new provisions for legal issues,

especially claims related to FX mortgage loans agreements.

Debt securities issued

Securities issued by the Group amounted to PLN40mn as on 31 December 2021 recording significant

decrease by PLN519mn (or 93%) relative to the balance as on 31 December 2020. The decrease

resulted from the lower balances of bonds and other debt securities issued by the Bank by PLN234mn,

repurchase of bonds issued by Euro Bank taken over by the Bank (PLN250mn) and the repurchase of

securities issued by its subsidiary Millennium Leasing of PLN34mn.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Subordinated debt

The value of subordinated debt amounted to PLN1,541mn as on 31 December 2021, and stayed on

similar level vs. the end of 2020 (a very minor difference results from interest accrued). The

subordinated debt line includes ten-year subordinated bonds in PLN at the total nominal value of

PLN830mn maturing in January 2029 and ten-year bonds in PLN at the total nominal value of

PLN700mn maturing in December 2027.

Equity

As on 31 December 2021, equity capital of the Group amounted to PLN6,697mn and recorded a

material decrease by PLN2,394mn or 26% y/y. Apart from the net loss incurred in 2021 the main factor

of the decline of equity was a negative valuation of debt securities of PLN792mn and hedging

derivative instruments of PLN271mn since 31 December 2020.

Information on capital adequacy was presented in Chapter 8 of this document and will also be

available in a separate report titled ‘Report on capital adequacy, risk and remuneration policy in the

Bank Millennium Capital Group for 2021’ to be published at a later stage.

The non-consolidated Bank’s liabilities as at 31 December 2021 reached the value of PLN96,756mn

million and were 10% higher compared to the end of 2020. Structure of the Bank’s liabilities and own

equity capitals as well as changes of their particular components are presented in the table below:

Bank's Liabilities and Equity

(PLN million)

31.12.2021

31.12.2020

Change

y/y

Value

Structure

Value

Structure

(%)

Deposits from banks

186.2

0.2%

563.9

0.6%

-67.0%

Deposits from customers

91 672.3

94.7%

81 832.5

93.3%

12.0%

Liabilities from securities sold with

buy-back clause

18.0

0.0%

248.6

0.3%

-92.7%

Financial liabilities at fair value

through P&L and hedging derivat.

758.0

0.8%

907.4

1.0%

-16.5%

Liabilities from issue of debt

securities

0.0

0.0%

484.7

0.6%

-100.0%

Provisions

594.4

0.6%

158.4

0.2%

275.3%

Subordinated debt

1 541.1

1.6%

1 540.2

1.8%

0.1%

Other liabilities*

1 985.8

2.1%

1 995.4

2.3%

-0.5%

Total liabilities

96 755.9

100.0%

87 730.9

100.0%

10.3%

Total equity

6 632.2

8 835.7

-24.9%

Total liabilities and equity

103 388.1

96 566.6

7.1%

(*) including tax liabilities

The key difference between non-consolidated Bank's and Group's liabilities is the value of liabilities

from issued securities of the leasing company (PLN40mn presented in the Group's statements) whereas

for the unconsolidated Bank there were no such liabilities as at the end of December 2021.

The value of customer deposits of the Bank reached PLN91,672mn as on 31 December 2021 and was

higher by PLN225mn than the balance for the Group (mainly effect of intra-group elimination).

Deposits, similar to the Group’s case, grew by 12% year-on-year.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The values and annual changes of such liabilities lines of the Bank’s balance sheet as Liabilities from

securities sold with buy-back clause, Financial liabilities at fair value through P&L and hedging

derivatives, Provisions and Subordinated debt are similar to those of their equivalents in the

consolidated reports for the Group, as discussed above in this part of the report.

Bank’s equity, as on 31 December 2021, amounted to PLN6,632mn and recorded a decrease by 25%

y/y (similar level of decline as in the case of Group’s consolidated equity).

Contingent liabilities

The structure of contingent liabilities of the Group is presented in the table below:

Group's Contingent Liabilities

(PLN million)

31.12.2021

31.12.2020

Change y/y

(%)

Total contingent liabilities

16 007.9

15 722.7

1.8%

1. Liabilities granted:

13 882.1

14 177.2

-2.1%

a) financial

12 034.7

12 420.9

-3.1%

b) guarantees

1 847.4

1 756.3

5.2%

2. Liabilities received:

2 125.8

1 545.6

37.5%

a) financial

40.0

0.0

b) guarantees

2 085.8

1 545.6

35.0%

Through these operations the Group executes transactions generating conditional liabilities. The main

items under conditional liabilities (granted) are as follows: (i) financial liabilities mainly relative to

loan prolongation (including, inter alia, not utilised credit card limits, not utilised overdraft facilities,

not utilised tranches of investment loans) and (ii) guarantees, including mainly guarantees and letters

of credit issued by the Group (to secure performance of obligations undertaken by Group’s customers

vis a vis third parties). Granted conditional liabilities result in Group’s exposures to various risks,

including credit risk. The Group creates provisions against irrevocable risk based conditional liabilities

booked in the line item “Provisions” on the liability side of the balance sheet.

As on 31 December 2021, the total value of conditional liabilities of the Group amounted to

PLN16,008mn, including liabilities granted by the Group at the level of PLN13,882mn. In 2021, the

value of conditional financial liabilities granted by the Group decreased by 2%, mainly financial

liabilities, which fell by 3% due to lower value of commitments related to lending activity, whereas

guarantees grew by 5%.

More information on the issue of conditional liabilities can be found in Chapter 12 of the Financial

Statements of Bank Millennium S.A. Capital Group for the period of 12 months ending on 31 December

2021.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The structure of contingent liabilities of the non-consolidated Bank is presented in the table below:

Bank's Contingent Liabilities

(PLN million)

31.12.2021

31.12.2020

Change y/y

(%)

Total contingent liabilities

17 365.8

16 589.2

4.7%

1. Liabilities granted:

15 236.7

15 040.7

1.3%

a) financial

12 658.4

12 478.7

1.4%

b) guarantees

2 578.3

2 562.0

0.6%

2. Liabilities received:

2 129.1

1 548.4

37.5%

a) financial

40.0

0.0

b) guarantees

2 089.1

1 548.4

34.9%

The total value of conditional liabilities granted and received by the Bank amounted to PLN17,366,

recording increase by 5% in annual terms. The main difference between this value and the value of

the Group’s conditional liabilities is the balance of guarantees granted: at the Bank’s level guarantees

granted to Group companies are presented to be netted off at the level of the Group. The key items

among these guarantees were guarantees securing repayment of loans and a guarantee line granted

to Millennium Leasing to the total amount of PLN714mn. In addition, the Bank provided guarantees

and sureties to external entities on behalf of other Group companies (PLN18mn). Evolution in the area

of other granted and received conditional liabilities of the Bank remains similar to that recorded for

the Group, as described above.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

7. PRESENTATION OF BUSINESS ACTIVITY

7.1. INNOVATION AND HIGHEST QUALITY OF POSITIVE CUSTOMER

EXPERIENCE

The quality of customer service is one of the fundamental values for Bank Millennium. The market

specificity caused by the COVID-19 pandemic had a large impact on the Bank's activities in the area

of customer service and the scope and quality of products and services. The starting point was a

thorough analysis of market trends as well as new customer expectations and attitudes towards

banking. Thanks to the constant monitoring of customer needs, Bank Millennium effectively adjusts

solutions to the dynamically changing market.

The year 2021 for Bank Millennium was a time of further increasing the availability of services in

remote channels, in terms of communication and the possibility of making transactions. Bank

Millennium focused on enhancing customer self-service capabilities while providing support to

employees at the same time. Effectively and in line with customer needs, the Bank combines modern

methods of banking via a mobile application or transaction system with constant access to highly

qualified branch staff and telephone advisors in all business lines. The dynamic development of

remote advisor services, also in the area of affluent clients, increased the convenience of access to

the Bank's services and products.

The dynamic development of customer service in remote channels posed another challenge for the

Bank - the integration of contact channels and an even greater flow of information about customer

needs. The solutions developed on the branch - remote service line allow customers to smoothly

switch between service channels and gives possibility of executing transactions, including those

initiated in a different contact channel, in a manner convenient for the customer. Increasing

flexibility and a convenient transition between contact channels provides customers with a sense of

consistent service, and thus comfortable banking.

Bank Millennium has taken dynamic steps to increase customer satisfaction - not only in terms of

direct service, but also in terms of transparency of communication and language simplification. The

signing by the Bank of the "Declaration on the plain language standard" gave the institution another

impulse to continue work on improving quality by simplifying communication - both external and

internal.

Building processes and solutions based on the customer's perspective translates into their loyalty and

satisfaction as well as positive banking experience. According to the results of the Survey of Bank

Customers in Poland, carried out by Kantar Polska, the level of recommendations of retail clients

remained stable – the NPS index in 2021 amounted to 49, which places Bank Millennium in second

place in terms of the most recommended banks in Poland.

NPS of Polish banks (2021)

The quality activities carried out by the Bank have been appreciated in one of the most prestigious

rankings of service quality - "Newsweek's Friendly Bank". Bank Millennium took first place in the "Bank

for Kowalski" category and second place in the "Remote Banking" category. In turn, in the "Złoty

Bankier" poll in 2021, Bank Millennium was on the podium in the main category "Golden Bank - the

best multi-channel service quality".

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

7.2. RETAIL BANKING

The sale of current accounts in 2021 was almost 365 thousand. The key product in support of new

client acquisition was the Konto 360° account, for several years now one of the most preferred

personal accounts in Poland. In 2021, the number of Konto 360º accounts in the Bank portfolio

exceeded 1.84 million, with a definite majority opened by clients who had not yet used personal

accounts in Bank Millennium. The Bank achieved market share in development of accounts above 9%

in 3Q21 (according to PRnews report).

The 360º Account promotion in 2021 was supported by:

• new rounds of advertising campaigns on TV channels and the Internet,

• promotional activities involving the use of the goodie shopping app and in cooperation with

external internet portals - almost 28% personal accounts were acquired online

• new rounds of the „Like it! Share it” referral program, under which you may receive

attractive prizes for recommending Konto 360° or Konto 360° Student to others. In 2021

almost 276 thousand clients registered in consecutive rounds of the program.

Saving and Investment Products

The Bank concentrated on deposit offer simplification and maintaining desired level of customer

funds. In total, the retail deposit portfolio increased by PLN4.9 billion in 2021, including ca. PLN4.15

billion for individual customers, while the market in this segment grew by PLN57 billion, which

allowed the Bank to increase its market share to 6.77% and ca. 7.3% of the market growth.

The increase in market interest rates in 3Q21 and 4Q21 allowed a gradual recovery in the profitability

of savings products and the ability to offer customers more attractive offers aimed at attracting funds

to the Bank. The interest margin for the full year 2021 was approximately 0.4% with an increase to

1.14% in 4Q and approximately 1.8% in December 2021.

With regard to investment products, the Bank continued its strategy to offer a diversified portfolio

that includes both its own solutions and products of external partners. Depending on the customer

segment, the offering consisted of structured products, mutual funds, investment insurance products

and bonds.

Due to pressure on yields of debt investment funds resulting from growing market interest rates, the

Bank in cooperation with Millennium TFI changed the basic product offer and in October 2021 proposed

new, more flexible and universal version of the Investment Program (Millennium TFI Investment Plans)

available both in the Bank's outlets as well as through electronic channels. New Investment Plans were

also used in the new investment advisory service, which in the form of pilot was launched in mid-

December for individual customers in electronic channels.

In order to make the offer more attractive, during the year the Bank launched cyclical promotions of

funds with regard to the fee for their purchase. A special strategy was also introduced to reward use

of remote channels by reducing to 0% the handling fee rates for purchase of selected TFI funds through

Millenet and Mobile Application.

Rising interest rates also allowed the Bank to make its Structured Deposits offering more attractive

and to reduce the minimum product term from 3 to 2 years, which contributed to a significant increase

in customer interest in these products in 4Q21.

The Bank continued the process of digitizing its investment product offering and optimizing sales

processes using modern tools. All newly implemented investment products were made available

immediately in electronic channels and for processes carried out in outlets it was enabled to conclude

transactions using the customer's phone and Mobile Application i.e. in fully paperless process.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Cash Loan

Cash loan sales in 2021 was higher than in previous year and reached the level of PLN5.6bn (+21% y/y)

what helped to reach the sales market share equal 10.23%. Cash loan portfolio reached PLN13.6bn.

The Bank implemented additional system solutions allowing further digitalisation of credit process –

functionalities with use of PSD2 enabled verification, new process for cash loan x-sell for POS loan

customers, development of omnichannel loan consolidation process. As a result of implementation of

these enhancements the share of loans sold through digital channels in 4Q reached 61%.

The omnichannel approach of closing the sales of cash loan in digital channels was especially

successful for mobile application which was responsible for 80% of sales in digital in 4Q.

In 2021 cash loan sales was mainly supported by offer „PLN120 instalment for each PLN5 000 of loan”

for loans in following amounts: PLN5 000, PLN10 000 , PLN15 000 or PLN20 000 granted for 58 months.

Overdraft

2021 can be described as a year of stable portfolio growth and maintaining an attractive offer. The

Bank maintained its strategy of developing a competitive offer and sales process. The sale was

supported by the following actions:

• the "Limit in the account for PLN 0 - 3rd edition" offer addressed to new customers of the

Bank, enabling the use of the product in the first year without additional costs - the

commission for activating the limit is PLN 0. These conditions are among the most attractive

on the market.

• 7-day interest-free period, which allows you to use the limit without incurring interest costs

in each settlement month.

At the same time, the market share calculated by portfolio was equal 13% at the end of December.

Insurance products (bancassurance)

In 2021, the Bank continued to offer life and non-life insurance in branches and digital channels. The

Bank's customers were able to use a wide range of insurance products offered by Bank Millennium in

cooperation with many Insurers. The distribution of insurance related to cash loans and mortgage

products had a significant share in the revenues from bancassurance. The Bank's customers were able

also to take advantage of special offers, including promotions for motor insurance "Ubezpieczając

więcej, zyskujesz podwójnie".

Payment cards

Acquisition results and spending on cards in 2021 showed a large rebound after the period related

to COVID-19 restrictions. Thanks to many supporting actions, the acquisition of credit cards

increased and was higher than the market dynamics. This made it possible to achieve an increase in

the market share of credit cards sales to the average level of 10.1%. The flag product remains

Impresja card, which offers its holders a 5% money back from transactions in partners of the

program.

The credit card portfolio at the end of 2021 amounted to 486 thousand cards and increased by over

9 thousand cards (+ 2.0%) in 2021. With decreasing number of cards on the market, this allowed for

increase of Bank Millennium's share to 7.9% in volume of the credit card portfolio.

The number of debit cards increased along with the increase in the number of current accounts,

where the main sales product was a debit card issued to Konto 360. The Bank's debit card portfolio

at the end of 2021 amounted to 3.1 million cards and increase YoY by 95 thousand (+ 3.2%). In 2021,

Bank Millennium expanded its offer and introduced debit card for children over 7 years of age.

Thanks to intensive card’s activation actions in portfolio and improvement of the overall market

situation, 20% increase of transactions amount on debit and credit cards was achieved. Bank

Millennium's market share in terms of card spending increased to 9.8% for credit cards and 7.9% for

debit cards.

At the same time, the Bank focused our activities on promoting paid services among cardholders.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Mortgage

2021 was a record year for Bank Millennium, both in terms of the volume of newly concluded mortgage

credit agreements and disbursed credits. The Bank's market share for the year was 12.47% (data

according to SARFIN ZBP). The Bank concluded 34.4 thousand new contracts with a total value of

PLN10.5 billion (increase over 45% y/y). The value of the disbursed credits is PLN9.75 billion.

Throughout the year, the Bank actively worked on increasing the attractiveness of its mortgage loan

offer and increasing the efficiency of the credit granting process. Bank Millennium was awarded the

Golden Banker for the best product on the market. The changes were aimed at shortening the

processing time of the credit application through numerous automations and digitization of the

process of accepting and analysing credit applications. The bank also improved the after-sale service

of credits. It was made possible for our clients to remotely deliver insurance policies for the credit

via electronic banking and a mobile application. The main change to the product was the introduction

of a credit with a periodically fixed interest rate. Alternatively, the client can choose an offer that is

most suitable for him - with a periodically fixed or variable interest rate. The bank also conducted a

large-scale training process in the field of changes in the process and product, reminding them how

to communicate the details of the offer to the client in a clear, reliable and transparent way.

Similarly to the previous year, the Bank's lending campaign was based on an unconditional 0%

commission for granting the loan and a 0% commission for early credit repayment. The price offer was

kept stable in the main LTV ranges, even in the difficult pandemic period.

In 2020, the Bank continued its activities to offer special conditions for customers who have credits

in CHF, which relate to currency conversion, partial and full repayment of the credit. The Bank

continued to proactively negotiate the exchange rate and credit parameters after currency conversion

or partial credit repayment. At the same time, it took into account an individual approach to the

client's situation and his expectations.

Prestige and Private Banking segment - offer for an affluent clients.

Prestige is an offer addressed to customers with min. PLN200 thousands assets or PLN10 thousands

monthly inflow. For these customers, Bank enhanced the existing service model by proposing fully

remote relationship development. Both traditional and remote service models offer access to an

individual expert, supporting clients in daily banking and important financial decisions with parallel

digitalization process. The offer includes advanced investment products, provided by Polish and

foreign investment funds, as well as structured products with a guarantee of capital protection.

Wealthy clients also have wide access to convenient forms of financing their needs.

The condition for entering the Private segment is PLN1 million assets. Private Banking customers can

use Millennium MasterCard® World / Elite ™ credit cards with access to the World / Elite Privileges

Program, insurance package as well as Assistance and Concierge packages.

At the end of 2021, the Bank was covering 57 thousands clients under the affluent service model.

In the Private segment, the number of clients at the end of December 2021 was stable at the level of

4 thousands.

Biznes Client segment

Business offer is addressed to individuals running sole proprietorship businesses, partnerships and

commercial law companies with annual revenues up to PLN5 million.

In 2021, 26 thousands business current accounts were opened as result of:

• utilisation of the capacity to open business current accounts in the Millenet internet

banking system for the Bank’s current and new retail clients. In 2021 36% of business

current accounts were opened online by using possibility to open accounts remotely via

open banking,

• special offers for clients opening business current accounts online,

• increase in the level of cross-selling of business accounts in the Bank’s branches.

The Bank offers a broad range of transaction banking and credit products to Biznes clients, in

particular an attractive leasing offer as well as modern internet and mobile banking services.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The value of credits granted in 2021 for Biznes segment customers was more than 2.5-fold increase

in comparison of 2020. Usage of de minimis guarantee from Bank Gospodarstwa Krajowego increased

significantly with over 80% participation in value of loans granted by Bank Millennium in 2021.

As of 31 December 2021, Bank Millennium had above 115 thousand active Biznes segment customers,

posting a 11% y/y increase.

Mobile and Internet banking for individual customers

Bank Millennium is one of the leaders in innovation and digital banking, as confirmed by numerous

national and international awards, including the title of The Best Digital Bank in Poland in the Global

Finance magazine ranking. Electronic channels provide easy access to banking and additional services

(VAS). Services in the mobile application and the internet banking system are constantly developed

to provide customers with full support and a comprehensive offer available online. The bank

cooperates with partners from public agendas, fin-tech and other industries and implements

innovations, including those related to the use of artificial intelligence or biometrics. Additionally,

the opinions of users of digital channels are monitored and they are included in the process of creating

new services thanks to UX-Lab tests, which are a permanent element of the work on each new

solution.

In 2021, the number of active users of digital channels steadily increased, as well as the disproportion

between customers already using the bank's services exclusively on mobile devices and those logging

in on a computer. Today's users appreciate full service available on the go and in one place, and Bank

Millennium e-banking services give them a single platform on which they can easily manage their

finances and daily affairs. Especially young people, accustomed to services available in the virtual

world, now treat mobile solutions as a standard. The share of digital channels in the sale of individual

products is also growing year by year.

2021

2020

change

Active digital users

2 263 233

2 052 806

10%

Active mobile banking users

1 920 883

1 658 554

16%

BLIK users

1 326 946

1 007 745

32%

Digitalisation and omni-channel processes

Bank Millennium develops services using an omni-channel approach and focus on mobile solutions in

the processes. In 2021 the Bank developed existing processes, but new solutions were also

implemented to support customers in daily financial management on mobile device or computer. The

Bank also continued the educational activities undertaken with the beginning of the pandemic, aimed

at supporting customers in the use of online services. The digitalization project primarily included

people who previously preferred to be served at branches. The second important group included in

these activities were those who used electronic channels to a limited extent. Customers were

targeted by campaigns promoting convenient online solutions also outside banking, e.g. Trusted

Profile.

Opening a current account online. Today, new customers can use three online paths to open a

personal account in Bank Millennium. The account can be opened fully remotely on a mobile device

with "selfie" or by logging into another bank to confirm identity. In these processes, the account is

active in about 15 minutes since sending the application. In the third possible path – the customer

fills out an online application on the Bank's website and signs documents delivered by courier. Almost

a third of new customers open a current account without visiting a branch, of which almost half

confirm identity by logging into another bank.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Credit processes. In 2021, the Bank further improved the credit processes available in online channels

and in the hybrid sales model - started in a branch or during a phone call with a consultant and ended

with signing an agreement in Millenet or in a mobile app. Apart from the improvements visible to

customers, the Bank introduced changes, which facilitate hybrid sales for branch employees and call

centre consultants. The share of digital channels in cash loan sales in 2021 was as high as 69% (in 2020

it was 49%). The bank has also introduced a satisfaction survey in the cash loan process. In the survey,

customers can express their expectations and review the process. Customers with access to e-banking

but without a current account gained the ability to open an account directly on the loan process.

2021 also brought changes to the external debt consolidation process. The bank expanded the process

online and in hybrid sales.

Digital mortgage. In 2021 Bank Millennium continued the project of digitalization of mortgage loans.

Solutions in this area have been introduced for several years, and the work on digitalization of the

application process is currently the most intensive. The Bank designed and implemented a number of

facilities that significantly optimized mortgage loan processing and positively impacted the customer

experience. Customers applying for a loan can approve the loan application with an SMS code and

track the status of the application in the mobile application and in the Millenet web service - each

time they receive information when the application status changes. Customers can also use e-operat,

which is a convenient, electronic process of property valuation. In November 2021, the Bank made

available the ability to remotely attach external insurance policies in e-banking for customers with a

mortgage loan.

Investment products. Bank Millennium customers can invest their savings from their computer, tablet

or phone. In 2021 the Bank has extended its offer of investment products available online, mainly in

the mobile application. Currently in the Bank's offer are available: individual investment funds of

Millennium TFI (for customers from Prestige and Private segments also funds of external companies);

ready-made investment plans with different risk levels, and structured deposits. Also MiFID

questionnaire can be completed and updated online. Some fund instructions ordered in the branch

may be conveniently confirmed by customers via mobile application without the need to sign paper

documents.

Mobile Authorisation in branches. In 2021, Bank Millennium expanded the array of instructions that

customers can confirm at branches on their phone using Mobile Authorisation, without signing paper

printouts.

Open banking

Bank Millennium used the potential of PSD2 to support innovation and is a market leader in this area.

The popularity of services based on open banking is constantly growing. Tens of thousands of our

customers have already benefited from them. In 2021, the existing services of account aggregation,

payment initiation and confirmation of income and identity were expanded - the availability of other

banks in these services was extended. Further solutions were also implemented: a new path for

opening an account online and an instalment loan application at partners' online stores. Additionally,

the bank started to use open banking to give customers tailored offers. Based on the history from

another bank, we can calculate loan proposals and suggest savings and investment products.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

FINANCE 360º, ACCOUNT AGGREGATION

SERVICE, WHICH ENABLES YOU TO VIEW

THE BALANCE AND HISTORY OF AN

ACCOUNT IN ANOTHER BANK

9 banks in the service: Alior Bank, BNP

Paribas, Bank Pekao, Citi bank, ING Bank

Śląski, Inteligo, mBank, PKO BP and Santander

Bank. Soon 2 more banks will be added.

INITIATING PAYMENTS FROM ACCOUNTS IN

OTHER BANKS

6 banks in the service: Alior Bank, Bank

Pekao, ING Bank Śląski, mBank, PKO BP oraz

Santander Bank.

CONFIRMING INCOME ON A CASH LOAN

APPLICATION

8 banks in the service: Alior Bank, Bank

Pekao, BNP Paribas, ING Bank Śląski, Inteligo,

mBank, Santander Bank and PKO BP.

OPENING A PERSONAL ACCOUNT WITH

IDENTITY CONFIRMATION BY LOGGING

INTO AN ACCOUNT AT ANOTHER BANK

7 banks in the service: Alior Bank, Bank

Pekao, BNP Paribas, ING Bank Śląski, mBank,

Santander Bank and PKO BP.

OPENING A COMPANY ACCOUNT FOR SOLE

PROPRIETORSHIPS, WITH IDENTITY

CONFIRMATION THROUGH LOGGING INTO

AN ACCOUNT IN ANOTHER BANK

7 banks in the service: Alior Bank, Bank

Pekao, BNP Paribas, ING Bank Śląski, mBank,

Santander Bank and PKO BP.

ONLINE INSTALMENT LOAN APPLICATION

(AT PARTNER STORES)

8 banks in the service: Bank Millennium,

Alior Bank, Bank Pekao, BNP Paribas, ING

Bank Śląski, mBank, Santander Bank oraz PKO

BP.

Cooperation with public administration offices

For several years now Bank Millennium has been cooperating with government agencies and playing

its part in building digital society and popularizing e-government solutions. Individual customers of

the Bank can use the Trusted Profile, log in to PUE ZUS using credential to Millenet, apply for 500+

and 300+ benefits via online banking (from 2022 it will be possible also in a mobile application).

E-commerce and online payments

For several months now the interest in online shopping and transactions has been growing steadily,

therefore Bank Millennium is developing solutions related to e-commerce and facilitating access to

such services for customers. In 2021 the integration of banking channels with the goodie shopping

platform continued. Customers can easily access goodie from Millenet and the mobile app, link their

payment card to their goodie account and enjoy special discounts, promotions and cashback offers.

In 2021, transaction volume using BLIK was record-breaking. Throughout 2021, more than 1.3 million

of our customers (+32% y/y) used BLIK mobile payments at least once. Customers performed 79% more

BLIK transactions than in 2020. Bank Millennium actively participates in the development of new BLIK

services under the Polish Payments Standard (Polski Standard Płatności).

In May 2021, the Bank, in cooperation with e-commerce partners, made available online instalment

loan. The process is based on open banking solutions and can be used by customers of popular stores

with household appliances and audio/video devices, who have an account in one of the 8 banks

available in the service. The loan process is unique, the bank supports the customer in filling in the

application form, and the verification processes take place in real time and in the background, thanks

to which the customer can receive the final credit decision right after filling in the application form.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Mobile banking and VAS innovations

The Bank Millennium mobile application is a modern and convenient platform for managing everyday

life. Customers can e.g. pay for parking, motorway or public transport tickets, buy a cinema tickets

or insure their vehicle. The app allows for purchase of travel insurance with an innovative travel

assistance service. It also allows to update the identity document data and conveniently use credit

products or invest savings. It provides access to quick assistance,

e.g. via live chat, or self-locking a lost card. In 2021 a contextual live-chat was made available, on a

cash loan application among others.

Huawei Mobile Services. In 1Q 2021, the app was integrated with HMS and is now available on

AppGallery. It can be used by customers with the latest Huawei mobile devices.

BLIK contactless. In July 2021 Bank Millennium was the first in Poland to provide customers with BLIK

contactless payments. Within six months from the implementation of the service customers performed

in this way over one million transactions.

