1. Introduction

Characteristics of operations

PKO Bank Polski S.A. Group – history

Main events and financial results achieved in 2021

Development paths

Market position

1.1 Characteristics of operations of the PKO Bank Polski S.A. Group

The Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna Group (PKO Bank Polski S.A. Group or the Bank’s Group) is one of the largest groups of financial institutions in Poland and one of the largest financial groups in Central and Eastern Europe. The Parent of the Bank’s Group is Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna (PKO Bank Polski S.A. or the Bank). PKO Bank Polski S.A. is the largest commercial bank in Poland and the leading bank on its home market in terms of the scale of operations, equity, loans, deposits, number of Customers and size of the distribution network.

PKO Bank Polski S.A. is a universal bank that services individuals, legal entities and other Polish and foreign entities.

Apart from strictly banking operations, the PKO Bank Polski S.A. Group also provides services in respect of leases, factoring, investment funds, pension funds and insurance, car fleet management services, transfer agent services, provides technological solutions, outsources IT professionals and supports other entities’ operations, manages properties. The Bank’s Group conducts banking operations and provides financial services outside Poland through its branches in the Federal Republic of Germany (German Branch), the Czech Republic (Czech Branch) and the Slovak Republic (Slovak Branch).as well as through its subsidiaries in Ukraine.

more than 11 million

of the Bank’s Customers

6.1 million

of active IKO applications

……………..

The PKO Bank Polski S.A. Group develops not only in its traditional area of operations, i.e. retail banking. It is also the leader in servicing corporate Customers and companies and enterprises (in particular in respect of financing them), and on the market of financial services for communes (gminy), counties (powiaty), voivodeships and to the budget sector. It is also the major managing underwriter of issues of municipal bonds.

The PKO Bank Polski S.A. Group has the largest share in the Polish banking sector (19.2%), in loans (17.4%) and the market for investment funds for individuals (19.2%). PKO Bank Polski S.A. is the leader in terms of current accounts and payment cards.

The PKO Bank Polski S.A. Group offers modern and comprehensive services via its digital service channels. Customers use iPKO and IKO as means of modern banking, which extends outside the traditional financial area. PKO Bank Polski S.A. was involved in the development of a modern approach to the e-administration services based on cutting edge technologies. Since 2018, PKO Bank Polski S.A., in cooperation with Operator Chmury Krajowej S.A. has consistently followed its “path towards the cloud”. As a result of such actions, over the coming years, the key business IT systems in the Bank are to operate in a computing cloud based on hybrid architecture. The first cloud solutions implemented using global cloud service providers and Operator Chmury Krajowej sp. z o.o. have already supported the Bank’s employees and Customers.

As at the end of 2021 the branch network of PKO Bank Polski S.A. was the largest such network in Poland, and covered 975 own outlets (including branches, offices and centres) and 447 agencies. The Customers of PKO Bank Polski S.A. have at their disposal a highly developed network of ATMs (nearly 3 thousand devices as at the end of 2021).

The PKO Bank Polski S.A. Group is one of the largest and best assessed employers in Poland. As at the end of 2021 the PKO Bank Polski S.A. Group employed over 25.7 thousand FTEs.

The PKO Bank Polski S.A. Group between 2017 and 2021

	2021	2020	2019	2018	2017
Statement of financial position (in PLN million)
Total assets	418,086	376,966	347,897	324,255	296,912
Total equity	37,693	39,911	41,578	39,101	36,256
Own funds	41,224	41,516	42,330	37,850	34,026
Financing granted to Customers	247,572	235,727	244,083	230,438	214,361
Customer deposits	322,296	282,356	256,170	238,723	217,306
Net profit/loss	4,874	-2,557	4,031	3,741	3,104
Financial ratios
Net ROA	1.2%	-0.7%	1.2%	1.2%	1.1%
Net ROE	12.1%	-6.0%	10.0%	10.0%	9.0%
Net ROTE	13.2%	-6.5%	10.9%	11.0%	10.0%
C/I1)	40.6%	40.9%	41.3%	44.2%	46.0%
Interest margin	2.7%	3.0%	3.4%	3.4%	3.3%
Share of impaired exposures	3.98%	4.43%	4.26%	4.87%	5.47%
Cost of credit risk	0.55%	0.78%	0.46%	0.59%	0.71%
Total capital ratio	18.23%	18.18%	19.88%	18.88%	17.37%
Number of Customers of PKO Bank Polski S.A. (in thousands), including:	11,120	11,006	10,933	10,653	10,330
Individuals (in thousands)	10,541	10,463	10,427	10,179	9,877
Companies and enterprises (in thousands)	563	526	491	459	438
Corporate Customers (in thousands)	17	16	16	15	15
Operational data
Number of branches of PKO Bank Polski S.A.	975	1,004	1,115	1,155	1,194
Number of employees (in FTEs)	25,657	25,859	27,708	27,856	28,443
Number of current accounts with the Bank (in thousands)	8,490	8,257	8,012	7,697	7,362
Information on shares
Stock exchange capitalization (in PLN million)	56,163	35,900	43,075	49,338	55,388
Number of shares (in million)	1,250	1,250	1,250	1,250	1,250
Share price (in PLN)	44.93	28.72	34.46	39.47	44.31
Dividend per share (in PLN) (paid in the current year from profit for the preceding years)	0.00	0.00	1.33	0.55	0.00

1) Data for the years 2017-2018 does not take into account presentation changes made in 2020, which had an impact on the amount of the result on business activities and operating expenses.

The definitions of particular items of the statement of financial position and the income statement are described in Section 14: Glossary.

1.2 The PKO Bank Polski S.A. Group - History

The PKO Bank Polski S.A. Group has been offering services to its retail and institutional Customers for more than 100 years.

The main events in the history of the Bank and the Bank’s Group.

1919-1938	1.	Pocztowa Kasa Oszczędności was established on 7 February 1919 by virtue of a decree signed by the Head of the country, Józef Piłsudski, Prime Minister Ignacy Paderewski and Hubert Linde – PKO’s founder and first president.
	2.	Pocztowa Kasa Oszczędności was vested with legal personality as a state institution, operating under the supervision of and with the guarantee of the State.
	3.	The first local branch of Pocztowa Kasa Oszczędności was opened in Poznań.
	4.	Pocztowa Kasa Oszczędności began running School Savings Unions (Szkolne Kasy Oszczędności).
	5.	On the initiative of Pocztowa Kasa Oszczędności, the Ministry of the Treasury decided to set up Bank Polska Kasa Opieki (today Pekao S.A.) as a joint-stock company to facilitate the transfer of foreign currencies to Poland by Poles living abroad.
	6.	Pocztowa Kasa Oszczędności strongly contributed to the development of non-cash transactions – every other larger industrial plant and every large enterprise had a cheque account with Pocztowa Kasa Oszczędności, and the cheque turnover in Poland was one and a half times higher than the cash turnover.
1939-1945		The Second World War was a period in which Pocztowa Kasa Oszczędności’s activity came to a standstill and it suffered huge losses.
1946-1990	1.	Pocztowa Kasa Oszczędności was transformed into Powszechna Kasa Oszczędności.
	2.	The Banking Law Act introduced a privilege for saving deposits held in Powszechna Kasa Oszczędności; they were covered by a State guarantee.
	3.	Powszechna Kasa Oszczędności introduced a modern product: a current account.
	4.	In the years 1975–1987, Powszechna Kasa Oszczędności was merged into the structures of the National Bank of Poland (NBP), yet it retained its identity.
1991-2001	1.	The first Internet information portal of the Bank and the first e-PKO Internet branch were launched.
	2.	PKO Towarzystwo Funduszy Inwestycyjnych S.A. (PKO TFI S.A.) began its operations.
	3.	PKO BP BANKOWY PTE S.A. was formed.
	4.	Bankowy Fundusz Leasingowy S.A. (currently PKO Leasing S.A.) was formed which provides operating and finance leases of non-current assets and property.
	5.	PKO BP, as one of the founders, formed Centrum Elektronicznych Usług Płatniczych eService S.A. (currently CEUP eService sp. z o.o.).
	6.	In 2000, the Bank was transformed into a joint-stock company fully-owned by the State Treasury under the name Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna (PKO Bank Polski S.A.).
2002-2009	1.	The Bank acquired Inteligo Financial Services S.A., a company that provides services covering the maintenance and development of banking systems, also including electronic access to bank accounts (Inteligo account).
	2.	The Bank acquired 66.65% shares in KREDOBANK S.A. The company is registered and operates in Ukraine. At present, the Bank holds 100% of shares in the company’s share capital.
	3.	In 2004, PKO Bank Polski S.A. was floated on the WSE. At the end of the first day of quotations, shares reached a price of PLN 24.50 against the issue price fixed at PLN 20.50.
	4.	PKO BP Faktoring S.A. (currently PKO Faktoring S.A.) began operating.
2010-2015	1.	2013–2015 strategy: “PKO Bank Polski. Every day the best” strengthened the position of the Bank’s Group as a leader in key market segments.
	2.	In 2013, PKO Bank Polski S.A. set a new standard of mobile payments – IKO. The innovative solution on the market of mobile payments was used to create the BLIK payment system in 2015. BLIK became the Polish market standard.
	3.	PKO Bank Polski S.A. signed an agreement for a twenty-year strategic alliance in the electronic payment market with EVO Payments International Acquisition GmbH, and at the same time sold a significant portion of shares in CEUP eService sp. z o.o.
	4.	PKO Bank Hipoteczny S.A. was formed. Its operations include issuing long-term mortgage covered bonds and granting long-term mortgage loans to retail Customers.
	5.	PKO Bank Polski S.A. acquired shares in the Nordea Group companies, including shares in Nordea Bank Polska S.A., and a portfolio of amounts due from corporate Customers. In October 2014, the merger of the banks was carried out.
	6.	PKO Towarzystwo Ubezpieczeń S.A. was formed. The Company provides property insurance services to the retail Customers of PKO Bank Polski S.A.
	7.	PKO Bank Polski S.A. started its expansion into foreign markets and established its first foreign branch abroad (in Frankfurt-am-Main in the Federal Republic of Germany).
2016-2020	1.	PKO Bank Polski S.A. realized two years in advance the financial goals set for 2020 and announced an updated strategy for the years 2020–2022 “PKO Bank of the Future. We support the development of Poland and the Poles”.
	2.	PKO Leasing S.A. – the Bank’s subsidiary – acquired Raiffeisen-Leasing Polska S.A. and Prime Car Management S.A. (with their subsidiaries). This allowed PKO Leasing S.A. to strengthen its position on the lease market, as well as to extend its offer of car fleet management services and rental of cars.
	3.	The Bank’s Group acquired KBC TFI S.A. and the merger with PKO TFI S.A. helped additionally accelerate the rapid development of PKO TFI S.A., and strengthened its leading position in the retail funds segment.
	4.	The Bank’s portfolio of investment projects expanded by Operator Chmury Krajowej sp. z o.o. (cloud computing services), which was joined by another shareholder – Polski Fundusz Rozwoju S.A.
	5.	PKO Bank Polski S.A. established an investment fund managed by PKO TFI S.A. under the business name PKO VC, which pursues an appropriate policy for a venture capital funds and invests in financial technological innovations.
	6.	PKO Bank Polski S.A. continued its development abroad and established a corporate department in Prague (the Czech Republic) and in Bratislava (the Slovak Republic). The branch in Bratislava started its operating activities in March 2021.
	7.	According to the Inteliace Research report, PKO Bank Polski S.A. was the largest bank in the CEE region in terms of assets in 2020.

1.3 Main events and financial results achieved in 2021

Currency mortgage loans – Settlements programme

PKO Bank Polski S.A. was the first bank in Poland to launch, on 4 October 2021, the process of the systemic resolution of the problem of CHF housing loans by offering settlements to its retail Customers who had active loans in CHF, which were intended for satisfying their own housing needs. This solution is based on the proposal of the President of the Polish Financial Supervision Commission (PFSA) and involves converting CHF loans into PLN loans as if it had been a PLN loan from the start subject to interest rate at the WIBOR reference rate increased by the margin historically applied to such loans.

The settlements are offered in the process of mediation proceedings conducted by the Mediation Centre at the Arbitration Tribunal at the PFSA in the course of court proceedings and proceedings resulting from a request to call for an attempt at arbitration.

The settlements are not available to Customers who have already repaid their loans, paid out in full in CHF or who used the Borrowers Support Fund (Fundusz Wsparcia Kredytobiorców).

The amounts to be repaid after conversion may be subject to interest at a variable rate or a fixed rate (for loans maturing within 5 years).

The process – for Customers who have iPKO – is carried out remotely, and the borrowers have to be present in the branch only once – when signing the settlement.

As at the end of 2021, more than 19 thousand applications for mediation were registered. 7,182 mediations were concluded with a positive outcome, including 5,754 cases in which settlements were signed. As at the end of 2021, 1,399 mediations were concluded with a negative outcome. The total number of settlements concluded as at 31 December 2021 amounted to 5,887, of which 5,754 were concluded in mediation proceedings and 133 in court proceedings. Until 22 February 2022, the number of registered applications was 22.7 thousand, 9,343 settlements were concluded including 9,191 in mediation process and 152 in court proceedings.

Changes in the supervisory board and management board of the bank

In 2021, there were changes in the composition of the Supervisory Board of PKO Bank Polski S.A. (the Bank’s Supervisory Board or Supervisory Board), including:

• the following people resigned from membership in the Supervisory Board: Marcin Izdebski and Piotr Sadownik,

• the following people were dismissed from the Supervisory Board: Grażyna Ciurzyńska and Zbigniew Hajłasz,

• the following people were appointed to the Supervisory Board: Dominik Kaczmarski, Tomasz Kuczur, Maciej Łopiński, Bogdan Szafrański and Agnieszka Winnik-Kalemba.

As at 31 December 2021 the Supervisory Board comprised:

• Maciej Łopiński – Chair of the Supervisory Board;

• Wojciech Jasiński – Deputy Chair of the Supervisory Board;

• Dominik Kaczmarski – Secretary of the Supervisory Board;

• Mariusz Andrzejewski – Member of the Supervisory Board;

• Grzegorz Chłopek – Member of the Supervisory Board;

• Andrzej Kisielewicz – Member of the Supervisory Board;

• Rafał Kos – Member of the Supervisory Board;

• Tomasz Kuczur – Member of the Supervisory Board;

• Krzysztof Michalski – Member of the Supervisory Board;

• Bogdan Szafrański – Member of the Supervisory Board;

• Agnieszka Winnik-Kalemba – Member of the Supervisory Board.

In 2021, there were changes in the composition of the Management Board of PKO Bank Polski S.A. (the Bank’s Management Board or the Management Board), including:

• the following people resigned from membership in the Management Board: Zbigniew Jagiełło, Adam Marciniak and Jan Emeryk Rościszewski;

• the following people were dismissed from the Management Board: Rafał Antczak, Rafał Kozłowski and Jakub Papierski;

• the following people were appointed to the Management Board: Iwona Duda, Bartosz Drabikowski, Marcin Eckert, Wojciech Iwanicki and Artur Kurcweil;

• in the period from 8 June 2021 to 2 September 2021, Jan Emeryk Rościszewski led the activities of the Management Board, and from 3 September 2021 to 22 October 2021 was the President of the Management Board.

As at 31 December 2021 the Management Board comprised:

• Iwona Duda – Vice-President of the Management Board, leading the activities of the Management Board; appointed the President of the Management Board subject to the consent of the PFSA as of the date of such consent;

• Bartosz Drabikowski – Vice-President of the Management Board;

• Marcin Eckert – Vice-President of the Management Board;

• Wojciech Iwanicki – Vice-President of the Management Board;

• Maks Kraczkowski – Vice-President of the Management Board;

• Mieczysław Król – Vice-President of the Management Board;

• Artur Kurcweil – Vice-President of the Management Board;

• Piotr Mazur – Vice-President of the Management Board.

On 26 January 2022, the PFSA unanimously agreed to the appointment of Iwona Duda as President of the Management Board of PKO Bank Polski S.A.

Development of remotely offered services

The Group consistently developed remotely offered services:

• The number of active IKO applications provided to the Bank’s Customers reached a record high of 6.12 million on the Polish banking market.

• The IKO mobile application makes is possible to check the balance of an account with another bank and use a new version of voice assistant. The IKO application can also be used by people who have no open account with PKO Bank Polski S.A.

• PKO Bank Polski S.A. was one of the first banks to launch BLIK proximity payment technology. The technology allows transactions to be made using the BLIK system, without providing a BLIK code, without a card, at no cost for currency translation. The new BLIK proximity payment function is available in the IKO application for Android.

• The Bank launched subsequent cloud applications and services. As part of this work, it launched the MLOps Analytical Platform which allows for advanced data analytics and supporting internal processes, as well as pilot implementation of the Infosite, the Bank’s Information Services, i.e. websites available to Customers in the pkobp.pl domain. The Projects are being performed in cooperation with Operator Chmury Krajowej sp. z o.o. – a company co-owned by PKO Bank Polski S.A.

• In April 2021, Google launched the Google Cloud Warsaw region. It is the first computation infrastructure of the global public cloud provider in Central and Eastern Europe. The investment stems from the strategic partnership of Google and Operator Chmury Krajowej sp. z o.o. Each Polish company and institution may use world cutting-edge cloud solutions available in the Google Cloud region located in Poland.

PKO Bank Polski S.A. among the most stable banks in the European union

PKO Bank Polski S.A. participated in the subsequent edition of the European stress tests conducted in 2021 by the European Banking Authority (EBA) with the participation of the PFSA and the European Central Bank and the European Systemic Risk Board. Fifty banks from 15 countries of the European Union and the European Economic Area, accounting for 70% of assets of the EU banking sector, participated in the test. The results of stress tests confirmed that the Bank is highly resilient to theoretical negative macroeconomic scenarios. The Bank was ranked among the most stable banks in the European Union.

Position of the Bank’s brokerage office

In 2021, Brokerage Office of PKO Bank Polski S.A. achieved a turnover on the secondary market of shares of PLN 81.6 billion, corresponding to 12.25% market turnover, which placed the Bank’s Brokerage Office as leader in the ranking of brokerage offices in Poland.

PKO TFI S.A. the leader on the Employee Capital Plans market

As at the end of 2021, PKO Towarzystwo Funduszy Inwestycyjnych S.A., remained the leader on the Employee Capital Plans (PPK) market in terms of managed assets. The total number of management agreements signed at the end of 2021 amounted to 48,912, and the total number of registered participants exceeded 913 thousand. On the PPK accounts managed by the company there were assets worth nearly PLN 2.5 billion, which comprised 38.2% of all assets serviced by investment fund management companies and 32.5% of all PPK market assets.

Support for the community, customers, and employees in the fight against the COVID-19 pandemic

The PKO Bank Polski S.A. Group engaged in battling the pandemic from the very start. In 2021, it took steps to ensure uninterrupted operations and the safety of its Customers and staff. It supported local communities and countrywide actions. It continued the digitization and automation of processes and implementation of advanced digital solutions.

The Bank’s Group supported:

• medical facilities and help organizations – in 2021 it made money and in-kind donations worth PLN 2.9 million;

• anti-COVID-19 vaccinations – the Customers were able, through the iPKO electronic banking service, to log into the Internet Patient Account and register for vaccination; the Bank also supported the vaccination raffle – money prizes could be collected via ATMs and in the Bank’s branches;

• Customers, by making available funds from aid programmes, including those offered by Bank Gospodarstwa Krajowego (BGK) and Polski Fundusz Rozwoju S.A. (PFR); it offered moratoria to the entities from so-called sectors at risk for repayment of loans and made it possible to submit applications for subsidies from the Financial Shield PFR 2.0 in the iPKO and iPKO biznes services.

It developed organizational solutions and tools which enabled remote work, and facilitated communication with Customers and ensured their seamless servicing.

Financial results

The activities which the PKO Bank Polski SA Group conducted in 2021 allowed it to achieve very good financial results and to reinforce its leading position among the largest financial institutions in Poland.

Table 1. Basic financial data of the Bank’s Capital Group (PLN million)

	2021	2020	Change (y/y)
Net profit/loss	4,874	-2,557	+2.9x
Net interest income	9,882	10,346	-4.5%
Net fee and commission income	4,431	3,920	+13.0%
Result on business activities	15,202	14,625	+3.9%
Operating expenses	-6,174	-5,983	+3.2%
Tax on certain financial institutions	-1,079	-1,055	+2.3%
Net write-downs and impairment	-1,466	-9,299	-84.2%
Total assets	418,086	376,966	+10.9%
Total equity	37,693	39,911	-5.6%
Net ROE	12.1%	-6.0%	+18.1 p.p.
Net ROTE	13.2%	-6.5%	+19.7 p.p.
Net ROA	1.2%	-0.7%	+1.9 p.p.
C/I (cost to income ratio)	40.6%	40.9%	-0.3 p.p.
Interest margin	2.70%	3.03%	-0.33 p.p.
Share of impaired loans	3.98%	4.43%	-0.45 p.p.
Cost of credit risk	0.55%	0.78%	-0.23 p.p.
Total capital ratio	18.23%	18.18%	+0.05 p.p.
Common equity Tier 1 (CET 1)	17.03%	16.99%	+0.04 p.p.

In 2021, the PKO Bank Polski S.A. Group generated net profit of PLN 4,874 million, which means an increase in the result of PLN 7,431 million y/y. The change in the net result was due to:

1) significant improvement of net write-downs and impairment of PLN 7,833 million as a result of:

• charging the 2020 result with the costs of legal risk related to mortgage loans in convertible currencies of PLN 6,552 million, which reflected the decision of the Extraordinary General Shareholders’ Meeting (EGSM) of 23 April 2021 related to settlements with Customers;

• an improvement in net expected credit losses of PLN 910 million, mainly as a result of a change in macroeconomic projections given the fact that the credit risk did not materialize.

• an improvement in the net impairment allowances on non-financial assets of PLN 370 million, among other things, as a result of recognizing, in 2020, an impairment allowance on the shares of Bank Pocztowy S.A. (PLN -93 million), goodwill which arose as a result of acquisition of Nordea Bank Polska S.A. (PLN -116 million) and PKO Leasing Pro S.A. (PLN -31 million), value of activated costs of acquisition of OFE Customers (PLN -49 million), and impairment of real estates (PLN -62 million).

2) an improvement in the result on business activities of PLN 577 million which reached PLN 15,202 million, mainly due to:

• increase in net fee and commission income of PLN 511 million resulting from an increase in the result in all core positions, both commissions related to loans, cards, and savings;

• an increase in other profit/loss of PLN 530 million, mainly as a result of exchange positions (in effect of recognizing the net result on closing currency position following the EGSM decision on offering settlements to Customers), other net operating income and costs (among other things, as a result of creating lower provisions for return of commissions on overdue consumer loan repayments and development of other lease activities) and net income/cost on financial operations (mainly as a result of an increase in the net result on derivatives);

• accompanied by a decrease in net interest income/cost of PLN 464 million, determined by a low-interest-rate environment in the first three quarters of 2021, which was partially offset by an increase in interest-bearing assets;

3) an increase in operating expenses of PLN 191 million, mainly an increase in the employee benefit expense accompanied by a decrease in the regulatory costs.

In 2021, there was an apparent increase in the scale of operations of the Bank’s Group:

• total assets exceeded PLN 418 billion (PLN +41 billion y/y);

• amounts due to Customers increased to approx. PLN 322 billion (PLN +40 billion y/y) – as a result of an increase in both retail and private banking deposits, as well as corporate deposits;

• the financing provided to Customers increased to approx. PLN 248 billion (PLN +12 billion y/y), as a result of an increase in the financing granted to both retail and corporate Customers;

• a significant increase in the bank securities portfolio of nearly PLN 12 billion y/y, to PLN 122 billion took place.

1.4 The PKO Bank Polski S.A. Group development paths

Who we are – our mission

PKO Bank Polski S.A.’s Strategy for the years 2020–2022

Pursuit of the Strategy

The paths for the development of PKO Bank Polski S.A. are set out in the Strategy for the years 2020–2022 “PKO Bank of the Future. We support the development of Poland and the Poles” (Strategy), approved by the Supervisory Board on 17 November 2019.

Who we are – our mission

“We support the development of Poland and the Poles”.

For 100 years we have been delivering financial solutions to our Customers; therefore, we understand the needs of Poles and Polish firms.

We are consistently changing, investing in development, and we responsibly implement modern technologies to enable easy finance management at any place or time. We are proud of our history and of our Polish roots.

We wish to continue exerting a positive influence on Poland – its people, firms, culture and the environment. As one of the largest banks in Central and Eastern Europe we responsibly care for the interests of the shareholders, Customers, employees, and local communities.

PKO Bank Polski S.A.’s Strategy for the years 2020– 2022

The Strategy focuses on four pillars which PKO Bank Polski S.A. intends to develop and reinforce.

1. Accessible, mobile and personal. A digital banking model which uses advanced analytics to ensure personalized experience in Customers’ everyday life.

2. Open and innovative. Using open banking possibilities, strategic partnerships and cloud solutions to propose innovative solutions to Customers.

3. Digital and effective. Digitized processes with minimal manual service requirements, paperless. A fast and safe cloud-based Bank.

4. Shaping the competence of the future. A motivated and committed team with competences adapted to the new business challenges, working smoothly, using state-of-the-art technologies.

Medium-term financial goals of the Bank defined in the Strategy for 2022 are as follows:

• net profit over PLN 5 billion;

• target ROE at the level of 12%;

• C/I ratio at the level of approx. 41%;

• cost of risk in the 0.60% – 0.75% bracket;

• capability to pay out dividend.

The Strategy takes into account non-financial factors (ESG) relating to the environment, society and corporate governance.

PKO Bank of the Future:

• is aware of the challenges resulting from climate change;

• gradually eliminates actions that are harmful to the environment;

• supports environmental education;

• is driven by the principle of social responsibility;

• takes into account the impact of its activities on society, Customers, suppliers, employees and shareholders;

• improves its corporate governance;

• ensures transparency of the principles of the Bank’s management.

Pursuit of the Strategy

The financial goals for 2022 defined in the Strategy were, in particular in 2020, under pressure from the COVID-19 pandemic and changes in the economic and regulatory environment, among other things, due to a drop in interest rates and the legal risk related to foreign currency mortgage loans, which had not been taken into account at the time of developing the Strategy.

The 2021 results indicate that the Bank has maintained the assumed profitability, high effectiveness of its operations and risk management, as well as strong capital position.

Table 2. Strategic goals of PKO Bank Polski S.A. for 2022

	2019	2020	2021	2022 target	Accomplishment degree
ROE	10.0%	-6.0% adjusted: 7.1%*	12.1%	12.0%	√
C/I	41.3%	40.9%	40.6%	~41%	√
cost of credit risk	0.46%	0.78%	0.55%	0.60%-0.75%	√
net result	PLN 4.0 billion	PLN -2.6 billion adjusted: PLN 3.2 billion*	PLN 4.9 billion	> PLN 5 billion	realistic
capital	TCR: 19.9%	TCR: 18.2%	TCR: 18.2%	capability to pay out dividend	realistic
capital	TIER 1: 18.6%	TIER 1: 17.0%	TIER 1: 17.0%	capability to pay out dividend	realistic

* return on equity and net result adjusted for the recognized costs of the legal risk and other implications of the EGSM decision on entering into settlements with holders of foreign currency mortgage loans.

The COVID-19 pandemic intensified the Bank’s digital transformation process. There is an accelerated evolution of service models related to the integration of sales channels, so as to ensure Customers have access to the same products in digital channels as in the physical outlets. In the era of the pandemic, PKO Bank Polski S.A. focused on optimizing its internal processes and the resulting limitation of its operating expenses (digitization, automation and robotization). These are still very important factors: maintaining relations with Customers, high quality of service and innovations which the Bank implements to find new, non-interest sources of revenue. Such capabilities are enhanced by advanced data analytics and solutions relying on artificial intelligence and cloud technology.

As a result of changes in the market environment due to the pandemic, PKO Bank Polski S.A. designated, as part of its strategy, priority areas and actions for 2021.

• Customer-centric approach – a segmented approach to the service offer and model, personalized experiences of the Customer and building long-term relationships, further transforming the network into an advisory centre and digital education for the Customers.

