(backtesting procedures) and performing
periodic quantitative validation of the models.
In the models of expected credit losses, the
Bank uses large amounts of data, therefore
the completeness and reliability of data may
significantly affect the accuracy of allowances
for credit losses.
We considered allowances for expected credit
losses for loans and advances portfolio as a
key audit matter due to:
•
significant judgement used by the Bank's
Management Board in modelling future
scenarios and forecasting
macroeconomic variables, assuming the
probability of occurrence of individual
scenarios;
•
high degree of uncertainty related to the
estimation of the allowance for expected
credit losses due to dynamic changes in
the economic environment, e.g. as a
result of the ongoing COVID-19
pandemic, which affect the forecasted
macroeconomic parameters and thus the
credit risk parameters used in the models
for estimating expected credit losses;
•
the complexity of the audit procedures
and the audit evidence obtained due to
the complexity of the calculations and the
amount of data used to estimate the
allowances for expected credit losses.
N Note 2.5.
Use of estimates
, Note 2.7.
Accounting policies
, Note 3.
Risk
management
and Note 21.
Loans and
advances to customers
in the financial
statement provide detailed information on the
methods and models used and the level of
allowances for the expected credit losses in
the portfolio of loans and advances to
customers.
•
critical analysis of key judgments and
assumptions, including macroeconomic scenarios
and the probability-weightings assigned to
particular scenarios;
•
independent tests of the credit risk parameters.
In the area of the individually assessed exposures, we
performed the following procedures:
•
we selected a sample taking into account various
risk criteria based on our professional judgement,
•
for selected loans and advances we checked the
stage classification as at the balance sheet date;
•
for selected impaired loans and advances (stage
3) we tested the assumptions used in the expected
credit loss allowances’ calculation, particularly
expected scenarios and probabilities assigned to
them and the timing and amount of expected cash
flows, including cash flows from repayments and
realisation of collaterals.
Moreover, we performed the following procedures:
•
we reconciled selected input data used for
determining default parameters and estimating
expected credit losses;
•
we verified the allocation of exposures to
appropriate stages;
•
for the portfolio of loans we recalculated the level
of expected credit losses;
•
we performed analytical procedures over provision
coverage of the credit portfolio, its changes in
2021 and transfers between stages in 2021;
•
we analysed the results of the management's
sensitivity analysis of the level of allowances for
expected credit losses due to deterioration or
improvement of risk parameters.
Additionally, we verified adequacy and completeness
of disclosures in the financial statements in
accordance with applicable accounting standards.
Estimating the provision for legal risk related
to the portfolio of mortgage loans in CHF
As at the balance sheet date, the Bank has
a portfolio of mortgage loans denominated in
and indexed to foreign currencies, mainly to
the Swiss franc, in the total amount of PLN
7,227,559 thousand. As described in the Note
As part of our audit procedures, we assessed whether
the accounting approach applied by the Bank is in line
with IFRS. Our audit procedures were mainly aimed at
assessing the model and the particular assumptions
adopted by the Management Board that had