App for Apple Watch. The bank has released an innovative app that can be paired with Apple

smartwatches. The application works on the watch independently from the phone and allows to pay

with BLIK, confirm transactions ordered online and some instructions ordered at the branch.

Milla Chatbot. The mobile application uses solutions based on AI. Customers can benefit from the

support of an automatic assistant 24/7. In 2021, new speech recognition and intention understanding

modules were uploaded, which allow Milla to better recognize the words pronounced by users and

even more accurately match prompts.

Mobile app for children. In the first half of 2021, the bank released a version of the app for children

aged 7-12 with a unique "Ask for pocket money" feature. Upon activation, the app recognizes the user

and adapts the version to their age. The app for kids is not only a helpful gadget, but also a tool to

introduce children to the world of finance and safe use of technology. Customers have also gained

the ability to open an account for a child through electronic channels.

New design and UX. The appearance of the mobile application main screen before and after logging

in has been refreshed. Shortcuts to the most popular services available immediately after logging in

are a new solution. The mobile application activation process has been simplified. The ability to

manage card limits has also been added to the application and management of other daily limits has

been made easier.

Cyber-secure

With the start of the pandemic, the number of scams using electronic channels increased markedly.

Since then, the Bank has significantly strengthened its security solutions and cybersecurity education

campaigns. Security issues are addressed in a variety of contexts, including when establishing a

relationship with a new customer.

Customer education campaigns are conducted using available channels:

• banners on the portal, in the mobile application and Millenet,

• PUSH messages in the mobile application,

• Messages in the contact box accessible from both Millenet and the application,

• SMS messages to customers less active in electronic channels.

The campaigns are refreshed regularly, and additionally the communication is strengthened each time

new methods of fraudsters' activity or intensified attacks on customers are observed. Communication

plans and content are the result of collaboration between several departments. Campaigns are

targeted both to customers with access to an online account (about 2 million) and to selected groups

based on prepared risk profiles.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

7.3. CORPORATE BANKING

Corporate Banking is a business line which provides professional and comprehensive services to

companies generating annual sales revenues above PLN5 million, as well as public sector institutions

and units. The Bank creates comprehensive financial solutions tailor-made to meet the unique needs

of a specific client business supported by modern digital solutions shortening the time of client

involvement in operational activities connected with a client’s Bank relationship. Our objective is to

assure the highest quality of service and the shortest reaction time on the side of the Bank. Therefore,

our internal processes relating to customer service have been consistently automated. At the same

time in response to environmental challenges we support our clients in their implementation of

projects reducing the environmental impact of their businesses - by financing projects connected with

renewable energy, innovations reducing the demand for energy and natural resources and more

effective waste management.

In its 29 corporate centres the Bank employs top-class professionals guaranteeing a comprehensive

service for corporate banking clients. Relationship Managers, who are the first line of contact with

the client, are supported by product specialists in transactional banking, treasury products, trade

finance products and leasing. Moreover, specialists in transactional systems and consultants who

support our clients in operational issues are available locally. The team working with the clients is

augmented by experts in funding mergers and acquisitions and also with support of a post regarding

EU funds.

Very high customer satisfaction with the quality of service is confirmed by the results of annual

internal corporate banking customer satisfaction surveys. In accordance with a study conducted in

July 2021 the bank’s NPS ratio was 49 points, NPS for the Relationship Manager 76 points, while 88%

of clients were very satisfied with the operational service provided by the consultants.

Support of companies during the pandemic

Due to the sustained pandemic situation, in 2021 the Bank continued to focus on reacting to new

needs of businesses, connected with the changed situation relating to their operation.

BGK guarantee programmes

In 2021 Bank Millennium together with Bank Gospodarstwa Krajowego was implementing 3 guarantee

programmes to secure loans to businesses: De minimis guarantee programme, programme of

guarantees from the Liquidity Guarantee Fund and Biznesmax guarantee programme. SMEs and larger

companies could get them under special terms and the application process uses digital channels and

qualified signature.

Loans with de minimis guarantee are dedicated to entrepreneurs from the SME segment. Throughout

2021, the programme operated on changed rules facilitating companies' access to the loan and its

repayment - the guarantee period was extended, the amount limit was increased, the commission to

BGK for granting the guarantee for first valid year was abandoned. Moreover, it became possible to

secure with a de minimis guarantee also the repayment of a foreign currency loan, which had been

unavailable before. This condition will apply until the end of the BGK program.

We are also continuing the implementation of the guarantee programme introduced in 2020 from

the Liquidity Guarantee Fund, the so-called liquidity guarantees. It is part of the government’s

anti-crisis shield and its aim is to support financial liquidity for medium and large business entities.

Liquidity guarantees for loans sustained high coverage of up to 80%, a higher amount of the loan

covered by the guarantee - up to 200 million PLN as well as increased total amount of the guarantee

- up to PLN250 million. Moreover, a guarantee may also be used for foreign currency loans.

Businesses could also use reverse factoring secured with a guarantee of repayment of the granted

limit within the liquidity guarantees programme of Bank Gospodarstwa Krajowego - up to PLN250

million, with maturity up to 24 months as well as guarantees up to 27 months, covering up to 80% of

the limit amount.

Biznesmax guarantees in the formula valid at the Bank pertain first of all to financing companies

focused on environmentally friendly projects. The programme was changed at the beginning of 2021

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

to better meet the new needs of companies. In addition to the available investment loans in PLN, it

also became possible to finance the company's current operations, also as part of an overdraft facility

granted for a period of 36 months. The most important element of the program is, apart from the

lack of commission for BGK during the entire duration of the guarantee – regardless of the period of

validity of the guarantee – also the possibility of applying for a partial refund of interest paid on the

loan granted.

Processing application under the Financial Shield

From January Bank Millennium enabled submitting applications for support as part of Financial Shield

2.0 through its internet banking service. Application submission was simple and intuitive. In order for

every eligible entrepreneur to be able to conveniently apply for subsidy, the Bank made the

application available both in Millenet for Companies as well as in internet banking for individuals, the

latter being used also by sole traders. The entire process was fully online. Checking the application

status and confirmation of granting or refusing a subsidy, prepared on the basis of a decision received

by the Bank from the Polish Development Fund, are also enabled online.

In the second quarter of 2021, the bank introduced a process in electronic banking enabling

entrepreneurs to settle subsidies received under the PFR 1.0 Shield. Customers who benefited from

the subsidy received in electronic banking preliminary calculations prepared by PFR of the amount

that is subject to redemption and the amount required for repayment. Also using electronic banking,

customers had the opportunity to confirm the settlement calculated by PFR or apply for a different

amount. The final decisions of PFR are presented in electronic banking along with the repayment

schedule. The bank has implemented a process, convenient for customers, of automatic repayment

according to the schedule. The Millenet electronic banking system also allows early repayment of all

or part of the subsidy that has not been written off.

Because it was necessary for entrepreneurs to submit an application for remission as part of Shield

2.0, we enabled in Millenet a functionality for Businesses to submit a statement on the settlement

of a subvention.

Educational initiatives for corporate banking clients

Bank Millennium support clients through educational initiatives and distributing information.

about important changes affecting the conduct of business activity. We publish a monthly newsletter

presenting macroeconomic information, discussing tax changes and describing new product and

system solutions. We also organize educational webinars, an example of which can be a training

webinar carried out in December, dedicated to employees of financial departments of local

government units. It was devoted to good practices improving the security of digital processes as well

as methods of counteracting fraud attempts. The Bank's experts in the field of transactional banking

and fraud risk, based on examples of methods used by criminals, showed how to identify fraud

attempts to avoid financial losses.

Other educational activities focused on two communities supported by the Bank - financial directors

and family businesses. As part of the CFO Club, the bank's experts appeared at face-to-face and online

meetings, sharing knowledge in the field of tax changes, legal regulations in the field of sustainable

development, the impact of macroeconomic changes on business development, as well as soft skills

necessary in the position of financial director. On the other hand, the meetings as part of the Family

Business Forum were an opportunity for the Bank's experts to present our experience in the field of

customer analytics and building customer experience in digital channels.

Educational initiatives for corporate banking sales staff

Bank Millennium provides trainings for employees of the corporate banking sales network presenting

the possibilities of obtaining financing for enterprises from public programmes, including the National

Recovery Plan, and the Multiannual Financial Framework or the so-called EU funds. The training

concerned both the general program assumptions, the latest financial perspective for 2021-2027, as

well as specific competitions announced in 2021, enabling obtaining subsidies for investments planned

among the Bank's Clients. The training discussed the issues of innovation, financing the

implementation of new products and services, support for conducting research and development

works in enterprises. These trainings are both information for relationship managers about the

programmes, along with the criteria and parameters for financing new investments, as well as support

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

for them in interviews with clients about investments, in particular in the field of financing

innovations, green investments, digitalisation.

Corporate banking employees also took part in the "Financing of investment projects" training series,

improving their competences in the analysis of their clients' investment projects.

We also regularly provide sales employees with knowledge about the current macroeconomic situation

and its impact on the markets and activities of companies. We do this in the form of monthly webinars

conducted by experts from the Bank's Macroeconomic Analysis Office. This information is

supplemented by industry analyses made available on the intranet.

Employees also take part in trainings on new solutions for corporate banking clients, as exemplified

by webinars devoted to the Financial Shield 2.0 on applying for and redeeming subsidies in Millenet

for Companies, a webinar on the document exchange module in Millenet, solutions in the field of

payment terminals or a series of trainings devoted to solutions that customers can use as part of

Millennium Leasing customer e-service.

Relationship Managers and credit analysts in the area of corporate banking took part in a webinar

conducted by a law firm specialising in the renewable energy sector. The meeting was devoted to

discussing the specifics of financing transactions in the PV sector, taking into account the legal and

regulatory environment of the industry.

Financing

Despite limited market demand for financing, the volume of all credit products – loans to finance

current needs, investment loans, leasing, trade finance products and products with participation of

EU funding increased in 2021 by 3% vs. the previous year to reach the level of PLN19.5bn net.

Factoring

After a record year in 2020, also in 2021 the Bank posted record-high growth rates in the factoring

area. Realised factoring turnover stood in that period at PLN27.2bn, i.e. +17.1%. In terms of realised

turnover value, the Bank was ranked 6th among the factoring institutions associated in the Polish

Factors Association, with a 7.5% market share. Factoring assets as of the end of 2021 reached the

highest level in history and were PLN3.14bn.

For another year businesses could also enjoy reverse factoring secured with a guarantee of repayment

of the granted limit within the programme of liquidity guarantees from Bank Gospodarstwa

Krajowego. The great interest in the programme among Bank Millennium's clients is confirmed by the

very high, 16% share of the Bank in factoring financing offered to businesses under this programme in

Poland.

Trade finance

In trade finance 6.3% growth was posted in commission income on guarantees and LCs, with a stable

value of the portfolio of active guarantees and letters of credit, which reached the level of PLN937

million at the end of the year. There was an 83% increase in the value of new/increased limits and

new one-off guarantees and letters of credit granted outside the limits.

In the 4th quarter of 2021, systems for handling guarantees and letters of credit were adapted to the

new SWIFT standards in terms of changes in messages regarding guarantees and stand-by letters of

credit, which increases the automation of the processes of handling these products.

On our trade finance platform, customers' interest in electronic orders to provide guarantees and

open a letters of credit is growing. At the end of the year, 91% of orders to grant a bank guarantee

and open a documentary letter of credit within the line were submitted by customers electronically.

Almost every third guarantee had the form of an e-guarantee, i.e. electronic form of guarantee with

the guarantor’s qualified electronic signature.

Transactional Banking

Corporate banking clients have access to a comprehensive offer of transactional banking products for

companies, supported by an efficient and ergonomic internet banking system, mobile app and

solutions based upon web service technology and SWIFT network. With respect to transactional

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

products and services the Bank offers solutions in support of the management of receivables

collection, payment settlements, liquidity management. The high quality of offered remote services

led to a consistent growth of the transactional activity of Clients.

2021 was characterized by a further solid increase of 18% in the balance of funds accumulated on

current accounts; at the same time, the balance of deposits increased by 38%, which in total gave an

increase of 24%. Transaction activity in the field of domestic transfers was higher by 6%, and in the

field of FX transfers it remained at a similar level as in 2020. We observed a recovery in the volumes

of closed cash deposits in 4Q, they were 14% higher than in the same period of the previous year. At

the same time, interest in payment cards increased significantly - the number of cards in 2021

increased by 27%.

The high balance on current accounts and the threefold increase, by a total of 1.65%, of the NBP's

key interest rates significantly improved the interest result by 46% (including deposits by 42%), at the

same time net commission income significantly improved by 32%.

In early 2021 a new type of business account (settlement account) - the so-called FNDR account, was

introduced. From 1 January 2021 CIT taxpayers (joints stock companies, limited liability companies,

limited joint-stock partnerships, limited partnerships) may benefit from a tax preference consisting

among others in write-offs to a “fund established for investment purposes”. Thanks to the FNDR

account clients had the opportunity to benefit from tax relief and claim the amount of write-offs up

front as tax deductible expenses.

Bank Millennium’s POS payment terminal offer was also made available on special price terms in

cooperation with PayTel.

In the second quarter, using the synergy with Millennium Goodie Sp. z o.o., the payment cards offer

was expanded with a modern and innovative solution - goodie gift eCards. A gift eCard is a type of

financial bonus in the form of a secure virtual payment card available in the goodie application, which

can be used for paying in traditional and online stores. The recipient during the activation of the

eCard on his phone will see an animation with dedicated wishes, logo or other message and graphics

tailored to the occasion.

For all payment cards issued to corporate banking customers, we have launched the possibility of

adding them to the following external wallets: Google Pay, Apple Pay, Garmin Pay, Fitbit Pay. Adding

a card to your favourite wallet ensures that payments are made without having to remember about

the card in plastic form.

Electronic Banking

In line with the trend of increasing the use of electronic banking channels, another year was recorded

in which the use of electronic banking channels increased.

In 2021, the functions of electronic banking enabling the secure exchange of electronic documents

were significantly expanded, which further increased the Bank's ability to support businesses in a

remote way.

Customers can use a dedicated module designed to exchange contracts concluded in electronic form.

It enables two-way sending of documents by the bank as well as by the customer, with the possibility

for each party to add their comments. The customer as well as the bank may endorse or reject the

documents sent, until both parties have negotiated wording to the satisfaction of each of them. The

module enables attaching documents containing a qualified signature and each document version sent

to the customer bears the bank’s electronic seal.

At the end of the year, the function was enriched with a qualified validation and maintenance service

of electronic signatures carried out in cooperation with Asseco Data Systems. The qualified

maintenance service provides in the long term the legal and technical protection of the evidential

value of a qualified e-signature or seal linked to a specific electronic document. The integration of

services with the circulation of documents in electronic banking significantly increases the comfort

of concluding contracts in an electronic version, because it eliminates the need to use additional

software to verify signatures.

In Q4 2021 57% of agreements were signed with the use of an electronic signature.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The Bank was also working on the development of support tools for electronic banking users.

Corporate banking customers have been given the opportunity to contact

technical and substantive support consultants for electronic banking via chat. Businesses can get

online support this way when using the system and navigating it, selecting the best solution and

service. During the chat the customers can additionally activate the service of co-browsing with the

consultant, which improves customer support greatly.

The functionality of the MillenetLink service has also been expanded, which is a channel for direct

data exchange between customers' ERP systems and electronic banking. In addition to the most

commonly used SEPA transfers in EUR, the service now supports other types of cross-border transfers

available at the Bank. New services have also been added to enable customers to manage prepaid

cards in an automated manner (e.g. card funding, balance verification).

Together with Millennium Leasing, the function of electronic service of leasing products was also

developed; it is already used by almost 90% of joint customers (Bank and Millennium Leasing). The

module of electronic leasing service, which contains a wide range of functions, has been additionally

enriched with a set of reports containing complete data on leasing contracts, instalments, invoices

and insurance of the customer’s products concluded with Millennium Leasing.

Treasury Business

The Treasury Department offer includes a broad range of products: spot FX transactions, deposit

products, FX risk management instruments (fx forward, fx swap, options) and interest rate risk

management instruments (FRA, IRS, CIRS). Solutions offered by the Bank enable exporters and

importers to hedge against FX risk and, thereby, properly calculate costs and prices. Customers also

can hedge against the risk of deterioration of financial results due to adverse future changes of market

interest rates. The proposed solutions facilitate the determination of the fixed cost of financing and

inflow of interest without requiring any changes to be introduced to already existing loan or leasing

agreements.

The bank enabled customers to conclude currency exchange transactions in electronic banking (in the

desktop version and in the mobile application) 24 hours a day, 5 days a week. The services are

available from Monday 0:00 till Friday 23:00 hrs in the electronic millennium Forex Trader FX

platform, which is embedded in the Millenet for Companies online system.

The app allows monitoring current levels of FX rates for 16 currency pairs simultaneously and enables

concluding FX transactions on all currency pairs available in Bank Millennium’s FX rates table,

including the Chinese yuan. It provides easy and quick access to history of transactions with the

possibility of exporting data to a spreadsheet. The platform has a clear and intuitive interface based

on HTML5 technology. In December 2021, we expanded the functionality of the Millennium Forex

Trader FX platform with conditional orders, which were made available to clients at the beginning of

January 2022.

In 2021, a significant increase of 26% in the foreign exchange turnover of corporate banking clients

was also recorded on the FX platform.

Custodial services

Bank Millennium provides custodial services on the basis of an individual permit issued by the

Securities and Exchange Commission (now the Polish Financial Supervision Authority). The Bank is a

direct participant of the deposit and settlement systems such as the National Depository of Securities

(kdpw_stream), NBP Register of Securities (RPW), Euroclear Bank SA/NV (Brussels) and Clearstream

Banking Luxembourg.

Custody Department customers include domestic and foreign financial institutions (global custodial

banks, banks - depositaries of global depositary receipts, investment banks, asset management

institutions, insurance companies, collective investment institutions, investment funds) and other

legal persons actively participating in capital and money market transactions, requiring

comprehensive and customised service and advanced ICT and infrastructural solutions.

In terms of the number of domestic and foreign clients entrusting us with their assets, the Bank holds

one of the top spots in Poland. The total value of assets on securities accounts of customers as of 31

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

December 2021 reached PLN32.7bn. As of the end of 2021 the Bank maintained 13148 securities

accounts and deposit accounts and performed depositary function for 22 Investment Funds.

International operations and external financing

With respect to financing obtained on the international market, last year the Bank continued its

collaboration and management of agreements concluded with International Financial Institutions

including, primarily, the European Bank for Reconstruction and Development (EBRD) and the European

Investment Bank (EIB), which, as of 31 December 2021, covered as follows:

• agreement concluded with the EBRD in August 2018 on a medium term loan in the amount of

PLN300 million, granted by the EBRD under the PolGEFF (Polish Green Energy Financing for

Leasing) project. Millennium Leasing is the borrower under this agreement, on the basis of a

guarantee issued by Bank Millennium. Loan proceeds will be used by ML to finance leasing

agreements connected with the purchase of machines and equipment contributing to the

transformation of the Polish economy in the direction of the so-called ‘green economy’ including,

in particular, in the area of energy and resource efficiency, renewable energy, water management

and waste management. The loan will be paid back in full in August 2023, while its active balance

at end of 2021 was PLN200 million.

• agreement concluded with the EBRD in November 2017 (by the former Euro Bank) on a medium

term loan in the amount of PLN40 million (with the option of expansion to 100 million PLN),

granted by the EBRD under the PolGEFF (Polish Green Energy Financing for Leasing) project. Funds

from the loan have been made available to the Bank’s retail clients with the allocation for the

implementation of purchases connected with the replacement or upgrading of the standard of

selected equipment or installation, whose purpose is to reduce the consumption of energy

(electric power or heat energy) and/or water in the housing real estate owned by them. The last

loan instalment will be paid in November 2022.

• loan agreement concluded in December 2016 with EIB, in the amount of EUR100 million with

Millennium Leasing being the borrower and allocated for supporting activities in the area of

financing leasing agreements concluded with companies from the SME sector. The loan was

disbursed in four tranches in the period between June and December 2018. The loan balance at

year-end 2021 was EUR33.3 million.

The Bank also continued projects connected with the multiyear process of strengthening the base of

credible counterparties and partners on the interbank market, including, in particular, in the segment

of instruments involving medium and long-term liquidity management in FX. One of the important

aspects of the activities in the area was managing the portfolio of agreements with domestic and

foreign banks (including agreements of ISDA and GMRA types) whose form requires regular adjustment

to a changing regulatory environment and market standards. A considerable part of the activity was

also connected with the finalisation of Brexit, broadly understood compliance issues (including

growing demands in the KYC/AML area and sanctions), as well as with continuation of work involved

with the planned issue of debt instruments meeting the MREL criteria.

Irrespective of the above activities, in the past period the Bank performed, on an on-going basis, all

other tasks connected with the overall carrying out of international operations, in areas of

implementing various objectives including, inter alia, processing payments and settlements, current

financing of own needs and those of Bank clients, processing foreign trade transactions, participating

in international money and FX market transactions, operating on the capital market. The achievement

of these objectives was supported, to a large extent, by an almost thirty-year long process of

developing the Bank’s cooperation with its foreign partners and counterparties. The Bank maintains

ongoing contacts and relations with selected reputable correspondent banks and their units located

in all important countries in terms of the structure of turnover of Polish foreign trade and non-trade

transactions.

In parallel to medium-term financing obtained on the international market, in several recent years

the bank has successfully carried out senior debt issues denominated in PLN in the form of bonds

placed among institutional investors on the domestic market (in 2014 at the nominal value of PLN500

million, in 2015 PLN300 million and in 2017 PLN300 million), and subordinated debt (PLN700 million

in December 2017 and 830 million in January 2019).

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

7.4. SUBSIDIARIES’ ACTIVITY

Millennium Goodie

In 2021, the goodie app, downloaded already by more than 2.7 million people, saw further records in

users’ interest in online shopping and goodie cashback programme. During the past 12 months, more

than 4.4 million online transactions were made in goodie with cashback (+66% y/y) amounting to over

PLN 593m (+90% y/y). More than PLN12m was accrued to the goodie cashback user accounts (+42%

y/y).

4Q 2021 was an exceptional period for goodie cashback. The cashback service recorded huge increases

in the value of transactions and reached almost PLN208 million (+70% y/y). The number of transactions

made was also growing steadily, reaching nearly 1.3 million in this period. This resulted in accrual of

more than PLN3.8 million cashback on Users’ accounts.

It should be noted that the above results were achieved despite the entry into force as of 1 July 2021

of the new rules for VAT taxation of e-commerce as regards import of the so-called small consignments

from outside Europe. This change had a significant impact on the transaction rate on the e-commerce

platforms offering sale of goods from China and available in goodie cashback.

The popularity of the goodie cashback service was also growing among Bank Millennium's customers -

initially available only in the Bank Millennium mobile application, in 4Q 2021 it was also launched in

Millenet internet system. The goodie cashback service was featured several times in the Bank

Millennium TV commercials.

Significant results in 2021 were also driven by the sale of gift e-Cards, the number of which increased

90% y/y.

In June 2021, the goodie application was integrated with Huawei Mobile Services. This means that the

app is now available at AppGallery, both for the latest Huawei smartphones with HMS and older GMS

models.

A part of www.goodie.pl website was significantly changed with regard to cashback – thus, goodie

cashback online users enjoy a more friendly and clearer interface.

Millennium Leasing

Millennium Leasing sp. z o.o., a subsidiary of Bank Millennium, was established in 1991 and is one of

the longest operating leasing companies on the Polish market. Its activities cover the financing of all

types of fixed assets: cars and vans, machinery and equipment for most industries, heavy transport

(including: road, rail, water and air), as well as real estate.

The value of leasing agreements launched by the company in 2021 totalled PLN3.88 billion, i.e. 56.6%

more than in 2020. As at 31 December 2021, the value of capital involved in active leasing agreements

amounted to PLN6.74 billion, i.e. 6.4% above the level at the end of 2020.

In 2021, the company achieved a significant increase in leasing market share, reaching 5.1% share

compared to 4.1% in 2020.

Millennium Leasing experienced the largest increase in sales in 2021 in the group of means of

transport, and so — heavy transport increased by 84% and light transport — by 63.2%.

As a socially responsible organisation, Millennium Leasing promotes activities to help run an energy-

efficient business. Therefore, the company encouraged customers to use ecological solutions within

the MilleSun photovoltaic equipment financing programme. The product is implemented under a

simplified procedure, and an additional facilitation in obtaining financing is the possibility for the

customers to choose an authorised Millennium Leasing supplier.

In 2021, the company began offering customers the possibility of concluding a leasing agreement with

a BGK guarantee, thanks to which entrepreneurs from the SME sector may use financing on more

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

attractive terms, including: with regard to margins, financing amount, agreement term and required

collateral. BGK guarantee may cover up to 80% of the financing of the leasing transaction, with the

maximum agreement period of 10 years. Funds covered by the guarantee constitute state aid from

the Pan-European Guarantee Fund — an instrument implemented by the European Investment Fund

to protect the European Union economy from the effects of the COVID-19 pandemic.

In 2021, Millennium Leasing continued the possibility of signing documents with electronic signatures,

which was introduced in 2020. In addition, the company actively promoted the electronic agreement

service (eBOK) among its customers. At the end of 2021, as many as 75% of customers were already

using electronic invoicing.

The company actively promoted the MilleFlota service among its customers, which allows for

convenient, fast and cost-effective servicing of vehicles up to 3.5 t. Under the programme, customers

can purchase parts and services at attractive (and fixed throughout Poland) prices, also at Authorised

Service Stations, and furthermore receive a special fleet discount.

Millennium Leasing services are sold by leasing advisors in 78 branches throughout Poland. Moreover,

the company actively cooperates with banking advisors in retail branches and in the corporate banking

service network of Bank Millennium. This allows the company to offer entrepreneurs a full range of

financial services, including both leasing and banking products.

Millennium TFI investment funds

Millennium TFI S.A is a licensed financial institution operating since 2001 as an entity creating and

managing investment funds. At the end of the year 2021, the company managed customer assets

worth PLN5.2 billion and Millennium TFI funds had around 150 thousand participants.

The main goal of Millennium TFI’s activity is delivering to Clients an attractive and effective

investment solutions and providing professional investment customer service. The fund managers

and whole investment team are professionals with long years of experience and excellent insight into

financial markets.

During the year 2021, Millennium TFI has achieved significant growth of assets under management of

14.7%, much stronger than the market average (+7.5%).

Simultaneously Millennium TFI has managed to face up the threats related to COVID-19 pandemic.

Millennium funds carried out all transactions of the participants without any problems, while

maintaining the full liquidity of portfolios throughout the period. The operational continuity of the

company was also maintained. The transition to the remote work of the employees took place without

disturbances for the operational processes.

In the first half of 2021, Millennium funds recorded significant increase in assets of a total value of

PLN664 million, as a consequence of a conducive macro-economic environment and high risk appetite.

In the second half of the year, the value of AUM increased till September and since then has

systematically decreased due to capital market turbulences. At the end of the year, the assets under

management reached the level of PLN5.2 billion – representing the growth of PLN671 million.

In 2021 most of Millennium investment sub-funds with equity component (equity and balanced sub-

funds) has brought participants positive and competitive rates of return, even above +20% for selected

equity strategies. On the other hand, the bond sub-funds have realized negative or close to zero rates

of return, which were significantly impacted by rising interest rates and elevated inflation.