• Digitization – ensuring that Customers have an omnichannel access to banking products and services, increasing sales through remote channels, developing functions and innovations in IKO mobile banking, enhancing CRM and advisor tools, intensifying the use of advanced data analytics, the Road2Cloud Project and constructing a modern platform for electronic channels, including its high accessibility, scalability and security.

• Autonomous Bank – accelerating the automation and robotization of processes, increasing the number of processes performed fully digitally, “slim” outlets and an effective service model, simple and convenient offer and communication with the Customers, increasing the use of AI in sales and service processes, and in the organization’s internal processes.

In June 2021, the Management Board and the Supervisory Board adopted indicators to be achieved in the ESG area and included them in the Bank’s Group’s non-financial goals for the following years.

PKO Bank Polski S.A. undertook to reduce greenhouse gas emissions, eliminate exposure to the coal mining sector, increase green financing, take into account the key ESG aspects in its procurement processes, maintain the high participation of women in executive positions, low churn and voluntary terminations, and performance of projects which support the employment of disabled persons.

Information about meeting the key non-financial indicators in 2021 is included in the statement on non-financial information in chapter ‎13.3 Key non-financial performance indicators.

The Bank will continue its work on subsequent ratios and non-financial goals connected with the ESG area, and challenges connected with sustainable development will be included more extensively in its next strategy.

PKO Bank Polski S.A. is the undisputed leader of the Polish banking sector and the most mobile bank in Poland, providing services to more than 6 million users via its IKO mobile application. The Bank builds its long-term relationship with its Customers and remains the bank of first choice for 4.5 million primary Customers (an increase of 9% y/y).

In accordance with the Strategy assumptions, PKO Bank Polski S.A. has been building competitive advantages using its technological potential, which considerably extends beyond the traditional financial area. It cooperates with the fintech market leaders and initiated the establishment of Operator Chmury Krajowej sp. z o.o., with which it builds strategic partnerships with worldwide technology leaders – Google and Microsoft.

1.5 The PKO Bank Polski S.A. Group market position

In 2021 the Bank’s Group:

• maintained a high share in the loan market both in terms of volume and sales of selected products;

• increased its share in the savings market, both for individuals and institutional entities;

• maintained its position as leader on the market of investment funds for individuals and the sale of mortgage loans.

Table 3. Market share

	31.12.2021	31.12.2020	31.12.2019	31.12.2018	31.12.2017	Change 2021/2020
Loans for:	17.4%	17.6%	17.9%	17.6%	17.7%	-0.2 p.p.
1. individuals, of which:	21.9%	22.4%	22.8%	22.9%	23.0%	-0.5 p.p.
- housing	23.7%	24.9%	25.8%	26.1%	26.1%	-1.2 p.p.
PLN	24.7%	26.3%	27.6%	28.3%	28.6%	-1.6 p.p.
foreign currency	20.1%	20.8%	21.0%	21.0%	21.2%	-1.7 p.p.
- consumer and other, of which:	17.1%	16.5%	16.3%	15.8%	15.9%	+0.6 p.p.
in current account	34.1%	32.7%	32.4%	32.1%	32.0%	+1.4 p.p.
2. institutional entities	12.8%	12.6%	13.1%	12.7%	12.8%	+0.2 p.p.
Non-Treasury debt securities (indebtedness)	29.3%	30.2%	30.7%	32.4%	29.3%	-0.9 p.p.
Mortgage loans (sales)	19.8%	19.7%	25.7%	28.9%	29.6%	+0.1 p.p.
Total savings 1), of which:	19.2%	18.3%	18.3%	18.4%	17.3%	+0.9 p.p.
- savings of individuals 2)	25.6%	24.3%	22.6%	22.0%	21.1%	+1.3 p.p.
Deposits:	17.8%	17.3%	17.9%	18.1%	17.9%	+0.5 p.p.
individuals	22.5%	21.9%	20.8%	20.2%	20.4%	+0.6 p.p.
institutional entities	12.3%	11.5%	13.8%	15.2%	14.5%	+0.8 p.p.
TFI assets - funds of individuals 3)	19.9%	19.2%	19.5%	21.5%	17.1%	+0.7 p.p.
Brokerage activities - transactions on secondary market 4)	12.3%	11.2%	7.5%	7.7%	14.7%	+1.1 p.p.

Source: NBP, WSE, ZBP, Analizy Online

1) Total savings comprise total deposits, TFI assets and retail savings bonds.

2) Savings of individuals include deposits of individuals, funds of individuals and saving Treasury bonds.

3) In 2021 the market data changed due to the change in the status of two funds into funds for individuals. The data for the prior period was recalculated.

4) Taking into account the effect of intermediation in the sale of shares in Pekao S.A. in 2017. After elimination of this effect, the share of brokerage activities in the secondary market trading would be 11.2%.

2. External business conditions

Macroeconomic environment

Situation on the financial market

Position of the Polish banking sector

Position of the Polish non-banking sector

Ukrainian market

Regulatory and legal environment

Factors with an impact on the financial results of the Bank’s Group in 2022

2.1 Macroeconomic environment

Macroeconomic factors which shaped the national economy in 2021 are presented below:

Strong economic revival after the pandemic

The pace and decomposition of GDP growth (%, y/y) and its components (p.p.)

In 2021, the impact of subsequent waves of the pandemic on the business activities was considerably weaker than in 2020. Due to the progress of the vaccination programme, the scale of restrictions applied in 2021 was limited, and the economy has already recovered from pandemic losses in the second quarter. After a drop of 2.5% in 2020, the GDP growth in 2021 amounted to 5.7%, according to preliminary data. The year-to-year growth rate was positive starting from the second quarter, when it amounted to a record high of 11.2% y/y. The GDP growth was stimulated by a rapid recovery of demand, mainly from consumers, after lifting the pandemic restrictions. The investment dynamics in the second half of the year amounted to 10% y/y. Despite disruptions in the global value-added chains, which resulted from an insufficient supply of key components, exports grew at a two-digit pace. The strong growth of imports reflected, among other things, a change in the model of managing inventories from just-in-time to just-in-case and their significant increase. As a result, at the end of the year, the current account surpluses visible over the last two years turned into a deficit. At the end of the year, business activities were increasingly affected by inflation processes – both companies and households faced ever growing operating expenses and costs of maintenance which resulted, among other things, from a rapid increase in energy prices in Europe.

Apparent recovery of the labour market

The situation on the labour market in 2021 increased systematically. The recorded unemployment rate in December amounted to 5.4% compared with 6.3% at the end of 2020. Following the elimination of seasonal factors, unemployment was only 0.2 p.p. higher than before the pandemic (in the worst period the reaction of the unemployment rate to the pandemic amounted to 1.1 p.p.). According to BAEL, unemployment dropped in the third quarter of 2021 to a nearly record low of 3.0%, and the labour force participation rate increased to a record high of 58.2%. The increase in the labour force, makes it possible to satisfy the demand for jobs despite unfavourable demographic trends. The situation on the domestic labour market is tense due to the limited supply of potential employees. The number of available jobs recovered to the pre-pandemic level and during the year, the share of companies which reported recruitment problems grew, and this supported pressure on salaries, also in reaction to increased inflation. The average remuneration in the corporate sector was at a level exceeding the pre-pandemic level and –- what is important from the perspective of consumption base –- its growth rate still exceeded inflation. The growth rate of wages and salaries in the second quarter was supported by the effect of the low statistical base increased to around 10% y/y and remained close to this level by the end of the year, which suggests that despite a considerable increase in inflation, the wage-price spiral did not launch in 2021.

Unemployment and employment (end of period, %)

Increased inflation

The CPI inflation remained within the admissible variation range from the NBP target (2.5% +/- 1%) only in the first quarter, and subsequent months brought a considerable increase to a record high (in more the 20 years) of 8.6% y/y in December. During the year, inflation was enhanced by fuel prices (the effect on an increase in global demand for oil and the low statistical base), energy (a strong growth in demand combined with disruptions on the gas market and an increase in the CO2 emission allowances prices, and food. External factors which exacerbated inflation in 2021 worldwide accounted for approx. 80% of the increase in the price index. Pressure on price increases was nevertheless very broad and covered both goods and services. The core inflation increased in December to 5.3% y/y and was the highest in the last 20 years. Inflation in January 2022 increased to 9,2%, however the announced by the Government Anti-inflaiton Shield will reduce it from February 2022 by about 3.3 p.p.

Improvement in the public finances condition

Deficit and debt of the public sector	Results of the central budget (in PLN billion, per quarter)

The robust increase in nominal GDP and its fiscally effective structure supported the results of the State budget in 2021. Even after November, the budget showed a surplus of PLN 50.4 billion against a deficit of PLN 40.5 billion assumed in the Budget Law for the entire year. The accumulated revenues grew by 18% y/y, of which tax income by 17.4% (of which mainly CIT: 25.1% y/y), and non-tax incomes (among others, a distribution from the NBP profit and revenue from an auction of CO2 emission allowances) of 23.6%. As at the end of the year, the budget probably showed approx. PLN 25 billion deficit, and additionally approx. PLN 50 billion accounted for expenses from anti-COVID funds not covered by the budget. The fiscal situation improved considerably during the year, and the deficit according to ESA (covering a broad public sector) dropped to an estimated 2.5% of the GDP from 7.1% GDP in 2020. The public debt probably went down in relation to GDP to 56.5% from 57.4% of GDP.

Start of normalization of the monetary policy

NBP interest rates (end of the period)
Rate:	1-3Q 2021 [%]	4Q 2021 [%]
reference rate	0.10	1.75
bill rediscount rate	0.11	1.80
bill discount rate	0.12	1.85
Lombard rate	0.50	2.25
deposit rate	0.00	1.25

In the first half of 2021, the NBP maintained monetary support for the economy – stabilized interest rates at a record low level, pursued operations under the QE programme, and preferred the fundamental undervaluation of the PLN. In reaction to the rapid acceleration of price increase and in order to prevent the “de-anchoring” of inflation expectations, the Monetary Policy Council (MPC) decided in October on the first interest rate increase since 2012. This move was the first in a cycle of increases as a result of which the NBP increased its reference rate by 1.65 p.p. to 1.75% in 2021.

More increases followed in January and February 2022 – as a result the MPC determined the core NBP interest rates at the following levels: Lombard 3.25%, bill discount 2.85%, bill rediscount 2.80%, reference 2.75% and deposit 2.25%. According to MPC declarations, further interest rate increases should be expected with the target level of the reference rate at 3.5-4.0%.

2.2 Situation on the financial market

Interest rate market

In 2021, the profitability of Polish bonds increased rapidly. Profitability of 2-year bonds reached 3.35%, starting from nearly null as at the beginning of the year, and 10-year bonds reached 3.71%, which is a change of nearly 2.5 p.p. This was the result of a strong increase in PPI and CPI inflation accompanied by concerns about “de-anchoring” inflation expectations from the long-term targets. This situation motivated NBP to introduce significant changes in the monetary policy. The central bank also decided about reference rate increases from 0.10% to 1.75% in total as at the end of 2021, which raised the 3M WIBOR to 2.54%. The increases in returns on bonds were also seen abroad, although on the main markets – USA and Eurozone – they were not as conspicuous as in Poland. Higher volatility of quotations on the Polish debt market resulted mainly from the relatively strong increase in inflation, which amounted to 8.6% at the end of the prior year.

10-years bonds yield (%)

Currency Market

The year 2021 brought weaker PLN against USD and a symbolic change in relation to the EUR. The reinforcement of the USD and constant uncertainty related to the development of the pandemic had a negative impact on the currencies of emerging markets. The US currency benefited from the market increase in interest rates together with the process of limiting the purchase of assets initiated by the Fed. Deeply negative real interest rates which dropped as a result of a strong increase in inflation (an average yearly increase of 5.1%), had a negative impact on the PLN. Only the interest rate increases initiated by the MPC in the fourth quarter reinforced the Polish currency. The PLN exchange rate was also affected by the conflict with the European Union which resulted in the lack of approval of the National Reconstruction Plan, due to which Poland did not receive any financing from the EU Recovery Fund in 2021.

Foreign exchange rates

Stock Market

The year 2021 was beneficial for stock holders, including those investing on the WSE. At that time WIG gained nearly 22%. Following several difficult years, the banks’ securities brought considerable profits – the WIG index for Banks went up by more than 80%. Although the world still wrestled with the COVID-19 pandemic, investors focused on strong economic revival, which translated into the visible recovery of corporate profits. At the end of the year, the stock market felt the burden of global changes in the monetary policy driven by growing inflation pressure. Nevertheless, the financial conditions remained relatively mild, which in combination with solid current and forecast macroeconomic indicators encouraged stock investments.

Global stock market

2.3 Position of the Polish banking sector

Net profit and returns

(Calculations of PKO Bank Polski S.A, based on the last available PFSA data.)

In 2021 the banking sector recorded net profit of PLN 8.8 billion, compared with the loss of PLN -0.3 billion in 2020. The moving return on equity ratio (12M ROE) was 4.1%.

The increase in net profit resulted mainly from the y/y improvement of the net write-downs – in 2020, banks increased allowances due to less favourable macroeconomic forecasts related to the epidemic conditions. The second pillar of improvement in the banks’ results was the net profit on other business activities – the effect of the low reference base in the prior year. Moreover, the positive impact came from the net commission income which grew, among other things, due to changes in the banks’ pricelists, and the increased activity of Customers.

Higher tax burden as the opposite effect. Moreover, the results of the banking sector were affected by provisions related to the legal risk of foreign currency housing loans. At the same time, the net interest income also dropped y/y – primarily due to last year’s decreases in the core NBP interest rates (although a cycle of increases in the NBP rates started in October 2021). Net interest income was also affected by the relatively weak lending activity (in particular in the first half of 2021) in the COVID-19 pandemic conditions. The operating expenses were slightly higher.

The capital position of banks was good. As at the end of September 2021, the total capital adequacy ratio amounted to 20% (most recent data available). Revoking the obligation to use the systemic risk buffer (3%) had a positive impact on capital adequacy.

Change in the net profit of the banking sector (PLN billion)

The “provisions” item contains, among other things, a part of provisions related to the legal risk of foreign currency mortgage loans.

Loan and deposit market

(Based on NBP data and the Analizy Online service site)

At the end of December 2021, the y/y pace of growth in total loans (net of changes in exchange rates) was positive at 4.8% (compared with -0.8% as at the end of 2020). With respect to deposits, the annual rate of growth slowed down to 11.1% compared with 13.9% at the end of 2020, remaining among other things: under the influence of slowing down the growth rate of individual and corporate deposits.

Dynamics of loans and deposits (y/y)

The PLN housing loans growth rate accelerated to 12.5% y/y (compared with 10.1% y/y at the end of 2020) in a clear bull market. The growth rates of consumer loans (net of exchange rate changes) and corporate loans (net of exchange rate changes) were positive and amounted to, respectively: 1.6% y/y (compared with -2.2% y/y as at the end of 2020) and 4.7% y/y (compared with -6.2% y/y as at the end of 2020).

The growth rate of individual deposits slowed down to 6.3% y/y (compared with 8.1% at the end of 2020), while the current deposits growth continued, albeit slower than at the end of 2020, current deposits growth (14.6% y/y vs. 28.6% y/y at the end of 2020) and the term deposits fell slightly more slowly (-20.4% y/y compared with -28.6% y/y at the end of 2020). At the end of 2021, assets of investment funds (IF) of individuals increased by 7.9% y/y, which was influenced, among other things, by the low reference base of the prior year – strong drops on the investment funds market in the first months of the pandemic and the apparent interest of Customers in forms of savings alternative to deposits in the situation of low interest rates in the first half of 2021. The growth rate of cash in circulation slowed down to 10.9% y/y (36.9% y/y at the end of 2020) – which was related to a rapid growth in cash in circulation since March 2020. It was due to: conservative public approach to the access to cash during pandemic and low interest rates on deposits, related to low level of interest rates (in 2020 the reference rate was reduced three times, to the level of 0.1%). As at the end of December 2021, the growth rate of corporate deposits slowed down to 10.9% y/y (compared with 19.3% y/y at the end of 2020), which was, inter alia, due to the use of funds received by companies from Anti-crisis Shields, as well as the effect of high reference base of the prior year.

The liquidity position of the banking sector remained very good – the loan to deposit ratio dropped to 79% compared with 83% at the end of 2020.

Change of loans (y/y)	Change of deposits, FI assets, cash (y/y)

2.4 Position of the Polish non-banking sector

Investment Funds Market

(Based on the data of Analizy Online)

In 2021, assets managed by the Investment Funds Management Companies increased to PLN 301.5 billion (+7.1% y/y), including assets of individuals which increased to PLN 184.1 billion (+7.9% y/y). As at the end of the analysed period, the value of funds accumulated in the PPK Defined Maturity Date Funds was PLN 6.5 billion.

Structure of assets managed by the Investment Fund Management Companies (PLN billion)

As at the end of 2021, the balance of payments and redemptions totalled PLN 10.9 billion (PLN 0.6 billion in 2020). The high level of net inflow of funds to the market was due to the consistently high demand for investment funds among individuals who paid in a net amount of PLN 12.4 billion (PLN 0.3 billion in 2020). The inflow of new funds to the market visibly slowed down in the second half of the year, and in the last quarter the monthly redemptions clearly overweighed the payments.

At the same time, the structure of the balance showed a change in preferences of individuals and a shift towards funds which involved more risk. The largest inflow of funds was recorded by stock funds for which the annual balance of payments and redemptions amounted to PLN 7.2 billion (PLN -0.3 billion in 2020). Debt funds that were most popular with individuals in previous periods, showed a negative balance of payments and redemptions of PLN -8.0 billion in 2021.

Open Pension Funds Market

(Based on PFSA data)

In 2021 assets of Open Pension Funds (OFE) increased by 26.5% (PLN +39.4 billion) to PLN 188 billion. In this period, the number of OFE participants dropped by 1.7% (PLN -255 thousand to 15.2 million).

The OFE market remained under the influence of the recovery on the Warsaw Stock Exchange (in 2021, the WIG index went up by 21.5%) and uncertainty as to the future regulatory aspects of the functioning. Domestic stocks dominated in the OFE asset structure (approx. 81.9% of the net assets as at the end of 2021).

Insurance Market

(Calculations of PKO Bank Polski S.A, based on the last available PFSA data.)

During the three quarters of 2021 insurers earned a net profit of PLN 5.3 billion (+2% y/y), and their technical profit was 18% higher y/y (up to PLN 4.2 billion). The increase in the amount of the revaluation of deposits had a positive impact on the results of insurers, while the increase in the costs of claims and benefits paid (+4% y/y to PLN 29.6 billion) accompanied by an increase in gross written premium of 9% y/y (to PLN 50.9 billion y/y) had a negative impact.

In the life insurance segment, gross written premium went up by 8% y/y (to PLN 16.6 billion), with an increase in claims paid of 7% y/y (to PLN 13.5 billion). The costs of insurance activities in the life insurance segment went up by 7% y/y (PLN 4.0 billion).

The segment of other personal and property insurance noted a y/y increase in gross written premium of 10% (to PLN 34.4 billion), with a considerably slower increase in the cost of claims paid +3% y/y (to PLN 16.1 billion). The costs of insurance activities in the other personal and property insurance segment increased by 5% (to PLN 7.9 billion).

Lease Market

(based on Polish Leasing Association data)

Lease market structure (new sales) in PLN billion

In 2021, the lease industry financed assets of PLN 88.0 billion, compared with PLN 67.4 billion in 2020, which is an increase of 30.7% y/y. The increase was mainly related to the lease of cars and was mainly due to the low reference base related to the epidemic conditions in Poland in 2020, and economic recovery in 2021.

The heavy vehicle lease segment (i.e. covering trucks over 3.5 tonnes, tractors, semitrailers/trailers, buses, ships, airplanes, trains and other) noted the largest growth rate, which is connected with the post-pandemic clear economic recovery in the Eurozone. The value of assets financed in this segment amounted to PLN 21.6 billion (+61.6% y/y), which was approx. 25% of total financing granted by lease companies. Another segment which recorded high growth rates was the lease of light vehicles (passenger cars and trucks up to 3.5 tonnes), which confirmed that the economic growth in Poland is mainly based on consumer spending. The value of assets financed in this segment amounted to PLN 39.2 billion (+22.9% y/y), which was approx. 45% of total financing granted by lease companies. In the plant and machinery segment whose growth is driven by dynamic rebound of industrial production, the value of leased assets amounted to PLN 24.7 billion (+25.9% y/y).

In turn, the real estate segment noted a drop of -9.7% y/y, but its share in the market structure was marginal (1%).

Factoring Market

(Based on the Polish Factors Association data)

The factoring market has more than recovered its pre-pandemic position. In 2021, the turnover of members of the Polish Factors Association increased by approx. 26% y/y and reached a level of PLN 362.4 billion, and the number of business entities using factoring companies amounted to 26 thousand (+42% y/y).

The largest demand on the part of enterprises was for factoring without recourse, whose share in sales of factoring firms was approx. 51%. The share of the second largest market segment, i.e. recourse factoring, was 29%. Manufacturing and distribution companies, mainly from the food, metal and chemical industries, continued to be the entities that used factoring services the most often.

2.5 Ukrainian market

Economic conditions

The year 2021 was not as favourable for the Ukrainian economy as it seemed to promise at first. Following the GDP drop in the first quarter (-2.2% y/y), which was related to another wave of the pandemic (and the respective restrictions), the next two quarters showed an increase in activities (of 5.6% y/y and 2.7% y/y in the second and third quarter, respectively). The frequently published data indicates continued economic expansion in the fourth quarter, but at a level lower than before the pandemic. During the year, the retail trade was recovering from pandemic losses, and in the second half of the year its growth became more stable at a level lower than before the pandemic (6-7% y/y compared with approx. 13% y/y before March 2020). Also the industrial production remained only slightly positive. In total, over the year, the economic growth could exceed 3%, which did not allow for the Ukraine (despite economic revival) to recover the losses of 2020, when its economy shrunk by 4.0%.

The nominal dynamics of wages and salaries returned (for a while) above 20% y/y, but further in the year, it dropped below this level. At the same time, inflation accelerated to above 10%, mainly due to growing prices of food (a two-digit inflation rate in the second half of the year) and fuels. The core inflation increased from 4.5% y/y in December 2020 to 7.9% at the end of 2021. As a result, the actual increase in wages and salaries in the fourth quarter of 2021 (6% y/y in October-November) was lower than a year earlier (9.6% y/y).

The National Bank of Ukraine (NBU) fought inflation by increasing interest rates (five times: in March, April, July, September and December), overall from 6.00% to 9.50%. The tightening of the monetary policy reinforced the UAH exchange rate. The UAH/USD exchange rate was 27.28 at the end of the year, compared with 28.34 at the end of 2020.

The economic revival stimulated tax revenue. The dynamics of PIT revenue increased to nearly 20% y/y, and VAT and CIT exceeded 50% y/y. It allowed a reduction in the budget deficit (to -1.3% of GDP after November, compared with -2.8% of GDP in the same period of 2020), despite increased spending. The ratio of the public debt to GDP went down to 50.1% at the end of November 2021, compared with 60.8% at the end of 2020.

Ukrainian Banking Sector

According to data from the NBU, the number of banks which engaged in operations in Ukraine dropped to 71 in November 2021 (compared with 74 in December 2020).

The value of total assets in the Ukrainian banking system in 2021 increased to UAH 1.98 trillion (as at 30 November) from UAH 1.82 trillion (as at the end of 2020). Equity increased to UAH 244.1 billion from UAH 210.6 billion and as at the end of November 2021 they comprised 12.3% of the balance sheet total, compared with 11.6% as at the end of December 2020. The Ukrainian banking sector remains well capitalized (as at the end of 2021, the capital adequacy ratio of the sector amounted to 18.01%, compared with the minimum requirement of 10% and 22% at the end of 2020), whereas there are concerns that the ratios of 8/13 of banks with systemic relevance were below this level. December brought a clear drop in the capital adequacy ratio from 21.44% as at the end of November 2021.

The year 2021 can be the first year since 2018 in which the volume of loans increased. After November, it was UAH 107.3 billion higher than at the end of 2020 and amounted to UAH 1,086 billion. This was despite the drop in the value of currency loans (among other things due to the reinforcement of the UAH exchange rate). The sources of growth were consumer loans (an increase of UAH 44.1 billion from the end of 2020 to November 2021), loans for private non-financial enterprises (an increase of UAH 43.6 billion over the same period) and loans for the public sector (an increase of UAH 13.7 billion).

At the end of November 2021, the volume of deposits was UAH 100.8 billion higher than at the end of 2020 and amounted to UAH 1,471.4 billion. In this period, deposits of private enterprises went up by UAH 51 billion, and deposits of households increased by UAH 26.7 billion. The volume of currency deposits decreased. The loan to deposit ratio increased to 73.8% as at the end of November 2021, from 71.4% as at the end of 2020.

Profitability ratios returned to levels close to those of 2019: ROA (3.81% after November 2021, compared with 2.44% in 2020) and ROE (32.9% after November 2021, compared with 19.22% in 2020).

2.6 Regulatory and Legal Environment

The following new legal and regulatory solutions, which became binding in 2021, had a significant impact on the financial position and operations of the PKO Bank Polski S.A. Group, including in particular:

Solution

Impact

Risk management

Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and Regulation (EU) No 648/2012.	Starting to apply new regulatory requirements in respect of the net stable financing ratio (NSFR) and leverage ratio (LR), implementing the new method of calculating the capital requirements for counterparty risk (SA-CCR).
Update of the Polish Financial Supervision Authority’s Recommendation S concerning good practices for the management of mortgage-secured loan exposures.	The requirement to introduce in the bank’s offer mortgage loans with a variable interest rate and fixed interest rate (for a five-year period for loans with a maturity of more than 5 years, or over the entire period for loans maturing within 5 years), development of a method of designating overpayments of loans which have repayment schedules, taking into account changes in the calculation of liquidity risk measures.
Guidelines of the European Banking Authority on loan origination and monitoring (EBA/GL/2020/06) which have superseded the Guidelines on creditworthiness assessment (EBA/GL/2015/11).	Improvement of banking practices in order to ensure solid and prudent credit risk management standards and to ensure the granting of loans in line with consumer protection and the fair treatment of consumers.
Commission Implementing Regulation (EU) 2021/637 of 15 March 2021 laying down implementing technical standards with regard to public disclosures by institutions of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013 of the European Parliament and of the Council and repealing Commission Implementing Regulation (EU) No 1423/2013, Commission Delegated Regulation (EU) 2015/1555, Commission Implementing Regulation (EU) 2016/200 and Commission Delegated Regulation (EU) 2017/2295.	Ensuring uniform reporting process for banks regarding capital adequacy information. Introducing a set of uniform forms, templates and tables, and ensuring the high quality of the information disclosed.
Commission Implementing Regulation (EU) 2021/763 laying down implementing technical standards with regard to the supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities.	Introducing the obligation to regularly submit new reporting forms regarding MREL.
The Act of 8 July 2021 on amendments to the Act on the Bank Guarantee Fund, deposit guarantee scheme and compulsory resolution, and certain other acts.	Changes resulting from the BRR Directive, including the rules for calculating and maintaining MREL requirements, were implemented in the Polish legal system.
Letter from the Bank Guarantee Fund (BGF) of 2 December 2021 (Bank Guarantee Fund) on updating the level of MREL and designating mid-term MREL targets for the Bank.	Change in the regulatory requirements regarding MREL
PFSA decisions on the amount of additional capital requirement to secure the risk related to currency mortgage loans for households.	Reducing the minimum supervision requirements with regard to the value of indices.

Interest rates

In 2021, the Monetary Policy Council raised interest rates three times, in total by 165 b.p. (all increases took place in the fourth quarter of 2021), as a result of which the reference rate went up from 0.10% to 1.75%.

At the same time, the Monetary Policy Council changed the mandatory reserve rate from 0.5% to 2%.

The drop in the valuation of debt instruments, drop in the valuation of IRS instruments, hedging volatility of interest income.

Increase in interest income in 2022.

safety

Amended Act on countervailing money laundering and terrorist financing which implements the provisions of Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the so-called fifth AML Directive which modifies the EU legislation and increases the transparency of financial flows).

Introducing new obligations in respect of the application of financial safety measures and implementing further actions in business relations with Customers connected with high-risk third countries.

