Non-recourse assets (products for which the Bank’s claim is limited to certain debtor's assets or cash
flows from specific assets), in particular "project finance" and "object finance" products (products in
which the borrower, most often a special purpose vehicle is characterized by the minimum level of
equity, and the only component of its assets is the credited asset), are assessed by comparing the
value of the collateral in relation to the principal amount of the loan. Identification of the appropriate
buffer to cover the risk of changes in the value of the collateral satisfies the SPPI Test conditions.
The negative result of the SPPI Test implies the valuation of the debt at FVTPL, causing a departure
from the valuation at amortized cost or FVTOCI.
Modifications to the terms of the loan agreement
Modifications to the terms of the loan agreement during the loan period include:
▪ changing the dates of repayment of all or part of the receivables,
▪ changes in the amount of the repayment instalments,
▪ changing the interest or stop charging interest,
▪ capitalization of arrears or current interest,
▪ currency conversion (unless such a possibility results from the original contract),
▪ establishing, amending or abolishing the existing security for receivables.
Any mentioned above modification may result in the need to exclude from the balance sheet and re-
classify the financial asset taking into account the SPPI test.
If the contractual terms of the loan are modified, the Bank performs a qualitative and quantitative
assessment to determine whether a given modification should be considered significant and,
consequently, derecognize the original financial asset from the balance sheet and recognize it as a
new (modified) asset at fair value. A significant modification takes place if the following conditions
are met:
▪ quantitative criterion: increase of the debtor's involvement, understood as the increase in the
capital of each individual credit exposure above 10% in relation to the capital before the increase.
If the quantitative criterion is above 10%, the modification is considered significant, while the
occurrence of the quantitative criterion up to 10% results in considering the modification as
insignificant. The quantitative criterion does not apply to loans under restructuring, i.e. in the
case of such exposures, any change in the debtor's involvement results in the recognition of a non-
material modification due to the fact that the settlement or restructuring agreement is intended
to recover the debt and does not constitute a new transaction concluded on different terms.
▪ qualitative criteria: conversion of the exposure to a different currency (unless the possibility of
conversion was included in the original contract), change in the SPPI test result. The occurrence
of the qualitative criterion results in considering the modification as significant.
If the cash flows resulting from the agreement are subject to modification, which does not lead to
derecognition of a given asset (so called ‘insignificant modification”), the Bank adjusts the gross
carrying amount of the financial asset and recognizes the profit or loss due to insignificant
modification in the financial result (in a separate item of the Loss Profit Statement - "result on
modification "). The adjustment of the gross carrying amount of a financial asset is the difference
between the discounted cash flows before and after the contract modification. All costs and fees
incurred adjust the carrying amount of the modified financial asset and are depreciated in the period
remaining until the maturity date of the modified financial asset.
POCI assets
POCI assets ("purchased or originated credit-impaired") are financial assets that, upon initial
recognition, have an identified impairment. Financial assets that were classified as POCI at the time
of initial recognition are treated by the Bank as POCI in all subsequent periods until they are
derecognized from balance sheet, and expected credit loss is estimated based on ECL covering the
remaining life time of the financial asset, regardless of future changes in estimates of cash flows
generated by them (possible improvement of assets quality).