Millennium TFI S.A. currently manages three umbrella funds: the Open-End Investment Fund with 6

separate sub-funds investing on the Polish market (Millennium FIO), Specialist Open-End Investment

Fund with 6 separate sub-funds investing on the global markets (Millennium SFIO) and Millennium PPK

Specialist Investment Fund with 8 target date sub-funds. In 2021 Millennium TFI offered

participation units in 20 investment sub-funds with different investment strategies and different

risk levels.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The company’s broad offering includes also various savings products based on the investment funds it

manages. Its most popular products include the Millennium Investment Plan and Individual

Retirement Accounts (IKE). Millennium TFI currently manages IKE programs for 34 thousand

customers, with the total asset value of PLN400 million. At the end of 2021, the total value of

assets invested in various savings products was approximately PLN1 billion.

Brokerage activity - Millennium DM

The brokerage activity in the Bank Millennium Group is run by Millennium Dom Maklerski S.A.. It

renders a broad range of brokerage services, especially the execution of buy or sell orders for financial

instruments for the principal’s account, buying and selling financial instruments for its own account,

running securities accounts and cash accounts to serve them, investment advisory services, advisory

services concerning capital structure and strategy as well as combining, splitting and acquiring

businesses, offering financial instruments, rendering services to perform firm and standby

underwriting agreements, preparing investment and financial analyses and other recommendations

related to financial instruments.

In 2021, Millennium DM’s turnover on the equity market was PLN3.5 billion, giving the company 0.6%

market share according to the Warsaw Stock Exchange’s data. As at 31 December 2021 Millennium DM

had provided services to 24.7 thousand investment accounts and acted as a market maker and as an

issuer’s market maker for 8 companies listed on the Warsaw Stock Exchange.

In 2021, Millennium DM also acted as an intermediary, carried out a buyback of public company and

new issue of shares for a company listed on the Warsaw Stock Exchange. Moreover, as a member of a

distribution consortium, Millennium DM also participated in several new issues of shares.

In 2021, Millennium DM also provided analysis and consulting services to external clients as well as

group companies. The most relevant of these included: investment advisory service related to unit-

linked insurance funds for one of the leading domestic insurers, due diligence of investment funds

and insurance companies cooperating with the capital group, as well as research related to specific

sectors, public and private companies.

The Management Boards of Bank Millennium and Millennium DM decided to integrate the brokerage

business and transfer it to the Bank. Therefore, on May 10, 2021, the Division Plan of Millennium Dom

Maklerski was published. The division plan was examined by an expert appointed by the court, who

issued an unqualified opinion on August 9, 2021. In connection with the decision to integrate

brokerage services, Bank Millennium S.A. submitted an application to the Polish Financial Supervision

Authority for an extension of the license to conduct brokerage activities. The end of the procedure is

expected in 2022.

Millennium Bank Hipoteczny

Millennium Bank Hipoteczny Spółka Akcyjna (“MBH”) was established through an act of incorporation

by Bank Millennium S.A. on 9 July 2020, after the decision of the Polish Financial Supervision Authority

of 16 June 2020 allowing to set up the Bank. The purpose of establishing the Bank and its mission is

to ensure to the Group a stable and long-term financing of mortgage loans in the form of covered

bonds secured by mortgage receivables (business reserved in Poland exclusively for mortgage banks).

On 20 May 2021 the Polish Financial Supervision Authority licensed MBH to start its activities, which

in fact took place on 14 June 2021. Since the beginning of its operations MBH has focused on

conducting the first and more transfers of mortgage loans granted by Bank Millennium, which will

become the basis for the issuance of covered bonds secured on such loans. The first transfer of

mortgage loans from Bank Millennium was conducted on 15 October 2021. The transfer of the first

pool of mortgage loans to MBH’s balance sheet means the start of obtaining interest revenues from

the clients. Preparations also started for the second transfer planned to be finalised in the 2nd quarter

2022. At the same time MBH started work on the preparation of the first covered bond issue. As part

of this process the first prospectus is being prepared, as is the rating of the first issue. After the

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

prospectus has been approved by the PFSA and the rating has been assigned, MBH will implement the

first covered bond issue.

These activities will be conducted by MBH on a cyclical basis. The next pools of mortgage loans

originated by Bank Millennium under the rules for mortgage banks will be covered by the process of

determining the mortgage lending value (MLV) of the properties and then will be transferred to MBH

and (after performing a change in the mortgages) the amount of receivables will be increased in the

collateral register for covered bonds thus enabling subsequent issues of covered bonds. Only

mortgage loans to individuals for housing purposes will be transferred to MBH. MBH will not originate

mortgage loans on its own.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

8. RISK MANAGEMENT

8.1. RISK MANAGEMENT

The mission of risk management in the Bank Millennium Group is to ensure that all types of risks,

financial and non-financial, are managed, monitored, and controlled as required for the risk profile

(risk appetite), nature and scale of the Group's operations. Important principle of risk management is

the optimization of the risk and profitability trade-off – the Group pays special attention to ensure

that its business decisions balance risk and profit adequately.

The goals of the risk management mission are achieved through implementation of the following

actions:

▪ Development of risk management strategies, credit policy, processes and procedures defining

the principles for acceptance of the allowable level of particular types of risk,

▪ Increasingly wider implementation of the IT tools for risks identification, control, and

measurement,

▪ Increasing awareness of employees as regards their responsibility for proper risk management

at every level of the Group's organizational structure.

Risk management is centralized for the Group and considers the need to obtain the assumed

profitability and to maintain proper risk-capital relationship, in the context of having proper level of

capital to cover the risk. Within risk management system, a broad range of methods is used, both

qualitative and quantitative, including advanced mathematical and statistical tools supported by

adequate IT systems.

When defining the business and profitability targets, the Group considers the specified risk framework

(risk appetite) to ensure that business structure and growth will respect the risk profile that is

targeted and that will be reflected in several indicators such as:

▪ Loan growth in specific products / segments,

▪ Structure of the loan portfolio,

▪ Asset quality indicators,

▪ Cost of risk,

▪ Capital requirements / Economic capital,

▪ Amount and structure of liquidity needed.

The risk management and control model at the Group’s level is based on the following main principles:

▪ ensuring the full-scope quantification and parameterization of various types of risks in the

perspective of optimizing balance sheet and off-balance sheet items to the assumed level of

profitability of business activity. The main areas of analysis encompass credit risk, market

risk, liquidity risk and operational risk. Legal and litigation risk also are subject to specific

attention;

▪ all types of risks are monitored and controlled in reference to the profitability of operations

and the level of capital necessary to ensure the safety of operations from the point of view

of capital adequacy. The results of risk measuring are regularly reported as part of the

management information system;

▪ the segregation of duties between risk origination, risk management and risk control.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The Risk management process of the Group is presented in the below diagram

The split of competence in the field of risk management is as follows:

▪ The Supervisory Board is responsible for overseeing the compliance of the Group’s risk-taking

policy with the Group’s strategy and its financial plan. Within the Supervisory Board acts the

Committee for Risk Matters, which supports it in realization of those tasks, among others,

issuing opinion on the Group's Risk Strategy, including the Group's Risk Appetite;

▪ The Management Board is responsible for the effectiveness of the risk management system,

internal capital estimation process, for reviewing the internal capital calculation and

maintenance process and the internal control systems;

▪ The Credit Committee, the Capital, Assets and Liabilities Committee, and the Liabilities at

Risk Committee are responsible for current management of different areas of banking risk,

within the framework determined by the Management Board;

▪ The Risk Committee and the Processes and Operational Risk Committee are responsible for

defining the policy and for monitoring and control of different areas of banking risk, within

the framework determined by the Management Board;

▪ The Validation Committee is responsible for confirmation of risk models’ validation results

and follow-up in the implementation of the measures defined by the Models Validation Office;

▪ The Sub-Committee for Court Cases is responsible for expressing opinions and taking decisions

in matters regarding court proceedings, for the cases when value of the dispute or direct

effect for assets value as a consequence of court verdict exceeds PLN1mn or as result of

multiple cases with the same nature, excluding most of the cases belonging to the

restructuring and recovery portfolio of Bank’s receivables managed by the Corporate Recovery

Department and Retail Restructuring and Debt Collection Department;

▪ The Risk Department is responsible for risk management, including identifying, measuring,

analysing, monitoring, and reporting on risk within the Bank. The Risk Department also

prepares risk management policies and procedures as well as provides information and

proposes courses of action necessary for the Capital, Assets and Liabilities Committee, Risk

Committee, and the Management Board to make decisions with respect to risk management;

▪ The Rating Department is mainly responsible for risk rating assignment for Corporate clients

(based on the evaluation of clients’ creditworthiness) as well as for rating monitoring and

potential revision during the period of its validity. Rating assignment process is independent

from credit decision process;

▪ The Corporate Credit Underwriting Department, Mortgage Credit Underwriting Department

and Consumer Finance Credit Underwriting Department have responsibility, within the

Corporate Customer segment and Retail Customer segment, respectively, for the credit

decision process, including analysing customers’ financial situation, preparing credit

proposals for the decision-making levels, and making credit decisions within specified limits;

▪ The Retail Liabilities Monitoring and Collection Department and Retail Liabilities

Restructuring and Recovery Department have responsibility for monitoring repayment of

overdue debts by retail customers and their collection;

▪ The Corporate Recovery Department develops specific strategies with respect to each debtor

from recovery portfolio, which aims to maximize timely collection of the outstanding debt

and minimize the risk incurred by the Group. This approach is constantly revised to reflect

updated information, and the best practices and experiences regarding collection of overdue

debts;

Delineate key

risk definitions

Delineate the

models and

definitions to

classify

customers,

products,

processes, and

risk measures

Define Risk

Strategy

Defining

principles and

risk targets

according to risk

appetite, risk

capacity and

business

strategy

Define risk

policy

Defining

thresholds,

levels,

competences,

limits, cut-offs

according to Risk

Strategy

Implement

policy

Designing

products with

Business and

implement

them in tools

and

regulations;

Decision

processes

Monitor,

Control,

Reporting

Monitor the

models’

performance and

the portfolios

behavior

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

▪ The Treasury Control and Analyses Office has responsibility for monitoring the use of part of

the Group’s limits, including counterparty and stop-loss limits, the Group’s FX position, results

of active trading and control of operations of the treasury segment;

▪ The Models Validation Office has responsibility for qualitative and quantitative models’

analysis and validation, independent from the function of models’ development; development

of the models’ validation and monitoring tools; activities connected with issuing opinions on

the adequacy of the models for the segment, for which they were developed; preparing

reports for the Validation Committee needs;

▪ The Anti-fraud Sub-unit has responsibility for implementation and monitoring Bank policy

execution in the scope of fraud risk management in cooperation with others Bank units. The

Sub-unit constitutes a competence centre for anti-fraud process;

▪ The Compliance Department has the responsibility to ensure compliance with legal

regulations, related regulatory standards, market principles and standards as well as internal

organization regulations and codes of conduct;

▪ The Legal Department has responsibility for handling the litigation cases of the Bank, with

support of external legal offices and legal experts whenever necessary.

The Group has prepared a comprehensive guideline document for the risk management

policy/strategy: “Risk Strategy for 2022-2024”. The document takes a 3-year perspective and is

reviewed and updated annually. It is approved by the Bank’s Management Board and Supervisory

Board. The risk strategy is inextricably linked to other strategic documents, such as: Budget, Liquidity

Plan, and Capital Plan.

The Risk Strategy bases on the two concepts defined by the Group:

1. Risk profile – current risk level expressed in amount or type of risk the Group is currently

exposed. The Group also has a forward-looking view how their risk profile may change under

both expected and stress economic scenarios in accordance with risk appetite,

2. Risk appetite – the maximum amount or type of risk the Group is prepared to accept and

tolerate to achieve its financial and strategic objective. Three zones are defined in

accordance with warning / action required level.

Risk appetite must ensure that business structure and growth will respect the forward risk profile.

Risk appetite was reflected through defined indicators in several key areas, such as:

• Solvency

• Liquidity and funding

• Earnings volatility and Business mix

• Franchise and reputation.

The Bank and The Group has a clear risk strategy, covering retail credit, corporate credit, markets

activity and liquidity, operational and capital management. For each risk type and overall, the Group

clearly defines the risk appetite.

The Risk Management is mainly defined through the principles and targets defined in Risk Strategy

and complemented in more detail by the principles and qualitative guidelines defined in the following

documents:

a. Capital Management and Planning Framework

b. Credit Principles and Guidelines

c. Rules on Concentration Risk Management

d. Principles and Rules of Liquidity Risk Management

e. Principles and Guidelines on Market Risk Management on Financial Markets

f. Principles and Guidelines for Market Risk Management in Banking Book

g. Investment Policy

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

h. Principles and Guidelines for Management of Operational Risk

i. Policy, Rules and Principles of the Model Risk Management

j. Stress tests policy

k. Program of counteracting Anti-Money Laundering and financing terrorism.

Within risk appetite, the Group has defined tolerance zones for its measures (build up based on the

“traffic lights” principle). As for all tolerance zones for risk appetite, it has been set:

▪ Risk appetite status – green zone means a measure within risk appetite, yellow zone means

an increased risk of risk appetite breach, red zone means risk appetite breach

▪ Escalation process of actions/decisions taken - bodies/organizational entities responsible for

decisions and actions in a particular zone

▪ Risk appetite monitoring process.

The Group pays particular attention to continuous improvement of the risk management process. One

measurable effect of this is a success of the received authorization to the further use of the IRB

approach in the process of calculating capital requirements.

8.2. CAPITAL MANAGEMENT

Capital management and planning

Capital management relates to two areas: capital adequacy management and capital allocation. For

both areas, management goals were set.

The goal of capital adequacy management is: (a) meeting the requirements specified in external

regulations (regulatory capital adequacy) and (b) ensuring the solvency in normal and stressed

conditions (economic capital adequacy/internal capital). Completing that goal, Bank strives to

achieve internal long-term capital limits (targets), defined in Risk Strategy.

Capital allocation purpose is to create value for shareholders by maximizing the return on risk in

business activity, considering established risk appetite.

In a scope of capital management process, there is also a capital planning process. The goal of capital

planning is to designate the own funds (capital base that is risk-taking capacity) and capital usage

(regulatory capital requirements and economic capital) in a way to ensure that capital targets/limits

shall be met, given forecasted business strategy and risk profile – in normal and stressed

macroeconomic conditions.

Regulatory capital adequacy

The Bank is obliged by law to meet minimum own funds requirements, set in art. 92 of Regulation

(EU) No 575/2013 on prudential requirements for credit institutions and investment firms CRR. At the

same time, the following levels, recommendations, and buffers were included in capital limits/targets

setting:

▪ Pillar II RRE FX buffer - KNF recommendation to maintain additional own funds for the coverage

of additional capital requirements to secure the risk resulting from FX mortgage loans granted

to households, in line with art. 138.1.2a of Banking Act. A value of that buffer is defined for

banks by KNF every year because of Supervisory Review and Evaluation process (SREP) and relates

to risk that is in KNF’s opinion - inadequately covered by minimum own funds requirements, set

in CRR art. 92. At present, the buffer was set by KNF in recommendations issued in the end of

2021 in the level of 2.82pp (Bank) and 2.79pp (Group) as for Total Capital Ratio (TCR), which

corresponds to capital requirements over Tier 1 ratio of 2.11pp in Bank and of 2.09pp in Group,

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

and which corresponds to capital requirements over CET 1 ratio of 1.58pp in Bank and 1.56pp in

Group

;

▪ Combined buffer – defined in Act on macro prudential supervision over the financial system and

crisis management – that consists of:

▪ Capital conservation buffer at the level of 2.5 per cent;

▪ Other systemically important institution buffer (OSII) – at the level of 0.25 per cent, and

the value is set by KNF every year

;

▪ Systemic risk buffer at the level of 0 per cent in force from March 2020, in line with

Regulation of Ministry of Development and Finance;

▪ Countercyclical buffer at the 0 per cent level.

In accordance to binding legal requirements and recommendations of Polish Financial Supervisory

Authority (KNF), Bank defined minimum levels of capital ratios, being at the same time capital

targets/limits. These are OCR (overall capital requirements) as for particular capital ratios.

On February 11, 2022, the Bank received a recommendation from the PFSA to limit the risk occurring

in the Bank's operations by maintaining both at the standalone and at consolidated basis own funds

to cover the additional capital add-on in order to absorb potential losses resulting from the occurrence

of stress conditions under Pillar II (P2G). The required level of total capital ratio is described in the

article 92 item 1 letter c of the regulation (EU) No. 575/2013 of the European Parliament and of the

Council on prudential requirements for credit institutions and amending regulation (EU) No 648/2012

and equals to 0.89 p.p. on the top of total capital ratio, increased by the additional own funds

requirement referred to in Article 138(2)(2) of the Banking Act and by the combined buffer

requirement referred to in Article 55(4) of the Act on macro prudential supervision. The additional

capital requirement should be made up of Common Equity Tier 1 capital only. More details are

available here: P2G buffer

That recommendation replaces the previous one from 2020, to maintain own funds for the coverage of additional capital

requirements at the level of 3.41pp (Bank) and 3.35pp (Group) as for TCR, which should have consisted of at least 2.56pp

(Bank) and 2.52pp (Group) as for Tier 1 capital and which should have consisted of at least 1.91pp (Bank) and 1.88pp (Group)

as for CET1 capital

In November 2020 KNF issued the decision on identification the Bank as other systemically important institution and

imposing OSII Buffer

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The below table presents these levels as of 31 December 2021. The Bank will inform on each change

of required capital levels in accordance with regulations.

Capital ratio

31.12.2021

CET1 ratio

Bank

Group

Minimum

4.50%

Pillar II RRE FX

1.58%

1.56%

TSCR CET1 (Total SREP Capital Requirements)

6.08%

6.06%

Capital Conservation Buffer

2.50%

OSII Buffer

0.25%

Systemic risk buffer

0.00%

Countercyclical capital buffer

0.00%

Combined buffer

2.75%

OCR CET1 (Overall Capital Requirements CET1)

8.83%

8.81%

T1 ratio

Bank

Group

Minimum

6.00%

Pillar II RRE FX

2.11%

2.09%

TSCR T1 (Total SREP Capital Requirements)

8.11%

8.09%

Capital Conservation Buffer

2.50%

OSII Buffer

0.25%

Systemic risk buffer

0.00%

Countercyclical capital buffer

0.00%

Combined buffer

2.75%

OCR T1 (Overall Capital Requirements T1)

10.86%

10.84%

TCR ratio

Bank

Group

Minimum

8.00%

Pillar II RRE FX

2.82%

2.79%

TSCR TCR (Total SREP Capital Requirements)

10.82%

10.79%

Capital Conservation Buffer

2.50%

OSII Buffer

0.25%

Systemic risk buffer

0.00%

Countercyclical capital buffer

0.00%

Combined buffer

2.75%

OCR TCR (Overall Capital Requirements TCR)

13.57%

13.54%

Capital risk, expressed in the above capital targets/limits, is measured, and monitored in a regular

manner. As for all capital targets, there are determined some minimum ranges for those values.

Capital ratios in each range cause a need to take an appropriate management decision or action.

Regular monitoring of capital risk relies on classification of capital ratios to the right ranges and then

performing the evaluation of trends and drivers influencing capital adequacy.

Own funds capital requirements

The Group is during a project of an implementation of internal ratings-based method (IRB) for

calculation of own funds requirements for credit risk and calculates its own funds minimum

requirements using the IRB and standardise method for credit risk and standardise methods for other

risk types.

In the end of 2012, Banco de Portugal (consolidating Regulator) with cooperation of Polish Financial

Supervision Authority (PFSA) granted an approval to the use of IRB approach as to following loan

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

portfolios: (i) Retail exposures to individual persons secured by residential real estate collateral (RRE),

(ii) Qualifying revolving retail exposures (QRRE). According to the mentioned approval, minimum own

funds requirements calculated using the IRB approach should be temporarily maintained at no less

than 80 per cent (‘Regulatory floor’) of the respective capital requirements calculated using the

Standardized approach.

In the end of 2014, the Bank received another decision by Regulatory Authorities regarding the IRB

process. According to its content, for the RRE and QRRE loan portfolios, the minimum own funds

requirements calculated using the IRB approach had to be temporarily maintained at no less than 70

per cent (‘Regulatory floor’) of the respective capital requirements calculated using the Standardized

approach until the Bank fulfils further defined conditions. In July 2017 the Bank received the decision

of Competent Authorities (ECB cooperating with KNF) on approval the material changes to IRB LGD

models and revoking the ‘Regulatory floor’.

Since 2018, the Bank has been successively implementing a multi-stage process of implementing

changes to the IRB method, related to the requirements regarding the new definition of default. In

the first phase, in line with the “two-step approach” approved by Competent Authorities, the Bank

in 2020 successfully implemented solutions for the new definition of default in the production

environment. The Bank is obliged to include an additional conservative charge on the estimates of

the RWA value for exposures classified under the IRB approach. The level of this add-on, calculated

based on the supervisory algorithm, was set at 5 per cent above the value resulting from the IRB

method.

In 2021, all credit risk models included in the rating system subject to the current regulatory approval

were recalibrated and rebuilt. In 2021 the Bank also obtained a decision from Competent Authorities

to approve significant changes to the IRB models used (LGD, LGD in-default and ELBE) for rating

systems subject to the IRB approval.

Internal capital

The Group defines internal capital according to Polish Banking Act, as the estimated amount needed

to cover all identified, material risks found in the Bank’s activity and changes in economic

environment, considering the anticipated level of risk in the future.

Internal capital is used in capital management in following processes: economic capital adequacy

management and capital allocation. The Bank defined an internal (economic) capital estimation

process. To this end, as for measurable risk types, mathematic and statistic models and methods are

used.

Maintaining economic capital adequacy means a coverage (provision) of internal capital (that is an

aggregated risk measure) by available financial resources (own funds). An obligation to banks to have

in place that sort of risk coverage stems from Banking Act. It was mirrored in the Group’s capital

targets/limits: economic capital buffer and economic capital buffer in stressed conditions.

In 2021, both above capital targets were met with a surplus. A surplus of own funds over internal

capital supports a further increase of banking activity, in areas with a higher risk-adjusted return.

At the same time internal capital is utilised in capital allocation process, to assign an internal capital

to products/business lines, calculating risk-adjusted performance measures, setting risk limits and

internal capital reallocation.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Capital adequacy evaluation

Capital adequacy evolution of the Group and the Bank during 2021 was as follows:

Capital adequacy measures

(PLN million)

31.12.2021

Group

31.12.2020

Group

31.12.2021

Bank

31.12.2020

Bank

Risk-weighted assets

49 442.8

51 138.0

48 895.7

50 757.4

Own Funds requirements, including:

3 955.4

4 091.0

3 911.7

4 060.6

- Credit risk and counterparty

credit risk

3 479.8

3 677.0

3 477.7

3 688.3

- Market risk

32.3

26.7

32.3

26.6

- Operational risk

433.0

382.6

391.4

340.7

- Credit Valuation Adjustment

CVA

10.3

4.8

10.3

4.9

Own Funds, including:

8 436.3

9 969.0

8 397.1

9 726.6

- Common Equity Tier 1 Capital

6 906.3

8 439.0

6 867.1

8 196.6

- Tier 2 Capital

1 530.0

Total Capital Ratio (TCR)

17.06%

19.49%

17.17%

19.16%

Minimum required level

13.54%

14.10%

13.57%

14.16%

Surplus (+) / Deficit (-) of TCR ratio (pp)

+3.52

+5.39

+3.60

+5.00

Tier 1 Capital ratio (T1)

13.97%

16.50%

14.04%

16.15%

Minimum required level

10.84%

11.27%

11.31%

Surplus (+) / Deficit (-) of T1 ratio (pp)

+3.13

+5.23

2.73

+4.84

Common Equity Tier 1 Capital ratio

(CET1)

13.97%

16.50%

14.04%

16.15%

Minimum required level

8.81%

9.13%

8.83%

9.16%

Surplus (+) / Deficit (-) of CET1 ratio

(pp)

+5.16

+7.37

5.21

+6.99

Leverage ratio

6.46%

8.30%

6.45%

8.06%

As at 2021 end, capital adequacy in Bank Millennium Group stood on the safe level. Total Capital Ratio

stayed at year end at 17.06 per cent level for the Group (17.17 per cent for the Bank) and Common

Equity Tier 1 Capital ratio (equals T1 ratio) was at 13.97 per cent for the Group (14.04 per cent for

the Bank). Therefore, minimum capital levels required by KNF for Bank and Group were achieved with

a surplus.

TCR of the Group decreased during one year period by ca 2.4pp (by 2.0pp for the Bank). The reason

for this was a significant decrease in Own funds, mainly due to the created provisions for the legal

risk of FX housing loans. Own funds decreased in 2021 by approx. PLN1.5bn for the Group and by ca

PLN1.3bn for the Bank (by 15.4 per cent and 13.7 per cent, respectively). At the same time, there

was a decline in risk-weighted assets, which to some extent neutralized the decline in the capital

base. The Group's risk-weighted assets decreased in 2021 by approximately PLN1.7bn (by 3.3 per

cent), with a decrease for the Bank by PLN1.9bn (by 3.7 per cent).

Leverage ratio stood at the safe level of 6.46 per cent for the Group (6.45 per cent for the Bank), and

considerably exceeds a regulatory minimum 3 per cent.

In a long perspective, capital adequacy level of Bank and Group is evaluated as satisfactory.

In November 2021, the Group received a joint decision of the Single Resolution Board (SRB) and the

Bank Guarantee Fund, obliging the Bank to meet the minimum requirements for own funds and eligible

liabilities (MREL). Pursuant to this decision, the Group is required to meet the minimum MREL

trea

Calculated as a percentage of the total risk exposure amount

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

requirement of 21.41 per cent and the MREL

tem

requirement of 5.91 per cent by December 31, 2023.

The decision also sets out a gradual path towards reaching the minimum requirements. Their level

will be updated annually.

In connection with the above decision, in January 2022, the Supervisory Board of the Bank approved

the Eurobond Issue Program with a total nominal value of no more than EUR3bn.

8.3. CREDIT RISK

Credit risk means uncertainty about the Client’s compliance with the financing agreements concluded

with the Group i.e., repayment of the principal and interest in the specified time, which may cause

a financial loss to the Group.

The credit policy pursued in the Group is based on a set of principles such as:

▪ centralization of the credit decision process;

▪ using specific scoring/rating models for each Client segment/type of products;

▪ using IT information (workflow) to support the credit process at all stages;

▪ existence of specialized credit decisions departments for particular Client segments;

▪ regular credit portfolio monitoring, both at the level of each transaction in the case of major

exposures, and at credit sub-portfolio level (by the Client segment, type of product,

distribution channels, etc.);

▪ using the structure of limits and sub-limits for credit exposure to avoid credit concentration

and promote the effects of credit portfolio diversification;

▪ separate unit responsible for granting rating to corporate Client, thus separating the credit

capacity assessment and credit transaction granting from his creditworthiness assessment.

In the area of credit risk, in 2021, the Group focused on adjusting the principles of its credit policy

to changing economic conditions and on improving the tools and processes of credit risk management,

in particular

▪ updated the Risk Strategy for the years 2022-2024;

▪ optimised the methodology, tools, and processes of credit risk management for retail and

corporate clients;

▪ updating the industry risk classification and industry limits.

In the retail segment, special attention was paid to adapting and optimizing the lending policy to the

market situation resulting from the changing conditions of the COVID-19 coronavirus pandemic.

Several development activities in the area of mortgage loans were undertaken to optimize, automate

and digitize the process. Similar activities were also undertaken in the area of business clients as part

of granting products for financing activities, at the same time emphasizing increasing the level of

portfolio security with guarantees provided by BGK. Further efforts were also made in terms of overall

digitization and automation of credit processes.

In the corporate segment, the Group focused on the optimal use of capital while maintaining the

current profitability and maintaining a good risk profile. The Group also carried out activities aimed

at improving and accelerating credit processes, including decision-making processes. The Bank

focused especially on investment loans, including those with public support – the Bank verified and

improved processes in this area as a whole, preparing for the planned increase in the portfolio of

these loans. As in previous periods, work continued improving IT tools supporting the credit process.