Taxes

Regulations applicable as of 1 January 2021, amending income tax Acts introduced, among other things, in respect of taxpayers with annual revenue exceeding EUR 50 million and Tax Groups with an obligation to prepare and publish information on their pursued tax strategy on their websites. According to the communication of the Ministry of Finance, the first information for 2020 should be prepared by the end of 2021.

Still the solutions implemented in 2020 had an impact, in relation to countervailing the effects of the COVID-19 pandemic, mentioned in the PKO Bank Polski S.A. Group Directors’ Report for 2020.

The activities of KREDOBANK S.A. were affected by regulatory and legal changes in Ukraine, including in particular relating to changes in the discount rate, protection of the rights of financial services’ consumers, improving the corporate governance organization in Ukrainian banks, and provisions aimed at countervailing or limiting the consequences of the COVID-19 pandemic.

2.7 Factors with an impact on the financial results of the Bank’s Group in 2022

The following external factors may have a material impact on the operations of the Bank’s Group in 2022:

• development of the pandemic, including the spread of a very contagious variant, Omicron observed at the beginning of the year; effectiveness and progress of the vaccination programme, as well as the infectivity and virulence of subsequent coronavirus mutations;

• reaction of the global economy to the even more universal process of tightening fiscal policy, including probably relatively quick and numerous interest rate increases in the USA;

• possible easing of supply constraints in the second half of the year (shortages of production components, high level of energy commodity prices), which currently exacerbate the cost pressure and limit the pace and scale of economic revival;

• difficulties in the global trade related to maintaining the “zero COVID” policy in China, which particularly affected the main ports in Asia;

• effective functioning of the European gas and CO2 emission allowances market;

• potential concerns about stagflation and maintaining an increased level of inflation worldwide and in Poland;

• the political and economic conditions in Ukraine, significant risk of increased tension in relations with Russia, not only Ukraine-Russia, but also EU/USA – Russia;

and relating to the Polish economy:

• the scale and path of changes in the NBP interest rates and level of mandatory reserve;

• effectiveness as well as scope and timing of the Government’ inflation-reducing programmes, and also impact of the prices increases (which is the fastest in the last 20 years) on the real consumer spending and propensity to use savings;

• reaction of the household sector to the increased level of NBP rates, including the structure of demand for loans and ability to service already existing liabilities;

• weakening of the demand for loans on the part of households, including mortgage loans and maintaining the upward trend of demand for corporate financing, which will be accompanied by a deposit volume which is still above the norm;

• possible further court rulings in respect of currency mortgage loans, which may also impact the level of interest in the settlements programme;

• availability of funds which are to be the basis for the implementation of the National Development Programme;

• developments in the housing properties market and demand for housing loans, including likely weaker speculative/investment demand for housing due to NBP interest rate increases;

• implementation of the “Polski Ład” programme, including tax changes which will affect tax settlements of households and enterprises, and “Mieszkanie bez wkładu własnego” (“Housing loans without initial contribution”) which will increase the availability of mortgage loans for lower-income households;

• lowering the limits for non-interest costs of consumer loans (fees and commissions), and higher capital requirements for lending institutions as part of the planned “anti-usury” regulations;

• growing regulatory costs of the Bank Guarantee Fund, which have a direct impact on lower results in the banking sector.

3. Organization of the PKO Bank Polski S.A. Group

Entities covered by the financial statements

Key changes to the structure of the Bank’s Group in 2021

Related-party transactions

3.1 Entities covered by the financial statements

[GRI 102-45] Pursuant to the International Financial Reporting Standards (IFRS) as at 31 December 2021 the Bank’s Group comprised PKO Bank Polski S.A. as the parent and 38 direct or indirect subsidiaries (at all levels). All the subsidiaries were disclosed in the consolidated financial data pursuant to IFRS 10, “Consolidated financial statements”.

List of direct subsidiaries:

The list presents the share of PKO Bank Polski S.A. in the company’s share capital, and in the case of funds – share of the fund’s investment certificates held. All subsidiaries listed in the Consolidated financial statements of the PKO Bank Polski S.A. Group for the year ended 31 December 2021 (hereinafter: financial statements of the Bank’s Group for 2021) are accounted for using the acquisition accounting method.

A full list of the Bank’s subsidiaries, associates and joint ventures is presented in the 2021 financial statements of the Bank’s Group (Note 1).

3.2 Key changes to the structure of the Bank’s Group in 2021

In 2021 the following changes in the structure of the Bank’s Group took place:

• in January, the reverse merger of “CENTRUM HAFFNERA” sp. z o.o. as the acquiree and its subsidiary “Sopot Zdrój” sp. z o.o. as the acquirer took place;

• in March the process of liquidating ROOF Poland Leasing 2014 DAC started;

• in July, Finansowa Kompania “Prywatne Inwestycje” sp. z o.o. acquired shares in Finansowa Kompania “Idea Kapitał” sp. z o.o. from KREDOBANK S.A. which comprise 100% of its share capital and carry 100% of votes at the General Meeting of the company’s shareholders;

• in August, a new company was entered in the National Register of Legal Entities, Individual Entrepreneurs and Social Organizations of Ukraine, “KREDOLEASING” sp. z o.o. whose sole shareholder is KREDOBANK S.A.; the company’s share capital amounts to UAH 10 million; the company will provide mainly lease services; and had not started operating by the end of 2021.

3.3 Transactions with subordinated entities

In 2021, PKO Bank Polski S.A. provided services to its related (subordinated) entities, including maintaining bank accounts, accepting deposits, granting loans and advances, issue of debt securities, granting of guarantees and spot exchange transactions and offering participation units and certificates of investment funds, lease products, factoring products and insurance products of the Bank Group companies, and services offered by Brokerage Office of PKO Bank Polski S.A.

The Bank provided services to PKO Bank Hipoteczny S.A. within the scope of intermediation in sales of housing loans for individuals, performing tasks as part of post-transaction services in respect of these loans and support tasks under the outsourcing agreement. The Bank offered its infrastructure and IT services and rented office space to selected Bank’s Group companies. Together with Centrum Elektronicznych Usług Płatniczych eService sp. z o.o., the Bank rendered services of payment transaction clearance.

A summary of receivables, liabilities, revenues and costs of the transactions between PKO Bank Polski S.A. and its subordinated entities, including these companies’ indebtedness vis-à-vis the Bank as at 31 December 2021 is presented in the Financial Statements of PKO Bank Polski S.A. for the year ended 31 December 2021 (Note 51).

Information on transaction(s) with related parties concluded by the Issuer or its subsidiary, if they are material and have been concluded on terms other than on an arm’s length basis

Services provided by the Bank to related (subordinated) companies were performed on terms and conditions which do not diverge significantly from the arm’s length conditions.

In 2021, subsidiaries of PKO Bank Polski S.A. did not conclude any material transactions with related parties on conditions other than arm’s length.

4. Financial position of the PKO Bank Polski S.A. Group

Key financial indicators

Consolidated income statement

The consolidated statement of financial position

Any differences in sums, shares or growth rates arise from the rounding of amounts to full PLN millions and rounding of percentage shares in structures to two digital spaces.

4.1 Key financial indicators

The results of the PKO Bank Polski S.A. Group led to obtaining the key financial effectiveness ratios at the levels presented in the table.

Table 4. Financial indicators of the PKO Bank Polski S.A. Group

		31.12.2021	31.12.2020	Change
Net ROE	(net profit/(loss)/average equity)	12.1%	-6.0%	+18.1 p.p.
Net ROTE	(net profit/(loss)/average equity less intangible assets)	13.2%	-6.5%	+19.7 p.p.
Net ROA	(net profit/(loss)/average assets)	1.2%	-0.7%	+1.9 p.p.
C/I	(cost to income ratio)	40.6%	40.9%	-0.3 p.p.
Interest margin	(net interest income/average interest-bearing assets)	2.70%	3.03%	-0.33 p.p.
Share of impaired exposures		3.98%	4.43%	-0.45 p.p.
Cost of credit risk		0.55%	0.78%	-0.23 p.p.
Total capital ratio	(own funds/total capital requirement*12.5)	18.23%	18.18%	+0.05 p.p.
Common equity Tier 1 (CET1)		17.03%	16.99%	+0.04 p.p.

4.2 Consolidated income statement

Net interest income

Net fee and commission income

Other net income

Operating expenses

Net write-downs and impairment

The consolidated net profit of the PKO Bank Polski S.A. Group earned in 2021 amounted to PLN 4,874 million and was PLN 7,431 million higher than in 2020.

Change in net profit of the PKO Bank Polski SA Group (PLN million)

1) Other net income reflects dividend income, net income on financial operations, net foreign exchange gains/(losses) and other net operating income and expense.

2) This item comprises tax on certain financial institutions, share in profits/ (losses) of associates and joint ventures, and profit/(loss) attributable to non-controlling shareholders.

The profit on business activities of the PKO Bank Polski Group for 2021 amounted to PLN 15,202 million and was PLN 577 million (i.e. 3.9%) higher y/y, mainly as a result of an increase in net fee and commission income and other income, accompanied by a decrease in interest income.

Table 5. Income statement of the PKO Bank Polski S.A. Group (in PLN million)

	2021	2020	Change (PLN million)	Change (%)
Net interest income	9,882	10,346	-464	-4.5%
Net fee and commission income	4,431	3,920	511	13.0%
Net other income	889	359	530	1.5x
Dividend income	12	15	-3	-18.3%
Result on financial transactions	382	236	146	61.8%
Net foreign exchange gains/(losses)	436	182	254	1.4x
Net other operating income and expenses	59	-74	133	1.8x
Result on business activities	15,202	14,625	577	3.9%
Operating expenses	-6,174	-5,983	-191	3.2%
Tax on certain financial institutions	-1,079	-1,055	-24	2.3%
Net operating result	7,949	7,587	362	4.8%
Net write-downs and impairment	-1,466	-9,299	7,833	-84.2%
Share in profits and losses of associates and joint ventures	31	16	15	91.3%
Profit before tax	6,513	-1,696	8,209	4.8x
Income tax expense	-1,640	-865	-775	89.6%
Net profit (including non-controlling shareholders)	4,873	-2,561	7,434	2.9x
Profit (loss) attributable to non-controlling shareholders	-1	-4	3	-84.3%
Net profit	4,874	-2,557	7,431	2.9x

Net interest income

Interest income (in PLN million)

Interest expense (in PLN million)

Net interest income for 2021 amounted to PLN 9,882 million, i.e. PLN 464 million less than in the previous year. The lower result y/y was mainly due to a decrease in income from financing granted to Customers as a consequence of changes resulting from the MPC on reducing interest rates in the first half of 2020. This effect was partly reduced due to an increase in interest rates in the last quarter of 2021. The low level of market rates influenced the decrease in the interest expense on amounts due to Customers. In 2021 there was also a decrease in interest income from hedging accounting. In turn, the increase in income on securities had a positive effect on the interest income as a result of the increase in volume.

Interest income amounted to PLN 10,568 million and was 10.4% lower than in 2020. This was mainly due to:

• a decrease in income from financing granted to Customers of PLN 980 million y/y – related mainly to the drop in the average interest rate on financing granted to Customers of 0.4 p.p., resulting from a decrease in the market interest rates, accompanied by a change in the structure of financing (an increase in the share of PLN housing and consumer loans, with a decrease in the share of business and foreign currency housing loans);

• higher income on securities (PLN +141 million y/y), mainly as a result of an increase in the average volume of PLN 28 billion, despite a lower than average interest rate on securities resulting from a decrease in the market interest rates;

• lower income from hedging accounting (PLN -389 million y/y), related mainly to a considerable drop in the average CIRS transaction volume (PLN -17 billion y/y).

In 2021, interest income went down by PLN 452 due to the European Union Court of Justice’s judgment on the consumer’s right to a reduction in the cost of loans repaid before contractual maturity (of which PLN 369 million is related to returned costs paid automatically to Customers before the balance sheet date, and PLN 83 million is related to the provision for future reimbursement of costs to Customers). In 2020, interest income was reduced only by the reimbursed amounts paid automatically to Customers, by PLN 232 million (no provision was set up).

Interest expense amounted to PLN 686 million and was PLN 769 million lower than in 2020. The lower interest expense was mainly the effect of a drop in the costs of the deposit base of PLN 660 million y/y, which in particular was the effect of lower average PLN interest rates after the decisions of the MPC and the resulting decrease in the cost of deposits.

The interest margin decreased by 0.33 p.p. y/y and amounted to 2.70% as at the end of 2021. The decrease in the margin resulted from lower returns on assets in effect of changes in the structure of interest-bearing assets (the share of the lowest interest rates increased mainly at the expense of the share of the highest interest rates on receivables due from Customers). Moreover, the drop in the rate of return on assets was affected by a drop in net interest income as a result of lower market interest rates in Poland, which largely translated into a drop in interest rates on assets rather than on liabilities. In 2021 the average interest rate on PKO Bank Polski S.A.’s loans was 3.7%, and the average interest rate on total deposits was 0.1%. In 2020, it was 4.0% and 0.3%, respectively.		Average interest rate and interest margin (in %)

Net fee and commission income

Net fee and commission income (in PLN million)

In 2021 net fee and commission income amounted to PLN 4,431 million, and was PLN 511 million higher than in the previous year. The increase in net commission income was due to, among other things:

• higher net income on loans, insurance and operating leases (PLN +120 million y/y), mainly in effect of an increase in commission on business loans and leases, and an increase in the sale of insurance linked to loans, and motor insurance;

• higher net income from maintaining bank accounts and other (PLN +111 million y/y), among other things, connected with an increase in commission for maintaining bank accounts of Corporate customers and higher net income on transfers and foreign transactions;

• higher net income on margins in Forex transactions (PLN +106 million y/y) in effect of an increase in the number of transactions;

• higher net income from investment funds and brokerage activities (PLN +88 million y/y), mainly due to an increase in commission for fund management, higher commissions on securities exchange trading on the stock market, and on the sale of Treasury bonds;

• higher net income on cards (PLN +86 million y/y) due to the higher number of cards and higher number of non-cash transactions.

Net other income

Net other income (PLN million)

Net other income earned in 2021 amounted to PLN 889 million and was PLN 530 million higher than in 2020, among other things, as an effect of:

• higher net foreign exchange gains (PLN +254 million y/y), mainly as a result of closing the currency position resulting from the EGSM decision on offering settlements to Customers;

• higher net income on financial operations (PLN +146 million y/y), among other things, as a result of higher income on derivatives (including related to CO2 emission allowances) and higher net income on the sale of securities,

• net other operating income and expense higher by PLN 133 million y/y, among other things as a result of:

– costs of provisions for returns to Customers on early repayment of consumer and mortgage loans lower by PLN 79 million;

– setting up a provision in 2020 for potential proceedings before the President of the Office for Competition and Consumer Protection of PLN 41 million;

– an increase in income from other operations of the PKO Leasing S.A. Group of PLN 75 million (among other things, the sale of post-lease cars, remarketing, settlement of damages and insurance premiums);

– recognizing a loss in 2021 on the sale of CO2 emission allowances of PLN 60 million which was fully offset with a positive valuation of Customers’ derivatives related to the CO2 emission allowances.

Operating expenses

Operating expenses (in PLN million)

C/I ratio components

* including net regulatory charges

In 2021 operating expenses amounted to PLN 6,174 million and were 3.2% higher y/y. Their level was mainly determined by:

• an increase of PLN 226 million, i.e. 7.6% of the costs of employee benefits, mainly as a result of payments of employee awards in respect of the Bank’s results in 2021, higher bonuses and an increase in the number of employees in subsidiaries,

• an increase of PLN 79 million, i.e. of 6.3% of tangible costs, mainly as a result of:

– higher IT costs of PLN 35 million, i.e. 9.8% – mainly higher costs related to cloud services and overhauls, servicing and maintenance of the IT infrastructure;

and at the same time lower:

– costs of promotion and advertising of PLN 5 million, i.e. 3.4%;

• an increase of PLN 18 million, i.e. of 1.9% of depreciation and amortization expenses, as a result of an increase in amortization of intangible assets related to the computerization of the Bank;

• a drop of PLN 186 million, i.e. of 27.9% of the costs of contributions to the Bank Guarantee Fund (BGF) – these costs amounted to PLN 482 million, of which PLN 253 million accounted for a contribution to the mandatory bank restructuring fund (in 2020 BFG costs were at a level of PLN 668 million, of which PLN 318 million accounted for a contribution to the mandatory restructuring fund).

The effectiveness of operations of the PKO Bank Polski S.A. Group measured with the C/l ratio on an annual basis was 40.6% and improved by 0.3 p.p. y/y in consequence of the faster increase in the net income on business activities (3.9% y/y) than the increase in operating expenses (3.2% y/y).

Net write-downs and impairment

Net write-downs and impairment (in PLN million)

* includes the cost of legal risk related to mortgage loans in convertible currencies of PLN 6,552 million.

In 2021, net write-downs and impairment amounted to PLN -1,466 and were PLN 7,833 million more favourable compared with the same period of the prior year, which was due to the following items created in 2020:

– allowances on COVID-19 of PLN 1,224 million;

– cost of legal risk related to mortgage loans in convertible currencies of PLN 6,552 million.

In 2021 no costs of legal risk were incurred.

Net write-downs on non-financial assets amounted to PLN -46 million and were PLN 370 million more favourable than in the prior year, mainly due to write-downs on non-financial assets recognized in 2020, i.e. write-down on goodwill of Nordea Bank Polska S.A. (corporate CGU) of PLN -116 million, write-down on the value of shares of Bank Pocztowy S.A. of PLN -93 million, allowance on goodwill of PKO Leasing Pro S.A. of PLN -31 million, impairment of activated costs of acquisition of OFE Customers PLN -49 million and impairment of real estates of PLN -62 million.

The share of impaired loans amounted to 3.98% as at the end of 2021 (a 0.45 p.p. decrease compared with 2020).

At the end of 2021, the cost of risk amounted to 0.55% and was 0.23 p.p. lower than obtained in the same period of the prior year.

The Bank continues its conservative credit risk management policy of the Bank’s Group and strict monitoring of the receivables portfolio.

Cost of credit risk at the Bank’s Group	Quality of the Bank’s Group's loan portfolio

4.3 Consolidated statement of financial position

Main items of the Statement of financial position

Financing granted to Customers

Sources of financing operations

Amounts due to Customers

External financing

Main items of the Statement of financial position

As at the end of 2021 the PKO Bank’s Group total assets amounted to over PLN 418 billion and increased by approx. PLN 41 billion as of the beginning of the year. Thus, the PKO Bank’s Group reinforced its leading position in the Polish banking sector.

On the assets side, the Bank’s Group noted, among other things, an increase in financing granted to Customers and securities portfolio, and on the side of sources of finance the increase was determined mainly by the increase in the deposit base.

Structure of assets (in PLN billion)

Structure of equity and liabilities (in PLN billion)

Financing granted to customers

As at the end of 2021, financing granted to Customers by the Bank’s Group was PLN 247.6 billion which represents an increase of PLN 11.8 billion y/y.

The volume of retail and private banking loans increased by PLN 4.9 billion, including real estate loans by PLN 3.2 billion and consumer loans by PLN 1.7 billion.

In 2021 there was also an increase in corporate loans (PLN +5.4 billion) and loans for companies and enterprises (PLN +1.6 billion).

Retail and private banking loans were the main items in the structure of financing by type, with share of 58.2% of the portfolio as at the end of 2020.

Net financing granted to customers by type (PLN billion)

* including lease receivables and non-Treasury bonds (excluding held for trading)

Souces of financing operations

Structure of the sources of financing of the Bank’s Group operations

Structure of the financing of the Bank’s Group operations by currency

* including repo transactions

** including issues of securities, subordinated liabilities, loans and advances received

The PKO Bank Polski S.A. Group finances its operations from domestic and foreign sources which come from deposits (also on the interbank market), equity and financing from the wholesale market. The financing from the wholesale market includes liabilities in respect of issues of securities, subordinated liabilities and loans and advances received from monetary and non-monetary institutions. The main source of financing the Bank’ Group’s operations are Customer deposits, which represent 82% of all sources of finance.

The Group’s optimum financing structure enables the PKO Bank Polski S.A. Group to fully meet its investment objectives, including capital investments. The Bank’s Group mainly uses own funds from equity and securities’ issues to finance capital investments.

Amounts due to customers

Customer deposits constitute the basic source of financing the Bank’s Group’s assets. As at the end of 2021 amounts due to Customers reached PLN 322.3 billion, which is an increase of PLN 39.9 billion since the beginning of the year. The increase in the deposit base was partly due to an increase in all categories of amounts due to Customers: retail and private banking deposits (PLN +17.7 billion), corporate deposits (PLN +17.3 billion) and deposits from companies and enterprises (PLN +4.9 billion).

In the ageing structure of Customer deposits, the main items are current deposits whose share went up by 2.2 p.p. compared with the end of 2020 and amounted to 83.8%.

Structure of Customer deposits by type (in PLN billion)	Ageing structure of Customer deposits (in PLN billion)

* including liabilities in respect of insurance products	* including liabilities in respect of insurance products

External financing

As at the end of 2021 long-term sources of financing amounted to PLN 29.0 billion, which means a drop of PLN 8.0 billion since the beginning of the year, which was due:

•	maturity of the the Bank’s EMTN bonds with a nominal value of EUR 500 million and CHF 400 million;
•	maturity of the mortgage-covered bonds of Bank Hipoteczny S.A. in PLN totalling PLN 1.3 billion, and in EUR totalling EUR 0.6 billion;
•	lower level of securitization bonds issued by PKO Leasing S.A. at PLN 0.3 billion;
•	a drop in the level of own bonds of PKO Bank Hipoteczny S.A. of PLN 0.6 billion with an increase in own bonds of PKO Leasing S.A. of PLN 0.5 billion;
•	higher value of PKO Finance AB bonds of PLN 0.2 billion due to the foreign currency rate effect;
•	repayment of loan instalments received from international financial institutions in accordance with the payment schedule,
•	higher exchange rates of the USD (PLN +0.30) and CHF (PLN +0.18), accompanied by a drop in the exchange rate of the EUR (PLN -0.02).

External financing (in PLN billion)

5. Financial standing of the PKO Bank Polski S.A.

Key financial indicators

Income statement

Statement of financial position

Any differences in sums, shares or growth rates arise from the rounding of amounts to full PLN millions and rounding of percentage shares in structures to two digital spaces.

5.1 Key financial indicators

The results achieved by PKO Bank Polski in 2021 enabled the key financial efficiency indicators to achieve the levels shown in the table below.

Table 6. Financial ratios of PKO Bank Polski S.A.

		31.12.2021	31.12.2020	Change
Net ROE	(net profit/(loss)/average equity)	11.9%	-7.1%	+19 p.p.
Net ROTE	(net profit/(loss)/average equity less intangible assets)	12.8%	-7.6%	+20.4 p.p.
Net ROA	(net profit/(loss)/average assets)	1.3%	-0.9%	+2.2 p.p.
C/I	(cost to income ratio)	39.1%	40.2%	-1.1 p.p.
Interest margin	(net interest income/average interest-bearing assets)	2.60%	2.95%	-0.35 p.p.
Share of impaired exposures		3.90%	4.50%	-0.60 p.p.
Cost of credit risk		0.54%	0.77%	-0.23 p.p.
Total capital ratio	(own funds/total capital requirement*12.5)	19.84%	19.78%	+0.06 p.p.
Common equity Tier 1 (CET 1)		18.47%	18.45%	+0.02 p.p.

5.2 Income statement

Net interest income

Net fee and commission income

Net other income

Operating expenses

Net write-downs and impairment

In 2021, the net profit of PKO Bank Polski S.A. amounted to PLN 4,596 million and went up by PLN 7,540 million y/y. The level of the main result was due to an improvement in the net write-downs and impairment and increase in net result on business activities, accompanied by higher operating expenses.

In 2021 the net result on business activities amounted to PLN 13,577 million and was PLN 681 million, i.e. 5.3% higher than in 2020. This was mainly the effect of an increase in net fee and commission income of PLN 425 million y/y and net other income of PLN 729 million, with a drop in the net interest income of PLN 473 million y/y.

Table 7. Income statement of PKO Bank Polski S.A. (in PLN millions)

	2021	2020	Change (PLN million)	Change (%)
Net interest income	8,711	9,184	-473	-5.1%
Net fee and commission income	3,542	3,117	425	13.6%
Net other income	1,324	595	729	1.2x
Dividend income	624	332	292	88.1%
Result on financial transactions	367	213	154	72.2%
Net foreign exchange gains/(losses)	429	133	296	2.2x
Net other operating income and expenses	-95	-83	-12	15.1%
Result on business activities	13,577	12,896	681	5.3%
Operating expenses	-5,304	-5,180	-124	2.4%
Tax on certain financial institutions	-987	-957	-30	3.1%
Net operating result	7,287	6,759	528	7.8%
Net write-downs and impairment	-1,311	-9,025	7,714	-85.5%
Profit/loss before tax	5,976	-2,266	8,242	3.6x
Income tax	-1,380	-678	-702	1.0x
Net profit/loss	4,596	-2,944	7,540	2.6x

Change in the net profit of the PKO Bank Polski S.A. (in PLN milion)

1) Other net income reflects dividend income, net income on financial operations, net foreign exchange gains/(losses) and other net operating income and expense.

Net interest income

Net interest income for 2021 amounted to PLN 8,711 million, i.e. PLN 473 million less than in the previous year. The lower result y/y was mainly due to a decrease in income from financing granted to Customers as a consequence of the MPC decisions to reduce interest rates, made in the first half of 2020. The decrease was partly offset with a decrease in interest expense on amounts due to Customers and an increase in income on securities due to an increase in the volume.

Interest income (PLN million)	Interest expense (PLN million)

Interest income in 2021 amounted to PLN 9,164 million and was 11.3% lower than in 2020, mainly in effect of:

• a decrease in income from financing granted to Customers of PLN 867 million y/y – related mainly to the drop in the average interest rate on financing granted to Customers of 0.4 p.p., accompanied by a change in the structure of the average volume of loan receivables (an increase in the share of PLN housing and consumer loans, with a decrease in the share of business and foreign currency housing loans);

• higher income on securities (PLN +102 million y/y), mainly as a result of an increase in the average volume of PLN 28 billion, which resulted mainly from purchases of Treasury bonds, accompanied by a drop in their average interest rate of 0.3 p.p.;

• lower income from hedging accounting (PLN -377 million y/y), as a result of a drop in the average CIRS transaction volume of PLN 15 billion y/y.

In order to maintain the comparability of data, interest income was adjusted: income from non-Treasury bonds which is recognized in the financial statements in income from debt securities was transferred to income from financing granted to Customers.

In 2021, interest income went down by PLN 452 due to the European Union Court of Justice’s judgment on the consumer’s right to a reduction in the cost of loans repaid before their contractual maturity (of which PLN 369 million is related to reimbursed costs paid automatically to the Customer before the balance sheet date, and PLN 83 million is related to the provision for future reimbursement of costs to Customers). In 2020, interest income was reduced only by reimbursed amounts paid automatically to Customers, by PLN 232 million (no provision was set up).

Interest expense amounted to PLN 453 million and was PLN 695 million lower than in 2020. The lower interest expense was mainly the effect of a drop in the costs of the deposit base of PLN 648 million y/y, which resulted from lower PLN interest rates after the decisions of the MPC.

The interest margin decreased by 0.35 p.p. y/y and amounted to 2.60% as at the end of 2021.

The decrease in the margin resulted from lower returns on assets in effect of changes in the structure of interest-bearing assets (the share of the lowest interest rates increased mainly at the expense of the share of the highest interest rates on receivables due from Customers). Moreover, a drop in the rate of return was affected by a drop in net interest income as a result of lower market interest rates in Poland, which to largely translated into a drop in interest rates on assets rather than on liabilities.

In 2021 the average interest rate on PKO Bank Polski S.A.’s loans was 3.5%, and the average interest rate on total deposits was 0.1%. In 2020, it was 3.8% and 0.3%, respectively.

Average interest rate and interest margin (in %)

Net fee and commission income

Net fee and commission income (PLN million)

In 2021 net fee and commission income amounted to PLN 3,542 million and was PLN 425 million higher than in the previous year. The increase was determined – among other things – by:

• higher net income on margins in Forex transactions (PLN +106 million y/y) in effect of an increase in the number of transactions;

• higher net income from maintaining bank accounts and other income (PLN +104 million y/y), among other things related to an increase in commission for maintaining the bank accounts of corporate Customers and higher net income on bank transfers and foreign transactions;

• higher net income on loans and insurance (PLN +89 million y/y), mainly in effect of an increase in commission on business loans, and an increase in the sale of insurance linked to loans, and motor insurance;

• higher net income on cards (PLN +83 million y/y) due to the higher number of cards and higher number of non-cash transactions,

• higher net income from investment funds and brokerage activities (PLN +43 million y/y), mainly due to an increase in commission on securities exchange trading on the stock market, and on the sale of investment funds and Treasury bonds.

Net other income

Net other income (PLN million)

In 2021 net other income amounted to PLN 1,324 million and was PLN 729 million higher than that earned in 2020, among other things due to:

• higher net foreign exchange gains/(losses) (PLN +296 million y/y) – mainly as a result of closing the currency position resulting from the EGSM decision to offer settlements to Customers;

• higher dividend income (PLN +292 million y/y);

• higher net income on financial operations (PLN +154 million y/y) – among other things, as a result of higher income on derivatives (including related to CO2 emission allowances) and higher net income on the sale of securities;

• lower net other operating income and expense (PLN -12 million y/y), among other things, as a result of:

– costs of provisions for returns to Customers on early repayment of consumer and mortgage loans lower by PLN 79 million;

– setting up a provision in 2020 for potential proceedings before the President of the Office for Competition and Consumer Protection of PLN 41 million;

– recognizing costs of PLN 17 million in 2021 in respect of an increase in liability related to providing additional capital to a subsidiary, whereas income recognized in 2020 in this respect amounted to PLN 24 million;

– recognizing a loss in 2021 on the sale of CO2 emission allowances of PLN 60 million, which was fully offset with a positive valuation of Customers’ derivatives related to the CO2 emission allowances;

– setting up, in 2021, an additional provision of PLN 20 million on donations to the Fundacja PKO BP foundation.

Operating expenses

In 2021 operating expenses amounted to PLN 5,304 million and were 2.4% higher y/y. Their level was mainly determined by:

– an increase of PLN 199 million, i.e. 7.9% of the costs of employee benefits, mainly as a result of payments of employee awards in respect of the Bank’s results in 2021 and higher bonuses;

– an increase of PLN 43 million, i.e. 4.0% of tangible costs, mainly related to higher IT costs of PLN 33 million, i.e. 11.8%;

– an increase of PLN 15 million, i.e. 1.8% of depreciation and amortization costs, mainly as a result of an increase in amortization of IT intangibles and depreciation resulting from real estate lease agreements;

– a drop of PLN 185 million, i.e. of 28.6% of the costs of contributions to the Bank Guarantee Fund (BGF) – these costs amounted to PLN 461 million, of which PLN 232 million accounted for a contribution to the mandatory bank restructuring fund (in 2020 BFG costs were at the level of PLN 646 million, of which PLN 296 million accounted for the contribution to the mandatory restructuring fund),

– an increase of PLN 10 million, i.e. of 33.5% of payments to the PFSA.

The effectiveness of operations of the PKO Bank Polski S.A. measured with the C/l ratio on an annual basis was at 39.1% and improved by 1.1 p.p. y/y in consequence of the faster increase in the net income on business activities (5.3% y/y) than the increase in operating expenses (2.4% y/y).

Operating expenses (PLN million)	C/I ratio components

* covers the net result on regulatory burden

Net write-downs and impairment

Net write-downs and impairment (in PLN million)

* includes the cost of legal risk related to mortgage loans in convertible currencies of PLN 6,552 million.

In 2021, net write-downs and impairment amounted to PLN -1,311 and were PLN 7,714 million more favourable compared with the same period of the prior year, which was due to write-downs on COVID-19 of PLN 1,124 million recognized in 2020, and costs of the legal risk of mortgage loans in convertible currencies of PLN 6,552 million.

In 2021 no costs of legal risk were incurred.

Net write-downs on non-financial assets amounted to PLN -55 million and were PLN 322 million more favourable than in the prior year, mainly due to write-downs on non-financial assets recognized in 2020, i.e. write-down on goodwill of Nordea Bank Polska S.A. (corporate CGU) of PLN -116 million, write-down on the value of shares of Bank Pocztowy S.A. of PLN -88 million, impairment of real estates of PLN -61 million, impairment of shares of PKO BP BANKOWY PTE S.A. of PLN -37 million and shares of ZenCard sp. z o.o. of PLN -5 million.

The share of impaired loans amounted to 3.90% as at the end of 2021 (a 0.60 p.p. decrease compared with 2020).

At the end of 2021, the cost of risk amounted to 0.54% and was 0.23 p.p. lower than that obtained in the same period of the prior year.

The Bank continues its conservative credit risk management policy of the Bank’s Group and strict monitoring of the receivables portfolio.

Quality ratios of the Bank’s loan portfolio

Cost of Bank’s credit risk

5.3 Statement of financial position

Main items of the Statement of financial position

Financing granted to Customers

Amounts due to Customers

External financing

Main items of the statement of financial position

As at the end of 2021, total assets of PKO Bank Polski S.A. amounted to nearly PLN 389 billion and increased by PLN 44 billion since the beginning of the year. Therefore, PKO Bank Polski S.A. reinforced its position as the largest financial institution in the Polish banking sector.

On the assets side the Bank noted, among other things, an increase in financing granted to Customers and the securities portfolio, and on the side of sources of finance the growth was determined mainly by an increase in the deposit base.

Structure of assets (in PLN billion)

Structure of equity and liabilities (in PLN billion)

Financing granted to customers

As at the end of 2021 financing granted to Customers amounted to PLN 219.7 billion, which is an increase of PLN 12.8 billion y/y.

The volume of retail and private banking loans increased by PLN 6.5 billion and was related to real estate loans. Volumes of corporate loans and loans for companies and enterprises went up by PLN 5.8 billion and PLN 0.5 billion, respectively.

Retail and private banking loans, and corporate loans were the main items in the structure of net financing granted to Customers by type, with shares of 54.7% and 37.4% of the portfolio respectively as at the end of 2021.

Structure of net financing granted to Customers by type (in PLN billion)

* including non-Treasury bonds (excluding held for trading)

Amounts due to customers

Amounts due to Customers constitute the basic source of financing of the Bank’s assets. As at the end of 2021 amounts due to Customers reached PLN 318.0 billion, which is an increase of PLN 39.1 billion since the beginning of the year. The increase in the deposit base was due to an increase in all categories of Customers: retail and private banking deposits (PLN +17.5 billion), corporate deposits (PLN +17.0 billion) and deposits from companies and enterprises (PLN +4.6 billion).

In the structure of amounts due to Customers by type, the main items are the retail and private banking deposits (67.1% as at the end of 2021).

The share of current deposits in the break-down of total deposits increased to 84.4% (+2.2 p.p. compared with the end of 2020).

Ageing structure of Customer deposits (in PLN billion)

Structure of Customer deposits by type (in PLN billion)

External financing

PKO Bank Polski S.A. is an active participant of the debt securities markets, which enables it to diversify the sources of financing its operations and to adapt them to the regulatory requirements regarding long-term financial stability.

In 2021 borrowings decreased by PLN 3.8 billion, as a result of:

• maturity of the Bank’s EMTN bonds with a nominal value of EUR 500 million and CHF 400 million;

• repayment of loan instalments received from international financial institutions in accordance with the payment schedule;

• higher exchange rates of the USD (PLN +0.30) and CHF (PLN +0.18), accompanied by a drop in the exchange rate of the EUR (PLN -0.02).

External financing (in PLN billion)

6. Report on expenses on entertainment, and on legal, marketing, Public Relations and social communication, and management advisory services

The report was prepared on the basis of the provision of § 11.1.10a of the Articles of Association of PKO Bank Polski S.A. and pursuant to Article 17.6 of the Act on the Principles of Management of State Treasury Property.

In 2021 the Bank incurred entertainment costs, expenditure on legal services, marketing services, public relations and social communication services, and advisory services related to management totalling PLN 143.9 million, which represented 1.06% of the Bank’s Result on Business Activities (RBA).

Table 8. PKO Bank Polski S.A. entertainment costs, expenditure on legal services, marketing services, public relations and social communication services, and advisory services related to management.

Type of expense constituting part of the Bank’s administrative expenses	2021
	value (PLN million)	share in RBA (%)
Marketing services - advertising campaigns supporting the sale of products offered by the Bank, and image campaigns supporting the creation of a positive image of the Bank (mainly the Ekstraklasa campaign and the Anti-Crisis Shield campaign)	76.5	0.56%
Legal services - providing constant legal services on behalf of the Bank based on civil law agreements concluded with law firms, expenses on ad hoc legal aid and expenses related to concluding settlements regarding CHF loans.	53.2	0.39%
Public relations and social communication services - internal and external communication actions, relating mainly to media publications	8.1	0.06%
Costs of management advisory services - advisory services related to business and finance advice	4.3	0.03%
Entertainment costs - expenses aimed at maintaining positive relations with customers, partners and counterparties	1.8	0.01%
Total	143.9	1.06%

7. Equity, capital adequacy measures, dividend

Equity and return on equity

Capital adequacy measures

Offset of loss for 2020, allocation of retained earnings and dividend policy

7.1 Equity

Equity of the PKO Bank Polski S.A. Group went down by 5.6% y/y. The decrease in equity as at the end of 2021 of PLN 2.2 billion, compared with the prior year, results from a decrease in accumulated other comprehensive income of PLN 7.1 billion, which was partly offset with the net profit of PLN 4.9 billion generated in 2021.

Changes in the structure of equity result from resolutions adopted by the Extraordinary General Shareholders’ Meeting of the Bank on 7 June 2021 on:

• offsetting the Bank’s loss for 2020 of PLN 2.9 billion from a special fund set up by a resolution of the Extraordinary General Shareholders’ Meeting of the Bank of 23 April 2021 earmarked for offsetting special balance sheet losses which may arise as a result of recognizing the financial effects of settlements with consumers who concluded with the Bank mortgage-backed loan or advances agreements indexed to foreign currencies or denominated with foreign currencies, and

• maintaining the retained earnings of PKO Bank Polski S.A. of PLN 5.5 billion.

Table 9. Total equity and total capital adequacy ratio of the PKO Bank Polski S.A. Group (in PLN million)

	31.12.2021	31.12.2020	Change (in PLN million)	Change (%)
Total equity, including:	37,693	39,911	-2,218	-5.6%
Share capital	1,250	1,250	0	0.0%
Supplementary capital	23,003	29,519	-6,516	-22.1%
General banking risk fund	1,070	1,070	0	0.0%
Other reserves	6,970	3,137	3,833	1.2x
Accumulated other comprehensive income	-5,729	1,363	-7,092	-5.2x
Retained earnings	6,270	6,142	128	2.1%
Net profit for the period	4,874	-2,557	7.431	2.9x
Non-controlling interests	-14	-13	-1	9,5%
Own funds	41,224	41,516	-292	-0.7%
Total capital ratio	18.23%	18.18%		0.05 p.p.

7.2 Capital adequacy measures

The capital adequacy of the PKO Bank Polski S.A. Group in 2021 remained significantly above the supervisory limits.

As at the end of 2021 the total capital ratio of the PKO Bank Polski S.A. Group amounted to 18.23% and compared with the end of 2020 it increased by 0.05 p.p., and the core capital T1 ratio amounted to 17.03% and increased by 0.04 p.p.

The increase in the capital ratios was determined by a decrease in capital requirements of PLN 0.2 billion with own funds lower by PLN 0.3 billion.

In 2021, the requirement for own funds in relation to market risk went down by PLN 1.4 billion, mainly as a result of a decrease in requirements related to the currency risk due to the lower foreign currency position of the Bank after accounting for the EUCoJ provision. The increase in the own funds requirement in respect of credit risk amounted to PLN 1.1 billion and resulted mainly from the balance sheet total and an increase in foreign currency exchange rates.

The changes in own funds resulted mainly from a decrease in the fair value of financial assets measured at fair value through other comprehensive income of approx. PLN 1.8 billion and including in the core equity Tier 1 a part of the net profit earned for the period from 1 January 2021 to 30 June 2021 of PLN 1,975 million.

The level of capital ratios as at the end of 2021 was also affected by the application of regulations mitigating the impact of the COVID-19 pandemic (Art. 468 of the CRR), relating to the temporary treatment of unrealized profits and losses measured at fair value through other comprehensive income, which resulted in an increase in own funds of PLN 1.2 billion and stimulated the growth of the total capital ratio by approx. 55 b.p. and the core capital T1 ratio by approx. 55 b.p.

Capital adequacy measures of the Bank’s Group	Capital requirements of the Bank’s Group (in PLN billion)

In 2021, the total capital ratio of PKO Bank Polski S.A. increased by 6 b.p. to 19.84%, and the core capital T1 ratio by 2 b.p. to 18.47%. The increase in the capital ratios results mainly from a decrease in capital requirements of PLN 0.5 billion. The requirement for market risk went down by PLN 1.5 billion (the effect of the lower currency position of the Bank following accounting for the EUCoJ reserve), and the requirement for credit risk went up by PLN 0.8 billion, mainly as a result of an increase in the balance sheet total and an increase in foreign currency exchange rates.

Own funds of PKO Bank Polski S.A. decreased by PLN 1.1 billion, mainly as a result of a decrease in the fair value of financial assets measured at fair value through other comprehensive income of approx. PLN 1.8 billion, and an increase in the reduction due to exposures excluded from the exposure concentration limit, and deferred tax on the core equity Tier 1 position of PLN 0.9 billion. The increase in own funds resulted from the consent of the PFSA to include in the core equity Tier 1 a part of the Bank’s net profit earned for the period from 1 January 2021 to 30 June 2021 of PLN 2,073 million.

The level of capital ratios as at the end of 2021 was also affected by the application of regulations mitigating the impact of the COVID-19 pandemic (Art. 468 of the CRR) relating to the temporary treatment of unrealized profits and losses measured at fair value through other comprehensive income, which resulted in an increase in own funds of PLN 1.2 billion and stimulated growth of the total capital ratio by approx. 63 b.p. and the core equity T1 ratio by approx. 63 b.p.

Capital adequacy measures of the Bank	Capital requirements of the Bank’ (in PLN billion)

7.3 Offset of loss for 2020, allocation of retained earnings and dividend

Resolutions relating to the offset of the loss for 2020 and retained earnings

The Ordinary General Shareholders’ Meeting of the Bank of 7 June 2021 adopted resolutions on:

1. offsetting the loss of PKO Bank Polski S.A. for 2020 of PLN 2,943,792,603.05 from a special fund set up by a resolution of the Extraordinary General Shareholders’ Meeting of PKO Bank Polski S.A. of 23 April 2021 earmarked for offsetting special balance sheet losses which may arise as a result of recognizing the financial effects of settlements with consumers who concluded with the Bank mortgage-backed loan or advances agreements indexed to foreign currencies or denominated in foreign currencies;

2. maintaining the retained earnings of PKO Bank Polski S.A. of PLN 5,500,000,000 billion.

Dividend policy

In March 2021 the Supervisory Board of the Bank adopted the “Dividend Policy of PKO Bank Polski S.A. and the PKO Bank Polski S.A. Group” (hereinafter: Dividend Policy). The Dividend Policy assumes that the Bank's intention is to distribute dividend in a stable manner in the long term, pursuant to the principle of prudent management of the Bank and the Bank’s Group pursuant to the law and in accordance with the PFSA’s position on the assumptions for dividend policies of commercial banks. The aim of the dividend policy is to optimally shape the capital structure of the Bank and the Bank’s Group, in consideration of the return on equity and the cost of capital, as well as respective requirements related to development, while ensuring an appropriate level of capital adequacy ratios. According to the Dividend Policy adopted, the repurchase of own shares for the purpose of their redemption is an additional tool for the redistribution of capital; the shares may be repurchased when their book price is higher than the current market price, after the PFSA gives its consent for their repurchase.

PFSA recommendations as to distribution of dividend in 2022

In December 2021 the PFSA took a stand on the dividend policy of the supervised institutions in 2022, which was subsequently confirmed with the communication of 25 January 2022. The criteria for dividend distribution indicated in the PFSA’s positions in respect of distribution of dividend by commercial banks are as follows:

1. up to 50% of net profit for 2021 can only be distributed by banks which meet the following criteria jointly:

• do not pursue the recovery plan;

• are positively assessed under the supervisory review and evaluation process (SREP) – final SREP grade no lower than 2.5;

• with a leverage ratio (LR) higher than 5%;

• with core equity Tier 1 ratio (CET1) no lower than the required minimum: 4.5%+56%*P2R requirement + combined buffer requirement (taking into account 3% of the systemic risk buffer);

• with Tier 1 ratio (T1) no lower than the required minimum plus 1.5 p.p.: 6%+75%*P2R requirement + combined buffer requirement (taking into account 3% of the systemic risk buffer);

• with total capital ratio (TCR) no lower than the required minimum plus 1.5 p.p.: 8%+ P2R requirement + combined buffer requirement (taking into account 3% of the systemic risk buffer);

2. up to 75% of net profit for 2021 can only be distributed by banks which at the same time meet the criteria for the 50% distribution, taking into account – among capital criteria – the bank’s sensitivity to an unfavourable macroeconomic scenario;

3. up to 100% of net profit for 2021 can only be distributed by banks which at the same time meet the criteria for the 75% distribution, taking into account – among capital criteria – the bank’s sensitivity to an unfavourable macroeconomic scenario related to an increase in interest rates and its impact on the credit risk.

The criteria defined in points 1-3 above should be met by banks at both the separate and consolidated level.

Additionally, the PFSA indicated that the banks which have considerable portfolios of foreign currency housing loans should adjust the rate of dividend distribution based on two additional criteria:

• Criterion 1 – based on the share of foreign currency housing loans for households in the total portfolio of amounts due from the non-financial sector;

• Criterion 2 – based on the share of foreign currency housing loans granted in 2007 and 2008 in the foreign currency housing loans for households’ portfolio.

The PFSA recommended that appropriate adjustments be made depending on the size of the portfolio held by the bank:

• Criterion 1:

– banks with a share exceeding 5% – adjustment of the dividend rate by 20 p.p.;

– banks with a share exceeding 10% – adjustment of the dividend rate by 40 p.p.;

– banks with a share exceeding 20% – adjustment of the dividend rate by 60 p.p.;

– banks with a share exceeding 30% – adjustment of the dividend rate by 100 p.p.;

• Criterion 2:

– banks with a share exceeding 20% – adjustment of the dividend rate by 30 p.p.;

– banks with a share exceeding 50% – adjustment of the dividend rate by 50 p.p.;

whereas the total value of the adjustment (maximum 100%) is the sum of adjustments resulting from both criteria.

On 11 February 2022 the Bank received an individual recommendation from the PFSA regarding the level of capital add-on under pillar II (P2G) with an indication of a reduction of the risk imminent to the Bank’s activities by maintaining, both on the separate and consolidated level, own funds to cover additional capital add-on to absorb potential losses resulting from stress conditions at the level of 0.29% over the combined value of the capital ratio referred to in Art. 92.1.c of Regulation No. 575/2013, increased by an additional requirement in respect of own funds referred to in Art. 138.2.2 of the Banking Law, and the combined buffer requirement referred to in Art. 55.4 of the Act on macro-prudential supervision. The capital add-on should entirely consist of the core equity T1.

At the same time, according to the PFSA letter of 25 January 2022; in February the Bank will receive an individual recommendation related to the ability to pay dividends.

As at 31 December 2021 the ratios amounted to:

• at the consolidated level:

– T1 capital ratio and core equity ratio T1 = 17.03%;

– total capital ratio TCR = 18.23%;

– Criterion 1 = 8.3%;

– Criterion 2 = 38.7%;

• at the separate level:

– T1 capital ratio and core equity ratio T1 = 18.47%;

– total capital ratio TCR = 19.84%;

– Criterion 1 = 8.3%;

– Criterion 2 = 38.7%.

The Bank intends to pay dividends in 2022 out of the net profit of 2021.

Pursuant to Article 395 § 2.2 of the Commercial Companies Code the decision on the distribution of profit remains within the competences of the Bank’s Ordinary General Shareholders’ Meeting.

8. Activities of the PKO Bank Polski S.A. Group

Mortgage loans amicable settlement programme

Support of communities, Customers and employees with respect to the Coronavirus pandemic

Operating segments of the Bank’s Group

Insurance and leasing

IT projects and other services

Distribution network and access channels

Operational area

International cooperation

Operations of selected subsidiaries

Prizes and awards for the PKO Bank Polski SA Group

8.1 Mortgage loans amicable settlement programme

On 23 April 2021 the Extraordinary Shareholders’ Meeting (EGM) of PKO Bank Polski S.A. decided to conclude settlements with consumers who had concluded loan or borrowing agreements with the Bank secured by mortgages indexed to foreign currencies or denominated in foreign currencies (hereinafter: settlements with consumers). Pursuant to the resolution passed:

• the Bank set up a special fund of PLN 6,700 million for offsetting particular balance sheet losses which will arise as a result of recognizing the financial effects of the settlements with consumers;

• the Bank isolated from its supplementary capital, in the part created from prior years’ unappropriated profits, PLN 6,700 million and transferred it to the special fund referred to above;

• the General Meeting obliged the Bank’s Management Board to present for approval by the Bank’s Supervisory Board the terms and conditions on which the settlements will be concluded with consumers, including the terms and conditions for forgiving debt;

• the Bank’s Management Board began concluding the settlements with consumers (including those that stipulate debt forgiveness) after the Bank’s Supervisory Board issued a positive opinion on the terms and conditions on which they are to be concluded, including those relating to debt forgiveness (Supervisory Board resolution dated 27 May 2021).

In its estimation of the cost of legal risk of mortgage loans in foreign currencies, the Group took into account the impact of the expected settlements on the financial statements of the PKO Bank Polski S.A. Group for the year 2020.

On 4 October 2021, the Bank launched a programme of settlements for Swiss franc borrowers. The settlement process is conducted remotely (an application is filed by a Customer in the transactional system, mediations are conducted online) and the borrower appears at the branch only once, to sign the settlement agreement.

During the mediation proceedings before the PFSA Court of Arbitration the customer will learn all financial parameters of the proposal, including the balance after conversion and the amount of overpayment, if any, to be reimbursed by the bank.

The process is cost-free and customer-friendly. The mediation costs are borne by the Bank.

The Bank offers this solution to retail customers who have (and are still repaying) housing loans granted in Swiss francs. This form of aid is available to customers who obtained loans to finance their own housing needs. The mediations are conducted before the PFSA Court of Arbitration. Each application for mediation may only refer to a single loan agreement. Those Customers whose loans have already been repaid, whose loans were paid out fully in CHF or who used support from the Borrowers’ Support Fund cannot avail themselves of the offer.

A foreign currency loan, after having been converted to PLN, is treated as a loan granted in PLN from the date of its commencement. The other parameters, such as the term of the loan, the form of repayment and the fees, commissions and insurance premiums incurred, remain unchanged. The amount of the loan after conversion to PLN is calculated using the variable interest rate as at the date of the agreement (the sum of the WIBOR 3M reference rate and the margin).

As at the end of 2021 over 19,000 applications for mediation were registered. 7,182 mediations had a positive outcome, and 5,754 cases ended with signing an amicable settlement. As at the end of 2021, negative outcomes were noted in 1,399 mediations. The total number of amicable settlements concluded as at 31 December 2021 was 5,887, of which 5,754 were reached in mediation proceedings and 133 in court proceedings.

Until 22 February 2022, the number of registered applications was 22.7 thousand, 9,343 settlements were concluded including 9,191 in mediation process and 152 in court proceedings.

8.2 Support of communities, Customers and employees with respect to the Coronavirus pandemic

Since the beginning of the COVID-19 pandemic, the Bank’s Group has undertaken many aid actions. Their main purpose is to ensure that communities, the Bank’s Customers and employees are safe and to support Polish enterprises and local communities. The institutional commitment to fighting COVID-19 is supplemented with the actions of voluntaries – employees of the Bank’s Group.

Actions on behalf of the communities

In 2021, the total amount of aid granted by PKO Bank Polski S.A. and its subsidiaries was PLN 2.9 million (net of the costs of purchase of protective materials for the employees and Customers).

The Bank’s Group made cash and in-kind donations, including in particular:

– for the purchase of a computer CAT scanner with a radiologic platform for analysing X-ray images, supported by Artificial Intelligence, for the Central Clinical Hospital of the Ministry of the Interior and Administration in Warsaw;

– a car to the Healthcare Centre in Dąbrowa Tarnowska;

– a car to the Blessed Gerard Foundation of Polish Knights of Malta in Warsaw “Maltese Aid” Barczew Branch;

– 8,000 gloves and a cash donation for statutory operations in the scope relating to, among other things, counteracting the spreads of the pandemic – to the Foundation for the St. Sophia Specialist Hospital in Warsaw;

– a donation for organizing post-COVID rehabilitation aimed at a remission in the consequences of the COVID-19 infection to Caritas of the Rzeszów Diocese;

– a donation for the purchase of medical materials to the District Hospital in Opoczno;

and supported the General Sanitary Inspector in handling the process of consultations and providing information on the epidemiological and sanitary situation related to the pandemic, and other medical facilities and aid projects for battling COVID-19.

The Bank’s Customers using the electronic banking service iPKO may log into their Internet Patient’s Account and register for vaccinations. This solution was available since the launch of the vaccination system. PKO Bank Polski S.A. also supported the vaccination lottery – Customers could log into My ID in the Bank to confirm identity, and pay out cash prizes in ATMs and the Bank’s branches.

PKO Bank Polski S.A. was awarded in the Institution of the Year rankings (the Mojebankowanie.pl portal) and in the Gold Banker ranking organized by Bankier.pl and Puls Biznesu, for supporting communities in the era of the pandemic and for actions taken to combat the social and economic consequences of the pandemic.

Actions on behalf of customers

In 2021 the Bank’s Group offered special solutions to help Customers maintain their financial liquidity. The scope of the aid was adapted to the pandemic conditions and restrictions in business activities, and it accounted for the regulators’ guidelines.

• PKO Bank Polski S.A. introduced moratoria for Customers suffering from the effects of the pandemic, including from the so-called threatened industries. To entrepreneurs the Bank offered:

– suspending or extending the payment of instalments (principal or principal and interest – depending on the scale of operations of the enterprise and the form of financing) of investment loans, mortgage borrowings, SME borrowings, non-revolving working capital loans and restructuring agreements for a period of up to nine months, and with respect to the companies and enterprises segment – up to six months;

– renewing revolving loans which matured by 31 March 2021 for a period of up to nine months;

where the total period of suspension or extension for the payment of loan instalments or loan renewals under the moratoria in 2020 and 2021 could not exceed nine months. The moratoria were offered until 31 March 2021.

The Bank assessed the creditworthiness of Customers who submitted applications for these aforementioned support measures according to simplified procedures specified in the Bank’s Position with respect to standardizing the principals for offering support tools to customers, developed under the aegis of the Polish Banks Association.

• The Customers of the Bank and of PKO Bank Hipoteczny S.A. who lost their jobs or other main sources of income after 13 March 2020 could suspend servicing their mortgage loan contracts for 1, 2 or 3 months. During the suspension period banks did not accrue interest and did not collect any other fees related to the contracts apart from insurance premiums.

• PKO Leasing S.A. and Prime Car Management S.A. Group companies continued (until 31 March and 31 December respectively) to provide their Customers with the aid measures implemented in 2020, which include suspending or extending principal, or principal and interest instalment payments, deferring payment of lease liabilities and returning vehicles on preferential terms.

In 2021 voluntary and statutory moratoria on loans and advances, compliant with the EBA guidelines were used in total by more than 160 thousand Customers of the Bank’s Group (this also includes the moratoria granted in 2020), and the total carrying amount of loans and advances covered by the moratoria was PLN 26 billion. As at the end of 2021, the gross carrying amount of active moratoria was PLN 213 million.

Detailed data relating to the value of the moratoria granted is shown in the Bank Group’s financial statements for 2021 – in Note 65.

Customers of the Bank’s Group could also avail themselves of the aid tools introduced under the anti-crisis shields offered by BGK and PFR:

• the Bank’s Customers (micro- and small- and medium-sized enterprises) could use the guarantees securing repayment of loans or advances under the de minimis portfolio guarantee line with the BGK which in 2021 continued to be offered on the special conditions resulting from the pandemic (in higher amounts and on more favourable terms, without commission to BGK). The total amount of the de minimis guarantees granted in 2021 amounted to PLN 5.8 billion.