The Group also continued the close monitoring of the loan portfolio as well as the individual

monitoring of the largest exposures.

Calculated as a percentage of the total exposure measure

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

All the above changes in both the retail and corporate segment enabled the Group to maintain the

risk at an acceptable level defined in the Risk Strategy as well as prepared the Group to new

challenges and to act in changed conditions.

Loan portfolio quality

Share of impaired loans, including stage 3 portfolio and POCI Assets (Purchased or Originated Credit

Impaired) in default, in total loan portfolio was at the end of December 2021 on the level of 4.39 per

cent. This means a decrease from 4.95 per cent a year ago. It should also be noted that the evolution

of this indicator throughout the year showed a stable and even decline (March’21 – 4.85 per cent,

June’21 – 4.71 per cent and September’21 – 4.65 per cent). This is largely due to the Group’s sales

and write-offs policy of impaired portfolio. Thus, the Group still enjoys one of the best asset quality

among Polish banks. Share of loans past-due more than 90 days in total portfolio has also decreased

during last year from 2.74 per cent in 2020 to 2.27 per cent in December 2021.

Coverage ratio of impaired loans, now defined as relation of all risk provisions for stage 3 loans and

POCI in default, has increased during the year from 66 per cent in December 2020 to 69 per cent.

Coverage by total provisions of loans past-due more than 90 days also increased from 119 per cent

one year ago to 133 per cent now. Both these ratios improved despite the elimination from the Group’s

loans portfolio in 2021 of appr. PLN345mn of receivables covered of provisions with 100 per cent

(write-off).

The evolution of main indicators of the Group’s loan portfolio quality is presented below:

Group loans quality indicators

31.12.2021

31.12.2020

Total impaired loans (PLN million)

3 557

3 792

Total provisions (PLN million)

2 441

2 489

Impaired over total loans ratio (%)

4.39%

4.95%

Loans past-due over 90 days /total loans (%)

2.27%

2.74%

Total provisions/impaired loans (%)

68.6%

65.7%

Total provisions/loans past-due (>90d) (%)

132.6%

118.8%

(*) Purchase Price Allocation (PPA) implied consolidation of Euro Bank impaired (stage 3) portfolio at net value

Impaired loan ratios by segment show a downtrend both in the retail portfolio from 4.9 per cent to

4.55 per cent (including mortgage portfolio had a decreasing characteristic from 2.48 per cent to 2.17

per cent), as well as in the corporate portfolio, in which the ratio decrease during the year from 5.11

per cent to 3.86 per cent (in leasing portfolio reported decrease equalled to 1.31pp while for portfolio

of other corporate loans it was 1.19pp). Last year, the value of foreign currency mortgage loans

decreased as much by app. 30 per cent year-on-year (in PLN terms). Additionally, it should be noted

that ex-Euro Bank mortgage portfolio, in amount app PLN 0.8 billion, enjoys a guarantee and

indemnity from Société Genéralé. Excluding this portfolio, the share of FX mortgage loans (net) in the

total loan portfolio fell from 17.4 per cent to 11.4 per cent. The improvement in the currency

structure of the mortgage loan portfolio was supported by a significant increase in sales of loans in

PLN.

The evolution of the Group’s loan portfolio quality by main products groups:

Portfolio quality by products:

Loans past-due

> 90 days ratio

Impaired loans

Ratio

31.12.2021

31.12.2020

31.12.2021

31.12.2020

Mortgage

0.90%

1.00%

2.17%

2.48%

Other retail*

6.57%

7.30%

10.37%

10.70%

Total retail clients*

2.54%

2.86%

4.55%

4.90%

Leasing

1.29%

2.16%

3.16%

4.47%

Other loans to companies

1.42%

2.44%

4.27%

5.46%

Total companies

1.38%

2.34%

3.86%

5.11%

Total loan portfolio

2.27%

2.74%

4.39%

4.95%

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

(*) incl. Microbusiness, annual turnover below PLN 5 million

The Group's portfolio is characterized by appropriate diversification, both due to the concentration

of the largest exposures and due to the concentration in sectors of the economy. Participation of The

10 largest exposures remain at a safe, low level of 4.5 per cent (decrease in 2021 from 5.0 per cent).

The share of main sectors in the Group's portfolio is presented in the chart below:

8.4. OTHER RISKS

Market Risk and Interest Rate Risk in the Banking Book (IRRBB)

The market risk encompasses current and prospective impact on earnings or capital, arising from

changes in the value of the Group’s portfolio due to adverse market movement (prices).

The interest rate risk arising from Banking Book activities (IRRBB) encompasses current or prospective

impact to both the earnings and the economic value of the Group’s portfolio arising from adverse

movements in interest rates that affect interest rate sensitive instruments. The risk includes gap risk,

basis risk and option risk.

The framework of market risk and interest rate risk management and its control are defined on

a centralized basis with the use of the same concepts and metrics which are used in all the entities

of the BCP Group.

The main measure used by the Group to evaluate market risks is the parametric VaR (Value at Risk)

model – an expected loss that may arise on the portfolio over a specified period (holding period) with

a required probability (confidence level) due to an adverse market movement. The market risk

measurement is carried out daily, both on an individual basis for each of the areas responsible for risk

taking and risk management, and in consolidated terms for Global Bank, Banking Book and Trading

Book considering the effect of the diversification that exists between the portfolios.

Within the current market environment, the Group continued to act very prudently. The strong market

volatility in connection with the global COVID-19 pandemic and Monetary Policy Council’s (MPC’s)

series of decisions to increase interest rates in Poland resulted in increase of the Group’s market and

interest rate risk.

In 2021, the VaR for the Group that is jointly Trading Book and Banking Book, increased due to market

volatility and in 4Q2021 breached the limits in place. The VaR limits were not breached in Trading

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Book. All excesses of market risk limits are always reported, documented, and ratified at the proper

competence level.

In 2021, open positions included just interest-rate instruments and FX risk instruments. The VaR

indicators for the Group remained on average at the level of PLN161.7mn (63 per cent of the limit)

and PLN391.3mn (150 per cent of the limit) as of the end of December 2021. However, in 2021, the

VaR limits were very conservative - set for Global Bank at no more than 2.6 per cent and for Trading

Book at 0.31 per cent of Own Funds). FX open position (Intraday as well as Overnight) remained below

2 per cent of The Own Funds and well below the maximum limits in place.

Apart from daily measurement at the level of each book and market risk area, the VaR model is mainly

applicable and analysed at the Trading Book level, where the policy intention is to trade positions on

the regular basis (mostly daily). On contrary, following the supervisory guidelines, the interest rate

risk in Banking Book is additionally covered by both earnings-based and economic value measures, by

measuring:

- the impact on the net interest income over a time horizon of next 12 months resulting from

one-off interest rate shock of upward/downward yield curve shift by 100 basis points,

- the impact on the economic value of equity (EVE) resulting from different upward/downward

basis points shocks, including scenarios defined by the supervisor (standard, supervisory test

assuming sudden parallel +/-200 basis points shift of the yield curve as well supervisory outlier

test - SOT with set of six interest rate risk stress scenarios).

Exposure to interest rate risk in the Banking Book are primarily generated by the differences in

repricing dates of assets and liabilities as well as its reference indexes, if contractually existing. It is

specifically affected by the unbalance between assets and liabilities that have fixed rate, especially

by the liabilities which cannot have interest rate lower than 0. Consequently, the level of sensitivity

to interest rate changes is influenced by the level of interest rates taken as a reference. Additionally,

due to specificity of the polish legal system, the interest rate of credits is limited (it cannot exceed

two times Reference Rate of the National Bank of Poland increased by 7 percentage points). In

situations of decreasing interest rates, the impact on Net Interest Income is negative and depends on

the share of the loan portfolio that is affected by the new maximum rate. On the other hand,

assumptions regarding the timing and size of deposits repricing are also very important when assessing

the interest rate sensitivity and risk.

Considering the increase of interest rates that occurred in the 4

quarter 2021, the results of the

IRRBB measurement as of the end of December 2021 indicate that the Group is now in a more balanced

situation regarding the scenario of a decline or increase in interest rates. The supervisory outlier

stress tests result as of December 2021 show that even under the most severe outlier test scenario,

the decline of EVE for Banking Book is far below supervisory limit of 15 per cent of Tier 1. Similarly,

decline of EVE under standard scenario of sudden parallel +/-200 basis points shift of the yield curve

also stayed far below supervisory maximum of 20 per cent of Own Funds.

The results of sensitivity of NII for the next 12 months after 31

December 2021 and for position in

Polish Zloty in Banking Book are carried out under the following assumptions:

• static balance sheet structure as of that reference date (no change during the following 12

months),

• reference level of net interest income assuming that all assets and liabilities with variable interest

rate already reflect market interest rates levels as of 31

December 2021 (for example, the NBP

Reference rate at the end of 2021 was set at 1.75 per cent),

• application of a parallel move of 100 bps in the yield curve up and down is an additional shock to

all market interest rates levels as of 31

December 2021 and is set at the repricing date of the

assets and liabilities that happens during the 12 following months.

In a scenario of parallel decrease of interest rates by 100bp, the results are negative and equal to

PLN-162mn or -6.0 per cent of the Group’s NII reference level; In a scenario of parallel increase of

interest rates by 100bp, the results are positive and equal to PLN160mn or +5.9 per cent of the Group’s

NII reference level. The level of asymmetry that existed in past reporting dates is now lower as

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

interest rates were meaningfully above 0 per cent on 31

December 2021 and the leverage impact of

the maximum interest rate is now less strong than in previous years due to changes in the structure

of portfolio and pricing of loans.

More information on market risk and interest rate risk management can be found in chapter 8.4 of

the Annual Consolidated Report of the Bank Millennium S.A. Capital Group for the 12-month period

ending 31

December 2021.

Liquidity risk

Liquidity risk reflects the possibility of incurring significant losses because of deteriorated financing

conditions (financing risk) and/or of the sale of assets for less than their market value (market

liquidity risk) to meet the funding needs arising from the Group’s obligations.

The process of the Group’s planning and budgeting covers the preparation of a Liquidity Plan to make

sure that the growth of business will be supported by an appropriate liquidity financing structure and

supervisory requirements in terms of quantitative liquidity measures will be met.

In 2021, the COVID-19 pandemic still had an impact on global financial markets, however the Bank

did not observe any threat to its liquidity position due to the spread of COVID-19. The Group continued

to be characterized by solid liquidity position.

In 2021, the Group’s Loan-to-Deposit ratio decreased and was equalled to 86 per cent at the end of

December 2021 (comparing to level of 91 per cent as of end of December 2020).

The liquid assets portfolio, that is portfolio of government debt securities, supplemented by the cash

and exposures to the National Bank of Poland, is treated as the Group's liquidity reserve, which will

overcome crisis situations. At the end of 2021, the share of Polish government securities (including

NBP Bills) in total securities portfolio amounted to 98 per cent and allowed to reach the level of

approx. PLN17.6bn (17 per cent of total assets), whereas at the end of December 2020 was at the

level of approx. PLN18.4bn (19 per cent of total assets) (see table below).

Main liquidity ratios

31.12.2021

31.12.2020

Loans/Deposits ratio (%)

86%

91%

Liquid assets portfolio (PLN million)*

18 793

18 250

Liquidity Coverage requirement, LCR (%)

150%

161%

(*) Liquid Assets Portfolio: The sum of cash, exposure to Central Bank (the surplus above the required obligatory reserve),

Polish Government debt securities, NBP-Bills and due from banks with maturity up to 1 month. The debt securities portfolio

is reduced by NBP haircut for repo transactions and securities encumbered for non-liquidity purposes.

Consequently, the large, diversified, and stable funding from retail, corporate and public sector

Clients remains the main source of financing of the Group. The source of medium-term funding

remains also medium-term loans, subordinated debt, own bonds issue and bank’s securities.

The Group manages its FX liquidity using FX-denominated bilateral loans as well as subordinated debt,

FX swaps and cross-currency interest rate swaps transactions. The importance of swaps has been

decreasing because of the reduction of the FX mortgage loan portfolio and the hedge in foreign

currency of the provisions for legal risk. The swaps portfolio is diversified in term of counterparties

and maturity dates. For most counterparties, the Bank has signed a Credit Support Annex to the

master agreements.

The estimation of the Group’s liquidity risk is carried out both with the use of the ratios defined by

the supervisory authorities and own indicators, for which exposure limits were also established.

According to the Regulation of European Parliament and Council no 575/2013 on prudential

requirements for credit institutions and investment firms (CRR), the Group is calculating the liquidity

coverage requirement (LCR). The regulatory minimum of 100 per cent for LCR valid in 2021 was met

by the Group (as of the end of December 2021 the LCR reached the level of 150 per cent). The measure

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

is calculated daily and has been reported on the monthly basis to NBP since March 2014. Internally,

the LCR is estimated daily and reported to the areas responsible for the management and control of

the liquidity risk in the Group. In 2021, the Group complied also with supervisory measures imposed

by KNF Resolution 386/2008 as well as regularly calculated net stable funding requirement (NSFR).

Since 28

June 2021 the NSFR as obligatory supervisory long term liquidity measure replaced M3 and

M4 supervisory measures defined by the KNF. In each of the quarter, the NSFR was above the

supervisory minimum of 100 per cent (supervisory minimum valid since June 2021).

Additionally, the Group employs an internal structural liquidity analysis based on cumulative liquidity

gaps calculated on an actuarial basis (i.e., assuming a certain probability of cash flow occurrence).

In 2020 all the liquidity gaps were maintained positive however, in time buckets below 1 month,

temporary below the minimum limits. The Group adopted very conservative limits of 12 per cent of

the balance sheet total for the short-term gaps. Hence, exceeding the limits for the liquidity gap

should not be equated with any liquidity risk.

Liquidity stress tests are performed at least quarterly, to understand the Group’s liquidity-risk profile

and to ensure that the Group can fulfil its obligations in the event of a liquidity crisis and to update

the Liquidity Contingency Plan and management decisions.

The liquidity risk management process is regulated in the internal policy that is a subject of the Bank’s

Management Board approval.

The Group has also emergency procedures for situations of increased liquidity risk – the Liquidity

Contingency Plan. The Liquidity Contingency Plan establishes the concepts, priorities, responsibilities,

and specific measures to be taken in the event of a liquidity crisis. The Liquidity Contingency Plan is

tested and revised at least once a year. The revised Plan was approved by the Supervisory Board in

December 2021.

More information on liquidity risk management can be found in chapter 8.5 of the Annual Consolidated

Report of the Bank Millennium S.A. Capital Group for the 12-month period ending 31

December 2021.

Operational risk

Operational risk management is based on the processes structure implemented in the Group and

overlapping the traditional organizational structure. Current management of the specific processes,

including the management of the profile of process operational risk, is entrusted to Process Owners,

who report to all other units participating in the risk management process and are supported by these

units.

To manage the fraud risk, the Group has in its structure a special organizational unit to develop,

implement and monitor the Group’s policy for management of this risk in cooperation with other

organizational units of the Group and in accordance with its internal regulations. Fraud Risk

Management Sub-unit in the Security Department is a centre of competence for the fraud prevention

process.

Non-compliance risk

Lack of compliance of the Bank’s operations with binding laws, internal regulations, and market

standards, which is linked with the risk of material or reputation losses or., It’s one of the areas

threatening the banking activity. By monitoring compliance with both internal and external

regulations, Bank Millennium considers it to be particularly important:

▪ Preventing money laundering and financing of terrorism,

▪ Ensuring consistency of Bank Millennium’s internal normative acts with generally binding laws

as well as recommendations issued by supervisory authorities,

▪ Counteracting and managing conflicts of interest,

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

▪ Counteracting corruption,

▪ Observance of ethical principles,

▪ Monitoring personal transactions and protecting confidential information related to Bank

Millennium, financial instruments issued by the Bank as well as information connected with

purchase/sale of such instruments,

▪ Monitoring and ensuring compliance of the investment products covered by MiFID II.

Bank Millennium undertakes appropriate actions for the purpose of ongoing and continuous tracking

of changes occurring in generally binding legal regulations as well as recommendations and guidance

given by supervisory authorities, both national as well as of the European Union. To ensure compliance

of the Bank's operation with the generally applicable laws, the Compliance Department undertakes

several activities such as:

1) informing about changes in law,

2) periodically reviewing all internal normative acts binding at the Bank in terms of compliance

with applicable laws and standards,

3) analysing new products and services,

4) measuring compliance risk in processes operating at the Bank,

5) issuing opinions,

6) participating in key implementation projects, and

7) staff training.

The Bank’s operations may generate a conflict of interest between Bank’s interests and the interests

of Customers. The Bank’s main principle is to take all reasonable steps to identify a conflict of interest

between the Bank and its Customers, as well as between individual Customers, and to establish rules

ensuring that such conflicts have no adverse impact on Customers’ interests.

The Bank Millennium Group undertakes also appropriate actions to ensure conduct concerning

personal transactions, which is compliant with standards and laws. These actions and measures are

meant to, according to the circumstances, to restrict or prevent performance of personal transactions

by relevant persons in situations, which may cause a conflict of interest or be involved with access to

confidential information or to data about Customers’ transactions.

Shares of Bank Millennium are admitted to public trading on the Warsaw Stock Exchange. Such status

requires special attention and observance of the obligation to maintain highest standards for

transparency of financial markets. The policy of Bank Millennium is to maintain strict control as

regards protection of the flow of confidential information (including in accordance with the

requirements of Regulation No. 596/2014 of the European Parliament and of the Council of 16 April

2014 on abuses on the market abuse, MAR). The Bank prohibits the use and disclosure of confidential

information in any form. Purchasing and selling by persons discharging managerial responsibilities, of

the Bank’s shares, debt instruments of the Bank or derivatives or other financial instruments linked

to them is forbidden during closed periods.

The Anti-Money Laundering and Counter Terrorism Financing programme (AML/CTF), applied by the

Bank Millennium, is a comprehensive system of identification of threats related to money laundering

crimes.

Actions launched under this programme include in particular:

▪ application of financial security measures to Customers, depending on the degree of risk and

based on „Know your Client” or (KYC) principle – the key concept of the program,

▪ transaction registration and reporting,

▪ identification of suspicious transactions,

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

▪ cooperation with the General Inspector of Financial Information.

Bank Millennium adjusts its reports to the analysis of suspected transactions on the on-going basis,

considering up-to-date patterns (sectors, cash-flow routes, Customer behaviour) for effective

identification and reporting of transactions suspected of money laundering. Implemented internal

procedures, organizational solutions and employee training programmes ensure efficient operation of

the programme.

Bank Millennium, with view to protecting Customers who invest their funds in investment products

with varied degree of risk, strictly monitors compliance of these products, their offering and handling

process with relevant internal regulations, laws, and external guidelines – on the domestic and

European Union level. A specific compliance monitoring programme also covers consumer loans and

insurance products (including insurance – investment products) addressed to consumers.

The Bank Millennium has mechanisms and internal regulations allowing for anonymous reporting of

violations of law and internal regulations and ethical standards (the so-called whistleblowing) to the

Chairman of the Management Board, and in the case of notification concerning a Member of the

Management Board - to the Supervisory Board. The Bank Millennium will verify each application,

ensuring that the reporting person will be protected by acts of repressive, discriminatory, and unfair

nature.

8.5. LEGAL RISK RELATED TO FX-MORTGAGE LOAN BOOK

Court claims and current provisions on legal risk

On December 31, 2021, the Bank had 11,070 loan agreements and additionally 913 loan agreements

from former Euro Bank (94% loans agreements before the Court of first instance and 6% loans

agreements before the court of second instance) under individual ongoing litigations (excluding claims

submitted by the bank against clients i.e. debt collection cases) concerning indexation clauses of FX

mortgage loans submitted to the courts with the total value of claims filed by the plaintiffs amounting

to PLN1,512.4 million and CHF121.3 million (Bank Millennium portfolio: PLN1,391.9 million and

CHF119.0 million and former Euro Bank portfolio: PLN120.4 million and CHF2.3 million).

The claims formulated by the clients in individual proceedings primarily concern the declaration of

invalidity of the contract and payment for reimbursement of allegedly undue performance, due to

the abusive nature of indexation clauses, or maintenance of the agreement in PLN with interest rate

indexed to CHF Libor.

In addition, the Bank is a party to the group proceedings (class action) subject matter of which is to

determine the Bank's liability towards the group members based on unjust enrichment (undue benefit)

ground in connection with the foreign currency mortgage loans concluded. It is not a payment dispute.

The judgment in these proceedings will not grant any amounts to the group members. The number of

credit agreements covered by these proceedings is 3,281. At the current stage, the composition of

the group has been established and confirmed by the court. The proceedings entered the phase of

reviewing the case on the merits. A decision on the admission of evidence will be taken by the court

at a closed session. The next hearing will be scheduled ex officio.

The pushy advertising campaign observed in the public domain affects the number of court disputes.

Until the end of 2019, 1,981 individual claims were filed against the Bank (in addition, 236 against

former Euro Bank), in 2020 the number increased by 3,007 (267) while in 2021 the number increased

by 6,149 (417).

Based on ZBP (the Polish Banking Association) data gathered from all banks having FX mortgage loans,

vast majority of disputes were finally resolved in favour of banks until 2019 year. However, after the

Court of Justice of the European Union (CJEU) judgment issued on 3 October 2019 (Case C-260/18)

the proportion have adversely changed and vast majority of court cases have been lost by banks,

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

particularly in first instance proceedings. As far as the Bank itself is concerned, until 31 of December

2021 only 245 cases were finally resolved (210 in claims submitted by clients against the Bank and 35

in claims submitted by the Bank against clients i.e. debt collection cases). 60% of finalised individual

lawsuits against the Bank were favourable for the Bank including remissions and settlements with

plaintiffs. Unfavourable rulings (40%) included both invalidation of loan agreements as well as

conversions into PLN+LIBOR. The Bank submits cassation appeals to the Supreme Court against

unfavourable for the Bank legally binding verdicts. On the other hand, the statistics of first instance

court decisions have been much more unfavourable in recent periods and its number has also

increased. In general, the Bank submits appeals against 1st instance negative court rulings.

The outstanding gross balance of the loan agreements under individual court cases and class action

against the Bank on 31.12.2021 was PLN4,382 million (of which the outstanding amount of the loan

agreements under the class action proceeding was PLN962 million PLN).

If all Bank Millennium’s loan agreements currently under individual and class action court proceedings

would be declared invalid without proper compensation for the use of capital, the pre-tax cost could

reach PLN4,020 million. Overall losses would be higher or lower depending on the final court

jurisprudence in this regard.

In 2021, the Bank created PLN2,086.0 million provisions and PLN219.2 million for former Euro Bank

originated portfolio. The final level of provisions for the Bank Millennium portfolio at the end of

December 2021 was at the level of PLN3,078.9 million, and PLN253.7 million for former Euro Bank

originated portfolio.

The methodology developed by the Bank is based on the following main parameters:

(1) the number of current (including class action) and potential future court cases that will appear

within a specified (three-year) time horizon,

(2) the amount of the Bank's potential loss in the event of a specific court judgment three negative

judgment scenarios were taken into account:

• invalidity of the agreement

• average NBP

• PLN + LIBOR

(3) the probability of obtaining a specific court verdict calculated on the basis of statistics of

judgments of the banking sector in Poland and legal opinions obtained. Variation in the level of

provisions or concrete losses will depend on the final court decisions about each case and on the

number of court cases.

(4) in the case of a loan agreement invalidity scenario, a new component recognized in the

methodology, taking legal assessments into consideration, is the calculation of the Bank's loss taking

into account the assignment of a minimum probability of receiving the settlement of a remuneration

for the cost of use of capital.

(5) new component recognized in the methodology is the amicable settlement with clients in or out

of court. Notwithstanding the Bank’s determination to continue taking all possible actions to protect

its interests in courts, the Bank has been open to its customers in order to reach amicable solutions

on negotiated terms, case by case, providing favourable conditions for conversion of loans to PLN and

/ or early repayment (partial or total). As a result of these negotiations the number of active FX

mortgage loans was materially reduced in 2021. As the Bank is still conducting efforts to further

signing of agreements which involved some costs, a scenario of further materialization of negotiations

was added. However, it should be noted that:

a. negotiations are conducted on a case-by-case basis and can be stopped at any time

by the Bank,

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

b. as the effort was material in 2021, the probability of success is going down and at the

same time, gradually most of the client base has had contact with the Bank regarding

potential negotiation of the conversion of the loans to PLN, so the Bank is taking a

conservative approach when calculating the potential future impact for the time being.

Legal risk from former Euro Bank portfolio is fully covered by Indemnity Agreement with Société

Générale S.A.

The Bank analysed the sensitivity of the methodology for calculating provisions, for which a change

in the parameters would affect the value of the estimated loss to the legal risk of litigation:

Parameter

Scenario

Impact on loss due to legal risk

related to the portfolio of mortgage

loans in convertible currencies

Change in the number of

lawsuits

Additionally, 1 p.p. of active

clients file a lawsuit against the

Bank

PLN56 million

Change in the

probability of winning a

case

The probability of the Bank

winning a case is lower by 1 p.p

PLN40 million

Change in estimated

losses for each variant

of the judgment

Increase in losses for each variant

of the judgment by 1 p.p

PLN32.5 million

The Bank is open to negotiate case by case favourable conditions for early repayment or conversion

of loans to PLN. As a result of these negotiations the number of active FX mortgage loans decreased

by 8,449 (including 69 confirmed in court) in 2021 compared to over 57,800 active loans agreements

at the end of 2020. Cost incurred in conjunctions with these negotiations totalled PLN 364.3 million

year to date and is presented mainly in ‘Result on exchange differences’ in the profit and loss

statement.

Finally it should also be mentioned, that the Bank, as at 31.12.2021, had to maintain additional own

funds for the coverage of additional capital requirements related to FX mortgage portfolio risks

(Pillar II FX buffer) in the amount of 2.82 p.p. (2.79 p.p. at the Group level), part of which is

allocated to operational/legal risk.

Events that may impact FX-mortgage legal risk and related provisions

It can reasonably be assumed that the legal issues relating to foreign currency mortgage loans will be

further examined by the national courts within the framework of disputes considered which would

possibly result in the emergence of further interpretations, which are relevant for the assessment of

the risks associated with subject matter proceedings. This circumstance indicates the need for

constant analysis of these matters. Further requests for clarification and ruling addressed to the

European Court of Justice and Polish Supreme Court have already been filed and may still be filed

with potential impact on the outcome of the court cases.

On 29 January 2021, a set of questions addressed by the First President of the Supreme Court to the

full Civil Chamber of the Supreme Court was published. This may have important consequences in

terms of clarifications of relevant aspects of the court rulings and their consequences. The Civil

Chamber of the Supreme Court has been requested for answering the questions concerning key

matters related to FX mortgage agreements: (i) is it permissible to replace - with the law provisions

or with a custom - the abusive provisions of an agreement which refer to FX exchange rate

determination; moreover, (ii) in case of impossibility of determining the exchange rate of a foreign

currency in the indexed/denominated credit agreement - is it permissible to keep the agreement still

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

valid in its remaining scope; as well as (iii) if in case of invalidity of the CHF credit there would be

applicable the theory of balance (i.e. does arise a single claim which is equal to the difference

between value of claims of bank and the customer) or the theory of two condictions (separate claims

for the bank and for the client that should be dealt with separately). The Supreme Court has also

been requested for answering the question on (iv) from which point in time there shall be starting the

limitation period in case of bank's claim for repayment of amounts paid as a loan and (v) whether

banks and consumers may receive remuneration for using their pecuniary means by another party.