• The Bank’s Customers (medium and large companies) damaged by the effects of the pandemic could use the BGK Liquidity Guarantee to secure the working capital loans granted by the Bank. The total amount of guarantees granted to the Bank’s Customers in 2021 was PLN 0.7 billion.

• In the first quarter of 2021 the Bank’s Customers could apply for subventions under the PFR Financial Shield 2.0 for micro, small- and medium-sized enterprises from 54 industries, which had to limit business activities due to the epidemiological situation. The applications were submitted through the internet services: iPKO and iPKO biznes. Approx. 8.8 thousand enterprises availed themselves of this form of support via PKO Bank Polski S.A., and the total amount of subsidies provided was PLN 1.3 billion. PKO Bank Polski S.A. was the leader in the distribution of these subsidies, both in terms of the funds transferred and the number of firms which received the aid.

• Pursuant to the portfolio guarantee line concluded with BGK, PKO Faktoring S.A. has been offering its Customers the option to secure up to 80% of the amount of the factoring limit granted under quasi-factoring or reverse factoring contracts. Both Customers from the small and medium enterprises sector, and corporations could avail themselves of the BGK guarantee, irrespective of the size of their operations. The total amount of guarantees granted to the company’s Customers in 2021 was nearly PLN 358 million.

• PKO Leasing S.A. (directly and via the Bank) offered preferential finance to small- and medium-sized enterprises, following from the guarantees granted by the European Investment Fund. The Company’s offer included COSME and EGF guarantees (Pan-European Guarantee Fund), which facilitated access to finance to entities with a weaker than average risk profile. Almost all types of objects financed by PKO Leasing S.A. could be covered by the guarantees. Under the EGF Guarantee Customers could also count on lower margins. In 2021, almost 10,000 contracts with a total value of PLN 857 million were signed under the aid measure referred to above.

• PKO Leasing S.A. offered its Customers working capital financing through reverse leases with COSME COVID and InnovFIN COVID guarantees – the value of contracts concluded in 2021 was PLN 11 million.

• In August 2021, PKO Leasing S.A. signed a contract with BGK, which allowed offering the SME sector Customers guarantees securing the repayment of the amount due by them with respect to lease transactions (leases or lease financing). The guarantee secures up to 80% of the principal amount of the transaction for a period of from 3 to 120 months. The support is offered until 30 June 2022. The total amount of guarantees granted to the Company’s Customers in 2021 was PLN 9.4 million.

In 2021 PFR started settling the subsidies from the PFR Anti-Crisis Shields for micro-, small- and medium-sized enterprises. The settlement process is conducted by the bank via which the financial subsidy contract was concluded. In PKO Bank Polski S.A. it was conducted via electronic banking.

As at 31 December 2021, as part of settling the Financial Shield 1.0 (started in April 2021), the Bank made available the respective forms to over 67 thousand enterprises. Almost 64.8 thousand enterprises received positive PFR decisions – subsidies with a total value of PLN 10 billion were settled and PLN 6.4 billion was forgiven. The Bank made available to those Customers who have to repay the amount of the subsidy reduced by the redemption timetables for repayment to the accounts specified therein. In addition, the Bank monitors repayments of subsidies, providing notifications to Customers whose repayments are delayed.

At the end of 2021 the Bank started the settlement process with respect to the amounts received under the Financial Shield 2.0. The settlement process is phased and covers 1.4 thousand small- and medium-sized enterprises (it started in November 2021) and 7.4 thousand micro-enterprises (it started in January 2022).

PKO Bank Polski S.A. has purchased bonds financing anti-crisis shields of PFR and aid tools of BGK.

Actions on behalf of employees

The Bank’s Group continued actions to ensure that the employees were safe. The actions focused mainly on continued rotational remote work so as to limit the number of employees who are in the office at the same time. Throughout the pandemic the Bank’s Group has been equipping the employees of the Bank’s Group in necessary means of personal protection, and has been informing them of the rules which help reduce the risk of becoming infected. It also adapts the health care model to the situation relating to the pandemic.

In 2021 PKO Bank Polski S.A. in particular:

• introduced the possibility of making free-of-charge health checks after COVID-19 under the LUX MED subscription for employees of the Bank and their family members notified to health care of LUX MED;

• participated in the National Vaccination Programme as an employer, enabling registration and vaccination of employees and their families, and allowed the employees to use additional work-free hours to get vaccinated or to help a member of the family get vaccinated;

• systematically conducted surveys and collected information from employees on their state of health, remote work and areas requiring support on an on-going basis;

• launched a Bank-wide well-being programme which supports promotion of health and a positive workplace for the employees (including, among other things, lectures by experts, podcasts, videos, articles);

• developed an offer of remote development actions;

• covered the families of those employees who died due to contracting COVID-19 with special financial and psychological support.

The Bank and selected subsidiaries started to pay out an allowance (“equivalent”) related to the employees’ remote work.

Other entities of the Bank’s Group took similar actions adapted to the nature of their operations and employment structure. These actions focused mainly on completing tasks in various work systems and on maintaining a safe distance, ensuring an appropriate health care model, making available equipment and various communication tools.

In 2021 employee expenses of the PKO Bank Polski S.A. related to functioning during the pandemic and mitigating its effects (including the cost of the “equivalent” for remote work) amounted to PLN 7.4 million.

8.3 Operating segments of the Bank’s Group

Retail segment

Corporate and investment segment

The PKO Bank Polski S.A. Group conducts business activities in segments adapted in terms of products and services to specific groups of Customers. The manner in which the business segments are divided is consistent with the sales management model and a comprehensive product mix. Currently, the Bank’s Group conducts its business activities in the retail segment as well as in the corporate and investment segments.

The management reporting data of the Bank is presented in this subsection; any differences in the sums, shares and dynamics arise from rounding.

8.3.1 Retail segment

The offer of the PKO Bank Polski S.A. Group for individuals covers a wide range of credit, deposit and insurance products, as well as electronic banking services.

In 2021 in the retail segment the PKO Bank Polski S.A. Group built strong and long-term relations with Customers and supported them during the pandemic, among other things by making available a maximum number of processes remotely. It focused on developing tools and access channels to enable Customers to easily manage their finances from any place and at any time.

Individuals can take advantage of consumer loans in the form of cash advances, mortgage loans, revolving loans, credit cards and housing loans. Investment and investor loans, revolving loans, leases and factoring are available to companies and enterprises.

The deposit and investment offer comprises, among other things, regular saving products, term deposits, investment products of PKO TFI S.A., and Treasury savings bonds.

The Bank Group’s offer provides insurance services, both those related and not linked directly to bank products, to all Customers in the retail segment. Insurance linked to Bank products is offered to Customers in connection with, among other things, consumer loans and mortgage loans, checking accounts and bank cards. The offer of insurance independent of Bank products includes, among other things, life insurance, insurance of real estate, travel, motor and the OnkoPlan oncological insurance policy, and insurance of leased assets.

Customers of the segment

As at the end of 2021 the Retail Segment serviced more than 11.1 million Customers, including:

more than 10.5 million individuals; including 15.4 thousand Private Banking Customers;

• more than 0.5 million companies and enterprises.

Since the beginning of 2021 the number of Customers serviced in the retail segment increased by more than 114 thousand.

Number of retail segment Customers (in millions)

Business volumes

Gross loan receivables in the retail segment (in PLN billion)	Customer savings in the retail segment (in PLN billion)

	* taking into account insurance product liabilities

As at the end of 2021:

• total financing for Retail segment Customers exceeded PLN 183 billion and increased during 2021 by more than PLN 6.5 billion (i.e. 3.7%). This was mainly due to the growth of the portfolio of mortgage banking loans (+ PLN 3.2 billion), and retail and private banking loans (PLN +1.9 billion). In 2021, financing of companies and enterprises also increased (+PLN 1.4 billion);

• retail savings amounted to nearly PLN 354 billion and went up by PLN 41.8 billion (i.e. 13.4%) in 2021. An increase in retail and private banking deposits (of PLN 18.0 billion), and Treasury savings bonds (of PLN 14.4 billion) were the main contributing factors.

The Bank’s Group reinforced its position as market leader in terms of the number of checking accounts maintained (ROR). This number amounted to almost 8.5 million and went up by nearly 234 thousand during the year. It covers all active accounts, which constitutes growth potential for further cooperation with Customers.

In 2021, the Bank’s Group sold more than 433 million Treasury savings bonds (i.e. nearly 53% more than in 2020), and the debt in respect of the Treasury savings bonds issued to the domestic market amounted (at nominal value) to more than PLN 54 billion and was 36% higher than at the end of 2020.

Number of current accounts* (in millions)	Indebtedness under Treasury bonds issued for the domestic market (in PLN billion)*

* number of all active accounts with a potential for growth of cooperation with the Customer	* nominal value of savings bonds; source: Brokerage Office of PKO Bank Polski S.A.

Activities in 2021

In 2021, the PKO Bank Polski S.A. Group:

• with regard to housing loans:

– granted loans to individuals for a record total of nearly PLN 16.6 billion, which allowed it to maintain top position on the market with a share of 19.8% throughout 2021;

– enabled financing of up to 90% of the real estate value;

– extended the offer of a “green mortgage” by two further years; based on delivering an energy performance certificate to the Bank for the property constituting collateral for the loan Customers may be charged a lower margin;

– extended the offer to support borrowers with CHF mortgage loans until 31 December 2021 to limit the negative effects following from the changes in the exchange rate of CHF;

– and on 4 October 2021, the Bank launched a programme of amicable settlements for Swiss franc borrowers.

• with regard to consumer loans:

– it noted an increase of almost 1/3 on sales of consumer loans, rebuilding its portfolio in this loan category after the drop in 2020;

– it implemented on-line authorization methods for 3D Secure 2.1 card transactions,

– it implemented issuing credit cards to the Bank’s Customers based on the information on assets in other banks;

Sales of housing loans (in PLN billion)*	Sale of consumer loans (in PLN billion)

* source: ZBP, sale of PKO Bank Polski S.A. and PKO Bank Hipoteczny S.A.

• with respect to supporting operations and financing of companies and enterprises:

– implemented the option to remotely sign loan contracts secured with the BGK de minimis guarantees and annexes to these contracts;

– made available BGK de minimis guaranteed in electronic form; all de minimis aid certificates are generated in the form of electronic documents and sent to the email address of the borrower;

– made available current account overdrafts up to PLN 500,000 with individualized maximum reference ratio; the new solution introduces the option to hedge against interest rate increases;

• with respect to the transactions and savings offer:

– implemented a new process for remote opening of a checking account (ROR) – the Customer concludes an online contract, and a courier arrives at the Customer’s premises with a document to be signed;

– introduced the possibility of concluding an agreement for opening and maintaining an account in the Bank’s branches by signing on a touch screen;

– introduced quick transfers (30-minute) from Poland to Ukraine to an account with KREDOBANK S.A. on condition that the transfer is made from an account with PKO Bank Polski S.A.; in December 2021 more than 1,700 transfers were made for a total of PLN 2.1 million;

• with respect to service standards:

– implemented the voice of a bot on the PKO TFI S.A. helpline to service participants in products like IKE, IKZE under the distributed Pension Packages.

8.3.2 Corporate and investment segment

The PKO Bank Polski S.A. Group consistently tightens cooperation with the largest corporations, central and local government entities and foreign Customers, and expands its scope based on the range of products offered.

The Bank’s Group participates in financing strategic investment projects and local government projects. The financing takes the form of syndicated loans and bilateral loans, or the issue of securities.

The PKO Bank Polski S.A. Group offers wide access to funds to finance investment projects and advisory services focused on selecting the optimum form of funding and repayment terms to its Customers.

The Bank maintains securities accounts for Customers and facilitates Polish and foreign market transactions, and acts as a depositary for pension and investment funds.

The Bank's Customers who are interested in entering and increasing their share of international markets may use a wide scope of products and services, such as: transaction banking, including international cash pooling, e-banking, Treasury products, trade finance and corporate loans, offered by the Bank’s foreign branches.

Customers of the segment

As at the end of 2021 the Corporate Segment and the Investment Segment serviced nearly 17 thousand Customers, including:

•	almost 8.8 thousand corporate Customers,
•	over 1.3 thousand strategic Customers,
•	almost 5.2 thousand local and central government institutions plus budgetary and related entities,
•	nearly 1.4 thousand foreign Customers,
•	nearly 0.4 thousand financial Customers.

Since the beginning of 2021 the number of Customers serviced in this segment increased by over 0.5 thousand.

Number of corporate and investment segment Customers (in thousand)

In 2021, the Bank’s Group maintained its position as market leader for servicing the largest local government units: it handles the budgets of 7 voivodeships and 26 cities with poviat rights, including 9 voivodeship capital cities. For many years the Bank has also been financing and servicing banking of other public entities, including the Social Insurance Institute, organizational units of Państwowe Gospodarstwo Leśne Lasy Państwowe (State Forests), court bailiffs, hospitals, communal companies, systematically reinforcing the position of a leader in financing the Polish economy both independently and as a significant participant of banking syndicates.

Under the service offer of the Bank’s subsidiaries, Customers from the corporate segment may use lease and factoring products and services. Any fixed asset may be financed in the form of a lease, depending on the Customers’ needs. Apart from standard products, the offer also includes services of renting car fleet and cooperation with suppliers.

PKO Bank Polski S.A. conducted several actions with respect to adapting the foreign settlement infrastructure to the challenges posed by Brexit.

Business volumes

As at the end of 2021 total financing of Customers from the corporate segment, including loans, bonds issued and lease receivables amounted to PLN 74 billion and increased since the beginning of the year by nearly PLN 5.4 billion (i.e. 7.8%). The increase in factoring receivables exceeded 86% y/y in consequence of increasing sales of new factoring limits, as well as an increase in involvement under the contracts concluded with Customers, to the largest possible extent, in reverse factoring.

The level of savings of Customers from the corporate segment as at 31 December 2021 amounted to PLN 63 billion and increased by nearly PLN 17.8 billion from the beginning of the year, mainly due to an increase in current and term deposits. At the same time, in 2021 the level of investments in bonds issued by the Bank’s Group companies increased by almost PLN 0.5 billion.

Gross financing of clients from corporate segment (in PLN billion)

Savings in the corporate segment (in PLN billion)

* pozycja nie obejmuje obligacji od międzynarodowych organizacji finansowych

Activities in 2021

In 2021, the PKO Bank Polski S.A. Group:

• with respect to Customer service and transaction banking:

– implemented servicing of the Social Insurance Institute with respect to the 300+ Programme and prepared a solution for servicing the 500+ benefits;

– implemented a metal PKO VISA Business Credit Premium card, which is the most prestigious business payment card available in the Bank’s offer;

• with respect to financing and banking services for public entities, it concluded:

– more than 130 agreements for comprehensive servicing of local governments’ budgets, including, among others, of Kraków, Wrocław, Poznań, Elbląg and the Mazovian and Świętokrzyskie Voivodeships;

– 98 agreements for the issue of communal bonds totalling nearly PLN 2.1 billion;

• with respect to financing the corporate segment Customers in the form of banking syndicates and bond issue underwriter,

it concluded:

– 32 syndicated loan contracts for a total of PLN 18.6 billion, EUR 2.3 billion and USD 2.5 billion, in which the Bank’s share totalled more than PLN 2.6 billion, EUR 0.4 billion and more than USD 0.4 billion;

– six corporate bond issues totalling PLN 5.8 billion and USD 0.6 billion;

• with respect to brokerage activities (conducted by the Bank’s Brokerage Office):

it conducted:

– as a joint manager, sales transactions of Allegro.eu. S.A., shares worth approx. PLN 4.6 billion (according to the accelerated bookbuilding ABB procedure) on the primary market.

– as a joint bookbuilder and offering agent, the IPO of Pepco Group N.V., shares worth approx. PLN 3.7 billion;

– as a joint bookbuilder and an investment company intermediating in the offer, the IPO of STS Holding S.A. shares worth approx. PLN 1.1 billion;

– as the sole global coordinator and bookbuilder, a sale transaction according to the ABB procedure, of BNP Paribas Bank Polska S.A. shares worth approx. PLN 471 million;

– as a global coordinator and joint bookbuilder and an intermediator in the offer in Poland, the IPO of shares of Shoper S.A. with its registered office in Kraków, with a value of approx. PLN 363 million;

– as a joint bookbuilder, the IPO of Captor Therapeutics S.A. worth approx. PLN 184 million;

it serviced:

– almost 141 thousand securities accounts and cash accounts, as well as more than 371 thousand registration accounts;

– Additionally, 425 participation units in funds and subfunds managed by 11 Investment Fund Management Companies;

• in the corporate segment of foreign Customers:

– it engaged in new relations with Polish and European financial institutions (investment funds, payment and credit institutions) with respect to operational and settlement services of operations in Poland;

– it started transactional cooperation with new banks, including NH Bank from South Korea and OP Pankki from Finland, which are the leading banks in their countries; it also won the tender for servicing Nova Kreditna Banka in Slovenia – a new entity which was established after the largest banking merger on the market;

– it signed clearing agreements relating to making payments in PLN in the territory of the UK, the USA and China;

– it enhanced a Cash Pooling service offered to global banking groups under Loro accounts opened with PKO Bank Polski S.A.

8.4 Insurance and leasing

In 2021 insurance and leasing services provided both to retail Customers and enterprises were intensified.

Activities in 2021

Insurance	PKO Towarzystwo Ubezpieczeń S.A. launched a fully remote process for reporting and servicing losses, including: dynamic forms using mojeID, enabling the individual calculation of claims based on photographs, enabling quick disbursement and a dedicated claims account manager.
	PKO Bank Polski S.A. and PKO Towarzystwo Ubezpieczeń S.A. expanded their offer by new house and apartment insurance: PKO Dom. The product, developed jointly with PKO Towarzystwo Ubezpieczeń S.A., meets the Customers’ needs for real estate, movables, private liability and other risks insurance in a comprehensive manner. Connecting insurance cover with the use of the smart home technology is an additional innovation. After the purchase of PKO Dom, the Customer receives a 40% deduction on the purchase of smart equipment from FIBARO, which he/she may link to the policy. This allows notifying him/her through an application of any discovered threats (such as smoke, water, motion), and PKO Ubezpieczenia contacts him/her to offer help. The PKO Dom insurance achieved record sales results – more than 65 thousand policies within less than four months of sales. Gazeta Ubezpieczeniowa granted the “Product of the month” award to PKO Dom.
	In 2021 PKO Bank Polski S.A.’s Customers have already purchased more than 150 thousand sets of motor insurance. Since the beginning of the distribution, already more than 325 thousand sets of motor insurance were sold by the Bank.
	In the first quarter of 2021, PKO Bank Polski S.A. and PKO Towarzystwo Ubezpieczeń S.A. jointly expanded the scope of travel insurance for PKO Mastercard Platinum and PKO Visa Infinite by contracting COVID-19, events related to travelling in Poland and added new insurance regarding refunds for tickets to sports and cultural events.
Leases	PKO Leasing S.A. implemented the PKO Leasing Online process which is available in e-commerce stores and lease servicing process for traditional stores. Both offers are addressed to business-persons to finance such objects as RTV equipment and domestic appliances, photographic equipment, bicycles, workshop equipment, and catering equipment.
	The PKO Leasing S.A. Group introduced a new product – leases of passenger cars accompanied by their servicing. Under the Prime Car Management S.A. (PCM) service, Prime Car Management S.A. ensures organizational and logistics support, as well as the availability of several thousand Authorized Service Stations, car garages and collaborators from the automotive industry.
	PKO Leasing S.A. and the PCM Group signed an agreement with Bank Ochrony Środowiska S.A. under the government programme “Mój elektryk” (“My electric Car”). Business Customers will be able to obtain subsidies to leases of electric cars via PKO Leasing S.A. Customers may obtain additional finance to electric cars of up to PLN 27 thousand, and official contacts are exclusively with PKO Leasing S.A.
	PKO Leasing S.A. enabled signing contracts using electronic signatures to its Customers. It signed an agreement with Krajowa Izba Rozliczeniowa S.A. for the use of the mSzafir service with Autenti sp. z o.o. for providing services using software servicing electronic/qualified signatures.

8.5 IT projects and other services

New functions and remote services

IKO Voice Assistant “TalkIKO”	PKO Bank Polski S.A. implemented a new version of a voice assistant. Thanks to the new solution users of the IKO application on the iOS system may add shortcuts to Siri (the Apple voice assistant). The Customer may set his/her own commands to call the voice assistant or accept the default ones. The voice assistant also has facilities for the blind and visually impaired and has been adapted to cooperation with Talkback (Android) and VoiceOver (iOS) screen readers.
IKO Voice Assistant “TalkIKO”	In 2021 the assistant held more than 785 thousand conversations with Customers. The Customers made more than 75 thousand transfers via the assistant.
Proximity BLIK	PKO Bank Polski S.A. launched BLIK smartphone proximity payments, which enable performing transactions using the BLIK system without the necessity to give the BLIK code, without a card and without the costs of foreign exchange. The new BLIK proximity payments function is available in the IKO application for the Android. The number of transactions concluded until the end of 2021 using the proximity BLIK in the IKO application amounted to nearly 900 thousand. On workdays in December Customers concluded nearly 20 thousand transactions a day.
BLIK without a code and confirmation on the Allegro site	For all users of the IKO application PKO Bank Polski S.A. launched the option of making BLIK payments with automatic confirmation, i.e. without giving a code or confirming the transactions in IKO on allegro.pl.
Offer for Customers who do not hold an account with the Bank	PKO Bank Polski S.A. made available, free of charge, the iPKO service and the IKO application to those who do not hold an account with PKO Bank Polski S.A. Customers may, among other things, confirm their identity and use e-administration services, exchange currencies online, have access to the mSzafir electronic signature and the balance of funds accumulated under PPK and PPE, and file applications for mortgage loans online.
AIS services	Under the open banking and AIS (Account Information Service) services PKO Bank Polski S.A. enabled access to information on accounts maintained in 11 different institutions. The access is possible both in the IKO and iPKO internet banking services.
e-Kantor	In 2021 PKO Bank Polski S.A. introduced many new functions such as transferring the purchased currencies to the Customer’s account with another bank without charging additional fees. Customers have already performed more than 6 million transactions in e-kantor using the IKO application. Customers performed over 1.4 million transactions in the e-kantor via the internet service iPKO.
Automarket	In 2021 3,165 vehicles were sold via the internet platform Automarket.pl, and jointly more than 3,800 cars were sold since the beginning of the platform’s existence. From among the vehicles sold in this period, 80% were sold using the financial product of the Bank’s Group, and the remaining 20% for cash. The total credit volume granted for the transactions on the Automarket.pl platform in 2021 was close to PLN 200 million.
PKO supermakler	PKO Bank Polski S.A. implemented a new version of the internet service and a mobile application PKO supermakler (superbroker). The service was enhanced by adding new functions, e.g. integrated graphs with a technical analysis and clear presentation of information on dividends inflowing from companies, held in the account. The service was prepared in the RWD technology which means that irrespective of the size of the monitor PKO adapts to the Customer’s computer or tablet.
SIRA	PKO Bank Polski S.A. jointly with ING Bank Śląski S.A., Santander Bank Polska S.A. and a wide range of partners developed the Standard of the Shareholder Registers Interface (SIRA). SIRA is used to standardize the technical conditions of systems functioning and allows shareholders to manage their shares remotely in the electronic registers.
Process automation	PKO Bank Polski S.A. implemented the first autonomic instruction for “Cancelling a
Process automation	PKO Bank Polski S.A. implemented image recognition technology (iOCR), which supports the automation of servicing processes based on paper documents.

New technologies

In 2018 PKO Bank Polski S.A. initiated the establishment of Operator Chmury Krajowej sp. z o.o., a company which is being developed by the Bank jointly with the other shareholder, Polski Fundusz Rozwoju S.A.

The strategic partnerships between the company, Google and Microsoft enable the Bank’s comprehensive transition from the traditional IT model to the provision of cloud services. PKO Bank Polski S.A. plans to ultimately operate in a hybrid cloud.

In 2021 the Bank implemented and developed modern services which function based on cloud computing.

The MLOps Platform	It launched the first version of the MLOps analytic platform. The tool is based on cloud computing using the Google Cloud Platform. The use of modern tools enables supporting many processes, such as CRM and risk. The Bank implemented the first analytical models which successfully support internal processes.
Infosite	The Bank launched a pilot version of the first cloud pkobp.pl services. The use of the Google Cloud Platform enables using new optimization tools and delivering content to Customers. The pilot implementation ended in full success and enabled working out a model for the future development of the platform.
SAP SuccessFactors	It implemented a comprehensive SAP SuccessFactors system for HR processes, which ensures modern servicing of employee-related processes. The launch covered 23 thousand staff and is the largest implementation of such a solution in Poland to date.
Digital Employee Experience	It implemented the Digital Employee Experience platform – an innovative internal communication tool. The platform develops the Bank employees’ digital experiences and enables quick access to information, also in the mobile version.
Intragraf	The Bank implemented the Intragraf service which is used in sales and service processes with regard to the Bank’s Customers.

8.6 Distribution network and access channels

IKO mobile banking

iPKO Internet banking

PKO Bank Polski S.A.’s Contact Centre

Network of branches and agencies

Private Banking Centre

Corporate Banking Centre

IKO mobile banking

PKO Bank Polski SA offers advanced technological solutions to its Customers, providing them with complete, simple, functional and at the same time safe access to banking services using telephones. Digital banking at PKO Bank Polski S.A. is strongly supported by the IKO mobile application.

IKO transactions (in millions)

Only in 2021 users logged into the application nearly 1.5 billion times, and in total, from the moment of launching IKO in March 2013 until the end of 2021 there were more than 4.4 billion logins. IKO is the most popular banking application in Poland with the largest number of reviews in mobile stores (484 thousand) and a very high average rating of 4.8 out of 5.

In 2021 IKO functionalities were expanded by:

• parking fees – localization services;

• instruction for changing the account for repaying a mortgage loan;

• confirmation of biometric authorization of mobile transactions;

• marking mobile contacts with the BLIK logo when making mobile transfers;

• making available a full offer of investment funds of PKO Towarzystwo Funduszy Inwestycyjnych S.A. and views of accounts maintained by the Bank’s Brokerage Office, and the balances of funds accumulated under the Employee Capital Plans (PPK) and Employee Pension Programmes (PPE).

• dark mode, i.e. the option to switch the monitor view from bright to dark;

• the option to submit an application for a company account and a corporate loan;

• option to edit standing orders.

iPKO Internet banking

The Bank’s Customers can use iPKO and iPKO biznes services as part of the electronic banking services. These services provide Customers with access to information on their accounts and products, and enable them to effect transactions through the Internet.

iPKO

The Bank constantly promotes iPKO Internet banking among retail Customers and small- and medium-sized enterprises. It includes remote self-management of accounts, banking products and other services. The Customers have fast, safe and easy access to their funds (also those entrusted to some other companies of the Bank’s Group) irrespective of the equipment used. Fees for using iPKO banking services are lower than the commissions and fees charged for the transactions in the traditional channels of contact with the Bank.

Number of retail segment Customers with access to iPKO (in millions)*

* from the second quarter of 2019 a change in the definition – the number of retail Customers who have an active relation with a product in the iPKO service

In 2021 PKO Bank Polski S.A. introduced the following new features to iPKO to make it easier for Customers to use banking services:

• transfers from the iPKO service directly to the PKO Leasing Customer Portal without the need to re-log; the new function is available for sole proprietorships or partners in partnerships;

• independent changing of paper correspondence regarding mortgage loans, cash loans and investment funds into electronic form;

• increasing safety by making available to Customers the option of adding trusted equipment for use in internet banking (Device Fingerprint);

• quick registration and purchase of Treasury bonds in the obligacjeskarbowe.pl service via the iPKO service;

• support in sales and post-sales services with regard to sending documents required in the processes to the Bank by Customers by improvements in the section “eDokumenty” (before, a visit in a branch office was required);

• making available the “mSzafir” signature – to enable the remote signing of loan contracts/annexes and selected documents relating to collateral;

• sales of payment terminals (POS) under the Polska Bezgotówkowa (Cashless Poland) programme;

• showing concrete offers from the Automarket.pl platform with the option of leaving a contact request in each of them;

• downloading the MT940 report – a detailed report with information on transactions on the account in the form of a text file with a specific structure;

• making available – as the first Bank on the market – a remote form of applying for high amount loans and using digital data from the standard audit files in risk assessment processes;

• making available applications: for subsidies under the PFR 2.0 Financial Shield, for mediation relating to translating a CHF loan into PLN and for the Dobry Start 300+ programme, and expanding the scope of remote applications for a mortgage loan;

• developing Qlips – quick payments for invoices and bills; the Customer only has to select a supplier and click on the issued invoices, and the transfer forms are automatically serviced;

• submitting applications for closing current, savings and foreign currency accounts;

• a solution enabling Customers to leave their evaluations and comments relating to the functioning of the iPKO service.

iPKO biznes

The iPKO biznes electronic banking system is addressed to all institutional Customers who wish to have online and mobile access to the standard products and specialist banking services.

Number of the Bank’s Customers with access to iPKO biznes (in thousands)

In 2021 PKO Bank Polski S.A. made new functionalities available to the iPKO biznes users, such as:

• activation of prepaid debit cards;

• Express Elixir transfers which enable immediate performance of transactions;

• the mass disbursements module which enables easy management of cash disbursement orders in ATMs and branch offices, monitoring statuses and generating reports; Customers may use the service without the need to sign additional documentation;

• the Virtual Accounts module which enables opening and managing virtual accounts;

• opening and servicing tax investment accounts – in a separate account corporate Customers may accumulate finance in a special investment fund which enables quicker settlement of depreciation; the account is connected to the VAT account, Split Payments may be made through this account;

• making available securities accounts to institutional Customers – Customers gained the option to view the list of accounts, securities held, corporate events and lists of transactions;

• adapting the iPKO biznes service to the amendments to the VAT Act in the part relating to the split payment mechanism;

• enabling the SWIFT MT101 service which makes transfers from accounts maintained by third party banks. The service is addressed to companies, e.g. groups, with members in Poland or abroad, that are serviced at the same time by various banks;

• implementing PUSH messages received from the Bank.

Contact Center of PKO Bank Polski S.A.

The Contact Center (CC) of PKO Bank Polski S.A. plays an important role in serving retail segment Customers. Its purpose is to provide efficient and effective Customer service via phone or the Internet and to sell the Bank’s products during incoming and outgoing calls.

PKO Bank Polski S.A.’s hotline employs several hundred consultants who remain at the Customers’ service 24 hours a day. The consultants not only handle telephone calls but also answer Customers’ questions and requests electronically – e-mails and website requests. Customers may also send messages in the iPKO or Inteligo transaction service.

The Contact Centre also plays an important role in the amicable settlement processes relating to loans denominated in CHF. The helpline provides the requested information on an on-going basis and enables making meeting appointments for the purpose of signing the settlements. To ensure the efficiency of the process, a special IVR solution was made available which supports Customers in answering their queries.

Since 2021, each of the Bank’s Customers is greeted by AI (Artificial Intelligence) which verifies his/her intentions and connects him/her with the consultant most knowledgeable on the matter. Development of dialogues and intentions used in conversations with Customers using AI enabled the Bank to achieve the planned results of support for Customers using a voice bot. Using AI the Bank reduces its costs and increases the speed of Contact Center services in autonomic processes: cancelling payment cards, blocking identity cards, servicing security anomalies and anti-fraud services for cash loans.

Branch network and agencies

PKO Bank Polski SA, with an eye to providing convenient access to its products and services, provides its Customers with a wide network of retail branches and agencies, private banking offices, corporate branches, as well as branches located abroad. The optimization of the branch network is carried out on a continuous basis, and decisions on whether to open a branch on a particular micro-market are made by reference to economic criteria, taking into account the growth potential of that micro-market (retail branches) and optimization of the coverage of business areas (corporate branches).

As at the end of 2021, the network of PKO Bank Polski S.A.’s branches comprised:

• 913 retail branches organized into 10 regional divisions, 8 private banking offices and 11 corporate banking offices;

• 23 regional corporate centres organized into 7 regional corporate branches, as well as the branches located in the Federal Republic of Germany and the Czech and Slovak Republics.

In relation to the end of the year 2020, the total number of retail units decreased by 30, and the number of corporate units increased by 1 foreign branch.

The drop in the number of branches is among other things the result of digital transformation which is one of the key elements of the consistently pursued development strategy of PKO Bank Polski S.A. The digital transformation supports Customers switching to remote service channels and at the same time implements the assumptions of the government project “Od papierowej do cyfrowej Polski” (From a Paper to a Digital Poland).

Table 10. Operating data of the retail and corporate segment*

	2021	2020	2019	2018	2017
Number of branches in the retail segment:	942	972	1,073	1,113	1,153
regional retail branches	10	10	11	11	11
retail branches	913	943	1,043	1,083	1,132
private banking branches	8	8	8	8	8
corporate banking branches	11	11	11	11	2
Number of branches in the corporate and investment segment:	33	32	42	42	41
regional corporate branches	7	7	7	7	7
regional corporate centres	23	23	33	33	32
foreign branches	3	2	2	2	2
Number of agencies	447	492	538	577	745
Number of ATMs	2,976	3,022	3,080	3,133	3,190

* In 2020, the Bank established a Corporate Branch in the Slovak Republic, which started operating in March 2021 – the branch is included in the above table.

The branch and ATM network is complemented by the agency network. As at the end of 2021, PKO Bank Polski SA collaborated with 447 agencies. The drop in the number of agencies observed during the last two years is caused by lower profitability resulting from a lower number of Customers using agencies during the Covid-19 pandemic.

In 2021 the Bank made a pilot launch of a new outlet model – a cashless branch. At the end of the year 30 such outlets were operative. Payments to and disbursements in cashless branches were transferred to self-service devices – ATMs, cash deposit machines and recyclers. Additionally, self-service internet stands were added which enable Customers to log into the iPKO transactional banking service, and paper posters and leaflets were replaced by electronic media. Design changes were also introduced.

Moreover, the Bank launched a branch in Łódź in a new PKO Koncept format. It is a multi-business outlet characterized by a holistic approach to Customers. The nature of the design refers to the Łódź industrial and artistic traditions. In the outlet, there is a gallery of paintings of authors from Łódź, and space is available for discreet business meetings. Employees also educate Customers in using various channels and support them in using remote channels.

Private Banking Centre

PKO Bank Polski S.A. is constantly developing its Private Banking and enables Customers to access a wide range of financial products and instruments.

The Private Banking Offices serve Customers in the largest Polish cities: Warsaw, Gdańsk, Kraków, Katowice, Poznań, Wrocław, Łódź, Szczecin, Bydgoszcz (the branch is part of the Private Banking Office in Szczecin), Białystok and Lublin (the branches are part of the Private Banking Office in Warsaw).

As at the end of 2021, the Private Banking Centre managed a portfolio of assets with a value of more than PLN 52.9 billion. During the year, the process of replacing agreements with Customers was executed with relation to optimizing the serviced Customer base. As at the end of 2021 the Private Banking Centre services 15.4 thousand Customers.

Agreements and assets of the Customers of the Private Banking Centre

Corporate banking centre

The Corporate Banking Centre of PKO Bank Polski S.A. is an optimum environment created for the development of businesses with revenues ranging from PLN 5 million to PLN 30 million and similar product and service needs. In 2021, the number of Customers served by the Corporate Banking Centre increased by nearly 6% to 14.2 thousand at the end of the year.

A separate Corporate Banking Centre makes it possible to build the image of PKO Bank Polski S.A. as a reliable business partner for Polish businesses, thanks to:

• its service team;

• creating a specialized group of nearly 150 mobile advisors cooperating directly with credit analysts;

• improving the advisors’ credit competence, better matching of the product offer and price range to the Customer’s needs, and reducing the waiting time for a credit decision due to improvements in the lending process;

• limiting paper documentation in relations with the Bank, remotely communicating with Customers, as well as automating the processes using iPKO and iPKO biznes.

8.7 Operations

In 2021, PKO Bank Polski S.A. continued to digitize and centralize operations under the Service Transformation project, which was the beginning of the integration of the backoffice and the Contact Center, and the Prosty Bank (Easy Bank) strategic programme. Based on the standardization and optimization of processes, further synergies were achieved as a result of adding to the structure of the Operations function, among other things, the Trusteeship Department and operational tasks which had previously been dispersed throughout the Bank’s and the Bank Group’s structure. In conditions of further spread of the pandemic in 2021, the Bank demonstrated high operating efficiency and cost-effectiveness, both with respect to settlements, Customer service and cash transactions.

The Operations function continued to transmit cost processes to revenue processes. Operating synergies of the merged areas enabled the employees to service 9% more Customer orders, queries and telephones in 2021 than in 2020 (25 million in total).

New technologies, AI, robotization and automation were a great support. In 2021:

• 10% more robotized processes in the RPA (Robotic Process Automation) technology were implemented y/y; in effect, the number of tasks performed by robots increased more than twofold – robots performed more than 65 million tasks and actions, and the voice bot greeting Customers on the helpline serviced 5.5 million calls;

• image recognition technology with the use of AI (iOCR) was implemented and 1.8 million paper documents were processed, from which data for processes in electronic form was obtained which enabled their automation;

• access to the robotization platform was expanded to include further subsidiaries of the Bank – PKO Towarzystwo Ubezpieczeń S.A. and PKO Życie Towarzystwo Ubezpieczeń S.A.

Further orders were made available to Customers in the iPKO transactional service and in the IKO mobile service, which previously could only be made in the Bank’s branches and via the Contact Center.

The Operations function also actively supported the performance of regulatory projects (government shields for companies, draft settlements with Customers who had taken out loans in CHF, support for the Chief Sanitary Inspectorate). It shared its experience and technologies with the Bank’s subsidiaries, centralizing services and processes in all of the Bank Group’s structure.

Robotization and automation of processes played a significant role in the performance of new tasks following from the implemented regulations – they supported among other things servicing subsidies for companies granted by PFR S.A. and servicing Customers’ applications for mediations with respect to CHF loans, significantly reducing the labour intensity and accelerating completion of the Customers’ orders.

In 2021 the Cash Management area also developed. Starting sealed cash collection services for corporate Customers (including two material of a total of approx. 2,000 service outlets) led to an increase in such transactions in the Cash Management Centre – in December 2021 in terms of value of 43% y/y and in terms of processed collections of 298% y/y.

In 2021 a new sorting station of the Cash Management Centre in Lublin was opened. The Lublin team services 237 cash outlets, including 49 Bank’s branches, 165 ATMs and payment machines, and 23 night safes. On a monthly basis, almost one billion zlotys worth of cash is counted there.

8.8 International cooperation

The Bank’s Group acquires funds from foreign financial markets, among other things by obtaining loans from international financial institutions (including the Development Bank of the Council of Europe and the European Investment Bank) which allows it to present a preferential offer to SMEs.

The Bank’s Group also participates in portfolio guarantee programmes (including of the European Investment Fund). In 2021, guarantees were offered under the COSME, InnovFin, EFSI and EGF programmes.

Detailed information about loans received under the international cooperation is given in Note 44 to the financial statements of the Bank’s Group for 2021.

The Bank’s Group is systematically increasing the portfolio of serviced foreign Customers and expanding the range of available products. The Bank focuses mainly on acquiring Customers that are daughter companies of leading foreign entities from the area of the European Union, and at the same time expands competences which allow building long-term relations with Customers from other regions of the world, including particularly Asia.

The insurance companies from the Bank’s Group – PKO Życie Towarzystwo Ubezpieczeń S.A. and PKO Towarzystwo Ubezpieczeń S.A. – cooperate with reinsurers on the international market.

8.9 Operations of selected subsidiaries

In addition to strictly banking activities, the PKO Bank Polski S.A. Group provides services related to leases, factoring, investment funds, pension funds and insurance, as well as car fleet management services, transfer agent services, technological solutions, IT outsourcing, debt collection, business support services, and real estate management.

In 2021 companies maintained uninterrupted operations and financial liquidity.

Characteristics of the operations of selected PKO Bank Polski S.A. Group companies

The results of operations presented in the description are derived from the financial statements of the individual companies prepared according to the International Financial Reporting Standards (in the case of the KREDOBANK S.A. Group, in accordance with the policies applicable in the PKO Bank Polski S.A. Group), and in respect of insurance companies, according to Polish Accounting Standards. Data available as at the date of the report.

PKO Bank Hipoteczny S.A.

PKO Bank Hipoteczny SA is the leader on the Polish mortgage bank market in terms of total assets and the portfolio of mortgage loans. The company is also the largest issuer of mortgage covered bonds in Poland.

In 2021, PKO Bank Hipoteczny S.A. earned net profit of PLN 94.9 million (vs. PLN 81.5 million in 2020).

PKO Bank Hipoteczny S.A. specializes in granting mortgage housing loans to retail Customers and purchases receivables in respect of such loans from PKO Bank Polski S.A. The Company issues mortgage covered bonds (in PLN and in foreign currencies), which constitute one of the main sources of long-term financing of loans secured with real estate in the PKO Bank Polski S.A. Group.

In 2021 PKO Bank Hipoteczny S.A., under the Framework Receivables Sale Agreement, purchased further portfolios of mortgage secured housing loans for a total of PLN 0.16 billion. As at 31 December 2021 the total gross value of the PKO Bank Hipoteczny S.A. loan portfolio amounted to PLN 22.9 billion, including PLN 11.3 billion of mortgage housing loans purchased under the agreement concluded with PKO Bank Polski S.A.

The company did not issue any mortgage covered bonds in 2021. The total nominal value of mortgage covered bonds issued by PKO Bank Hipoteczny S.A. and outstanding as at the end of 2021 was PLN 13.1 billion. This included green mortgage bonds worth PLN 500 million.

PKO Towarzystwo Funduszy Inwestycyjnych S.A.

The core business of the Company is creating and managing investment funds. The Company also offers specialized investment programs and manages Employee Pension Programmes (PPE) and Employee Capital Plans (PPK).

In 2021 the Company earned net profit of PLN 218.8 million (vs. PLN 194.5 million in 2020).

The value of the funds’ net assets under the Company’s management amounted to PLN 38.9 billion as the end of 2021, which represents a 15.1% increase in assets compared with the end of 2020.

Value of assets of managed investment funds (in PLN billion)

PKO TFI S.A. is ranked first in terms of the managed assets of retail Customers’ investment funds, with a 19.2% share in the market, and second in terms of the net asset value with a market share of 12.91% in the market of all investment funds*.

As at 31 December 2021, PKO TFI S.A. managed 68 investment funds and sub-funds.

In 2021 the Company extended among other things the functionalities of remote distribution tools the effect of which, among other things, were: electronic processing of applications addressed to Employers in the iPPK application and the implementation of the mojeID (my ID) service as an identity verification tool.

In 2021 the Company introduced the following to its offer: Subfund Emerytura 2065 and PKO Energii Odnawialnej – FIZAN.

At the end of 2021 PKO TFI S.A. was the Polish market leader in Employee Capital Plans in terms of the assets under management with a 32.5% market share.

*Source: Analizy Online, January 2022.

PKO BP BANKOWY PTE S.A.

The Company manages PKO BP Bankowy Otwarty Fundusz Emerytalny and PKO Dobrowolny Fundusz Emerytalny, which offer the Individual Retirement Account (Indywidualne Konto Emerytalne – IKE) and Individual Retirement Security Account (Indywidualne Konto Zabezpieczenia Emerytalnego – IKZE).

In 2021 the Company earned net profit of PLN 16.2 million (vs. a net loss of PLN 32.6 million in 2020).

Results of operations of the Open Pension Fund (OFE)*:

As at the end of 2021, the net asset value of PKO BP Bankowy OFE managed by PKO BP BANKOWY PTE S.A. amounted to PLN 8.5 billion, which is an increase of nearly PLN 2 billion compared with the end of 2020. This increase is the effect of improvement in the conditions on the financial markets.

PKO Bankowy OFE had 877.1 thousand participants as at the end of December 2021 (899.8 thousand as at the end of 2020).

PKO BP Bankowy OFE ranks 9th on the pension fund market in terms of net asset value and in terms of the number of participants*.

*Source: www.knf.gov.pl

Capital group of PKO Leasing S.A.

The PKO Leasing S.A. Group (i.e. PKO Leasing S.A. and its subsidiaries) offers financial services in respect of lease and factoring and provides insurance agent, fleet management and vehicle rental services.

The PKO Leasing S.A. Group earned a net profit of PLN 249.1 million in 2021. The net profit for the year 2020 was PLN 155.2 million.

PKO Leasing S.A. and its subsidiaries offer leases and loans. Customers may use these services to finance their fixed assets, such as passenger cars, delivery vehicles and trucks, machines, equipment, technological lines, medical equipment, computer hardware and software.

As at 31 December 2021, the carrying value of amounts due from Customers in respect of leases and loans (both matured and not yet matured) and the carrying value of fixed assets under operating leases in the PKO Leasing S.A. Group totalled PLN 21.1 billion.

Amounts due from Customers in respect of leases and advances, and fixed assets under operating leases (in PLN billion)

The PKO Leasing S.A. Group has been the leader of the Polish lease and rental market for several years. It pursues the “Cyfrowa Era Leasingu” (Digital Era for Leases) strategy, which stipulates stronger use of digital tools and development of operations in new market segments.

PKO Faktoring S.A. provides domestic and export factoring services with and without recourse, reverse factoring and a factoring programme service for suppliers.

In 2021, the carrying amount of amounts due from Customers was PLN 2.95 billion. As at the end of 2020, it was PLN 1.3 billion.

In 2021, the value of factoring turnover was PLN 22.5 billion (in 2020: PLN 18.6 billion).

As at 31 December 2021, the Company ranked 8th (in terms of turnover) among the factoring companies associated in the Polish Factors’ Association, with a market share of 6.21%.

PKO Życie Towarzystwo Ubezpieczeń S.A. Group

The PKO Życie Towarzystwo Ubezpieczeń S.A. Group earned a net profit of PLN 15.5 million in 2021 (in 2020, the Group’s net profit was PLN 45.1 million). The drop in profit compared with the previous year was mainly the result of a material increase in mortality in consequence of the COVID-19 pandemic.

PKO Życie Towarzystwo Ubezpieczeń S.A.’s business activities comprise life insurance (Section I insurance). The Company offers both standalone products and products supplementing the banking products offered by PKO Bank Polski S.A.

In 2021, the Company’s operations was strictly related to the situation on the Polish banking market. After a year of strong limitation in the Poles’ propensity to incur loans, in 2021 we could observe a material increase in sales of credit products. Low interest rates led to a higher propensity of incurring loans by the Bank’s Customers, which translated into a material realized increase in the level of gross written premium.

Gross written premiums under insurance contracts concluded by the Company in 2021 amounted to PLN 517.0 million. As at the end of 2021, the Company insured 1 021 thousand people (994 thousand people in 2020).

Gross written premium (in PLN million)

PKO Towarzystwo Ubezpieczeń S.A.

In 2021 the Company earned net profit of PLN 67.1 million (vs. PLN 56 million in 2020).

PKO Towarzystwo Ubezpieczeń S.A.’s business comprises other non-life insurance (Section II insurance). The Company focuses on providing insurance against loss of income, accident and sickness, as well as property insurance for borrowers and mortgage borrowers. The Company also offers automotive insurance.

In 2021 the Company implemented modern house and apartment insurance PKO Dom.

Gross written premiums under insurance contracts concluded by the Company in 2021 amounted to PLN 815.8 million. As at the end of 2021, the Company insured 1,196 thousand people (1,060 thousand people in 2020).

Gross written premium (in PLN million)

KREDOBANK S.A. Group

The KREDOBANK S.A. Group consists of KREDOBANK S.A. and its subsidiary, “KREDOLEASING” sp. z o.o.

KREDOBANK S.A. is a universal bank, focused on providing services to retail Customers and small- and medium-sized enterprises operating mainly in the western part of Ukraine and in Kiev. At the same time, KREDOBANK S.A. strives to attract corporate customers with high creditworthiness.

“KREDOLEASING” sp. z o.o. provides financial services, including leases, factoring and granting advances. The Company was registered in August 2021 and received a licence to provide financial services; by the end of 2021 it had not started operating.

The KREDOBANK S.A. Group earned a net profit of UAH 800.8 million in 2021 (PLN 113.9 million). The KREDOBANK S.A. Group earned a net profit of UAH 522.8 million in 2020 (PLN 75.2 million).

The loan portfolio of the KREDOBANK S.A. Group (gross) in 2021 increased by UAH 3.3 billion, i.e. 23.3%, and amounted to UAH 17.5 billion (PLN 2.6 billion). The increase in the loan portfolio in UAH is mainly the result of an increased number of new loans.

Gross loan portfolio (in UAH billion)

In 2021, the value of the term deposits of the KREDOBANK S.A. Group Customers increased by UAH 0.9 billion (14.5%) to UAH 7.4 billion (PLN 1.1 billion). The increase in the value of term deposits in UAH resulted from an increase in the number of Customers and the scale of business under the Bank’s Strategy for 2021-2023.

As at 31 December 2021 the network of KREDOBANK S.A. outlets covered the Head Office in Lviv and 82 branches in 22 of 24 provinces of Ukraine.

PKO BP Finat sp. z o.o.

In 2021 the Company earned net profit of PLN 33.0 million (vs. PLN 35.3 million in 2020).

PKO Finat sp. z o.o. provides comprehensive services to financial sector companies, i.a. in respect of providing technical solutions, transfer agent, fund and company accounting services and outsourcing skilled IT specialists, project teams and IT processes.

The Company also offers marketing tools based on innovative technologies and maintains the Employee Capital Plans (PPK) Records System. Its offer includes implementing and maintaining cloud solutions for companies, i.e. providing stable, automated and safe solutions in the cloud environment.

8.10 Prizes and awards granted to the PKO Bank Polski S.A. Group

In 2021 the PKO Bank Polski S.A. Group received many prizes and awards, the most important of which are listed below.

Dynamic development and excellent financial results
Largest Bank in the Region	In the Inteliace Research report for 2020, covering 200 leading banks from the CEE region, PKO Bank Polski S.A. is the largest in terms of assets which amounted to EUR 75.7 billion. In the ranking of the largest banks in the region, 23 are from Poland, 26 in Hungary and 30 in the Czech Republic. Concluding, in terms of asset value Polish banks are the largest in the region. The report covered 15 countries of Central and Eastern Europe.
Modern technology leader
Bain&Company Ranking	PKO Bank Polski S.A. was one of the Top 10 most digitally advanced banks in Europe, according to the Bain&Company ranking. The Bank received high mentions for, among other things, the best digital strategy, innovative actions and strong position in internet banking and mobile applications, well digitized banking processes from the point of view of the Customer, and intuitive and well-designed internet banking for personal computers and mobile equipment.
Best in Cloud	PKO Bank Polski S.A. ranked 1st in the ninth edition of the Best in Cloud competition. The jury appreciated the migration of the Bank’s resources to the cloud conducted under the Road to Cloud Technological Transformation Programme, the originality of the project, its innovative nature and operational effects. Special attention was paid to the scale of changes which – according to the justification provided – transform the Bank into a cloud giant, cloud avant-garde of the financial sector. The Best in Cloud competition is organized by IDG Poland, publisher of the Computerworld magazine.
Best products and services
Best private banking	PKO Bank Polski S.A.’s Private Banking received the highest score (5 stars) in the annual Forbes ranking. This score was awarded, among other things, thanks to the banking platform for purchasing cars – Automarket, the possibility of opening investment accounts remotely in the Brokerage Office using the mSzafir e-Podpis (e-signature), and the expansion of the spectrum of investment funds.
Mobile Trends Awards	In the 10th edition of the Mobile Trends Awards, IKO – the mobile application of PKO Bank Polski S.A.– won in the category Special Internauts’ Award. Users appreciate IKO mainly because of quick and easy access to banking transactions, user-friendly and practical solutions such as the option to pay for parking, and innovation and dynamic development. The Mobile Trends Awards competition is organized by ClickMaster Polska. A jury comprising experts in the mobile industry selects the winners. Internauts also award their favourites.
Instytution of the year	In the sixth edition of the Institution of the year ranking, PKO Bank Polski S.A. was awarded four statuettes: for internet banking, for opening accounts remotely, for the quality of services and for actions taken in the battle against the social and economic consequences of the pandemic. In addition, 14 of the Bank’s branches were awarded with the Best Banking Outlet in Poland certificate. The “Institution of the Year” is an initiative of the Mojebankowanie.pl portal. Independent experts evaluate customer friendly actions of banks and insurance companies, and award them for their comprehensive approach to Customer service.
Brand
Superbrands 2021	In the 15th edition of Superbrands, the PKO Bank Polski S.A. brand was awarded the title Superbrands 2021 in banking. The award was granted based on the results of a consumer survey performed by the Research Institute ARC Rynek i Opinia and recommendations of experts from the Rada Marek brand council. The brand strength index is the key factor which is decisive for granting the Superbrands award. The index is the difference between the results of recommending and advising against a brand.
Actions awarded in the area of Corporate Social Responsibility (CSR)
CSR white leaf	In the 10th run of the CSR Leaves of the Polityka weekly, PKO Bank Polski S.A. was awarded in the sustainable development area, including the initiative for counteracting the economic and social effects of the pandemic and limiting the negative impact on the natural environment. The Bank received the CSR White Leaf. In addition, it was awarded for involvement in the mamyklimat.pl project. The Polityka CSR Leaves ranking is prepared in collaboration with the Responsible Business Forum and the consulting firm Deloitte.
Exemplary communication with the market
The Best Annual Report	For years now the Bank’s annual reports are highly ranked, among other things, for their useful value for shareholders and investors. In the 16th edition of The Best Annual Report competition organized by the Institute of Accountancy and Taxes, PKO Bank Polski S.A. won “The Best of the Best” award. The jury also awarded the Bank with two special prizes: for the best report according to the ESEF standard, i.e. the European Single Electronic Format, and the best remuneration report.
Top Marka 2021	In the 14th edition of the Top Marka (Top Brand) ranking organized by the Press magazine and Press-Service Monitoring Mediów, PKO Bank Polski S.A. took first place in the “banks” category. It was also awarded the title of “Brand of Brands” coming first in the general ranking comprising 500 brands from 50 industries. In this year’s edition more than 108 million press and internet publications as well as social media posts were analysed.
PKO Bank Polski SA – Leader among employers
PKO Bank Polski S.A. among TOP Employers 2021	PKO Bank Polski S.A. received the prestigious title of Top Employer Polska 2021. This once again confirms that the HR strategy pursued, creating an employee-friendly working environment and the solutions supporting continuous development and building of employee commitment are among the best on the market. The certificate granted confirms the high quality of working conditions in the Bank. Top Employers Institute awards employers by assessing and certifying them with respect to strategy, employee policy, monitoring its effects and actions contributing to employee development.
the best specialists on the market
Best Stock Exchange analysts	Piotr Łopaciuk from the Brokerage Office of PKO Bank Polski S.A. won in the 19th edition of the securities exchange analysts ranking of Parkiet Gazeta Giełdy i Inwestorów. He was second to none in the general classification without the category break-down. Every year representatives of TFI and OFE asset managers (32 institutions in total) selected the best analysts in particular sector categories. Five out of thirteen were won by analysts of the Bank’s Brokerage Office. It is the best result from among all the offices participating in the ranking.
Analyst Forecast Awards 2021 FocusEconomics	Analysts of PKO Bank Polski S.A. once again showed they are the best in Poland in economic forecasting – they won the Analyst Forecast Awards 2021 FocusEconomics. They came first in the general classification and received honourable mentions in four detailed categories: inflation, interest rates, foreign exchange rates and balance of payments. The award is granted in more than 90 countries throughout the world based on an assessment of the accuracy of forecasts of major economic ratios.
Awards received by the brokerage office and the companies of the Bank’s Group
Bulls and Bears and Golden Wallet	In the 27th edition of the Parkiet Gazeta Giełdy i Inwestorów, PKO TFI S.A. won a Bull and Bear statuette in the Employee Capital Plans (PPK) 2020 category for effective management and the highest value of assets accumulated in PPK. The Company also won the Golden Wallet award in the raw materials market for its subfund PKO Akcji Rynku Złota (shares in the gold market) which in 2020 generated a rate of return of 28.3%, which made it the most profitable investment fund in 2020. The Bulls and Bears and the Golden Wallets are awarded to market leaders.
Broker of the year 2020	Summing up the results of 2020, the WSE granted the Broker of the Year 2020 prize to the Bank’s Brokerage Office (Biuro Maklerskie PKO Banku Polskiego S.A.), the most important one awarded by the WSE. It was awarded for the highest turnover on session and block trades in shares on the Main Market and on NewConnect, in Treasury bonds and other bonds traded on the regulated market, the WSE alternative market and BondSpot, as well as for supporting liquidity on the largest number of categories of WSE-listed assets in the previous year. The Bank’s Brokerage Office also won prizes for the biggest share in session trading in shares on the Main Market and the biggest share in bond trading on the Catalyst market. The PKO Bank Polski S.A. Group will be awarded for the highest value of the portfolio of orders for information products including WSE and BondSpot data.