On 11 May, the Civil Chamber of the Supreme Court requested opinions on Swiss franc mortgage loans

from five institutions including the National Bank of Poland (NBP), the Polish Financial Supervision

Authority (UKNF), the Commissioner for Human Rights, the Children's Rights Ombudsman and the

Financial Ombudsman.

The positions of: the Commissioner for Human Rights, the Children's Rights Ombudsman and the

Financial Ombudsman are in general favourable to consumers, while the National Bank of Poland and

the Polish Financial Supervision Authority present a more balanced position, including fair principles

of treatment of FX mortgage borrowers vis-à-vis PLN mortgage borrowers, as well as balanced

economic aspects regarding solutions for the problem that could be considered by the Supreme Court.

In the next meeting of the Supreme Court that took place on 2 September 2021, the Court did not

address the answers to the submitted questions and no new meeting date is known. The Bank will

assess in due time the implications of the decisions of the Supreme Court on the level of provisions

for the legal risk.

With the scope of settlements between the Bank and borrower following the fall of the loan

agreement is also connected the legal issue directed to the seven-person composition of the Supreme

Court (case sign: III CZP 54/21). The date of case review has not been specified yet.

The Supreme Court was also presented with the issue of whether the loan agreement is a mutual

agreement in the light of the regulations concerning retention right.

In August 2021, the Court of Justice of the European Union (“CJEU”) was asked for a preliminary ruling

(C-520/21) whether, in the event that a loan agreement concluded by a bank and a consumer is

deemed invalid from the beginning due to unfair contract terms, the parties, in addition to the

reimbursement of the money paid in contracts (bank - loan capital, consumer - instalments, fees,

commissions and insurance premiums) and statutory interest for delay from the moment of calling for

payment, may also claim any other benefits, including receivables in particular, remuneration,

compensation, reimbursement of costs or valorisation of the performance.

Notwithstanding the above, there are a number of further questions addressed by Polish courts to the

European Court of Justice which may be relevant for the outcome of the court disputes in Poland.

The subject matter questions relate, in particular, to:

- the possibility of replacing of an abusive contractual clause with a dispositive law provision;

- the limitation period of a consumer claims concerning reimbursement of benefits made as

performance of an agreement which has been declared to be invalid

- the possibility of declaration by the Court of abusiveness of only part of a contractual provision.

On December 8, 2020, Mr. Jacek Jastrzębski, the Chairman of the Polish Financial Supervision

Authority (‘PFSA’) proposed a ‘sector’ solution to address the sector risks related to FX mortgages.

The solution would consist in offering by banks to their clients a voluntary possibility of concluding

arrangements based on which a client would conclude with the bank a settlement as if his/her loan

from the very beginning had been a PLN loan bearing interest at an appropriate WIBOR rate increased

by the margin historically employed for such loan.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Following that public announcement, the idea has been subject of consultations between banks under

the auspices of the PFSA and Polish Banking Association. Banks in general have been assessing the

conditions under which such solution could be implemented and consequent impacts.

As expressed in our previous financial reports, in the view of the Management Board of the Bank,

important aspects to take into consideration when deciding on potential implementation of such

program are : a) favourable opinion or at least non-objection from important public institutions; b)

support from National Bank of Poland to the implementation; c) level of legal certainty of the

settlement agreements to be signed with the borrowers; d) level of the financial impact on a pre- and

after tax basis; e) capital consequences including regulatory adjustments in the level of capital

requirements associated with FX mortgage loans.

Based on current information some of the above mentioned aspects are not likely to be fully clarified

and / or achieved.

At the time of publishing this report, neither the Management Board nor any other corporate body of

the Bank took any decision regarding implementation of such program. If / when a recommendation

regarding the program would be ready, the Management Board would submit it to the Supervisory

Board and General Shareholders meeting taking into consideration the relevance of such decision and

its implications.

Bank Millennium conducted a survey among its customers in cooperation with an external reputed

company regarding the willingness to accept settlement in the terms of the sector solution put

forward by the Chairman of KNF. 49% of clients enquired were preliminarily interested in benefitting

from the proposal, while 25% were not able to clearly express their opinion and 26% would not take

such offer.

According to the current calculations, implementation of a solution whereby loans would be

voluntarily converted to Polish zloty as if from the very beginning they had been a PLN loan bearing

interest at an appropriate WIBOR rate increased by the margin historically employed for such loans,

could imply provisions for the losses resulting from conversion of such loans (if all the then existing

portfolio would be converted) with a pre-tax impact between PLN 4 390 million to PLN 4 848 million

(not audited data). The impacts can significantly change in case of variation of the exchange rate and

several assumptions. Impacts on capital could be partially absorbed and mitigated by the combination

of the existing surplus of capital over the current minimum requirements, the reduction of risk

weighted assets and the decrease or elimination of Pillar 2 buffer.

Due to the complexity and uncertainty regarding the outcome of court cases, as well as from potential

implementation of KNF Chairman solution or from potential Supreme Court decisions or European

Court of Justice decisions, it is difficult to reliably estimate potential impacts of such different

outcomes and their interaction as at the date of publication of the financial statements.

More information on legal risk related to FX-mortgage loan book can be found in chapter 13 of the

Annual Consolidated Financial Report of the Bank Millennium S.A. Capital Group for the 12-month

period ending 31st December 2021.

8.6. FURTHER RISK FACTORS

Further risk factors:

• Risk connected with cash loans fees return in case of early repayment. On 11 September,

2019 the Court of Justice of the European Union ruled in the case of Lexitor against SKOK

Stefczyka, Santander Consumer Bank and mBank (case C 383/18) in which it stated that

consumer has rights to demand the reduction of the total loan cost corresponding to interest

and costs for the remaining term of the agreement in case of early repayment of loan. Taking

into consideration this verdict, Bank Millennium Group created in 2019 a provision in the

amount of PLN 66.4 million (split between Net Interest Income and Other Operating Costs),

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

for potential returns to the clients. In 2020, the provision was increased by additional

PLN142mn. No increase of provision took place in 2021. The provision was estimated based

on the maximum amount of potential returns and the probability of payment being made.

• Risk of financing costs increase due to a need of MREL eligible instruments issuance. On

November 18, 2021, the Bank received a letter from the Banking Guarantee Fund on MREL

(minimum requirement for own funds and eligible liabilities) requirements set for December

31, 2023 as well as interim target levels. The Bank is still to meet its YE21 target MREL level

due to the net loss booked in 2021 (higher-than-initially planned provisions against legal risk

related to FX-mortgage portfolio) and the fact that an issue of senior non-preferred bonds on

the Polish market initially planned for 4Q21 was not possible to execute due to a gap in the

Polish bond law. Due to this fact, the Bank decided to alternatively prepare and launch a new

EMTN programme that will allow the international issue of senior non-preferred bonds, to be

executed in the first half of 2022. On January 28, 2022, the Bank’s Supervisory Board approved

the Eurobond Issue Programme of the total nominal value not higher than EUR 3 billion.

• In 2020, the systemic risk buffer was lowered to 0% from 3% which contributed to a decrease

in the level of MREL requirements. If the level of systemic risk buffer was to would increase

in the future, it would influence the level of MREL requirements and the issuance volume

needs.

• Risk of reduced franchise network. The franchise network has significantly increased the

Bank’s distribution network in 2019 along with the take-over of Euro Bank. Its size remained

practically unchanged since.

• Cyber-risk is among the highest ranked risks that banks are facing globally and the Polish

banking market is no exception. The rapid development of new technologies, digitalisation of

the economy and increasingly sophisticated cyber-attacks make cyber-risk a likely constant

risk factor that banks going forward will need to put increasing resources to mitigate.

• Regulatory environment remains a big challenge for the banking sector and further tightening

of rules and introduction of new ones by either European or local regulators cannot be ruled

out. Competition is becoming increasingly intense in the financial services sector. While

historically banks had to mostly combat threats from their peers, the relaxation of access to

customer data that results from the recent introduction of PDS2 directive accelerates the

potential entry of bigtechs and fintechs onto the market. Furthermore, the ongoing

consolidation of the domestic banking market is likely to further increase competitive

pressures further out. As a result larger players are likely to benefit from the economies of

scale to the detriment of smaller banks. The increasing share of State owned/controlled banks

in the sector is another risk factor worth highlighting.

Risk factors presented above do not constitute a complete list of potential risks that the Bank and the

BM Group are, or may be, exposed to.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

9. HUMAN RESOURCES MANAGEMENT

9.1. PERSONNEL POLICY

The Bank Millennium Group implements a Human Resources Policy, which sets out the general

principles related to employee recruitment, evaluation, development and retention. Based on this

policy and business assumptions, the Bank has developed a Human Resources strategy. The strategy

regulates all areas of human resources management, including employment and remuneration.

The Human Resources Policy and the HR Management Strategy based on it support the business needs

of the Bank Millennium Group and create a friendly, supportive and safe workplace.

Friendly workplace

Bank Millennium creates a good working environment for employees regardless of gender, age, race,

religion, nationality, ethnic origin, disability, political beliefs, union membership and sexual

orientation, who find here conditions for professional development in an atmosphere of cooperation

and mutual respect.

Bank Millennium was ranked second in the Poland's Best Employers 2021 ranking by Forbes magazine

and Statista in the Banks and Financial Services category. Among the criteria taken into account were:

development and prospects, employee relations and management and sustainable development.

For the eighth time in a row, the Bank passed the certification process and retained the title of Solid

Employer 2022. The distinction of the emblem attests to the clarity and reliability of the company

and its compliance with the highest standards in the area of Human Resources.

Bank Millennium has been ranked among the "European Diversity Leaders 2022". In the list published

by the Financial Times, 850 employers who support and promote diversity in their organisations were

selected from among 15,000 companies. The ranking is based on the opinions of 100,000 employees

and human resources and recruitment experts. The research company Statista is a content partner of

the project.

Safe working environment

In 2021, the Bank had a special committee, already established at the start of the pandemic, to

monitor staff safety from an epidemiological point of view, to monitor the pandemic situation in the

country and the regulations of the competent authorities, to decide on procedures to ensure

epidemiological safety in the Bank and to assess the impact of the pandemic on the operation of

business areas.

There was a systematic communication campaign to prevent infections, informing on how to deal with

infections. Employees were regularly provided with information on safety procedures in place,

available protection measures and how to deal with infections. The obligation to keep a distance and

use masks was maintained and business trips were limited to what was necessary. Work organisation

was also changed. The bank allowed employees to work remotely.

In 2021, the COVID-19 medical cost support fund for employees and their next of kin, established in

April 2020 by a decision of the Bank's Board of Directors, was also operational. The amount of this

fund is PLN 1 million.

Competence development

Despite the pandemic constraints, the Bank provided a very large range of training courses for

employees, a large part of which took place remotely in 2021, and the Bank further developed its

already very extensive e-learning training portfolio.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

The Bank continued to provide extensive training programmes for business lines, in particular retail

banking, which enable both on-boarding of new employees and ensure their development while

working in the organisation. Specialised training for technology areas was also offered.

Managers training was also an important element. In 2021, particular emphasis was placed on training

managers in the retail banking area.

The Bank ran a lecture programme as part of the Millennium Campus, which was highly appreciated

by employees. Lecturers in this programme were recognised experts from the world of science and

business. The programme covered topics related to the development of new technologies, artificial

intelligence as well as psychology and business.

The Bank Millennium Group recognises and rewards employee attitudes leading to an increase in the

quality of work, as well as optimisation of processes, efficiency and taking up professional challenges.

In 2021 the "Impakt" employee awards programme was continued, under which Group employees

themselves nominate candidates for distinction.

Supporting digital technology development

Bank Millennium is one of the most modern bank on the market and for years has based its

development on information technology. They are the basis for the progressive digitalisation of

customers through the development of remote customer service systems - electronic and mobile

banking. The Bank maintains and develops large teams of IT specialists in various fields.

Staff development of IT area* during recent years (number of employees)

(*) Incl. IT Security, Information Technology, and Communication and Application Development; 2019 increase is caused by

the merger of teams with Euro Bank SA.

Diversity policy

In accordance with the Diversity Policy, introduced in the Bank Millennium Group in 2017 and amended

in 2021, the Group acts with respect for human dignity and observes the right to equal treatment

irrespective of age, gender, ethnic and national origin, religion, creed, family status, sexual

orientation, state of health, beliefs, union membership and other grounds exposing to discriminatory

behaviour.

The Bank Millennium Group incorporates the principle of respect for diversity in the Work Regulations,

Code of Ethics and other important regulations in the area of human resources management and

implements it in the following areas: recruitment and employment, access to salaries and positions,

support for parent employees, equal access to benefits, support for people in difficult life situations,

value-based leadership development as well as freedom of expression and open communication.

In the Bank Millennium Group, knowledge and awareness of employees are developed in relation to

ethics and respect for diversity issues. All employees undergo mandatory training on ethical issues. In

addition, all managerial staff mandatorily undergoes training on counteracting mobbing and

discrimination in employment. The Bank Millennium Group has implemented an anti-mobbing and

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

anti-discrimination procedure. There is a system of reporting abuse, which is independent of the

hierarchy of service.

In Bank Millennium women constitute the majority of employees - about 67%. Their share in the Bank's

broadly understood management staff (starting from the position of branch manager) was about 55%.

Although in recent years the share of women among management staff has been increasing, they are

still under-represented and account for only 29% of this group.

The Bank's strategy, including, for example, building service units for foreigners working in Poland,

also serves to increase the diversity of employees in terms of nationality: 41 foreigners were employed

in 2021.

The age structure of employees is relatively balanced, hiring people both entering the labour market

and those at the end of their careers. The largest group of employees is between 30 and 50 years old

- almost 67%. Young people under 30 years old - 22%.

In connection with its long-term development strategy, the Bank will strive in its human resources

management policy to further take into account diversity in terms of the competencies and

professional experience of its employees. An increase in the number of employees in the areas of new

technologies, communications and new marketing strategies with diverse professional experience is

expected.

9.2. EMPLOYMENT AND STAFF COSTS

Efficiency of human resources management is an important part of Bank Millennium Group’s strategy.

The Group monitors particular staff cost items as well as the number of FTEs, for some years now

pursuing a policy of stable headcount. Staff rotation is monitored and reported on an ongoing basis.

Headcount and efficiency of use of resources are verified against relevant market benchmarks.

Employment in the Group

(in FTEs)

31.12.2021

31.12.2020

Change (y/y

Number of Bank’s employees

6 598

7 164

-566

- including key positions

156

159

-3

Subsidiaries

345

329

BM Group total

6 942

7 493

-550

Employment in Bank Millennium Group at end of 2021 reached 6,942 FTEs, which means decrease vs

end of 2020 by 550 FTEs (i.e. 7.3%). The biggest employer in the Group is Bank Millennium, with a

headcount at end of 2021 of 6,598 FTEs. Bank Millennium Group subsidiaries at the end of the year

were employing in total 345 FTEs, with the following three companies having highest significance:

Millennium Leasing, Millennium Dom Maklerski, Millennium TFI and, the new one, Millennium Bank

Hipoteczny.

Employment in the Bank

(in FTEs)

31.12.2021

31.12.2020

Change (y/y)

Branches and direct sales

4 213

4 572

-359

Head Office

2 385

2 592

-207

Total Bank Millennium

6 598

7 164

-566

The structure of employment in Bank Millennium demonstrates a definite majority of persons

employed directly in sales of banking products and services, in particular in the network of the Bank’s

branches located throughout Poland.

The bank reduced employment in all areas as a result of continuing employment optimization after

the merger with Euro Bank.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Employment in the Bank

(in FTEs)

31.12.2021

31.12.2020

Change (y/y

Direct Banking

704

738

-34

Digital

645

652

-7

Retail and corporate banking

3 509

3 834

-325

Support units

1 740

1 940

-199

Total Bank Millennium

6 598

7 164

-566

Remuneration policy of Bank Millennium Group aims to assure the staff remuneration is adequate

given currently performed tasks, competencies and scope of responsibility. In particular much weight

is attached to proper levels of base salary. Remuneration levels are verified with consideration of

periodic evaluation of performance as well as possible evolution of the level of skills employed in

performance of the organization’s tasks. Also remuneration information presented in surveys of

salaries on the financial market is analysed.

The total level of staff costs in Bank Millennium Group in 2021 and in the previous year was as follows:

Staff costs

(in PLN million)

2021

2020

Change (y/y)

Bank Millennium

768.8

813.8

-5.5%

Subsidiaries

47.4

42.5

11.4%

Total Bank Millennium Group

816.2

856.3

-4.7%

9.3. REMUNERATION POLICY

The Bank Millennium Group functions the "Employee remuneration policy in the Bank Millennium SA

Group", which formulates the assumptions used to shape fixed and variable remuneration components

for all employees of the Group.

According to the policy, in the Bank Millennium the main source of employees' income is the base

salary resulting from the employment contract. Variable remuneration is an additional, motivational

element of total remuneration and shall not exceed 100% of base salary. The employee's base salary

is shaped in relation to the tasks performed in a given organizational unit, the scope of responsibility,

qualifications, impact on the company's risk profile and based on the analysis of payroll information

presented in remuneration reports with regards to the financial market.

The Bank regularly reviews salaries and positions. Based on the assessment of the Group's financial

condition and business environment, the Bank's Management Board may decide to allocate a pool of

funds to change the base salary of employees. Salary levels are verified taking into account periodic

assessment of work results, skills and are compared with market remuneration benchmarks

information.

Variable remuneration is shaped within various bonus systems, which aim to motivate employees to

implement business and organizational targets. Bonus systems and periodic assessment criteria in the

Bank Millennium Group are adapted to the specific nature of employees' activities in individual areas

of the Group. The amount of bonus budgets is determined after analysis of capital and liquidity ratios

and depending on realisation of Bank Millennium operational results. In case of business lines staff,

the budgets are also linked to realization of targets of particular lines. It is assumed that individual

bonuses may not exceed 100% of the total annual base salary. Individual bonuses are awarded within

the variable remuneration pool based on an assessment of the work and the degree of commitment

to achieving the goals set for employees.

The Bank Millennium Group pay attention to properly shape the remuneration of employees in

managerial positions that are classified as Risk Takers. The principles of awarding variable

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

remuneration for Members of the Management Board of Bank Millennium and other Risk Takers are

included in the "Policy of remuneration of employees having a significant impact on the risk profile in

the Bank Millennium SA Group". The policy is reviewed annually.

The bonus pool for Risk Takers is determined after prior analysis of the Bank's situation in terms of:

• business results achieved:

• liquidity: loans/deposits ratio, value of liquid assets;

• capital adequacy ratios in relation to the KNF reference level.

The evaluation of the results includes financial and non-financial criteria and takes place over a period

of at least three years.

Rules for the payment of variable remuneration paid in 2021 for 2020:

Risk Takers - Members of the Management Board of Bank Millennium (Risk Takers I)

Awarding and payment of 50% of the value of variable remuneration components takes place after

the end of the settlement period and after the announcement of the financial results. The payment

of 50% of the variable remuneration is deferred for 5 years, payable in equal annual instalments.

Members of the Management Board will receive each part of the bonus granted - paid in the year

following the accounting period and deferred - half in cash and half in own shares. The portion of the

bonus paid in own shares is subject to retention for 12 months.

The Risk Takers other than Members of the Management Board (Risk Takers II)

Granting and payment of 60% of the variable remuneration components for 2019 takes place after the

end of the settlement period. The payment of the remaining 40% of the variable remuneration is

deferred for 3 years, payable in equal annual instalments. A minimum of 50% of the variable

remuneration is paid in own shares. The portion of the bonus paid in own shares is subject to retention

for 12 months.

The Personnel Committee of the Bank's Management Board may decide not to defer variable

compensation below a certain value. When the amount of bonus determined for Risk Taker II for a

given calendar year does not exceed the equivalent of EUR50 thousand and 1/3 of the total annual

remuneration, the bonus may be paid in full in cash, in a non deferred form, pursuant to a decision

made by the Bank's Management Board Personnel Committee.

Information on own shares acquired in 2021

Justification for the acquisition of own shares

In financial year 2021, Bank Millennium SA, under implementation of the incentive programme the

rules of which are provided for in the Resolution no. 4 of the Extraordinary General Meeting of

Shareholders of 27 August 2019 in the matter of establishment of incentive programme and

determination of principles governing management thereof, authorisation of the Company

Management Board to purchase own shares for purpose of implementation of the incentive programme

and establishment of reserve capital for purchase of such shares (as amended by Resolution of the

Extraordinary General Meeting of Shareholders no. 2/2020 of 3 July 2020; (‘GM Resolution’), as well

as in Remuneration Policy with respect to Risk Takers in Bank Millennium S.A. Group and the Incentive

Programme Regulations, acquired the Bank's own shares exclusively for the purpose of implementing

an incentive programme for employees whose professional activities have a significant impact on the

risk profile.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Aggregate data on share purchases in 2021

Period

Total

number of

acquired

Nominal

value of

shares in

PLN

Share in

capital

Share of

votes under

shares in the

total number

of votes

Total value

transactions

in PLN

Average

weighted

price in

PLN

13-14.05.2021

565 446

0.05%

2 539 305.16

4.491

21-22.06.2021

160 335

0.01%

793 878.11

4.951

2021

725 781

0.06%

3 333 183.27

4.593

All shares thus acquired, were transferred to employees free of charge during 2021.

Management Board remuneration

Determining the terms of contracts and remuneration for Members of the Management Board is the

responsibility of the Supervisory Board, taking into account the recommendations of the Personnel

Committee of the Supervisory Board responsible for supervising the remuneration policy. The

remuneration framework for Management and Supervisory Board Members is defined in the

"Remuneration policy with regard to members of the Management Board and Supervisory Board of

Bank Millennium SA " adopted by the Shareholders’ General Meeting.

The Policy is one of instruments facilitating implementation of business strategy, long term interests

and stability of the Bank and supports proper and effective management of risk

and mitigation of conflicts of interests in particular through:

a) development of adequate level of remuneration components, in relation to the function

performed and the scale of the Bank's operations, including the principle of transparency

of their creation,

b) rendering parts of remuneration due to management Board Members conditional upon

the financial and business performance of the Bank,

c) adoption of the structure of variable and fixed components of remuneration of Management

Board Members ensuring that motivation aimed towards receiving variable components

of remuneration does not creative the incentive to undertake excessive risks,

d) ensuring only a fixed component of remuneration for Members of the Supervisory Board, and

its independence from the financial and business results of the Bank

e) supporting responsible management attitudes relative to long term business objectives of the

Bank by way, inter alia, of transparent assessment of performance by the Management Board

Members.

The total remuneration of the members of the Management Board consists of a fixed and a variable

part. The variable part of the remuneration may be an annual bonus, which depends on the Bank's

performance, the result compared to banks of a similar size and the individual assessment of the

Management Board Member.

Decisions on granting bonuses to Management Board members are made after analysing the results,

taking into account the financial criteria:

• implementation of planned budgets and indicators set for the managed area of activity,

• comparisons with other banks of a similar size,

• business market criteria established for the period;

and non-financial criteria, in particular:

• overall quality of management in the area of responsibility,

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

• effective leadership and contribution to the Bank's development,

• management and supervision over units in the area of responsibility.

Members of the Supervisory Board receive only fixed remuneration for their work in the Supervisory

Boards and Committees which is adequate to their function and the scale of operations of the Bank

Millennium Group.

The total value of base remuneration of Members of the Management Board for performing this

function in 2021 was PLN 10 500 thousand. Additionally, Members of the Board were paid part of an

annual bonus for 2017, 2018 and 2019 years (in the form of cash and phantom shares) as well as

additional benefits.

Fixed remuneration for the membership of Management Board paid to the Members in 2021

(in PLN thousand):

Name

Period

Fixed remuneration

(PLN’000)

Joao Bras Jorge

01.01.2021 - 31.12.2021

2 280.00

Fernando Bicho

01.01.2021 - 31.12.2021

1 620.00

Wojciech Haase

01.01.2021 - 31.12.2021

1 320.00

Andrzej Gliński

01.01.2021 - 31.12.2021

1 300.00

Wojciech Rybak

01.01.2021 – 31.12.2021

1 320.00

Antonio Pinto Junior

01.01.2021 - 31.12.2021

1 320.00

Jarosław Hermann

01.01.2021 - 31.12.2021

1 320.00

Additional benefits of Management Board Members in 2021 (in PLN thousand)

Name

Period

Benefits

(PLN’000)

Joao Bras Jorge

01.01.2021 - 31.12.2021

1 165.64

Fernando Bicho

01.01.2021 - 31.12.2021

48.00

Wojciech Haase

01.01.2021 - 31.12.2021

13.31

Andrzej Gliński

01.01.2021 - 31.12.2021

25.07

Wojciech Rybak

01.01.2021 - 31.12.2021

3.83

Antonio Pinto Junior

01.01.2021 – 31.12.2021

571.39

Jarosław Hermann

01.01.2021 - 31.12.2021

3.83

The additional benefits are mainly connected with accommodation of foreign members of the

Management Board and healthcare benefits.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Variable remuneration vested in 2020 to Management Board Members and to persons who

performed this function in prior years (in PLN thousand):

Name

Awards for 2017, 2018 i 2019 (PLN’000)

cash

in shares of Bank

Millennium *

cash

Joao Bras Jorge

425.34

101.59

259.00

Fernando Bicho

337.77

80.68

205.67

Wojciech Haase

275.22

65.74

167.58

Andrzej Gliński

275.22

65.74

167.58

Wojciech Rybak

275.22

65.74

167.58

Antonio Pinto Junior

131.47

65.74

52.59

Jarosław Hermann

106.82

65.74

32.87

Maria Campos

143.75

115.00

*Part of the deferred bonus in Bank Millennium shares is subject to Retention for a Period of 12 months counted

from the date of acquisition of rights, i.e. from 14.06.2021. The amounts are given according to the value

granted.

In 2021, no variable remuneration was awarded to the members of the Management Board with

respect to 2020.

The decision to award variable remuneration to Management Board Members for 2021 shall be taken

by the Supervisory Board Personnel Committee after approval of the Bank’s results by the General

Meeting of Shareholders.

Policy Evaluation

The Bank Millennium Group maintains a stable remuneration policy. The body supervising the activity

of Bank Millennium, having reviewed the remuneration policy, has found that it is conducive to the

development and security of the Bank Millennium SA Capital Group and the existing practice of

managing variable components corresponds to the goals established in the Policy.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

10. PRINCIPLES OF CORPORATE GOVERNANCE AT BANK MILLENNIUM

10.1. STATEMENT ON THE PRINCIPLES OF CORPORATE

GOVERNANCE APPLIED IN 2021

Corporate governance is a set of rules addressed to governing bodies of companies and their members

as well as defining relations with shareholders and investors.

The set of rules covering the area of Polish financial institutions and companies listed on the Warsaw

Stock Exchange (GPW) are in particular ‘Best Practice for GPW Listed Companies 2016’ (hereinafter

referred to also as ‘Best Practice’) adopted by the Board of the Warsaw Stock Exchange, binding from

1 January 2016, as well as the ‘Principles of Corporate Governance for Supervised Institutions’

(hereinafter referred to as the ‘Principles’) adopted by the Polish Financial Supervision Authority by

its resolution of 22 July 2014, which have been binding since 1 January 2015.

On 29 March 2021 the Supervisory Board of the Warsaw Stock Exchange adopted resolution no.

13/1834/2021, by a virtue of which it adopted “Best Practice for GPW Listed Companies 2021”

(hereinafter referred to also as ‘Best Practice 2021’), that entered into force on 1 July 2021. On that

date they replaced the current version of the Best Practice. However, in 2021 the Bank was obliged

to follow both Best Practice (from 1 January to 30) and Best Practice 2021 (from 1 July to 31

December).

The application of corporate governance principles guarantees the transparency of company

operations and strengthens the protection of shareholder rights, also with respect to issues not

regulated by generally applicable laws.