9. Risk management

Principles of Risk Management

Reform of interest rates

Discussion of the Bank’s lending policy

9.1 Principles of risk management

Risk management is one of the key internal processes, both in PKO Bank Polski SA, and in other entities of the PKO Bank Polski SA Group. Risk management is aimed at ensuring the profitability of business activities while ensuring control over the risk level and maintaining it within the system of limits and risk tolerance limits adopted by the Bank and the Group in the changing macroeconomic and legal environment.

The primary objective is to ensure adequate management of all types of risk related to its business. As part of the risk management system, the PKO Bank Polski S.A. Group identifies, measures and assesses, controls, forecasts, monitors and reports risk, and performs management actions.

The risk management system covers:

• organizational structure, allocation of duties and responsibilities;

• internal regulation system;

• tools, including information databases.

Risk management at the Bank’s Group is based, in particular, on the following principles:

• the Bank’s Group manages all identified types of risk;

• the risk management process is appropriate from the perspective of the scale of operations and materiality, scale and complexity of a given risk, and adjusted on an on-going basis to take account of the new risks and their sources;

• risk management methods (especially models and their assumptions) and risk management measurement or assessment systems are tailored to the scale and complexity of individual risks, the current and planned operations of the Bank’s Group and its operating environment, and are periodically verified and validated;

• the area of risk management remains organizationally independent from business activities;

• risk management is integrated into the planning and controlling systems;

• the level of risk is monitored and controlled on an on-going basis;

• the risk management process supports the implementation of the Bank’s strategy in compliance with the Risk Management Strategy, in particular with respect to the level of risk tolerance.

The Bank regularly, at least annually, assesses the materiality of the identified risks. Some of them have a material impact on the profitability and capital necessary to cover the exposure. Internal capital is assessed for risks that are regarded as material. All risks classified as material for PKO Bank Polski S.A. are also material for the Bank’s Group.

In 2021, the catalogue of risk types regarded as material was not extended.

Below is a list of all risks regarded as material in PKO Bank Polski S.A.

• credit risk – the risk of incurring losses due to the Customer’s default in payments to the Bank’s Group or as a risk of a decrease in the economic value of amounts due to the Bank’s Group when the Customer’s ability to repay amounts due to the Bank deteriorates.

• currency risk – the risk of incurring losses in connection with exchange rate fluctuations. The risk is generated by maintaining open positions in various foreign currencies.

• interest rate risk – the risk of incurring losses on the Bank’s Group’s statement of financial position and off-balance sheet items sensitive to interest rate changes, in connection with changes in interest rates on the market.

• liquidity risk – the risk of the inability to regularly settle liabilities due to a lack of liquid assets; liquidity risk comprises financing risk.

• Operational risk - the risk of losses being incurred due to the failure or unreliability of the internal processes, people and systems or due to external events. This risk includes legal risk and cyber security risk;

– Legal risk - the risk of losses being incurred due to a lack of knowledge and understanding, failure to comply with legal norms and accounting standards, inability to enforce contractual provisions, unfavourable interpretations or rulings issued by courts or public administration bodies,

– cyber security risk – the degree of exposure to potential negative cyber security risk factors related to telecommunication technologies which may lead to a financial loss for the organization by violating the availability, integrity, confidentiality or accountability of the information processed in the Bank’s IT system resources (SIB).

• risk of foreign currency mortgage loans for households – the risk of incurring losses due to the Customer’s default in payments to the Bank related to a foreign currency mortgage loan.

• business (strategic) risk – the risk of failing to achieve the assumed financial targets, including incurring losses, which results from adverse changes in the business environment, making bad decisions, incorrectly implementing the decisions made, or not taking appropriate actions in response to changes in the business environment.

• macroeconomic risk – the risk of deterioration in the Bank’s Group financial situation as a result of an adverse change in macroeconomic conditions.

• model risk - the risk of incurring losses resulting from incorrect business decisions made based on the models in place.

The Bank pursues the ESG (environmental, social and corporate governance) risk integration plan with the risk management system in place at the Bank and pursuant to its stipulations determines ESG risk management processes embedding them comprehensively in the existing risk management framework.

ESG risk was defined by the Bank as the risk of negative financial consequences for the Bank of the current or future impact of ESG risk factors on Customers and counterparties or the Bank’s statement of financial position items.

The purpose of managing the ESG risk is to support sustainable growth and build the Bank’s long-term value pursuant to the Bank’s Strategy, through integrated management of impacts of the ESG factors.

The Bank manages the ESG risk as part of other risks management, and due to the specific nature of the ESG risk it is not defined as a separate risk, but as a cross-sectional risk with an impact on the Bank’s particular risks, in particular on credit risk.

In its Risk Management Strategy the Bank determined the quantitative strategic tolerance limit with respect to the ESG risk, as the share of loans to Customers from high-emission industries in the Bank’s total assets.

Below we present the Bank Group’s material actions taken in 2021.

• With respect to credit risk PKO Bank Polski S.A.:

– monitored its Customers’ positions and adapted its lending policy in consideration of securing a good quality loan portfolio and minimizing COVID-19 effects on Customers;

– launched – in accordance with the suggestion of the PFSA Chairman – an amicable settlement programme with reference to housing loans for consumers granted or denominated in CHF, which consists of proposing that the CHF loan be converted to PLN, as if the loan had been a PLN loan from the outset.

• In the first three quarters of 2021 the low interest rate environment was a challenge for the banking sector with respect to interest rate risk. In the fourth quarter the Monetary Policy Council increased interest rates thrice, by a total of 165 b.p. This led to an increase in the reference rate from 0.10% to 1.75%, causing a drop in the value of debt instruments and IRS instruments which hedge interest income fluctuations. Throughout 2021 the Bank continued the process of hedging interest rate risk both by concluding IRS hedging transactions, and by appropriately shaping the structure of its assets and liabilities.

• The Bank’s Group has prepared to stop publishing some of LIBOR reference rates by their administrators as of 1 January 2022; this refers to rates which are used to determine the interest rates on loans or amounts due for payment with respect to other financial instruments. Respective detailed information is provided in the chapter below.

• With respect to operational risk management PKO Bank Polski S.A. focused on countering the threats resulting from the pandemic to ensure that the Customers and employees are safe and to ensure uninterrupted functioning of business processes, in particular:

– conducted constant monitoring of reports on employee infections, contacts of employees with infected persons, prevention quarantines and quarantines ordered by the sanitary authority SANEPID; meetings of the Crisis Staff and task and regional teams met regularly to coordinate the operations of the Bank’s Group with respect to the COVID-19 pandemic on an on-going basis;

– on an on-going basis identified threats related to COVID-19 which were regularly monitored and reported to the Operational Risk Committee;

– took actions to limit identified threats, including in particular those relating to work procedures and conditions, ensuring appropriate efficiency of the IT infrastructure and its safety;

– regularly conducted educational actions on cybersecurity for Customers and employees, which were and are especially important due to the increasing use of remote channels in Customer service processes.

A detailed description of material risks management principles, including risk mitigation techniques, protection measures taken and hedge accounting policies is provided in the Bank Group’s financial statements for 2021 (in the part describing the purposes and principles of risk management and in Note 32 relating to hedge accounting), and in the Capital Adequacy Report and other information reportable by the PKO Bank Polski S.A. Group as at 31 December 2021.

9.2 Reform of benchmark interest rates

Legal environment

Interbank interest rates (IBORs) such as WIBOR, EURIBOR and LIBOR are universally used as reference rates to determine interest for a wide range of contracts and financial instruments.

In the European Union, a new standard was set for developing, making available and using reference rates. Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (hereinafter: the BMR) constitutes the legal basis in this respect, which, among other things:

• specifies the rules to be used to develop and use transparent, reliable and fair reference rates;

• indicates expanded controls over determining benchmark indices;

• expects that benchmark rates as a rule will be determined based on real transactions conducted on a given market.

In October 2020 ISDA, i.e. the international organization which sets standards for trading in derivative financial instruments published the so-called ISDA Protocol, describing the procedure for replacing in existing and new derivative transactions indices from the LIBOR family with new risk-free indices. The Bank adhered to the Protocol in November 2020.

On 10 February 2021 the European Union published an amendment to the BMR, giving the European Commission or an EU Member State competences to designate a replacement for the benchmark index which will cease to be developed – if such an event could threaten the stability of the EU market or the market of an EU Member State. The replacement will, by virtue of the law, replace all references to the index which ceases to be published, in all contracts and financial instruments in which there are no emergency clauses or the provisions of which do not stipulate solutions in the event of permanently ceasing to publish an index.

On 5 March 2021 the Financial Conduct Authority (FCA) announced that after 31 December 2021 it will discontinue publishing selected LIBOR rates due to the inability to adapt them to the requirements of the BMR. To further use them in contracts and financial instruments concluded until the end of 2021, 1, 3 and 6M LIBOR USD will be published until 30 June 2023, and 1, 3 and 6M LIBOR GBP and JPY – for 1, 3 and 6 months in synthetic form – until the end of 2022.

Adapting particular reference rates

With respect to EURIBOR, the process of adapting the rate to the requirements of the BMR was completed in June 2019 by expanding the scope of transactions used to determine the amount of the ratio and to introduce a cascade method which enables determining a temporary ratio when there are no transactions.

The reform of the WIBOR rate and adaptation to the BMR were completed in 2020 and consisted of changing the methodology for calculating the rate in a manner corresponding to that adopted for calculating EURIBOR. On 16 December 2020 the Polish Financial Supervision Authority decided to grant a permit to GPW Benchmark S.A. for administering key reference ratios: WIBID and WIBOR.

For the LIBOR family ratios, the FCA decision, referred to above, remains in force whereby the rates cease to be published and at the same time the said bridging solutions for USD, GBP and JPY are to be used to service the existing portfolio. With respect to LIBOR CHF the European Commission availed itself of the rights referred to above and on 22 October 2021 it issued an Implementing regulation determining the SARON 1-, 3-, 6- and 12-month composite rates, adjusted by a specified spread, as a replacement for the respective CHF LIBOR rates. The regulation applies as of 1 January 2022.

Adaptation of the Bank’s Group and of the Bank

The evolution of the legal environment and market migration to the benchmark rates in accordance with the BMR may have an impact on the Bank Group’s and PKO Bank Polski S.A.’s operations due to the contracts concluded with Customers and counterparties, a change in the value of financial instruments and the need to adapt processes and IT systems.

The Bank Group’s exposure to key benchmark rates used with respect to assets, liabilities and derivative financial instruments as at the end of 2021, at carrying amounts, is as follows:

Financial assets	Currency translated to PLN (in PLN million)
31.12.2021	LIBOR CHF	LIBOR USD	Other	Total
Loans and advances to Customers (measured at amortized cost)	12,665	530	149	13,344
Total assets	12,665	530	149	13,344

Financial and off-balance sheet liabilities	Currency translated to PLN (in PLN million)
31.12.2021	LIBOR CHF	LIBOR USD	Other	Total
Amounts due to Customers (measured at amortized cost)	1	25	7	33
Allowance for financial commitments and guarantees granted	3	4	-	7
Total liabilities	4	29	7	40
Financial and guarantee commitments granted	129	3,156	65	3,350

NOMINAL VALUE of derivative instruments	Currency translated to PLN (in PLN million)
31.12.2021	LIBOR CHF	LIBOR USD	Other	Total
Derivative hedging instruments	8,458	833	-	9,291
- Purchase (variable purchase leg)	3,640	833	-	4,473
- Sale (variable sell leg)	4,818	-	-	4,818
Other derivative financial instruments	10,562	1,726	-	12,288
- Purchase (variable purchase leg)	5,270	973	-	6,243
- Sale (variable sell leg)	5,292	753	-	6,045

As of the third quarter of 2020 the Bank has conducted an inter-disciplinary project supervised by Members of the Management Board, adapting the Bank and the Bank’s Group to the requirements of BMR and, among other things, to the interpretations and guidelines of the Polish Financial Supervision Authority, in particular in the following scopes:

• developing and implementing an emergency plan in the Bank, in contracts and in the Bank’s internal rules;

• adapting the offer of products and services;

• adapting transaction, accounting, analytical, risk and reporting systems;

• adapting the process of hedge accounting;

• annexing contracts and accessing to the market determined standards;

• cooperating with the banking sector to develop a uniform interpretation of the provisions of the BMR and the standards for its implementation.

As a result of the project work, as of 1 January 2022 the Bank and the Bank’s Group will continue to service loan portfolios and new loan contracts continuing to use WIBOR and EURIBOR as previously. With respect to loan contracts which use LIBOR and which were concluded before 1 January 2022, they will be serviced using the replacement rate for CHF indicated by the European Commission and “bridge” ratios available until 30 June 2023 for USD and until 31 December 2022 for GBP. Individual contracts using LIBOR EUR were annexed to EURIBOR. With respect to new loans granted to corporate Customers in foreign currencies based on variable exchange rates, new benchmark rates will be used, the so-called risk-free rates, e.g. SARON for CHF, SOFR for USD, SONIA for GBP, and depending on the nature of the product, interest will be accrued on a daily basis or using the interest rate compounding mechanism in advance, i.e. based on historical rates, or in arrears, i.e. at the end of the period of accruing interest. With respect to financial market transactions, the Bank, as already mentioned, acceded the ISDA Protocol and will service and settle transactions in accordance with this standard, i.e. using risk-free compound interest rates.

9.3 Discussion of the Bank’s lending policy

The credit policy of the Bank and the Bank’s Group consists of a set of principles and guidelines contained in credit regulations and procedures, which together form the credit risk management process.

The Bank’s credit risk management takes into account external factors, including compliance with external regulations and recommendations of the supervision and inspection authority, as well as internal factors, including in particular the level of strategic limits and credit risk parameters.

The priority of the risk management activities is the balanced relation of risk and the assumed profitability level, within the specified risk appetite limits. Comprehensive risk measurement is ensured by using a wide range of qualitative and quantitative methods, which are supported by appropriate IT systems and analytical tools.

The credit risk management model is adjusted to the current business activity and market conditions in the individual customer segments.

Credit risk assessment of exposures is separated from the sales function thanks to an appropriate organizational structure, independence in developing and validating tools supporting an assessment of credit risk and independence of decisions approving departures from the recommendations of these tools.

The financing terms offered to the Customer depend on the assessment of credit risk level of the Customer

In 2021 PKO Bank Polski S.A. adapted its credit risk management rules and processes to account for the requirements of the Polish Financial Supervision Authority, including the new definition of default, and new guidelines relating to granting and monitoring loans, including in particular with respect to leveraged loans, and for the requirements of the amended Recommendation S of the PFSA relating to the management of mortgage-secured loan exposures.

According to the rating of corporate Customers, companies and enterprises, the Bank each time assesses and classifies the impact of environmental, social and corporate governance factors (ESG) on the Customer’s creditworthiness and identifies leveraged credit transactions. The Bank’s subsidiaries with a material level of credit risk manage credit risk individually. Their credit risk assessment and measurement methods are adapted to those applied at PKO Bank Polski S.A. They take into account the specific nature of the entity’s activities.

10. Benefits for managers and Supervisors

Principles for remunerating Members of the Bank’s Management Board

Variable remuneration components for Members of the Management Board and key managers who have a material impact on the Bank’s risk profile

Information on non-financial remuneration components due to individual Members of the Management Board and key managers

Principles for remunerating members of the Bank’s Supervisory Board

Agreements concluded between the Bank and management persons

Liabilities due to pensions for former supervisors and managers

10.1 Principles for remunerating Members of the Bank’s Management Board

The system for remunerating Members of the Bank’s Management Board is regulated by:

a) Remuneration Policy for members of the Supervisory Board and the Management Board of the Bank, approved by the resolution No. 35/2020 of the General Shareholders’ Meeting of the Bank dated 26 August 2020;

b) Remuneration Policy for employees of the Bank and the PKO BP S.A. Group, approved by resolution No. 28/2021 of the Bank’s Supervisory Board dated 18 March 2021;

c) Principles of employment and remuneration of Members of the Bank’s Management Board, adopted by the Bank’s Supervisory Board in 2017 and amended by the resolutions of the Bank’s Supervisory Board dated 18 March 2021 (No. 29/2021) and 16 December 2021 (No. 179/2021); the principles implement the provisions of the Act of 9 June 2016 on the terms of setting the remuneration of managers of certain companies.

In accordance with these Principles, Members of the Bank’s Management Board are entitled to:

• fixed remuneration in the amount specified in the Act of 9 June 2016 on the terms of setting the remuneration of managers of certain companies, and as at 31 December 2021 amounting to, with respect to the President of the Management Board: 15 (fifteen) fold, and with respect to the other Members of the Bank’s Management Board: 14.5 (fourteen and a half) fold of the average monthly remuneration in the corporate sector, without profit sharing schemes in the fourth quarter of the preceding year, as announced by the President of the Polish Statistics,

• variable remuneration – additional remuneration awarded and paid after the performance appraisal period, in particular: bonuses, awards for special professional achievements, severance pay (excluding fixed remuneration and benefits awarded based on the applicable legal regulations).

benefits for members of the management board of PKO Bank Polski S.A. received and due from PKO Bank Polski S.A.

Table 11. Employee benefits for Members of the Management Board of the Bank paid by PKO Bank Polski S.A. (in PLN ’000)

	Fixed remuneration paid in 2021	Variable remuneration for 2016-2020 paid in 2021		Other benefits*	Total remuneration paid and benefits provided in 2021
	Fixed remuneration paid in 2021	Benefits paid in cash	Share-based payments settled in cash	Other benefits*	Total remuneration paid and benefits provided in 2021
Iwona Duda	162	-	-	-	162
Bartosz Drabikowski	423	81	239	26	769
Marcin Eckert	438	-	-	-	438
Wojciech Iwanicki	179	-	-	-	179
Maks Kraczkowski	760	313	476	54	1,603
Mieczysław Król	760	346	479	55	1,640
Artur Kurcweil	240	-	-	-	240
Piotr Mazur	784	364	559	60	1,767

Zbigniew Jagiełło	346	402	671	439	1,858
Rafał Antczak	583	289	341	139	1,352
Rafał Kozłowski	339	275	321	379	1,314
Adam Marciniak	453	287	338	263	1,341
Jakub Papierski	583	350	534	148	1,615
Jan Emeryk Rościszewski	606	342	463	135	1,546
Management Board of the Bank	6,656	3,049	4,421	1,698	15,824
Members of the Management Board who ceased to perform their functions in previous years	-	29	178	5	212
Total	6,656	3,078	4,599	1,703	16,036

* Payments to the Employee Pension Programme (PPE) and compensation for abiding by the non-competition clause.

	Fixed remuneration paid in 2020	Variable remuneration for 2015-2019 paid in 2020		Other benefits*	Total remuneration paid and benefits provided in 2020
	Fixed remuneration paid in 2020	Benefits paid in cash	Share-based payments settled in cash	Other benefits*	Total remuneration paid and benefits provided in 2020
Zbigniew Jagiełło	793	388	632	63	1,876
Rafał Antczak	740	172	187	39	1,138
Rafał Kozłowski	740	159	204	39	1,142
Maks Kraczkowski	740	263	317	46	1,366
Mieczysław Król	740	266	329	47	1,382
Adam Marciniak	740	171	216	39	1,166
Piotr Mazur	766	316	496	55	1,633
Jakub Papierski	740	303	477	53	1,573
Jan Emeryk Rościszewski	740	255	313	46	1,354
Management Board of the Bank	6,739	2,293	3,171	427	12,630
Members of the Management Board who ceased to perform their functions in previous years	-	281	729	28	1,038
Total	6,739	2,574	3,900	455	13,668

…* Payments to the Employee Pension Programme (PPE).

Table 12. Employee benefits for Members of the Bank’s Management Board due from PKO Bank Polski S.A. approved for payment (in PLN’000)

	Variable remuneration approved for payment as of 31.12.2021	Variable remuneration approved for payment as of 31.12.2020
Iwona Duda	-	-
Bartosz Drabikowski	-	-
Marcin Eckert	-	-
Wojciech Iwanicki	-	-
Maks Kraczkowski	210	-
Mieczysław Król	264	-
Artur Kurcweil	-	-
Piotr Mazur	270	-

Zbigniew Jagiełło	277	-
Rafał Antczak	264	-
Rafał Kozłowski	264	-
Adam Marciniak	264	-
Jakub Papierski	264	-
Jan Emeryk Rościszewski	264	-
Management Board of the Bank	2,341	-
Members of the Management Board who ceased to perform their functions in previous years	-	-
Total	2,341	-

Table 13. Remuneration of the Members of the Bank’s Management Board received from related entities (in PLN ’000)

	2021	2020
Bartosz Drabikowski	33	-

* refers to Members of the Management Board who performed a function on the Management Board as at 31 December 2021.

10.2 Variable remuneration components for Members of the Bank’s Management Board and key managers who have a significant impact on the Bank’s risk profile

The Bank updates the rules for determining the variable components of remuneration on an ongoing basis. This is performed in accordance with the requirements of CRD IV and the Commission Delegated Regulation (EU) No 604/2014 of 4 March 2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile.

Variable remuneration components are awarded primarily based on bonus targets set within the framework of the Management by Objectives (MbO) programme.

The purpose of the targets set is to guarantee that the risk related to the activities of the Bank is taken into account. Risk is reflected both by determining the appropriate risk-sensitive criteria for assessing the effectiveness of work, and reducing or withdrawing the variable remuneration component in the case of deteriorated financial results, loss or deterioration in other ratios.

Variable remuneration components for the particular assessment period (calendar year) are awarded after settling bonus targets, in accordance with the table below:

Table 14. Forms of variable remuneration

Amount of variable remuneration (gross)	Non-deferred variable remuneration	Deferred variable remuneration
Amount of variable remuneration (gross)	50% cash / 50% phantom shares	50% cash / 50% phantom shares
Up to PLN 700 000 (inclusive)	60% of the basic variable remuneration	40% of the basic variable remuneration
Up to PLN 700 000 (inclusive)	- in the first year following the assessment period	– in equal instalments over the next years after the first year following the assessment period
Over PLN 700 000	PLN 420,000 plus 40% of the amount exceeding PLN 700,000	PLN 280,000 plus 60% of the amount exceeding PLN 700,000

The deferral period for which the phantom shares are awarded equals 5 calendar years.

Each of the components of accrued variable remuneration may be reduced as a result of:

• breach of the obligations arising from the contract;

• lack of compliance with the legal regulations or Customer service standards;

• improper performance of professional duties;

• attitude towards other employees breaching social coexistence rules.

The bonus amount:

• for the Management Board Member (MBM) can be adjusted (decreased or increased) by a certain ratio, depending on the results achieved by the Bank, specified in the Bank’s Annual Note (a set of key management indicators specified for a given calendar year);

• for an MRT (Material Risk Taker), who is not a Member of the Management Board, it can be adjusted (increased) by a certain ratio, depending on the results achieved by the Bank, specified in the Bank’s Annual Note.

The Bank’s Supervisory Board or the Management Board respectively may apply a malus solution reducing the amount of the variable remuneration component due, deferred in subsequent settlement periods. This is possible when:

• a significant deterioration in the Bank’s results;

• a significant adverse change in equity;

• MRT breaching the law or making serious errors;

• adjustment of the achievement and degree of achievement of the results or targets of MRT;

• deterioration in the performance of the areas supervised or managed by the aforementioned persons;

• granting the variable remuneration component based on incorrect or misleading information or MRT fraud.

The remuneration policy for members of the Bank's Supervisory Board and Management Board does not provide for an obligation to pay back awarded and already paid out variable remuneration. The policy empowers the Supervisory Board to adopt additional provisions, inter alia, regarding the Bank demanding the return of the variable remuneration (clawback). In the years 2020-2021, no such demand occurred.

Material Risk Takers (except Members of the Bank’s Management Board) may benefit from health care services financed by the Bank and the social benefits fund. Material Risk Takers (including Members of the Bank’s Management Board) can avail themselves of PPEs.

In the case of severance pay related to dismissal (other than resulting from generally applicable laws), the amount reflects the performance assessment for the last three years of employment. The Bank’s internal regulations stipulate the maximum amount of severance pay.

A Member of the Management Board shall be entitled to severance pay subject to fulfilling the function of Member of the Bank’s Management Board for at least twelve months before termination of the aforementioned contract. An MRT can receive the severance pay subject to being employed as an MRT for at least twelve months before termination of the employment contract.

Members of the Management Board and certain MRTs are additionally subject to non-competition agreements. These agreements provide for payment of compensation equivalent of up to 100% of the basic salary arising from the contract for refraining from employment in a competitive firm after termination of employment with the Bank, for no more than six months.

In the first half of 2021, the Bank amended the Rules for Employment and Remuneration of Members of the Bank’s Management Board consisting of:

1. making the provisions relating to the manner of calculating a “fair rate” used in determining disbursements of deferred variable remuneration in cash more precise;

2. replacing the Finalty index with the Customer satisfaction index, each time selected by the Supervisory Board in setting the governance objectives.

Making the provisions relating to the “fair rate” more precise referred also to those of the Bank’s employees whose actions have a material impact on the Bank’s risk profile – Material Risk Takers.

In May 2021 the Bank’s Management Board passed a resolution on disbursements of variable remuneration awarded to the Bank’s Material Risk Takers in 2021. In June 2021 the Bank’s Supervisory Board passed a resolution on approving the amount of variable remuneration to be paid to the Members of the Bank’s Management Board. The resolutions of the Management Board and the Supervisory Board with respect to variable remuneration for 2020 introduced limits of the amounts payable in respect of the non-deferred portion of the remuneration of 21% due to the financial results achieved compared to the long-term development plans. In connection with the circumstances related to the COVID-19 epidemic, in particular the extraordinary business restrictions, and the possible economic consequences of the situation and their expected impact on the banking sector, in 2021 the change in proportion and date of payment of variable remuneration for the years 2016–2019 introduced in 2020 was upheld.

Table 15. Changes in the proportion and dates of payment of variable remuneration.

Description	Amount arising from internal regulations			Amount arising from extraordinary resolutions adopted in 2021, i.e.:
Proportion between non-deferred and deferred variable remuneration for 2019	Non-deferred 60%*			Non-deferred 40%*
	Deferred 40%*			Deferred 60%
Proportion between variable remuneration for 2019 in cash / in the form of financial instruments	Cash 50%			Cash 40%
	Financial instrument 50%			Financial instrument 60%
Date of payment of the amount arising from converting the phantom shares to cash amount for non-deferred remuneration for 2019 in the form of a financial instrument	MBM	2 January 2021		MBM	1 July 2021
	MRT	15 November 2020		MRT	31 May 2021
Date of payment of deferred variable remuneration with reference to outstanding instalments for the years 2016–2019	MBM	cash	1 July	MBM	cash	1 July (unchanged)
		Financial instrument	2 January		Financial instrument	1 July
	MRT	cash	30 April	MRT	cash	31 May
		Financial instrument	15 November		Financial instrument	31 May of the following year
* In accordance with internal regulations, up to the amount of PLN 700,000 the proportion is 60% to 40%, and above this amount 40% to 60%.

10.3 Information on non-financial remuneration components due to individual Members of the Bank’s Management Board and key managers

Since 1 July 2017, the principles for employment and remuneration of Members of the Bank’s Management Board have been adapted to the provisions of the Act of 9 June 2016 on the terms of setting the remuneration of managers of certain companies (Journal of Laws of 2016, item 1202 as amended). Following the change, Members of the Management Board are not entitled to non-financial remuneration components.