The complete text of the document „Best Practice for GPW Listed Companies 2016” and of the

document “Best Practice for GPW Listed Companies 2021” is published on the GPW website:

https://www.gpw.pl/pub/GPW/o-nas/DPSN2016_EN.pdf and

https://www.gpw.pl/pub/GPW/files/PDF/dobre_praktyki/en/DPSN2021_EN.pdf, and on the Bank’s

website: https://www.bankmillennium.pl/about-the-bank/corporate-bodies-and-governance.

The most important standard of the above-mentioned Best Practice, Best Practice 2021 and Principles

is the ‘comply or explain’ rule, This rule means that a company is obliged to apply the principles

stipulated in the document, and in the event of deviation from use of a particular principle the

company must clarify the causes of such conduct and make this fact publicly known in the form of a

report by using the GPW Electronic Information Database (in the case of Best Practice and Best

Practice 2021) or by means of a website (in the case of the Principles).

Like in previous years, in 2021 the Bank guided by the principle of transparency of its actions in

shaping corporate and investor relations, as well as the highest quality of communication with

shareholders, the Bank complied with the principles of Best Practice. The confirmation of employing

the recommendations contained in Best Practice is the document ‘A statement on the company's

compliance with the corporate governance recommendations and principles contained in Best

Practice for GPW Listed Companies 2016’ published on the Bank’s website.

As regards recommendation IV.R.2 item 2 and 3, regarding ensuring for the shareholders the

opportunity to participate in a General Meeting of Shareholders (hereinafter, also ‘General Meeting’

or ‘GM’) with the use of real-time two-way electronic communication where shareholders may address

a General Meeting of Shareholders from a location other than the General Meeting and exercise, in

person or through a plenipotentiary, their voting rights in the course of the General Meeting – in the

Bank’s opinion - the implementation of this rule during a General Meeting carries technical and legal

risks to the correct and efficient conducting of a General Meeting. Avoiding these risks constitutes a

bigger value for the shareholders than the implementation of the rule from part IV, Recommendation

IV.R.2, item 2 of Best Practice. The Bank, ever since 2008, has been providing real-time online

broadcasts of the proceedings of General Meetings, in accordance with the requirement specified in

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

part IV, Recommendation IV.R.2 item 1 of Best Practice. At the same time, the Bank, within

implementing Best Practice 2021, provided shareholders with a technical possibility of real-time, two-

way communication during the proceedings of General Meeting. Hence the aforementioned

recommendation, previously not met by the Bank, since 1 July 2021 will be feasible to implement and

exercise.

As regards Best Practice 2021, the Bank was required to notify WSE of its compliance status no later

than 31 July 2021. The Bank made the notification earlier, i.e. on 28 July, indicating full compliance

of the Bank's conduct with all the rules contained therein. The application of the recommendations

included in the Best Practice 2021 is confirmed by the document published on the Bank's website

entitled "A statement on the company’s compliance with the corporate governance principles

contained in Best Practice for GPW Listed Companies 2021".

The Bank as a financial institution has been subject, since the beginning of 2015, also to the

‘Principles of Corporate Governance for Supervised Institutions’ referred to at the outset, which are

available on the website of the Polish Financial Supervision Authority

https://www.knf.gov.pl/knf/en/komponenty/img/principles_of_corporate_governance_39736.pdf

and on the Bank’s website https://www.bankmillennium.pl/about-the-bank/corporate-bodies-and-

governance.

The Bank’s Management Board and the Supervisory Board took resolutions on the application of the

Principles, with the exception of § 16 sect. 1 and § 24 sect. 1, concerning the holding of meetings of

the Bank’s governing bodies (Management Board and Supervisory Board) in the Polish language.

The knowledge of the English language by members of the Management Board enables full mutual

understanding and a proper level of communication during meetings. Moreover, the practically

implemented principle of holding meetings of the Supervisory Board both in Polish and in English, with

the assurance of essential assistance of an interpreter, also ensures mutual understanding and a

proper level of communication.

The General Meeting in its resolution passed on 21 May 2015 expressed a positive opinion regarding

the position of the Management Board and Supervisory Board of the Bank about the scope of

application of the Principles.

In successive years General Meetings accepted the assessment of employing the Principles and

assessment of the manner of carrying out the information duties relating to the employment of Best

Practice. Likewise, in 2021 the General Meeting by its Resolution of 24 March 2021 accepted the

Report on the Activity of the Bank Millennium S.A. Supervisory Board in 2020 covering the assessment

of compliance with the ‘Principles of Corporate Governance for Supervised Institutions’ and of

assessment the manner of carrying out the information duties regarding the compliance with the

‘Code of Best Practice for WSE Listed Companies (2016)’, the Bank’s Supervisory Board by its

Resolution No 6/2021 of 29 January 2021 found that the Bank in 2020 correctly implemented the

Principles to the extent established by resolutions of the Bank’s governing bodies. The respective

General Meeting’s resolution on the application of Best Practice 2021 will be adopted at the first

planned shareholders’ meeting in 2022.

Bank Millennium has been included in the WIG-ESG index since 2019. Previously, for 12 years, it

belonged to the Respect index, which was withdrawn on January 1, 2020 and was replaced by the

WIG-ESG index. The companies included in the Index operate on the basis of best standards of

corporate governance, information policy and investor relations, including ecological, social and

employee issues. index WIG-ESG comprising 60 companies included in the WIG20 and mWIG40 indices.

Weights of companies in WIG-ESG depend on the number of free float shares adjusted for the results

of the ESG ranking prepared by Sustainalytics and the assessment of the application of the principles

of corporate governance.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

10.2. SHAREHOLDERS AND GENERAL MEETING OF SHAREHOLDERS

The General Meeting is the highest governing body of the Bank’s authorities operating in particular

on the basis of the Code of Commercial Companies and the Banking Law, as well as the Bank’s internal

regulations, i.e. the Articles of Association and the Regulations of the General Meeting. The Bank’s

Articles of Association and Regulations of the General Meeting are available from the Bank’s website

on the tab: “About the Bank > Corporate bodies and governance”, link to website

https://www.bankmillennium.pl/about-the-bank/corporate-bodies-and-governance.

These documents describe in detail the functioning of the General Meeting and scope of its

competencies as well as specific rights of the shareholders during the deliberations of a General

Meeting. The competencies of the General Meeting include inter alia making amendments to the

Articles of Association, including change in the amount of the share capital.

As at 31 December 2021, the Bank’s share capital was PLN 1,213,116,777 and was divided into

1,213,116,777 shares (with the nominal value of PLN 1 each). Below please find information, in

accordance with the data held by the Bank, about the shareholders holding directly or indirectly

substantial blocks of shares together with the indication of the number of shares held by them, their

participation in the share capital and in the total number of votes at the Bank’s General Meeting. Due

to the fact that the Bank is a public company whose shares are traded on the Warsaw Stock Exchange

the Bank does not have detailed information about the structure of shareholders holding less than 5%

of the shares in the share capital. According to information available, as at 31 December 2021 , the

Bank had four shareholders holding more than 5% of the votes at a General Meeting.

Banco Comercial Portugues (BCP), the largest private Portuguese bank – as the strategic investor -

holds 50.10% of all the shares of the Bank. The Bank’s significant shareholders are also: Nationale-

Nederlanden Otwarty Fundusz Emerytalny, which as at 31 December 2021 held 8.18% of the Bank’s

shares, AVIVA Otwarty Fundusz Emerytalny AVIVA Santander, which as at 31 December 2021 held

6.00% of the Bank’s shares and Otwarty Fundusz Emerytalny PZU “Złota Jesień”, which as at 31

December 2021 held 5.73% of the Bank’s shares.

The remaining shares, i.e. 29.99% of the share capital, are dispersed among Polish and foreign

shareholders, both institutional and private.

Shareholders of the Bank as at 31 December 2021

Shareholder

Number of

% stake in share

capital

Number of

votes

% participation

in votes at GM

Banco Comercial Portugues S.A.

607 771 505

50.10

607 771 505

50.10

Nationale-Nederlanden OFE

99 291 825

8.18

99 291 825

8.18

AVIVA Otwarty Fundusz

Emerytalny AVIVA Santander

72 760 035

6.00

72 760 035

6.00

Otwarty Fundusz Emerytalny

PZU „Złota Jesień”

69 451 428

5.73

69 451 428

5.73

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Shareholders of the Bank as at 31 December 2020

Shareholder

Number of

% stake in share

capital

Number of

votes

% participation

in votes at GM

Banco Comercial Portugues S.A.

607 771 505

50.10

607 771 505

50.10

Nationale-Nederlanden OFE

109 924 704

9.06

109 924 704

9.06

Otwarty Fundusz Emerytalny

PZU „Złota Jesień”

85 697 263

7.06

85 697 263

7.06

AVIVA Otwarty Fundusz

Emerytalny AVIVA Santander

76 760 035

6.33

76 760 035

6.33

Data in the tables were ascertained according to the rules described below. With respect to Banco

Comercial Portugues S.A. these are data collected in connection with the registration of shareholders

authorised to take part in the Bank’s Ordinary General Meeting convened for 24 March 2021, and in

the Bank’s Extraordinary General Meetings convened for 3 July 2020.

However, as regards Nationale-Nederlanden Otwarty Fundusz Emerytalny, Aviva Otwarty Fundusz

Emerytalny Aviva Santander and Otwarty Fundusz Emerytalny PZU „Złota Jesień” the number of shares

and their stake in the Bank’s share capital were calculated on the basis of the Annual Structure of

Assets of the above-mentioned Funds as at 31 December 2021 and as at 31 December 2020 (as

published on the websites: www.nn.pl, www.aviva.pl and www.pzu.pl respectively).

For the purpose of making the above-mentioned calculations the volume weighted average price

(VWAP) of the Bank’s shares was taken: : for 2021: PLN 8.1658 and for 2020: PLN 3.3088.

Banco Comercial Portugues S.A., as the majority shareholder, exercises a shareholder’s rights

specified in the Code of Commercial Companies and in the Bank’s Articles of Association. BCP holds

corporate control over the Bank. By holding a majority of votes at a General Meeting it can exercise

decisive influence over decisions regarding the most important corporate matters such as change of

the Bank’s Articles of Association, issue of new shares of the Bank, reduction of the share capital of

the Bank, issue of convertible bonds, payment of a dividend and other activities, which in accordance

with Code of Commercial Companies require an ordinary or qualified majority of votes at a General

Meeting. BCP also holds a sufficient number of votes to appoint all members of the Supervisory Board,

which in turn appoints members of the Management Board. In connection with the above-mentioned

corporate rights BCP has the capacity to exercise significant control over the Bank’s activity.

The Bank is not aware of any agreements concluded between its shareholders regarding their mutual

cooperation and the Bank is not aware of any agreements that, in future, might cause changes in the

proportions of shares held by existing shareholders.

The Bank’s shareholders exercise their corporate rights in the way and within the limits defined by

generally applicable laws, the Articles of Association of the Bank, as well as the Regulations of the

General Meeting of Shareholders. Each share of the Bank entitles to one vote, however registered

founder shares in the outstanding number of 61,600 items are preferential in as much as one share

entitles to two votes at a General Meeting. Registered founder shares in total accounted for 0.0051%

of the Bank’s share capital and 0.0102% of the total number of votes at a General Meeting, as at 31

December 2021.

Registered founder shares are subject to disposal restrictions, i.e. their disposal subject to the

consent of, at least, three fourths of the founders, to other founders does not result in their loss of

preferential status. A disposal of registered founder shares in all other cases causes loss of their

preferential status. There are no restrictions on exercising voting rights under the Bank’s shares and

none of the holders of securities issued by the Bank has any special controlling rights with respect to

the Bank.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

Bank Millennium shares have been listed on the Warsaw Stock Exchange since 13 August 1992 (first

bank to be listed). Currently 1,213,009,169 shares with the code ISIN PLBIG0000016 (GPW symbol:

MIL; Reuters: MILP.WA; Bloomberg: MIL PW) are traded on the stock exchange.

Shareholders have 107.608 registered shares, of which 61,600 are preferential founder shares (right

to two votes at a General Meeting). Thus, the total number of Bank Millennium shares is 1,213,116,777

and total number of votes at a General Meeting of Shareholders is 1,213,178,377.

10.3. SUPERVISORY BOARD

The Supervisory Board exercises constant supervision over the activity of the Bank operating under

legal regulations, including the Articles of Association of the Bank, resolutions of the General Meeting

as well as the Bylaws of the Supervisory Board available from the Bank’s website on the “About the

Bank > Corporate bodies and governance” tab, link to website

https://www.bankmillennium.pl/about-the-bank/corporate-bodies-and-governance.

Meetings of the Supervisory Board are convoked once a quarter and if such need arises. The

competences of the Supervisory Board comprise, in particular, the appointment and recalling of

Members of the Management Board (by a simple majority of votes) and determination of their

remuneration principles. Resolutions are adopted by a simple majority of votes with at least half of

its members present. In the case of an equal number of votes the Chairman of the Supervisory Board

has a casting vote.

The Supervisory Board of the Bank consists of at least five Members, of whom at least a half, including

the Chairman, are of Polish nationality. Members of the Supervisory Board are appointed at a General

Meeting for a three-year term of office.

The composition of the Supervisory Board between 1 January 2021 and 24 March 2024 was as follows:

- Bogusław Kott – Chairman of the Supervisory Board,

- Nuno Manuel da Silva Amado – Deputy Chairman of the Supervisory Board,

- Dariusz Rosati – Deputy Chairman and Secretary of the Supervisory Board,

- Miguel de Campos Pereira de Bragança – Member of the Supervisory Board,

- Agnieszka Hryniewicz-Bieniek – Member of the Supervisory Board,

- Anna Jakubowski – Member of the Supervisory Board,

- Grzegorz Jędrys – Member of the Supervisory Board,

- Andrzej Koźmiński – Member of the Supervisory Board,

- Alojzy Nowak – Member of the Supervisory Board,

- José Miguel Bensliman Schorcht da Silva Pessanha – Member of the Supervisory Board,

- Miguel Maya Dias Pinheiro – Member of the Supervisory Board,

- Lingjiang Xu – Member of the Supervisory Board.

On 24 March 2021, the General Meeting of the Bank appointed the Bank's Supervisory Board for a new

term of office ending on the date of the General Meeting approving the Bank's financial statements

for the financial year 2023. Accordingly, the composition of the Supervisory Board is as follows:

- Bogusław Kott – Chairman of the Supervisory Board,

- Nuno Manuel da Silva Amado – Deputy Chairman of the Supervisory Board,

- Dariusz Rosati – Deputy Chairman and Secretary of the Supervisory Board,

- Miguel de Campos Pereira de Bragança – Member of the Supervisory Board,

- Olga Grygier-Siddons – Member of the Supervisory Board,

- Anna Jakubowski – Member of the Supervisory Board,

- Grzegorz Jędrys – Member of the Supervisory Board,

- Alojzy Nowak – Member of the Supervisory Board,

- José Miguel Bensliman Schorcht da Silva Pessanha – Member of the Supervisory Board,

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

- Miguel Maya Dias Pinheiro – Member of the Supervisory Board,

- Beata Stelmach – Member of the Supervisory Board,

- Lingjiang Xu – Member of the Supervisory Board.

1. Bogusław Kott – Chairman of the Supervisory Board

Mr Bogusław Kott graduated from the Foreign Trade Faculty at SGPiS (present name SGH - Warsaw School

of Economics) in Warsaw. For many years he worked at the Ministry of Finance, specializing in foreign

trade financing.

He co-founded and co-organised Bank Millennium S.A., and from 1989 when the Bank was established,

till 24 October 2013 was the Chairman of the Management Board. Since 24 October 2013 he has been the

Chairman of the Supervisory Board of Bank Millennium S.A. From 31 May 2019 to the day of merger with

Bank Millennium S.A. i.e. 1 October 2019, also the Chairman of the Supervisory Board of Euro Bank S.A.

Mr Bogusław Kott has been a Member of the Polish Business Roundtable since 1994 and since May 2020

Honorary Member. Since 1 September 2018 he has been a Member of Board of Trustees of Kozminski

University in Warsaw.

2. Nuno Manuel da Silva Amado – Deputy Chairman of the Supervisory Board

Mr Nuno Manuel da Silva Amado has a Business Degree from ISCTE (Instituto Superior de Ciencias do

Trabalho e da Empresa) and attended the Advanced Management Programme at INSEAD (France).

From 1980 he worked in auditing (KPMG) and in international banks (Citibank, Deutsche Bank and Banco

Santander) in Portugal. Between 2006 - 2012 he was Vice-Chairman of the Board of Directors and CEO

of Banco Santander Totta (Portugal). From 2012 to 2018 he was Vice-Chairman of the Board of Directors

and CEO of Banco Comercial Portugues (BCP), Portugal. Since July 2018 he has been Chairman of the

Board of Directors of BCP.

Since 20 April 2012 Deputy Chairman of the Supervisory Board of Bank Millennium S.A.

3. Dariusz Rosati – Deputy Chairman and Secretary of the Supervisory Board

Mr Dariusz Rosati graduated in International Trade from the Main School of Planning and Statistics -

SGPiS (now the SGH Warsaw School of Economics) in Warsaw. Professor Emeritus of Economic Sciences,

Institute of International Economic Policy at SGH.

In 1978 – 1979 he was a consultant at Citibank in New York. In 1985 – 1986 and 1987 – 1988 - founder

and Director of the World Economy Research Institute at SGH. In 1986 – 1987 he was a Fulbright scholar

at the University of Princeton (USA). In 1988 – 1991 he was the director of the Foreign Trade Research

Institute. Since 1990 Professor of Economic Sciences at SGH. In 1991 – 1995 he worked in the UN

Economic Commission for Europe in Geneva (Switzerland) as Head of the Central and Eastern European

Section. In 1995 – 1997 he was Minister of Foreign Affairs of the Republic of Poland. In 1998 – 2004

Member of the Monetary Policy Council of the National Bank of Poland.

In 1978 – 1991, UNIDO consultant and member of numerous missions to developing countries. In 1988 –

1991 many times worked as an expert of the World Bank, the United Nations University World Institute

for Development Economics Research (WIDER), International Labour Organisation and European

Commission. Member of the Economic Reform Commission (1987 – 1989), team of the economic advisors

to the Prime Minister (1988 – 1989), the Socio-Economic Strategy Council at the Council of Ministers

(1994 – 1998). Since 1997 Member of the Committee of Economics at the Polish Academy of Sciences.

In 2001 – 2004 he was a member of the Group of Economic Policy Advisors to the President of the EU

Commission. From 2003 to 2005 Rector of Lazarski University in Warsaw.

Management Board Report on activity of Bank Millennium and Capital

Group of Bank Millennium for 2021

In years 2004 – 2009 and 2014 - 2019 Member of the European Parliament. Member of Parliament of the

Republic of Poland of 7th term in 2011 – 2014 – he was the Chairman of the Public Finance Committee

– and of 9th term, elected in 2019. Author of more than 200 scientific papers and publications, including

six books on economic policy.

Since 27 May 2004 Member of the Supervisory Board of Bank Millennium S.A.

4. Miguel de Campos Pereira de Bragança – Member of the Supervisory Boar

Mr Miguel de Campos Pereira de Bragança has a Licentiate Degree in Management and Administration

from the Catholic University of Portugal and an MBA from INSEAD (France).

Since 1989 he has worked at banks in Portugal, Brazil and Great Britain. Between 2008-2012 he was

Director, responsible for the Financial, Accounting and Management Control, Marketing and Products

Areas, at Banco Santander Totta and Banco Santander de Negocios (Portugal). Since 2012 Member of

the Board of Directors and Vice-Chairman of the Executive Committee of Banco Comercial Portugues

(BCP), Portugal.

Since 20 April 2012 he has been a Member of the Supervisory Board of Bank

Millennium S.A. and since 2019 Vice-Chairman of the Board of Directors of Activobank.

Since 2018 Non-executive Director of SIBS, SGPS, SA and of SIBS Forward Payment Solutions, SA and

Non-executive Director of the BofD of UNICRE- Instituição Financeira de Crédito, SA, as representative

of Banco Comercial Português, SA.

5. Olga Grygier-Siddons – Member of the Supervisory Board (independent member)

Ms Olga Grygier-Siddons graduated from the University of Manchester, Computer Science and

Accounting. She is also Fellow Chartered Accountant, Institute of Chartered Accountants of England

and Wales.

After having graduated in Great Britain, she pursued her professional career in the advisory sector. In

1991, she joined PwC in the Corporate Finance area. In 1998, she was promoted to the position of

Partner and was responsible for the delivery of diverse projects for the public and private sectors

around the world. In 2004, she decided to relocate to Poland and in 2014, she assumed the position

of Managing Partner for Central and Eastern Europe at PwC. For 15 years she was responsible for

business development and overseeing projects in 29 countries, in a company with 12,000 employees.

She became the first female member of the PwC Strategy Council which comprises 20 top leaders of

the PwC Network.

She retired from PwC in 2019 and currently serves as a strategic advisor and Mentor.

Moreover, until today she performs among other the following functions: Member of the Council of

the Silesian University, Member of the Belvedere Forum Steering Committee; Member of the Emerging

Europe Steering Committee; founder and CEO of the Experiential Learning Hub - Villa Poranek.

Since 24 March 2021 Member of the Supervisory Board of Bank Millennium S.A.

6. Anna Jakubowski - Member of the Supervisory Board (independent member)

Ms Anna Jakubowski graduated with a Bachelor of Business Administration (1990) from Wilfrid Laurier

University, Waterloo, Ontario. Canada.

Her professional career started with Procter & Gamble Canada (1991 – 1993), where she was the

National Account Manager. Between 1993 and 1998 she held different positions, from Pharmacy

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Group of Bank Millennium for 2021

Channel Manager to Trade Marketing Manager and Area Sales Manager in P&G Poland. In 1998 she

became Regional Customer Business Development Manager in P&G Central Eastern Europe while

between 1999 and 2007 she was New Business Development Manager and (from 2002) Strategy,

Business Development Director in P&G Western Europe. She continued her career in Switzerland in

the P&G the Fabric Care Division (2007 – 2009) as an Associate Director: Marketing. Between 2011 and

2016 she connected her professional career with The Coca-Cola Company where she held the following

positions: the International Group Marketing/Strategy Director in Coca-Cola Hellenic Bottling

Company (2011 – 2013), Business Capability Director in the Coca-Cola Company (2013) and from 2013

– 2016 Management Board Member – Managing Director in Coca-Cola Poland Services Sp. z o.o. and

Franchise General Manager – Poland/Baltics in The Coca-Cola Company, Management Board Member

in Multivita Sp. z o. o, Management Board Member – Managing Director in Coca-Cola Balti Jookide AS.

In 2018 she held the role of General Manager for Poland and Baltics for Marie Brizard Wine & Spirits

Sp. z o.o. In 2019-2020, she held the role of General Manager of Avon Cosmetics Polska Sp. z o.o. and

is currently the Managing Director and investor in Life Institute Sp. z o.o. Sp. k. She is an independent

Supervisory Board member of Artic Paper S.A.

She has also been involved with the following organizations and associations: Women’s International

Networking Leadership Forum - Board of Advisors (2004 – 2012), Organization of Women in

International Trade - Board of Directors (2005 – 2010) and in 2008 as an Executive Vice President as

well as in 2009 as the President (2005 – 2010) in Geneva Women in International Trade, across 2015 –

2016 she served also as a Member of the Board of Directors of the American Chamber of Commerce

in Poland, 2015 – 2018 as a Management Board Member, Vice President International Association of

Advertising (IAA) in Poland (Warsaw, Poland). Currently is a Member of the Board of the Polish -

Canadian Chamber of Commerce, an Adviser and Mentor in the Global Shapers – Mentor4Starters

initiative, and a mentor of the CFA Society Poland.

In 2011 she was awarded the TIAW – The World of Difference 100 Award (Recognizes individuals whose

efforts have advanced the economic empowerment of women) and in 2016 she was awarded Woman

of Charisma: Business & Social Enterprise Award (Poland).

Since 21 May, 2015 Member of the Supervisory Board of Bank Millennium S.A. From 31 May 2019 to

the day of merger with Bank Millennium S.A. i.e. 1 October 2019, also Member of the Supervisory

Board of Euro Bank S.A.

7. Grzegorz Jędrys – Member of the Supervisory Board (independent member)

Mr Grzegorz Jędrys graduated from the Production Economics Faculty of the Warsaw School of

Economics and from a post-graduate course at the Warsaw School of Economics in Strategic Marketing

Management as well as real estate agency operation. Moreover, Mr G. Jędrys attended many courses

and training sessions, i.a. for candidates for members of supervisory boards of State Treasury

companies (2008).

He began his professional career in 1994 in the Housing Finance and Municipal Advisory Programme

for Poland/PADCO – a joint Poland-USAID programme. In 1996 he worked as Manager of the Building

Projects Financing Team in Polsko-Amerykański Bank Hipoteczny S.A. From 1997 to 1999 he was

employed in Jedenasty Narodowy Fundusz Inwestycyjny S.A., initially as an Investment Analyst, then

as Project Director. Between 1999 and 2005 he was Investment Director in Trinity Management Sp. z

o.o. – a company which managed the assets of Jupiter NFI S.A. as well as Pekao Fundusz Kapitałowy

Sp. z o.o. From 1997 to 2005 he was a Member of Supervisory Boards of many companies. Starting

from 2005 he has been Head of the Poland’s Representative Office of the Polish American Freedom

Foundation.

Since 11 April 2013 Member of the Supervisory Board of Bank Millennium S.A. From 31 May 2019 to

the day of merger with Bank Millennium S.A., i.e. 1 October 2019, also Member of the Supervisory

Board of Euro Bank S.A. Since July 9, 2020, acting as a Member of the Supervisory Board of Millennium

Bank Hipoteczny S.A.

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8. Alojzy Nowak – Member of the Supervisory Board (independent member)

Mr Alojzy Nowak in 1984 graduated from the Warsaw School of Economics; earned a Ph.D. in 1991

and Habilitation in 1995. Moreover in 1992 – as part of an annual scholarship from the A. Mellon

Foundation - he studied economics at the University of Illinois at Urbana-Champaign, USA; n 1993, as

a scholarship holder of the United Kingdom Government under the Know-How Fund, he studied

banking, finance and capital markets at the University of Exeter; in 1996, as part of a semester

scholarship from the German Government, he studied economics at Freie Universitat in Berlin, and in

1997 as part of a semester scholarship of the Belgian Government, he studied international economics

at the RUCA University in Antwerp. In 2002 he became Professor of Economics.

He has won a number of prestigious awards, including the Rector’s Award for Scientific Achievements

(annually since 1997), Award of the Minister of Education for the book “Integracja europejska. Szansa

dla Polski?” and the book „Banki a gospodarstwa domowe - dynamika rozwoju”. Member of many

scientific organizations and professional editorial boards of periodicals, among others “Foundations

of Management” (member of the editorial board), “Journal of Interdisciplinary Economics” (editor-

in-chief), “Yearbook on Polish European Studies”, “Mazovia Regional Studies”, “Gazeta Bankowa” and

a reviewer in PWE SA Warszawa publishing company. For many years committee member of “Teraz

Polska” Award and scientific council member of “Studia Europejskie”. Author of over 300 publications

in Poland and abroad.

He gained his professional experience working among others as Head of the International Business

Relations Section at the Management Faculty, University of Warsaw, Head of National Economy Chair

at the Management Faculty, University of Warsaw, Director of European Center at the University of

Warsaw, Deputy Dean in charge of foreign cooperation at the Management Faculty, University of

Warsaw, Dean at the Management Faculty, University of Warsaw and Vice-Rector for Research and

Liaison, University of Warsaw. Since June 2020 he has become the rector of the University of Warsaw,

elected for the 4-year term of office. He is a lecturer at the University of Warsaw, and also in France,

UK, USA, Russia, China and Korea.

Further, he worked as: advisor to the Prime Minister, to the Minister of Agriculture, CEO of the

University Sports Association in Poland and at the University of Warsaw, member of the NewConnect

advisory committee at the Management Board of the Warsaw Stock Exchange, member of the

Foundation Council of the National Bank of Poland, chairman of the Council of the Scientific of the

National Bank of Poland.

Over the years he sat on supervisory boards of various institutions, including among others: PZU S.A,

PTE WARTA S.A., PKO BP S.A., Cyfrowy Polsat S.A., ZE PAK S.A., JSW S.A., Chairman and Deputy

Chairman of the Supervisory Board in EUROLOT S.A.

He was a member of the National Development Council appointed by President Andrzej Duda. Since

December 2018 he has been a member of the Scientific Council of the Institute of New Structural

Economics at the University of Beijing, where he is among 22 outstanding scientists from around the

world, including 4 Nobel laureates in the field of economic sciences.

Since 26 March 2018 Member of the Supervisory Board of Bank Millennium S.A.

9. José Miguel Bensliman Schorcht da Silva Pessanha – Member of the Supervisory Board

Mr José Miguel Bensliman Schorcht da Silva Pessanha has a Master’s Degree in Economics from

Université Catholique de Louvain and a Master’s Degree in Operational Research (academic portion)

from Instituto Superior Técnico and also has a Licentiate Degree in Economics, Universidade Católica

Portuguesa. He attended the PADE (Corporate Senior Management Programme) at Associação de

Estudos Superiores de Empresa (AESE), the Eureko Program in INSEAD, he had a Scholarship from

Invotan (NATO) and received a scholarship linked to the Award Joseph Bech, granted by the

Government of Luxembourg for commitment to the European Union.

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From 1982 to 1989 he worked as a financial services advisor - Banco Português do Atlântico, Banco

Nacional Ultramarino, Banco Espírito Santo, Manufacturers Hannover Trust, between 1982 – 1995 he

was Professor in charge of the courses of Statistics I and II and Econometrics - Universidade Católica

Portuguesa. He was responsible for risk control, ALM, financial markets research and capital markets

areas in the Financial Division – Banco Português do Atlântico, S.A. from 1989 to 1995 and Advisor to

the Chairman of the Plan National Council from 1990 to 1993. Between 1993 and 2002 he was a

Member of the Board of Directors of Corretora Atlântico - Soc. Financeira de Corretagem S.A. and of

Servimédia – Sociedade Mediadora de Capitais, S.A. and Chairman of the Board of Directors of

Servimédia - Sociedade Corretora S.A. and Head of the Assets and Liabilities Management Division of

BPA (1995 – 1998), and of BCP (1998 – 2000). At Banco Comercial Português, S.A. he was Head for the

"Year 2000" Project of Group BCP (1999 – 2000) and was responsible for the design, development and

launching of the "cidadebcp" bank website (2000 – 2002). From 1998 to 2003 he coordinated the

Investment Products Unit of Banco Comercial Português, S.A. From 2003 to 2015 he was the Group

Risk Officer of Banco Comercial Português, S.A. In 2014 he was a lecturer responsible for the banking

in a global context course at Universidade Católica Portuguesa.

Currently he is a Member of the Board of Directors and of the Executive Committee of Banco Comercial

Português, S.A. , Vice-Chairman of the Board of Directors and Chairman of the Audit Board of

Millennium bcp Ageas Grupo Segurador, SGPS, S.A., Vice-Chairman of the Board of Directors and

Chairman of the Audit Board of Ocidental - Companhia Portuguesa de Seguros de Vida, S.A. and Vice-

Chairman of the Board of Directors and Chairman of the Audit Committee of Ageas – Sociedade

Gestora de Fundos de Pensões, S.A. (formerly Ocidental – Sociedade Gestora de Fundos de Pensões,

S.A.).

He is also Member of the Board of Directors and Chairman of the Audit Committee of BIM – Banco

Internacional de Moçambique, S.A., and Member of the Board of Directors and Chairman of the Audit

Committee of Banco Millennium Atlântico, S.A.

Since 26 March 2018 Member of the Supervisory Board of Bank Millennium S.A.

10. Miguel Maya Dias Pinheiro – Member of the Supervisory Board

Mr Miguel Maya Dias Pinheiro graduated from Instituto Superior das Ciências do Trabalho e da

Empresa (ISCTE) with a bachelor’s degree in Business Organization and Management, having also

completed a Senior Management Programme (PADE) at AESE, an Advanced Management Programme

at INSEAD and a Corporate Governance Programme – at AESE.

From 1987 to 1990 he held commercial and financial functions in a manufacturing SME company.

Joined Banco Português do Atlântico in 1990, institution where he assumed functions in the corporate

banking area and led the coordination of the Economic and Financial Research Office.

Between 1996 and 2007 he assumed several senior management positions within BCP Group both in

Portugal and Spain, namely head of the Corporate Banking Marketing Division of BCP, Coordinator of

the retail banking network of NovaRede, CEO of Manager Land in Barcelona, head of Innovation and

Commercial Division of BCP. From 2007 to 2009 he was Chief of Staff for the Chairman of the Executive

Board of Directors of BCP.

In 2009 Mr Miguel Maya was appointed Member of the Executive Board of Directors of BCP and Member

of the Board of Directors of Fundação Millennium BCP.

Between 2012 and 2016 he was Chairman of the Board of Directors of Banco Millennium Angola, S.A

and in 2016, following the merger of this institution with Banco Privado Atlantico, S.A. which resulted

in the creation of Banco Millennium Atlantico, S.A., Mr Miguel Maya was appointed Vice-Chairman and

Member of the Board of Directors of the new entity – position that he still holds.

From 2012 to 2019 Mr Miguel Maya was Chairman of the Board of Directors of Interfundos - Gestao de

Fundos de Investimento Imobiliario, S.A.

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Currently Mr Miguel Maya holds the following positions in BCP’s Group governing bodies: Chief

Executive Officer (CEO) and Vice-Chairman of the Board of Directors of BCP, Chairman of the Board

of Directors of ActivoBank, S.A., Manager of BCP Africa, SGPS, Lda. and Member of the Board of

Directors of Banco Internacional de Moçambique, S.A.

Since 21 May 2015 he has been a Member of the Supervisory Board of Bank Millennium S.A.

11. Beata Stelmach – Member of the Supervisory Board (independent member)

Ms Beata Stelmach is a graduate of the Finance and Statistics Faculty at the Warsaw School of

Economics, she also holds an MBA from Calgary University and at INSEAD.

For many years she was involved with the capital and financial market - from the start of economic

transformation she worked in the Securities and Exchange Commission, then she held management

functions in capital market entities, including MCI Capital TFI SA, Intrum Justitia TFI SA, she stood at

the head of the Polish Association of Listed Companies. Ms B. Stelmach also has management

experience in other industries: during 2001 – 2005 she sat on the governing bodies of Prokom Software

SA; in 2013 she became the CEO and Director General of General Electric (Poland and Baltics). During

2018 – 2020 she was the President of PZL Świdnik SA.

Moreover, she held advisory functions in the World Bank and also sat on the Supervisory Boards i.a.

of Bank BPH SA and HSBC BANK POLSKA SA.

During 2011 – 2013 she was Undersecretary of State in the Ministry of Foreign Affairs, responsible for

global economic policy as well as public and cultural diplomacy.

Ms B. Stelmach was decorated with the Knight's Cross of Polonia Restituta Order for outstanding

contribution in the Foreign Service and work achievements undertaken for the benefit of the country

and diplomatic activity.

Since 24 March 2021 Member of the Supervisory Board of Bank Millennium S.A.

12. Lingjiang Xu – Member of the Supervisory Board

Mr Lingjiang Xu has a Bachelor's Degree in German from the Foreign Studies University of Beijing, a

Master’s Degree in World Economics from the Nan Kai University, Tianjin and a Master’s Degree in

Finance from the London Business School.

From July 1993 to February 1995, he worked as Desk Officer at the European Affairs Department of

the Chinese Ministry of Foreign Trade and Economic Cooperation in Beijing. He was Third Secretary

of the Commercial Office of the Chinese Consulate General in Hamburg from February 1995 to October

1998. Between October 1998 and February 2006, he was the Division Director of the European Affairs

Department of Chinese Ministry of Commerce in Beijing. From February 2006 to January 2010, he was

the First Secretary of the Commercial Office of the Chinese Embassy in London. In September 2011

he was elected Associate Director of Vermilion Partner LLP (London) (to March 2012). From March

2012 to December 2013 was Partner to RH Regent Investment Management Co Ltd (Shanghai). During

the years of 2015 to 2017, he was Non-Executive Director of Luz Saúde, S.A. and Non-executive

Director of Multicare – Seguros de Saúde, S.A., as well as Non-executive Director of the Board of

Directors of Fidelidade Assistência – Companhia de Seguros S.A. From 18 October 2016 to 31 March

2017, he held the position of Non-executive Member of the Board of Directors of Chiado (Luxembourg)

S.à.r.l. From 2015 to 2018 he also held the managerial position in Fosun Management (Portugal), Lda.

Currently he is Non-executive Member of the Board of Directors, Member of the Committee for

Nominations and Remunerations and Chairman of the Committee for Corporate Governance, Ethics

and Professional Conduct of Banco Comercial Português, S.A. He is also Non-executive Member of the

Board of Directors of Fidelidade - Companhia de Seguros, S.A., Chairman of the Board of Directors of

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Longrun Portugal, SGPA,S.A. and since November 2019 Member of the Board of Directors of Luz Saude,

S.A.

Since 26 March 2018 Member of the Supervisory Board of Bank Millennium S.A.

Standing Committees of the Supervisory Board

The Supervisory Board may establish standing or ad hoc committees to carry out specific tasks. The

Standing Committees of the Supervisory Board are: the Audit Committee, Personnel Committee,

Strategic Committee and Risk Committee.

Detailed information regarding the composition of the committees and the issues raised during the

meetings of the Committees in 2021 is to be found in the „Report on activities of the Supervisory

Board of Bank Millennium S.A. in 2021”, published on Bank Millennium’s website.

Audit Committee

The Audit Committee is a standing committee of the Supervisory Board, established in 2000 and

supporting the Supervisory Board in supervision over the execution of the internal audit function in

the Bank. Furthermore, the Audit Committee focuses on financial reporting, internal control and risk

management at the Bank.

Pursuant to the Act of 11 May 2017 on statutory auditors, audit firms and public oversight the Audit

Committee consists of at least three Members. The Members of the Audit Committee have knowledge

and skills in accounting or auditing of financial statements, as well as in the banking sector, which is

confirmed by the history of their professional career and the duties hitherto performed by them. The

majority of the Members of the Audit Committee, including its Chairman, are independent of the

Bank. The Audit Committee meets on a regular basis (once every quarter) upon the initiative of the

Chairman of the Committee and in the extraordinary mode it is convened by the Chairman of the

Supervisory Board on his own initiative or at the request of a Member of the Supervisory Board or a

Member of the Management Board.

The main responsibilities of the Audit Committee include specifically:

(I) monitoring the process of financial reporting,

(II) monitoring the effectiveness of the internal control systems and risk management systems, and

internal audit, including in the area of financial reporting,

(III) monitoring financial audit activities,

(IV) preparing for the Supervisory Board opinions providing the basis of performing by the Supervisory

Board assessments of the adequacy and effectiveness of the internal control system, including

the annual review of the adequacy and effectiveness of the control function, Compliance

Department and Internal Audit Department, and

(V) controlling and monitoring the independence of a statutory auditor and audit firm, particularly in

the case when other services than audit of financial statements are provided for the Bank by an

audit firm.

In 2021 took place six meetings of the Audit Committee of the Supervisory Board at the following

dates: 28 January 2021, 18 February 2021, 7 May 2021, 22 July 2021, 21 October 2021, 13 December

2021 and one additional meeting by circulation on 11 February 2021.

Detailed information regarding the issues raised during the meetings of the Committee in 2021 is to

be found in the „Report on activities of the Supervisory Board of Bank Millennium S.A. in 2021” in

the chapter „Activities of the Audit Committee in the reporting period”.

From 1 January 2020 to 24 March 2020 the Audit Committee of the Supervisory Board of Bank

Millennium SA was composed of the following members:

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1. Grzegorz Jędrys – Chairman (independent)

2. Bogusław Kott

3. Miguel de Campos Pereira de Bragança

4. Anna Jakubowski (independent)

5. Alojzy Nowak (independent)

On 24 March 2021, the newly appointed Supervisory Board elected the Members of the Audit

Committed (Supervisory Board Resolution No. 25/2021) for the new terms of office, with the following

composition:

1. Grzegorz Jędrys – Chairman (independent)

2. Miguel de Campos Pereira de Bragança

3. Olga Grygier-Siddons (from 1 July 2021) (independent)

4. Anna Jakubowski (independent)

5. Alojzy Nowak (independent)

6. José Miguel Bensliman Schorcht da Silva Pessanha

In this, unchanged composition the Audit Committee of the Bank Millennium S.A. Supervisory Board

functioned until the end of 2021.

The composition of the Audit Committee satisfied the criteria stipulated in Art. 129 section 1 and 3

of the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Oversight.

Personnel Committee

The Personnel Committee has existed at the Bank since 2000. Its responsibilities include in particular:

(I) evaluating candidates for Members of the Bank’s Management Board,

(II) defining and conditions of employment of newly appointed Members of the Bank’s Management

Board,

(III) negotiating change of terms and conditions of employment of Members of the Bank’s Management

Board,

(IV) with respect to Members of the Management Board defining evaluation criteria, evaluating work

as well as deciding on annual bonuses,

(V) determining terms and conditions of termination of employment of Members of the Bank’s

Management Board,

(VI) evaluating policy on variable components of remuneration, and issuing recommendations

regarding:

a) remuneration amount and components, guided by prudential and stable risk, capital and

liquidity management as well as long-term benefit of the Bank,

b) variable remuneration of persons occupying management positions in the Bank involved with

risk management and with compliance of the Bank’s activity with legal and internal

regulations.

During the period from 1 January 2021 to 31 December 2021 the composition of the Committee was

as follows:

1. Alojzy Nowak – Chairman

2. Miguel de Campos Pereira de Bragança

3. Bogusław Kott

4. Olga Grygier-Siddons

5. Anna Jakubowski

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The composition of the Committee until 24 March 2021:

1. Andrzej Koźmiński – Chairman

2. Nuno Manuel da Silva Amado

3. Miguel de Campos Pereira de Bragança

4. Bogusław Kott

Strategic Committee

The Strategic Committee has existed at the Bank since 2013. The tasks of the Strategic Committee

are in particular:

(I) study of macroeconomic trends,

(II) study new trends, developments and new solutions in the banking industry,

(III) analyse Bank competitive position and benchmarking,

(IV) analyse and recommend long-term strategy, goals and objectives for the Bank.

During the period from 1 January 2021 to 24 march 2021 the Committee consisted of the following

persons:

1. Bogusław Kott – Chairman

2. Nuno Manuel da Silva Amado

3. Miguel de Campos Pereira de Bragança

4. Agnieszka Hryniewicz-Bieniek

5. Anna Jakubowski

6. Andrzej Koźmiński

7. Dariusz Rosati

8. Lingjiang Xu

In the time between 24 March 2021 and 31 December 2021 the Committee worked in the following

composition:

1. Bogusław Kott – Chairman

2. Nuno Manuel da Silva Amado

3. Miguel de Campos Pereira de Bragança

4. Anna Jakubowski

5. Miguel Maya Dias Pinheiro

6. Dariusz Rosati

7. Lingjiang Xu

Committee for the Risk Matters

The Committee for the Risk Matters was set up on 4 December 2015. Its competences include the

tasks stipulated for such committee in the Banking Law and allocated to it in other regulations

applicable to banks as well as supervisory recommendations implemented by the Bank ,in particular:

(I) provision of opinions on overall, current and future readiness of the Bank to undertake risk,

(II) provision of opinions on the strategy of management of risk inherent in the Bank operations, as

developed by the Bank Management Board and on information regarding implementation of the

said strategy, as submitted by the Bank Management Board,

(III) provision of support to the Bank Supervisory Board in supervision of implementation of the risk

management strategy relative to the Bank operations by the Bank’s senior management staff,

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(IV) provision of opinions on the assessment Risk Management Function and Validation Function as well

as on exceptional transactions that may impact the Bank risk profile;

(V) provision of opinion on whether incentives provided by the remuneration policies and practices

take into consideration the institution’s risk, capital and liquidity and the likelihood and timing

of earnings.

(VI) verification whether prices of assets and liabilities offered to Clients fully take into account the

Bank’s business model, its risk strategy and in case the prices fail to reflect types of risk

appropriately and in keeping with the said model and strategy, submission of proposals to the

Bank Management Board to ensure adequacy of prices of assets and liabilities relative to relevant

types of risk.

During the period from 1 January 2021 to 24 March 2021, the composition of the Committee was as

follows:

1. Mr. Dariusz Rosati – Chairman,

2. Mr. Bogusław Kott,

3. Mr. Miguel de Campos Pereira de Bragança,

4. Mr. Grzegorz Jędrys,

5. Mr. José Miguel Bensliman Schorcht da Silva Pessanha.

On 24 March 2021, the newly appointed Supervisory Board appointed Members of the Committee for

Risk Matters, for a new term of office in the following composition:

1. Mr. Dariusz Rosati – Chairman,

2. Mrs. Beata Stelmach,

3. Mr. Miguel de Campos Pereira de Bragança,

4. Mr. Grzegorz Jędrys,

5. Mr. José Miguel Bensliman Schorcht da Silva Pessanha.

According to the „Policy of Remuneration of Members of the Supervisory Board of Bank Millennium

S.A.”, adopted by the General Meeting, members of the Supervisory Board of the Bank are entitled

to monthly remuneration for sitting on the Supervisory Board. The amount of the remuneration is

defined by a resolution adopted by the General Meeting with the consideration of the principles

stipulated in the Policy, including the principle of its adequacy to the scale of the Bank’s operation.

The remuneration may be diversified in view of the function performed in the Supervisory Board and

should be correlated with the involvement in the work of the Supervisory Board and the level of

remuneration received by members of supervisory bodies of institutions with a similar scope and scale

of operation. Irrespective of the remuneration for sitting on the Supervisory Board, members of

standing committees of the Supervisory Board are entitled to separate remuneration in connection

with the tasks performed by them as part of these committees. If the Supervisory Board delegates its

member to individually exercise supervision on a permanent basis, the Supervisory Board may assign

to such Supervisory Board member additional remuneration for the duration of the delegation,

however its monthly amount cannot exceed 100% of the base remuneration for sitting on the

Supervisory Board. In case of standing committees of the Supervisory Board the remuneration is

payable for participation in their meetings. The total remuneration due to a Supervisory Board

member for participation in meetings of committees of the Supervisory Board in a given accounting

year cannot exceed 100% of his base remuneration for sitting on the Supervisory Board of the Bank.

In connection with remuneration paid, the Bank shall make appropriate deductions under relevant

legal regulations. Each of the Supervisory Board members may make a declaration to refrain from

collection of all or part of the remuneration. Declarations to such effect shall be submitted to the

Chairman of the Supervisory Board.

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Remuneration paid to members of the Supervisory Board in 2021 (in PLN thousand):

Name and surname

Remuneration for

2021

Remuneration

for participation

in Committees

Other

benefits

Total

Bogusław Kott

240.00

75.00

21.58

336.58

Nuno Manuel Da Silva Amado

120.00

30.00

0.00

150.00

Dariusz Rosati

120.00

45.00

0.00

165.00

Miguel Bragança

120.00

90.00

0.00

210.00

Anna Jakubowski

120.00

60.00

0.00

180.00

Grzegorz Jędrys

120.00

80.00

0.00

200.00

Alojzy Nowak

120.00

45.00

0.00

165.00

José Miguel Pessanha

120.00

40.00

0.00

160.00

Miguel Maya Dias Pinheiro

120.00

5.00

0.00

125.00

Lingjiang Xu

120.00

20.00

0.00

140.00

Olga Grygier-Siddons*

100.00

20.00

0.00

120.00

Beata Stelmach*

100.00

15.00

0.00

115.00

Andrzej Koźmiński**

30.00

0.00

60.00

Agnieszka Hryniewicz-Bieniek**

30.00

10.00

0.75

40.75

RAZEM:

1 580.00

565.00

22.33

2 167.33

* Member of the Supervisory Board from 24 March 2021

** Member of the Supervisory Board until 24 March 2021

In 2021, Members of the Supervisory Board received additional remuneration from the Bank’s

subsidiary companies ( in PLN thousand):

Name and surname

Remuneration for

2021

Other benefits

Total

(PLN’000)

Grzegorz Jędrys

105.59

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The Bank’s shares held by Supervisory Board Members (performing their functions on

31 December 2021):

Name and surname

Function

Number of shares

31.12.2021

Number of shares

31.12.2020

Bogusław Kott

Chairman of the

Supervisory Board

1 000

Nuno Manuel da Silva Amado

Deputy Chairman of the

Supervisory Board

Dariusz Rosati

Deputy Chairman and

Secretary of the

Supervisory Board

Miguel de Campos Pereira de Bragança

Member of the

Supervisory Board

Olga Grygier-Siddons

Member of the

Supervisory Board

Anna Jakubowski

Member of the

Supervisory Board

Grzegorz Jędrys

Member of the

Supervisory Board

Alojzy Nowak

Member of the

Supervisory Board

Member of the Supervisory BoardJosé

Miguel Bensliman Schorcht da Silva

Pessanha

Member of the

Supervisory Board

Miguel Maya Dias Pinheiro

Member of the

Supervisory Board

Beata Stelmach

Member of the

Supervisory Board

Lingjiang Xu

Chairman of the

Supervisory Board

10.4. MANAGEMENT BOARD

The Management Board is the executive authority of the Bank and manages the entirety of the Bank’s

operations. In legal terms, the Management Board operates pursuant to the Code of Commercial

Companies and other regulations, the Bank’s Articles of Association, resolutions of the General

Meeting of Shareholders and the Supervisory Board, as well as provisions of the “Bank Millennium S.A.

Management Board’s Operations bylaws” adopted by the Supervisory Board, which are available from

the Bank’s website on the ”About the Bank > Corporate Bodies and Governance” tab, link to website

https://www.bankmillennium.pl/about-the-bank/corporate-bodies-and-governance.

The competences of the Management Board include all matters that are not reserved for other bodies

of the Bank.

The Management Board makes decisions in the form of resolutions. Resolutions of the Management

Board are adopted by an absolute majority of votes of the Management Board Members present at the

Management Board meeting. In the case of equal votes the Chairman of the Management Board has a

casting vote. Resolutions of the Management Board may be adopted, if at least half of the

Management Board Members are present at the meeting.

The following persons are authorized to make declarations of will regarding the Bank's property rights

and obligations and to sign documents on behalf of the Bank:

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(I) the Chairman of the Management Board individually,

(II) two other Members of the Management Board acting jointly or one Member of the Management

Board acting jointly with a registered proxy or two registered proxies; or,

(III) attorneys-in-fact acting individually or jointly within the scope of the power of attorney granted.

The Management Board of the Bank is composed of at least three persons, including the Chairman of

the Management Board. At least half of the Members of the Management Board should be Polish

nationals. The Management Board is appointed by the Supervisory Board. The term of office of a

Management Board is 3 years. A Member of the Management Board may be recalled by the Supervisory

Board at any time.

The Bank’s Management Board during the period from 1 January 2021 to 31 December 2021 remained

unchanged and consisted of the following persons:

1) Joao Nuno Lima Bras Jorge – Chairman of the Management Board

2) Fernando Maria Cardoso Rodrigues Bicho – Deputy Chairman of the Management Board

3) Wojciech Haase – Member of the Management Board

4) Andrzej Gliński – Member of the Management Board

5) Wojciech Rybak – Member of the Management Board

6) António Pinto Júnior – Member of the Management Board

7) Jarosław Hermann – Member of the Management Board

1. Joao Bras Jorge – Chairman of the Management Board

Mr Joao Nuno Lima Bras Jorge, graduate of the Management Studies at

Universidade Catolica Portuguesa and PADE Advance Management Programme

under AESE.

He started his professional career as a stockbroker in 1990. In the ensuing 10 years

he worked in investment banking, inter alia, as Member of the Management Board

at an investment bank. He also sat on the Board of the Lisbon Stock Exchange.

During the 5 years prior to his move to Poland he held the position of Head of the Retail Banking

Customer Division and Coordinator of the Retail Network at Millennium bcp.

Since 19 July 2006 - Member of the Management Board of Bank Millennium S.A., in the years 2006-

2008 Head of the Retail Banking Division and from 2009 – Head of the Corporate Banking Area. From

22 April 2010 – Deputy Chairman of the Management Board and since 24 October 2013 – Chairman of

the Management Board of Bank Millennium S.A. From 3 June 2019 until the day of merger with Bank

Millennium S.A. i.e. 1 October 2019, also First Deputy Chairman of the Management Board of Euro

Bank S.A., Acting Chairman of the Management Board.

He is responsible for the work of the Management Board, internal audit, compliance, legal support,

HR, marketing communication & public relations, and personal data protection.

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2. Fernando Bicho – Deputy Chairman of the Management Board

Mr Fernando Maria Cardoso Rodrigues Bicho graduated from the Economic

Department at Universidade Catolica Portuguesa in 1984. In 1993 he obtained an

MBA from Universidade Catolica Portuguesa.

He gained his professional experience inter alia in the Portuguese Foreign

Investment Institute, Lloyds Bank Plc in Lisbon and Uniao de Banco Portugueses

(UBP), later renamed to Banco Mello. He performed duties as fund manager and

later in the bank, as Head of the Financial Division, he was in charge of inter alia

the treasury and capital markets, securities operations, asset and liabilities management, issues on

international capital markets, capital management and investor relations. After the purchase of

Banco Mello by Banco Comercial Portugues (BCP) in 2000, Mr Fernando Bicho worked in the BCP

Corporate Centre and from June 2001 he was Head of the Asset and Liabilities Management

Department of the BCP Group.

Since 1 August 2002 Member of the Management Board of Bank Millennium S.A. (CFO – Chief Financial

Officer) and since 20 April 2012 Deputy Chairman of the Management Board. From 3 June 2019 until

the day of merger with Bank Millennium S.A., i.e. 1 October 2019, also Deputy Chairman of the

Management Board of Euro Bank S.A.

He supervises treasury, accounting, financial reporting and control, taxes, capital investments,

relations with investors and financial institutions, management information and central acquisition,

as well as coordination of Group entities (other than leasing, brokerage, investment funds and

startups).

3. Wojciech Haase – Member of the Management Board

Mr Wojciech Haase graduated from the Faculty of Production Economics at Gdańsk

University.

He worked at the National Bank of Poland in Gdańsk to be then transferred to the

group organising Bank Gdański S.A. In 1989-1997 he worked at Bank Gdański S.A. -

first in the Credit Department and then in the Treasury Department. From 1993 he

was Deputy Chairman of the Management Board of Bank Gdański S.A. and, next,

acting Chairman of the Management Board of that Bank.

Since 27 June 1997 Member of the Management Board of Bank Millennium S.A. Since 4 December

2015 the Bank’s material risk management supervisor. Moreover, he supervises risk management,

risk models, credit and ratings processes, liabilities collection and treasury control.

4. Andrzej Gliński – Member of the Management Board

Mr Andrzej Gliński graduated from the Poznań University of Technology (1994) and

completed his post-graduate studies in banking and finance at the Warsaw School

of Economics.

From the beginning of his professional career, he has worked in the financial

sector: at Bank Handlowy S.A. in Warsaw - on management positions as Branch

Director and Sales Director in the Assets Financing Department. Between 2001-

2004 he was Vice President of Handlowy Leasing S.A. He has been working in the Bank Millennium

Group since 2004, first as Chairman of Millennium Leasing Sp. z o.o. and next as Head of Corporate

Banking Area at Bank Millennium S.A.

Member of the Management Board since 22 April 2010. He supervises corporate banking and its

support (excluding corporate banking marketing), factoring and trade financing, structured finance,

custody, as well coordination of the Group entities: leasing and brokerage.

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5. Wojciech Rybak – Member of the Management Board

Mr Wojciech Rybak graduated in economics from the University of Szczecin (1993)

and Tempus – Portassist Programme of the University of Antwerp (1992).

Since the beginning of his professional career, he has been associated with banking.

From September 1992 until August 1994 he worked in Bank Morski S.A. as a Credit

Inspector and, subsequently, Manager of the Business Credit Team. From

September until November 1994 – Head of Credit Sub-unit in Bank Przemysłowo-

Handlowy S.A., from December 1994 until September 1995 – specialist in the Capital Investment

Department of Pomorski Bank Kredytowy S.A., and subsequently until April 1996 – Branch Director

at PBB „Invest-Bank” S.A. in Szczecin.

Since May 1996 he has been working in the Bank Millennium S.A. Group, initially as a Branch Director

in Szczecin (until March 2000), and, subsequently, as Director in the Customer Relationship Centre

at the Bank’s Head Office (until August 2003).

From August 2003 he was a Member of the Management Board of Millennium Leasing Sp. z o.o.,

supervising, inter alia, the sales network and from June 2009 until June 2016 – Chairman of the

Management Board of Millennium Leasing Sp. z o.o. In 2011 - 2016 a member of the Executive

Committee of the Polish Leasing Association, including its Chairman in 2015 – 2016.

Member of the Management Board of Bank Millennium S.A. since 6 June 2016. From 3 June 2019 until

the day of merger with Bank Millennium S.A., i.e. 1 October 2019, also Deputy Chairman of the

Management Board of Euro Bank S.A.

He supervises the retail sales network, its optimization and support, private banking and direct

banking.

6. António Pinto Júnior – Member of the Management Board

Mr António Pinto Júnior graduated in Economics (1985-1990) from Oporto

University and Corporate Finance from Minho University (1993-1994).

He started his professional career in Banco Português do Atlântico (1990), since

1994 part of Millenniumbcp Group, gaining experience in Retail and Corporate

Banking by holding managerial positions in the marketing and sales support areas.

Between 2002 and 2011 he worked in Bank Millennium, S.A., as Head of Departments in charge of

Marketing, Quality, Processes and Operations, and, from April 2010, as a Member of the Management

Board. In the following 7 years he held the position of Head of Retail Banking Marketing Department

in Millenniumbcp in Portugal, and between July 2016 and May 2018 was also a non-executive Member

of the Management Board of ActivoBank.

Since 20 April 2018 Member of the Management Board of Bank Millennium S.A. From 3 June 2019

until the day of merger with Bank Millennium S.A., i.e. 1 October 2019, also Deputy Chairman of the

Management Board of Euro Bank S.A.

He supervises electronic banking, sales campaigns, retail and corporate banking marketing,

processes support management, administration and infrastructure, complaints and quality of

services, coordination of Group entities from the area of investment funds and startups.

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7. Jarosław Hermann - Member of the Management Board

Mr Jarosław Hermann graduated from the Applied Mathematics and Physics Faculty

at the Warsaw University of Technology in 1994 and Carlson School of Management

MBA program in 2002.

He gained broad IT & Operations practice working on managerial positions in

PepsiCo, Pioneer Financial Services and Accenture, where he conducted mid / large

scale projects in the banking sector in Poland and CEE countries.

Between 2005-2010 he was Board Member of First Data Poland responsible for providing IT and

operational services for card acquiring and financial solutions business lines.

Between 2010-2016 he was Board Member of AXA companies in Poland responsible for IT &

Operations.

From 2016 to 2018 he was Vice President of Polskie ePłatności, emerging card acquirer.

Since 1 August 2018 Member of the Management Board of Bank Millennium S.A. From 3 June 2019

until the day of merger with Bank Millennium S.A., i.e. 1 October 2019, also Deputy Chairman of the

Management Board of Euro Bank S.A. He supervises IT, products operations, settlement and cash

management, evidencing, control and settlement of treasury transactions, security and business

continuity.

The organisational structure of the Bank is consistent with the strategy, modern approach to business

and complies with the principles of corporate governance for financial institutions. The division of

the tasks between the members of Management Board of the Bank is presented on the following

diagram:

• Treasury

• Accounting

• Financial reporting and

control,

• Taxes

• Capital investments

• Relations with investors

and financial institutions

• Management information

• Central acquisition

• Group entities co-

ordination (other than

leasing, brokerage,from

the area of investment

funds and startups)

• Private banking

• Retail sales network, its

optimization and support

• Direct banking

Separate position to

supervise the management

of significant risk in Bank’s

activity

• Corporate banking and

its support

• Factoring and trade

financing

• Structured finance

• Custody

• Group entities co-

ordination: leasing and

brokerage

• Electronic banking

• Sales campaigns

• Retail marketing and

corporate marketing

• Processes support

management

• Administration and

infrastructure

• Complaints and quality

of service

• Group entity co-

ordination from the area

of investment funds and

startups

Fernando Bicho

Deputy Chairman of

the Mgt Board

Wojciech Rybak

Member of the Mgt

Board

Wojciech Haase

Member of the Mgt

Board

Andrzej Gliński

Member of the Mgt

Board

Antonio Pinto

Junior

Member of the Mgt

Board

• Management Board works

• Internal audit

• Compliance

• Legal support

• Marketing communication and public relations

• Human resources

• Personal data protection

Joao Bras Jorge

Chairman of the Management

Board

• Risk management

• Risk models

• Credit and ratings

processes

• Liabilities collection

• Treasury control

• IT

• Products operations,

settlements and cash

management

• Evidencing, control and

settlement of treasury

transactions

• Security and business

continuity

Jarosław Hermann

Member of the Mgt

Board

The principles of remuneration of the Management Board Members with the amount of salaries,

bonuses and other benefits received in 2020 can be found in chapter 9 of this report, part 9.3 entitled

"Remuneration policy".

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In accordance with the above-mentioned principles of remuneration, in 2021 Members of the Bank's

Management Board were granted Bank's shares as part of the implementation of the incentive

program. Therefore, the status of shares owned by the Management Board Members who performed

their functions on 31 December 2021 was as follows:

Name and surname

Function

Number of shares

31.12.2021

Including received

under the incentive

program (*)

Number of

31.12.2020

Joao Bras Jorge

Chairman of the

Management Board

278 900

31 879

247 021

Fernando Bicho

Deputy Chairman of

the Management

Board

101 568

25 316

76 252

Wojciech Haase

Member of the

Management Board

90 253

20 628

69 625

Andrzej Gliński

Member of the

Management Board

52 759

20 628

62 131

António Pinto Júnior

Member of the

Management Board

82 759

20 628

62 131

Wojciech Rybak

Member of the

Management Board

82 759

20 628

62 131

Jarosław Hermann

Member of the

Management Board

37 759

20 628

62 131

(*) shares blocked on investment accounts until 14 June 2022.

10.5. INTERNAL CONTROL SYSTEM AND EXTERNAL AUDITOR

Internal Control System

The Bank’s internal control system is organised in the framework of the so-called three independent

lines of defence, which comprise:

• 1

line – the Bank’s operating units not belonging to the 2

and 3

line of defence,

• 2

line – Compliance Department and other units managing particular risks,

• 3

line – Internal Audit Department.

The internal control system covers all organisational units of the Bank and subsidiaries belonging to

the capital group.

The main objectives of the internal control system are to ensure:

• effectiveness and efficiency of the Bank’s operations,

• credibility of financial information (including: completeness, correctness and

comprehensiveness of administrative and accounting procedures and fair and true internal

and external reporting),

• observance of risk management principles at the Bank,

• compliance of the Bank’s activity with laws, internal regulations and market standards.

Based on the developed selection criteria the Bank identified material processes, and then linked

them to the general and specific objectives of the internal control system. For material processes the

Bank selected controls (control mechanisms) functioning within such processes and selected out of

them certain controls of key importance for achieving the objectives of the internal control system

assigned to a given process. Key controls have been covered by the monitoring of their observance,

such monitoring performed independently by organisational units belonging to the 1

and the 2

line

of defence in the internal control system.

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The linking of the general objectives of internal control and specific objectives isolated as part of

them with material processes functioning at the Bank and key controls and principles of independent

monitoring of their observance is documented in the form of the Control Function Matrix. The Bank

in the Matrix also specified the responsibility of particular organizational units for employing control

mechanisms, as well as their independent monitoring.

The Bank has a formalized path of reporting about the results of monitoring controls, ascertained

irregularities and status of implementing remedial and disciplining measures. From time to time this

information is also transferred to the Internal Audit Department, the Bank’s Management Board and

Audit Committee of the Supervisory Board.

The Bank’s Management Board is responsible for the implementation and functioning of an adequate,

effective and efficient internal control system.

The Bank’s Supervisory Board exercises supervision and performs the annual evaluation of the

implementation and ensuring that the internal control system is adequate and effective, as a whole

and in its parts (including the control function, Compliance Department, Internal Audit Department).

Internal Audit (3rd line of defence)

The Internal Audit Department is within the internal control system a specialized unit of the 3rd line

of defence which carries out an independent review of processes and internal control in the Bank and

the capital group, verifying the implementation of tasks assigned to the 1st and 2nd line of defence.

The aim of the activities is providing the Bank's management with an assessment of the effectiveness

and adequacy of the risk management system and the internal control system, as well as adding value

and streamlining processes in the Bank and the capital group. When implementing its mission Internal

Audit takes into account the strategic objectives and tasks of the organization, as laid down by the

Management Board and Supervisory Board of the Bank. The audit process is performed according to

the Audit Charter and Internal Audit Methodology, fostering international standards of internal audit

and good banking practices.

The Internal Audit Department is an independent unit, directly reporting to the Chairman of the

Management Board of the Bank and the results of its activities are reported to the Management Board,

Audit Committee of the Supervisory Board and the Supervisory Board of the Bank.

The activity of Internal Audit is a planned and continuous activity, resulting from the implementation

of the mission and objectives, as well as the adopted Department Strategy and based on an annual

audit plan. The basis of the planning process is the assessment of the risk of particular areas and

processes of the Bank in order to identify increased risk and support the specification of priorities and

resources for the implementation of tasks. The planning process takes into account consultations with

senior management and owners of key processes. The annual audit plan is approved by the Bank’s

Supervisory Board and implemented on a quarterly basis by experienced and highly qualified

professionals.

Internal Audit performs independent and objective assurance and consulting activities. Assurance

activity is carried out as part of process audits, independent review function, branch audits,

preventive audits and investigations. Assurance activity includes assessment of the adequacy and

effectiveness of the risk management system and internal control system in all areas of banking

activity. Advisory services are aimed at supporting the organization in achieving its goals and are

provided, as far as their nature does not put under threat the independence, effectiveness and

objectivity of Internal Audit’s assurance activity, nor is related to the designing of control mechanisms

and risk management system.

In 2021 Internal Audit Department performed audit tasks in the Bank, its subsidiaries, external entities

to which the Bank, to the extent permitted by regulations, outsourced banking and bank-related

operations, as well as within the BCP Capital Group. The planned activity of the Department covered

among others audits of key business and support processes and also financial audits, branch audits

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and those of compliance with external regulatory requirements. The tasks performed by the Internal

Audit Department also included investigations and prevention audits.

The results of the review of the functioning of the entire internal control system as well as its selected

components, carried out by the Internal Audit Department in cooperation with the External Auditor

of the BCP Group, are presented cyclically and are subject to evaluation by the Audit Committee of

the Bank's Supervisory Board and once a year to the Bank's Supervisory Board.

Internal Control System with respect to the Process of Preparing Financial Reports

Implemented solutions regarding the internal control system protect to a significant extent the Bank

from financial reporting errors and provide the Bank’s Management with information which helps

evaluate the correctness, efficiency and security of the functioning of the process of preparing

financial reports, also in order to ensure the highest possible effectiveness in managing identified

types of risks accompanying the process.

The internal control system, introduced by the Management Board of the Bank and incorporating the

financial report preparation process, has been designed to facilitate the control of process risk while

maintaining appropriate supervision over the correctness of gathering, processing and presentation

of data necessary for the preparation of financial reports in keeping with effective laws.

An important element of the internal control system in the process of preparing financial reports is

the cooperation of the Audit Committee of the Bank's Supervisory Board with an audit firm providing

financial audit services. The Bank prepared the policy of selecting an audit firm for carrying out an

audit and policy for providing by an audit firm carrying out an audit, by entities connected with such

audit firm and by a member of an audit firm network - permitted services not being an audit. The

above-mentioned policies are captured in the document „Policy of Selecting and Cooperation with

Audit Firms”, which was approved by the Audit Committee of the Supervisory Board on 26 October

2017 and it was last updated on 28 February 2021. The policy specifies:

1) The principles of selecting the audit firm to conduct statutory audit and voluntary audit,

2) Principles of providing permitted services not being a statutory or voluntary audit by Audit Firm,

entities connected with Audit Firm or member of an Audit Firm network,

3) Procedure of accepting performance by Other Audit Firms of services other than the statutory

audit and the voluntary audit,

4) Principles of the Bank’s cooperation with audit firms, entities connected with an audit firm or

members of the audit firm network with respect to conducting statutory or voluntary audits and

providing permitted services.

The external auditor is selected by the Supervisory Board on the basis of a recommendation issued by

the Audit Committee of the Supervisory Board. In addition, in the interest of the quality of financial

data presented in the remaining published quarterly reports, the Bank, together with the external

auditor, has implemented cooperation procedures ensuring – on an on-going basis - the consultation

of important issues connected with the recognition of economic events in the books and financial

reports. At meetings of the Audit Committee of the Supervisory Board the external auditor presents

key findings relative to financial reporting, consults with the Audit Committee of the Supervisory

Board draft reports and proposes an approach to the audit of the annual financial report.

The Bank is covered by the consolidated financial report of the Millennium BCP capital group. In this

connection, the annual review of the Bank’s internal control system supporting the process of

preparing and disclosure of financial information is also subject to the terms and requirements of

consolidated supervision, which is performed by the Bank of Portugal and the European Central Bank.

The external auditor of the Millennium BCP capital group participated in 2021 in two reviews of the

adequacy and effectiveness of the part of the Bank's internal control system supporting the process

of preparing and disclosure of financial information (financial reporting) and issued an appropriate

opinion in this respect.

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Information on the agreements with the entity authorised to audit financial reports

On 22 February 2021 the Supervisory Board of the Bank approved the selection of Deloitte Audyt Sp.

z o.o. sp. k. as an entity authorised to perform audits of financial reports of Bank Millennium S.A. and

the Bank’s capital group for the years 2021, 2022 and 2023. The audit agreement was concluded on 6

May 2021.

Remuneration received by the auditor on account of services provided to the Capital Group of Bank

Millennium S.A.

Auditor’s Remuneration

2021

2020

(in PLN’000)

Bank

Subsidiaries

Bank

Subsidiaries

Statutory audit within the meaning

of art. 2 point 1 of the Act on

Statutory Auditors

1 142

517

928

464

Other assurance services

1 170

268

850

208

Tax advisory services

Other services

Services other than statutory audit:

▪ a review of the stand-alone and consolidated interim condensed financial reports of Bank

Millennium S.A. drawn up as at June 30, 2021,

▪ review of the interim condensed financial reports of Millennium TFI SA investment funds

prepared as at June 30, 2021,

▪ audit of the consolidation documentation and the reporting package of Bank Millennium S.A.

capital group for the period of 6 months, ended on 30 June 2021, and for the period of 12

months, ended on 31 December 2021, prepared in accordance with instructions and group

rules of BCP capital group,

▪ procedures for verification of consolidation documentation and the reporting package of the

Bank Millennium S.A. capital group for the period of 3 months, ended on 31 March 2021,

prepared in accordance with group principles,

▪ procedures for verification of consolidation documentation and the reporting package of the

Bank Millennium S.A. capital group for the period of 9 months, ended 30 September 2021,

prepared in accordance with group principles,

▪ assurance service concerning requirements for safekeeping of customers' assets for 2021 for

Bank Millennium S.A. and Millennium Dom Maklerski S.A.,

▪ assurance service concerning evaluation of adequacy of the risk management system in 2021

in Millennium TFI S.A.,

▪ assurance service in accordance with MSUA 3000, concerning verification of the internal

control system of Bank Millennium S.A. and Millennium Leasing, in accordance with

instructions of the group auditor for the period from 1 June 2020 to 31 January 2021 and for

the period from 1 February 2021 to 30 November 2021,

▪ assurance service in accordance with MSUA 3000, concerning verification of the remuneration

report for 2021 in Bank Millennium S.A.,

▪ assurance service in accordance with MSUA 3000: Statement of the independent auditor issued

on behalf of the entity authorized to audit financial statements on the conformity of methods

and principles of valuation of the Fund's assets described in the prospectus with the

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regulations on accounting of investment funds, as well as on the conformity and completeness

of these principles with the investment policy adopted by the Fund,

▪ assurance service in accordance with MSUA 3000: independent verification of the non-

financial data presented within CSR Report,

Deloitte Audyt Sp. z o.o. sp. k. also provided attestation service according to ISAE 3000 concerning

verification of internal control systems of Bank Millennium S.A. and Millennium Leasing S.A. , in

accordance with the instructions of the group auditor for the period from 1 June 2020 to 31 January

2021. The net remuneration amounting to PLN 119 thousand this service was presented in the financial

statements for the 12-month period ended 31 December 2021, as the period to which the service

relates ended on 31 January 2021.

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11. ACTIVITIES IN THE ESG AREA: ENVIRONMENT, SOCIETY AND

GOVERNANCE

ESG (Environmental, Social, Governance) issues have for years been part of the Bank Millennium

Group’s business strategy. The ESG area is also included in the new strategy for 2022-2024, which was

announced in December 2021. Of crucial significance for Bank Millennium is not only to attain the

goals set in the strategy, but also to take the proper path towards them, based on our commitment

to society and the natural environment, in line with stringent standards of quality and ethics in the

areas of sales and services. The new strategy entitled “Bank Millennium. Inspired by people” highlights

the importance attached to the inspirations provided by employees, clients and the community in

which the Bank functions.

In management processes the Bank incessantly cares about observing high ethical standards as well

as safety and transparency of relations with its clients. The Bank constantly develops its risk

management processes while giving consideration to the rapidly evolving challenges regarding climate

risks.

ESG issues are discussed in detail in the ESG Report of Bank Millennium and the Bank Millennium Group

for 2021, published on 21 February 2022. The ESG Report constitutes the report on non-financial

information referred to in Article 49b of the Accounting Act.

ENVIRONMENT

Environmental policy

The Bank Millennium Group continues its involvement in the financing of energy-efficient investment

projects. In compliance with the adopted environmental policy, the Group does not finance new coal

mines or coal-fired power generation projects, except for new projects aimed at reducing the levels

of pollution. Exposures to coal mining projects or industries directly related to mining are negligible

today.

Environmentally friendly products

Environmental activities cover the entire product portfolio in the Bank Millennium Group. We take

active measures to reduce the use of paper in communication with our clients. The reduction of paper

consumption is also supported by the development of Mobile Authorization. An example of a product

supporting environmental goals is the WWF Millennium Mastercard credit card (APR 14.77%) offered

as part of the Bank’s long-term cooperation with the WWF Poland Foundation. The card is made with

recycled plastic. Millennium Leasing, in turn, already since 2019 is particularly active in developing

the MilleSun program dedicated to financing PV investments. These and other pro-environmental

measures are described in the ESG Report.

In line with its strategy for 2022-24, the Bank Millennium Group will actively support clients in their

decarbonisation efforts and will provide PLN 2 billion in financing over the next three years to the

Bank’s and the Bank Group’s clients for sustainable and transformational projects.

Reduction of own greenhouse gas emissions

In the new strategy, the Bank has for the first time defined its goals pertaining to climate protection.

The Bank is well positioned and plans to reduce its own greenhouse gas emissions by 50% in 2022

compared to 2020. The achievement of climate neutrality in terms of the Bank’s own emissions is

planned by 2027 and the achievement of full climate neutrality is planned – by 2050.

In 2021, the Bank took numerous measures to reduce consumption of energy, water, and other

materials, and introduced more environmentally friendly solutions in its premises. The Bank attaches

great importance to reviewing and reducing the level of emissions from the properties that we occupy

for the conduct of our business. In 2022, all electricity purchased by the Bank will be covered by

certificates of origin from renewable energy sources. The Bank is introducing environmentally friendly

solutions in its head offices. In Q4 2021, employees of the Bank’s head office in Wrocław moved to a

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new location built in accordance with stringent environmental standards. In 2021, an exemplary,

environmentally friendly branch of Bank Millennium was opened in Gdańsk.

SOCIETY

Barrier-free banking

Bank Millennium’s goal is to offer banking without barriers. The Bank’s purpose is to dismantle digital

and physical obstacles to financial and non-financial services. Bank Millennium is not only a financial

services centre for clients. It is also the first access channel for other services, e.g. in the mobile

application clients can buy tickets for urban transport, pay for parking or buy car insurance simply by

scanning the code in their registration document. Remote contact with Polish government offices is

also possible through internet banking. The Bank has introduced numerous amenities to assist people

with impaired vision, hearing and movement. An increasing number of services are being digitized,

and the Bank helps its clients learn about online banking solutions and start using this form of banking.

Bank Millennium extends the barrier-free community concept also in the non-banking sphere. In 2021,

for the third consecutive year, during the 18th edition of the Millennium Docs Against Gravity festival,

selected films were available with audio description and voice-over, making it easier for people with

visual impairments to access the world of culture.

Since 2016, the Bank Millennium Foundation has been running its own financial education program for

kindergarten children, called the “Financial ABCs.” In 2020 and 2021, despite the pandemic, the

Foundation continued to execute the project remotely by creating a series of modern online

educational materials for children and their parents. In November and December 2021, as part of the

seventh edition of the program, the Foundation conducted 200 workshops in 54 kindergartens. Over

5,000 pre-schoolers aged 3 to 6 participated in these workshops. Classes were in compliance with the

safety rules required during the pandemic.

Responsible employer

Bank Millennium creates a friendly work environment for all staff regardless of their gender, age,

race, religion, nationality, ethnic origin, disability, political beliefs, trade union membership or sexual

orientation, so that everyone may thrive in conditions conducive to professional development in an

atmosphere of cooperation and mutual respect. It offers programs for working parents, opportunities

to take part in charitable activities, employee volunteerism.

As early as in April 2020, the Bank established a fund in the amount of one million zloty to finance

the treatment and rehabilitation of its employees in connection with COVID-19; the funds are provided

on an ongoing basis, upon requests from employees.

The Bank attaches great significance to the involvement of its staff in social campaigns. In 2021, the

Bank refreshed the formula of this type of activity. The employee volunteerism program

#słuchaMYwspieraMY (#WeAreListeningWeAreSupporting) is a competition for grants provided to

volunteerism projects to be carried out by the Bank’s employees for the benefit of specific individuals,

organizations and local communities in need of such support. In 2021, grants were awarded to 21

project leaders. 139 volunteers along with their family members and friends took part in these

activities. Support was granted to 2,638 beneficiaries – children taken care of by social welfare

institutions, people with disabilities, pre-schoolers, junior and high school students, including those

attending integration and special classes, and senior citizens.

Patronage of culture

For more than 30 years, cultural involvement has been an important part of Bank Millennium’s social

activities. The Bank supports cultural undertakings with a national and local range alike.

Bank Millennium has been a long-term sponsor of the Millennium Docs Against Gravity Film Festival,

which informs viewers of many phenomena transpiring in the contemporary world and educates them

through the films shown and the events accompanying the Festival. In 2021 the festival was highly

focused on the theme of climate change.

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In 2021, Bank Millennium was awarded for its involvement in the promotion of culture - with the

Culture Atlas title for the 6th time by the Kraków Festival Office for its sponsorship of the Sacrum

Profanum festival.

GOVERNANCE

The basis for defining the approach to managing sustainable development is an agenda formulated by

the United Nations that includes 17 goals, 169 targets, and 304 indicators. Bank Millennium signed a

declaration in support of the 2017 Sustainable Development Goals. The Bank takes cues from all 17

goals, but gives the highest priority to: Good Health and Well-Being; Quality Education; Gender

Equality; Decent Work and Economic Growth; Industry, Innovation and Infrastructure; Climate Action

and Partnership for the Goals.

As of 2018, the Bank is a signatory to the Diversity Charter. The Charter is a pledge signed by

organizations that choose to prohibit discrimination in the workplace and work to create and promote

diversity. The adoption of our stringent standards has been confirmed by the Bank’s inclusion in the

European Diversity Leaders 2022 ranking published by the Financial Times in November 2021, based

on opinions provided by 100,000 employees of various companies.

Bearing in mind the growing significance of sustainable development for the Bank Millennium Group’s

business, in December 2021 the Bank established within its structures the Sustainable Development

Committee and the Sustainable Development Department. Bank Millennium is actively getting ready

to comply with new reporting requirements resulting from the dynamic development of regulations

associated with the drive to achieve the climate objectives established in the Paris Agreement.

We invite you to read the content of the ESG Report of Bank Millennium and the Bank Millennium

Group for 2021.

12. ADDITIONAL INFORMATION

Other information regarding:

▪ Guarantees and sureties granted,

▪ Transactions with related companies,

▪ List of the relevant court cases, arbitration proceedings before an authority or public

administration,

can be found in the Annual Consolidated Report of the Bank Millennium S.A. Capital Group for the 12-

month period ending 31st December 2021.

As above mentioned, the Bank prepares the separate report comprising non-financial information,

which will be published on the Bank’s web site on February 21, 2022.

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13. STATEMENTS OF MANAGEMENT BOARD

Presentation of asset and financial position of the Bank and Capital Group in the financial reports

According to the best knowledge, the Annual Financial Statements of Bank Millennium and Capital

Group of Bank Millennium S.A. as at 31 December 2021 and the comparable data, were prepared in

line with the accounting principles, and reflect, truly, reliably, and clearly, the asset and financial

position of the Bank and Capital Group of Bank Millennium and their financial results. This Annual

Management Board Report on the activity of Bank Millennium and the Group contains a true picture

of development, achievements and condition of Bank Millennium and the Capital Group of Bank

Millennium.

Selection of an entity authorized to audit financial reports

The entity authorized to review financial reports that audits Annual Financial Statements of Bank

Millennium and the Capital Group of Bank Millennium SA as at 31 December 2021, was selected in

accordance with the regulations of law. The entity and chartered accountants, who performed the

audit, satisfied all the conditions required to issue an unbiased and independent audit report, as

required by the national law.

SIGNATURES:

Date

Name and surname

Position/Function

Signature

21.02.2022

Joao Bras Jorge

Chairman of the

Management Board

signed with a qualified electronic signature

21.02.2022

Fernando Bicho

Deputy Chairman of

the Management Board

signed with a qualified electronic signature

21.02.2022

Wojciech Haase

Member of the

Management Board

signed with a qualified electronic signature

21.02.2022

Andrzej Gliński

Member of the

Management Board

signed with a qualified electronic signature

21.02.2022

Wojciech Rybak

Member of the

Management Board

signed with a qualified electronic signature

21.02.2022

António Pinto Júnior

Member of the

Management Board

signed with a qualified electronic signature

21.02.2022

Jarosław Hermann

Member of the

Management Board

signed with a qualified electronic signature