10.4 Principles for remunerating Members of the Bank’s Supervisory Board

Monthly remuneration for the members of the Bank’s Supervisory Board is determined by the Remuneration Policy for Members of the Bank’s Supervisory Board and Management Board. Monthly remuneration of members of the Supervisory Board is determined as a product of the base salary referred to in Article 1(3)(11) of the Act of 9 June 2016 on the terms of setting the remuneration of managers of certain companies and the following multiplier:

• for the Chairman of the Supervisory Board – 2.75;

• for the Deputy Chairman of the Supervisory Board – 2.5

• for the Secretary of the Supervisory Board – 2.25;

• for the remaining Members of the Supervisory Board – 2.

The remuneration shall be increased by 10% if a Member of the Supervisory Board sits on at least one standing committee of the Supervisory Board.

In addition to their remuneration, Members of the Supervisory Board shall be entitled to reimbursement for the costs incurred in connection with their function. This comprises in particular travel costs from the place of residence to the location of the Supervisory Board’s meeting and back, costs of accommodation and food.

Remuneration received by members of the Supervisory Board from PKO Bank Polski S.A.

Table 16. Remuneration received by Members of the Supervisory Board from PKO Bank Polski S.A. (in PLN’000)

	Fixed remuneration paid in 2021	Fixed remuneration paid in 2020
Mariusz Andrzejewski	116	115
Mirosław Barszcz	-	86
Adam Budnikowski	-	86
Grzegorz Chłopek	116	30
Grażyna Ciurzyńska*	68	139
Dariusz Górski	-	19
Zbigniew Hajłasz	123	137
Marcin Izdebski	75	38
Wojciech Jasiński	130	115
Dominik Kaczmarski	63	-
Andrzej Kisielewicz	116	115
Rafał Kos	116	30
Tomasz Kuczur	16	-
Maciej Łopiński	70	-
Elżbieta Mączyńska-Ziemacka	-	86
Krzysztof Michalski	116	115
Piotr Sadownik	100	147
Bogdan Szafrański	16	-
Agnieszka Winnik–Kalemba	56	-
Razem	1,297	1,258

* Other benefits not included in fixed remuneration: use of a company car for private purposes by the member of Supervisory Board, including PLN 17 thousand in 2020 and PLN 7 thousand in 2021.

10.5 Contracts concluded by and between the Bank and its managers

In 2021, every Member of the Bank’s Management Board has concluded a management agreement with the Bank. The agreements lay down, among other things, the remuneration terms and competition ban.

10.6 Liabilities due to pensions for former supervisors and managers

In 2021, there were no liabilities arising from pensions and benefits of a similar nature for former members of management, supervisory or administrative bodies and no liabilities incurred in connection with those pensions (in accordance with the provisions of § 70 clause 7 point 18 of the Regulation of the Minister of Finance of 29 March 2018 on current and periodic information submitted by issuers of securities and the conditions for recognizing as equivalent the information required by the law of a non-member country (Journal of Laws of 2018, item 757 as amended).

11. Corporate governance

Information for investors

Statement of compliance with the corporate governance principles

Shares of PKO Bank Polski S.A. and its related entities held by the Bank’s authorities

11.1 Information for investors

Quotations of shares of PKO Bank Polski S.A. on the WSE

Ratings

Investor relations

11.1.1 Quotations of shares of PKO Bank Polski S.A. on the WSE

In 2021, the PKO Bank Polski S.A.’s share price increased by 56% to PLN 44.93 as at the end of the year. During the year the share price reached PLN 50.38, the highest level in more than a decade. Such a strong increase in the share price was primarily due to an improvement in the net profit, which reached its historical maximum with the support of the post-Covid economy rebound and the commencement of interest rate increases in the fourth quarter of 2021.

Prices and trading volumes of PKO Bank Polski S.A. shares in the period 31.12.2016-31.12.2021	Changes in the price of shares of PKO Bank Polski S.A. vs. WIG20 index in the period 31.12.2016-31.12.2021 (31.12.2016=100%)

As at the end of 2021, PKO Bank Polski S.A. was the biggest polish company listed on the Warsaw Stock Exchange. At the end of the last trading session in 2021, it was valued by the investors at PLN 56 billion.

Due to their high liquidity and capitalization, the Bank’s shares are a part of a number of stock exchange indices, such as the Polish large companies’ indices WIG20 and WIG30, the WIG-Banki banking sector index, the index of companies representing the highest social responsibility standards WIG-ESG, the MSCI Emerging Markets index and the large companies index FTSE Russell and STOXX Europe 600.

Table 17. Key data on the PKO Bank Polski S.A. shares

	2021	2020
Share price at the end of the year (PLN)	44.93	28.72
Maximum share price (PLN)	50.36	37.09
Minimum share price (PLN)	27.51	18.21
Rate of return since the beginning of the year (%)	56.44	-16.66
Number of shares	1,250,000	1,250,000
Capitalization at the end of the year (PLN million)	56,162.5	35,900.0
Average trading volume per session	2,293,578	3,307,051
Share in trading volume (%)	6.91	6.92
Average number of transactions per session	6,030	7,160
Earnings per share (PLN)	3.90	-2.05
Book value per share (PLN)	30.16	31.93
P/E (x)1)	10.0	11.9
P/BV (x)1)	1.21	0.77

Source: Data based on the WSE Statistical Bulletin

1) Source: Bloomberg.

Price of shares and capitalization of PKO Bank Polski S.A. compared to competing banks

Changes in the price of shares of PKO Bank Polski S.A. vs. share prices of competing banks in the period 31.12.2016-31.12.2021 (31.12.2016=100%)

Capitalization (at the end of the period, PLN billion)

11.1.2 Ratings

RATINGS OF PKO BANK POLSKI S.A.

The creditworthiness of PKO Bank Polski S.A. is assessed by Moody’s Investors Service rating agency which awards a paid rating to the Bank.

Table 18. Ratings of PKO Bank Polski S.A. as at 31 December 2021 (paid rating)

Moody’s Investors Service
Long-term deposit rating	A2 with stable outlook
Short-term deposit rating	P-1
Senior unsecured debt rating	A3 with stable outlook
MTN Programme rating	(P)A3
Other short-term liabilities of the Programme rating	(P)P-2
Counterparty risk assessment - long-term	A2
Counterparty risk assessment - short-term	P-1
Opinion on counterparty risk (CR) - long-term	A2(cr)
Opinion on counterparty risk (CR) - short-term	P-1(cr)

Table 19. ESG ratings of PKO Bank Polski S.A. as at 31 December 2021

FTSE Russell	3.7
MSCI	BBB
Sustainalytics	20.8 (Medium)
V.E	47

RATINGS OF PKO BANK HIPOTECZNY S.A.

Table 20. Ratings of PKO Bank Hipoteczny S.A. as at 31 December 2021 (paid rating)

Moody’s Investors Service
Long-term issuer rating	A3
Short-term issuer rating	P-2
Counterparty risk assessment - long-term	A2
Counterparty risk assessment - short-term	P-1
Opinion on counterparty risk - long-term	A2(cr)
Opinion on counterparty risk - short-term	P-1(cr)
Rating for PLN mortgage covered bonds issued	Aa1
Rating for EUR mortgage covered bonds issued	Aa1

Outlook: stable

RATINGS OF THE PKO LEASING S.A. GROUP

As at 31 December 2021, bonds issued by Polish Lease Prime 1 DAC, a special purpose vehicle established within the PKO Leasing S.A. Group for the purposes of the asset securitization programme, had the following ratings:

Table 21. Ratings of Polish Lease Prime 1 DAC bonds as at 31 December 2021 (paid rating)

A-class bonds rating
Scope Agency	AAA
ARC Agency	AA-
B-class bonds rating
Scope Agency	BB-
ARC Agency	BB+

RATINGS OF KREDOBANK S.A.

As at 31 December 2021, KREDOBANK S.A. had the following ratings granted by Ukrainian rating agencies:

Table 22. Ratings of KREDOBANK S.A. as at 31 December 2021 (paid ratings)

”Expert-Rating” Rating Agency
Credit rating on country-wide scale	uaAAA with stable outlook
Rating on country-wide scale for A- and B-series bonds issued	uaAAA with stable outlook
“Standard-Rating” Rating Agency
Credit rating on country-wide scale - long-term	uaAAA with stable outlook
Credit rating on national scale - short-term	uaK1 with stable outlook
Deposit rating on country-wide scale	ua1 with stable outlook
Rating on country-wide scale for A- and B-series bonds issued	uaAAA with stable outlook

The long-term credit rating of KREDOBANK S.A. on a country-wide scale reflects the investment level, and thus meets Ukrainian statutory requirements regarding investing funds from insurance reserves by insurers and investing pension fund assets.

11.1.3 Investor relations

PKO Bank Polski S.A. maintains regular contact with investors and financial market analysts and aims at maintaining high communication standards. The Bank’s representatives ensure transparent, reliable and complete access to information on the functioning of the Bank, its financial performance and the situation in the banking sector. The Bank allows various forms of contact preferred by the investors and analysts.

Due to the COVID-19 pandemic, most investor and analyst communications were conducted remotely via teleconference and video conference. in 2021, 299 meetings with investors were held.

In 2021:

• Bank’s Management Board at meetings with investors and capital market and debt securities market analysts held in the Bank’s office or remotely via teleconference and video conference;

• members of the Bank’s Management Board answered the investors’ questions during remote investor conferences organized for investors from all parts of the world; in 2021, a total of 235 meetings were held during 21 conferences with investors from Poland (42%), the United Kingdom (19%), other European countries (19%), USA (18%) and Asia (2%).

• 57 individual meetings took place, of which 53 were held online and four took place in the Bank’s office.

PKO Bank Polski S.A. is observed by a wide group of analysts (one of the biggest), who issue recommendations to entities listed on the Warsaw Stock Exchange on an ongoing basis. At the end of the year 2021, 19 Polish and foreign analysts published reports and recommendations concerning the Bank’s shares. The average target price of the Bank’s shares for 2022 was PLN 55.43.

Recommendations of analysts and the average target price

All information of significance to the Bank’s investors and shareholders was immediately published on the Investor Relations website at https://www.pkobp.pl/investor-relations/. In 2021, the Bank once again launched its online annual report in the form of an internet service site in two language versions: Polish and English (https://www.raportroczny2020.pkobp.pl/, https://www.raportroczny2020.pkobp.pl/en/), which facilitates obtaining key financial and business information.

11.2 Statement of compliance with the corporate governance principles

Application of corporate governance principles

Control systems in the process of preparing financial statements

Share capital, significant blocks of shares and control powers

Limitations relating to the shares of PKO Bank Polski S.A.

Principles of appointing and dismissing members of the Management Board of PKO Bank Polski S.A.

Principles for amending the Articles of Association of PKO Bank Polski S.A.

General Shareholders’ Meeting of PKO Bank Polski S.A. and the shareholders’ rights

Supervisory Board of PKO Bank Polski S.A. - composition, powers and principles of functioning

Management Board of PKO Bank Polski S.A. - composition, powers and principles of functioning

Policy for ensuring diversity in the composition of the Bank’s Management Board and Supervisory Board

11.2.1 Application of the corporate governance principles

General corporate governance principles in place at PKO Bank Polski S.A., i.e. the internal regulations for the Bank’s management and control of its operations taking into account the principles and expectations of all stakeholders, arise from the generally applicable legal regulations, including in particular the Commercial Companies Code and the Banking Law, the laws regulating the functioning of the capital market and the rules issued by the Warsaw Stock Exchange (Good Practices for companies listed at the WSE), the Polish Financial Supervision Authority (corporate governance principles for supervised entities and supervisory recommendations for the banking sector).

The Bank applies the following sets of corporate governance principles:

• “Good Practices for WSE Listed Companies 2021” (until 30 June 2021: “Good Practices for WSE Listed Companies 2016”);

– “Good Practices for WSE Listed Companies 2021” and “Good Practices for WSE Listed Companies 2016” are available on the WSE website in the section on corporate governance issues of listed companies (www.gpw.pl/dobre-praktyki);

• Corporate Governance Principles for Supervised Institutions,

– Corporate Governance Principles for Supervised Institutions are available on the Polish Financial Supervision Authority website (https://www.knf.gov.pl/dla_rynku/regulacje_i_praktyka/zasady_ladu_korporacyjnego).

CORPORATE GOVERNANCE PRINCIPLES CONTAINED IN DOCUMENTS ON GOOD PRACTICES FOR WSE LISTED COMPANIES

In 2021 PKO Bank Polski S.A. applied good practices issued by the Warsaw Stock Exchange; until 30 June 2021, these were the “Good Practices for WSE Listed Companies 2016” (Good Practices 2016).

COMPLIANCE WITH GOOD PRACTICES FOR WSE LISTED COMPANIES IN 2021

In the first half of 2021, the Bank applied the principles contained in the “Good Practices for WSE Listed Companies 2016”.

None of these principles were incidentally violated in that period.

The Supervisory Board of Giełda Papierów Wartościowych w Warszawie S.A. (“the Warsaw Stock Exchange”, “WSE”), by resolution no. 13/1834/2021 of 29 March 2021, adopted a set of new corporate governance principles for joint-stock companies issuing shares, convertible bonds or bonds with pre-emptive right, which are admitted to trading on a WSE regulated market, i.e. “Good Practices for WSE Listed Companies 2021” (“Good Practices 2021”), which entered into force in July 2021.

Good Practices 2021 include ESG issues relating to e.g. climate protection, sustainable development, diversity in the composition of the companies’ authorities and equal remuneration, as well as new principles concerning profit distribution, issue of shares without pre-emptive rights, or purchase of treasury shares. A lot of importance was attached to the best possible preparation of the General Meeting (a deadline is set for sending draft resolutions by shareholders), as well as to the process of proposing candidates to the Supervisory Board and appointing Supervisory Board members, in accordance with the legal requirements applicable to audit committee members and the diversity policy adopted in line with the relevant provision of the Good Practices 2021.

The Good Practices 2021 are addressed to all authorities of the company. The Management Board of PKO Bank Polski S.A. (hereinafter: the Bank’s Management Board or the Management Board), the Supervisory Board of PKO Bank Polski S.A. (hereinafter: the Bank’ Supervisory Board or the Supervisory Board) and the General Shareholders’ Meeting of PKO Bank Polski S.A. (hereinafter: the General Shareholders’ Meeting of the Bank or the General Shareholders’ Meeting) expressed their opinion on the application of these practices – they all approved the Good Practices 2021 without any exceptions.

The information on the scope of application of the aforementioned principles by the Bank (in the form stipulated in the WSE Rules) is available on the Bank’s website (https://www.pkobp.pl/investor-relations/corporate-governance/best-practice-for-wse-listed-companies-2021/).

On the same website, the Bank has also published reports on the potential incidental non-compliance with any of the principles contained in the Good Practices 2021. In 2021 none of the Bank’s authorities declared any deviations from the principles of the Good Practices 2021.

Compliance with the recommendations contained in the good practices for WSE listed companies 2016

In the first half of 2021, the Bank applied the recommendations contained in “Good Practices for WSE Listed Companies 2016” with the exception of recommendation IV.R.2., which concerned enabling shareholders to participate in the General Shareholders’ Meeting by means of electronic communication. The Bank applied recommendation IV.R.2 only in part concerning the real-time broadcast of General Shareholders’ Meetings.

Information on the application of principles and recommendations in 2021

Please find below the information on the application of the principles and recommendations contained in the good practices (arranged by subject - section of the good practices), including both the principles and recommendations contained in Good Practices 2016 and the principles contained in Good Practices 2021. In accordance with the Commission Recommendation of 9 April 2014 on the quality of corporate governance reporting (2014/208/EU), the issues which, in the Bank’s opinion, are the most important for the shareholders are described.

Information policy and communication with investors

The Bank’s overriding aim regarding information activities is to guarantee high standards of communication with the participants of the capital market, which are a sign of respect for the principles of universal and equal access to information. To achieve this aim, the Bank pursues its information policy in a manner that ensures proper, reliable and complete access to information about the Bank for all investors, with no preferences as regards any of them. The above rules have been formally adopted by the Bank in the “Principles of the information policy of PKO Bank Polski S.A. regarding contacts with investors and customers”, which can be found on the Bank’s website (https://www.pkobp.pl/investor-relations/corporate-governance/information-disclosure-policy/).

The Bank communicates with the investors directly, by organizing online performance meetings, by participating in a wide range of investor conferences and bilateral meetings (for more information see section 11.1.3), and through its activity on the corporate website, which contains a section dedicated to investor relations. The website contains key information on the Bank and the securities issued, including the information on the Bank’s strategy, financial statements, presentations, key financial data in a format that allows its direct use, contact details and other information which is usually published by companies, in accordance with the relevant recommendations.

In the investor relations section under Corporate governance – PKO Bank Polski (pkobp.pl) there is information on the corporate governance principles, the main corporate documents, policies and reports, as well as information on the application of Good Practices.

In order to ensure appropriate communication with stakeholders, the Bank published on its website the information on its strategy, measurable objectives, including in particular long-term objectives and planned activities, and progress in their execution. This information can be found in the investor relations section Investor’s day - strategy presentation – PKO Bank Polski (pkobp.pl).

The Bank’s ESG policy is an important aspect of communication with the market. The Bank has noted a rapid increase in the investors’ and analysts’ interest in this area, including in particular the issues concerning the natural environment and preventing climate change.

ESG issues are a part of the PKO Bank Polski S.A. strategy for the years 2020-2022. The Bank conducts its activities in a responsible manner, taking into consideration environmental issues. It is aware of the challenges resulting from climate changes, which is reflected in the non-financial objectives and policies adopted. The Bank eliminates activities which are harmful to the environment, supports environmental education in line with the principle of social responsibility, and considers the impact of its actions on society, the customers, suppliers, employees and shareholders. The Bank’s strategy also takes into account social and employment aspects.

The ESG risk assessment is an integral part of the creditworthiness assessment of business entities. Each customer is assigned an ESG category (positive, neutral, potentially negative or negative). The risk management strategy defines three main ESG risk management principles and a strategic limit of tolerance to ESG risk, in order to reduce exposure to high emission sectors.

In the second quarter of 2021, the Bank adopted key performance indicators for the individual ESG areas. The indicators are described in detail on the Bank’s website at ESG in the PKO Bank Polski Group (pkobp.pl), and information on the level of their implementation will be updated on an ongoing basis. Moreover, in 2022 the Bank will publish on its website a summary of the expenditure incurred in 2021 by the Bank, the PKO Bank Polski Foundation and the Bank Group companies on supporting culture, sports, charities, media, social organizations, trade unions, etc.

In order to ensure that investors have access to up-to-date financial information, the Bank publishes its financial statements as soon as possible after the reporting date.

Such publications are accompanied by meetings with the shareholders, analysts and representatives of the media, at which the Management Board presents and comments on the adopted strategy and its execution, the Bank’s and its Group’s financial results, and the most important events affecting the Bank’s operations, results and prospects for the future.

The meetings can be held in person, online or in a hybrid form. In the case of remote meetings, the Bank ensures that they are interactive, i.e. that bilateral communication is possible, so that questions can be asked and answered.

Due to the pandemic, in 2021 the meetings were held remotely.

Video recordings of the meetings with the media and analysts are published on the Bank’s website at Video conferences and teleconferences – PKO Bank Polski (pkobp.pl) .

In addition to the regular meetings associated with the publication of results, dialogue with shareholders is carried out on an ongoing basis. The investors’ questions are answered immediately after their receipt, not later than within 14 days. If more time is required due to special circumstances, the investor is notified in advance about the planned date of providing the response. The Bank does not limit the group of persons entitled to information to the shareholders. When answering questions, the Bank assesses the possibility of providing a response to a specific question taking into account the need to protect company secrets or a potential conflict with the applicable laws. It also evaluates the importance of the question in order to provide explanations within an appropriate time and at the appropriate level of detail.

The Bank also has recommended internal regulations in place concerning the provision of explanations and rectification of false, inaccurate or detrimental media reports.

Management Board and Supervisory Board of the Bank

Members of the Management Board and Supervisory Board are appointed in a manner allowing for the selection of persons having high qualifications, skills and experience that are adequate to their position and ensuring that the Management Board and Supervisory Board members (both individually and collectively) will issue independent opinions and decisions in all areas of the Bank’s operations.

The above is reflected in the following policies in place at the Bank:

– the policy concerning the assessment of appropriateness of the candidates for members and members of the Supervisory Board of Powszechna Kasa Oszczędności Bank Polski S.A. (adopted by the General Shareholders’ Meeting);

– the policy concerning the appropriateness of the Management Board members and key officers of the Bank and appropriateness assessment at the Bank’s Group companies (adopted by the Supervisory Board of the Bank).

The policy for ensuring diversity of the composition of the Management Board and Supervisory Board is a part of the suitability policy.

The diversity policy defines diversity objectives and criteria and is designed to ensure that members of the Management Board and Supervisory Board are appropriately selected to obtain a broad range of competences, knowledge and skills that are adequate for the position and, at the same time, to ensure diversity in terms of age and gender. The competent authorities that select candidates for specific positions take into account the result of suitability assessment and aim at achieving a balance between genders or at least 30% representation of the less numerous gender. The aforementioned suitability policies also specify deadlines and methods for monitoring the achievement of diversity objectives.

In accordance with the Bank’s Articles of Association, if the number of Supervisory Board members drops below five, the General Shareholders’ Meeting must be convened to appoint an appropriate number of members.

The Bank’s Supervisory Board, as part of succession management, makes decisions regarding the selection of new members of the Bank’s Management Board keeping in mind the objective to ensure continuity in decision making with regard to the area of the Bank’s operations supervised by a given member of the Management Board, the need to ensure execution of the Bank’s strategic objectives, the principle of diversity of the Management Board composition and the collective suitability of the Management Board.

As at 31 December 2021, the Supervisory Board was composed mainly of independent members. The Chair of the Supervisory Board does not combine his function with managing the work of the audit committee of the Supervisory Board. More information on the Supervisory Board is provided in section 11.2.8.

In accordance with the rules, the Supervisory Board members voting against a resolution may express a dissenting opinion (which shall be recorded in the minutes). The Supervisory Board votes on resolutions by open ballot. Voting by secret ballot is ordered when personal issues are discussed or at the request of at least one Supervisory Board member.

Members of the Supervisory Board devote the necessary amount of time for the performance of their duties. The turnout is very high and any absences are justified.

The Supervisory Board may use the services of external advisors, experts or consultants at the Bank’s cost.

Since the Bank has adopted all principles contained in Good Practices 2021, as of 2021 the Supervisory Board reports will contain all elements required by Good Practices 2021.

Serving on the Bank’s Management Board is the main area of activity for the members of this body, who do not take any other professional activity if devoting their time to such activity would make it impossible for them to serve on the Management Board diligently.

Appointment of a Management Board member to the supervisory body of a company which does not belong to the Bank’s Group requires the approval of the Supervisory Board.

Internal systems and functions

The Bank maintains effective systems of internal control, risk management and compliance, as well as an effective internal audit function, which are adequate to its size and the type and scale of its activities. The responsibility for the functioning of these systems lies with the Management Board. The Bank has separated in its structure units responsible for the performance of tasks in the particular areas described above.

The risk management process consists of the following main components: the risk management strategy adopted by the Management Board and approved by the Supervisory Board, the processes for managing the specific types of identified risk, and regular reviews of the aforementioned strategy and processes. The task of the internal audit function is to analyse and assess the adequacy and effectiveness of the internal control system and the risk management system, as well as compliance with the generally applicable laws, supervisory recommendations and the Bank’s internal regulations.

The Bank appoints an internal auditor who manages the internal audit function. Appointment of the Internal Audit Department (IAD) director requires the prior approval of the Supervisory Board. The Department is independent and its head directly reports to the President of the Management Board. The IAD operates in accordance with the law, the PFSA supervisory regulations, good practices and the International Standards for the Professional Practice of Internal Auditing published by the Institute of Internal Auditors.

In accordance with the adopted regulations, the heads of the internal audit unit, the compliance unit and the second level risk management units receive variable remuneration for the achievement of their objectives, and their remuneration is not dependent on the results of the Bank, its subsidiaries and the Bank’s Group.

The persons responsible for risk management and compliance at the Bank report directly to the President or another member of the Management Board. In accordance with the Bank’s organizational structure, the head of the Bank’s unit responsible for compliance and reputation risk reports directly to the President of the Management Board, and the heads of the structures responsible for the management of other risks report to the Management Board member supervising the Risk Management Area. The organizational structure of the subsidiaries that are significant to the operations of the Bank’s Group also complies with the Good Practices 2021. These companies have also implemented the Bank’s remuneration policy.

The IAD every year presents to the Management Board, the Audit Committee of the Supervisory Board and the Supervisory Board an annual report, which contains information on the assessment of the effectiveness of the Bank’s internal control system and risk management system, based on the results of the audits performed.

The Supervisory Board performs an assessment of the internal control system and its individual components, including the control function, which comprises the controls that are part of the processes and the systems or applications that support them and compliance. The Supervisory Board performs its annual assessment on the basis of the information and reports provided by the Management Board, the Audit Committee of the Supervisory Board and the Head Office organizational units, as well as the findings of the registered auditor and the supervisory authorities, including in particular the PFSA and the Office of Competition and Consumer Protection (UOKiK), and based on qualitative aspects and criteria. The Supervisory Board is supported in such activities by the Audit Committee of the Supervisory Board, which monitors the effectiveness of the internal control system and issues opinions on draft internal regulations of the Bank in this respect.

The IAD activities are subject to an independent external evaluation at least once in five years. The last such evaluation was performed in 2019 and its results confirmed that the IAD complies with the regulatory requirements and good practices. Additionally, as a result of the evaluation, the IAD was given the title of Innovation Generator, which is the highest category available on the Polish market to audit units of commercial banks in the internal audit practice maturity model applied by the consultancy which performed the evaluation.

General Shareholders’ Meeting and shareholder relations

The Bank’s aim is to convene annual General Shareholders’ Meetings as soon as possible after the publication of the annual report. The time between the publication of the report and the Annual General Shareholders’ Meeting was significantly shortened in the last five years.

The Bank sets the place, date and form of the General Shareholders’ Meetings taking into account the need to allow as many shareholders as possible to participate. The Bank did not organize any General Shareholders’ Meetings using means of electronic communication (e-meeting) in 2021. As a result of adopting all principles contained in Good Practices 2021, the Bank allows the possibility of organizing e-meetings if it is expected by the shareholders. The Bank is able to provide the necessary technical infrastructure.

Irrespective of the above, in order to ensure maximum transparency of the decision-making process, the General Shareholders’ Meetings are broadcast in real time and they are open to media representatives.

The principle that all draft resolutions presented to the General Shareholders’ Meeting by the Management Board or by the shareholders must contain a justification is applied and effectively enforced.

On 7 June 2021, the Annual General Shareholders’ Meeting adopted all principles contained in Good Practices 2021, including the principle that draft resolutions must be presented not later than 3 days before the date of the meeting and that the candidates to the Supervisory Board must make the necessary statements. The General Shareholders’ Meetings organized after 1 July 2021 complied with these principles and the Supervisory Board issued opinions on draft resolutions placed by the Management Board on the agenda of the General Shareholders’ Meeting.

As a rule, the Management Board and Supervisory Board members participate in the General Shareholders’ Meetings. In 2021 their participation took different forms – either of the physical presence at the place of the meeting or of real time bilateral communication with the use of electronic means. These bodies were represented by persons capable of discussing the matters on the agenda and providing informed responses to any questions asked during the meeting. The Management Board presented the financial results and other relevant information contained in the financial statements and discussed significant events relating to the previous financial year, comparing the presented data to the preceding years.

In 2021 the General Shareholders’ Meetings did not make any decisions to issue shares with or without pre-emptive rights. Nevertheless, the Bank has not identified any reasons not to apply Good Practices 2021 with respect to such decisions.

In accordance with the Bank’s dividend policy adopted in 2021, the Bank intends to disburse dividends in the long term in a stable manner, in compliance with the policy of prudent management of the Bank and the Bank’s Group. At the present stage, the Bank does not identify any reasons not to apply Good Practices 2021 with respect to limiting the possibility of retaining the total profit earned in a given year at the Bank.

Conflict of interests and transactions with related entities

The Bank has adopted the principles for the management, identification and disclosure of conflicts of interest or potential conflicts of interest and taking actions to control such conflicts, minimize their occurrence and mitigate their adverse effect on the Bank’s operations and its relations with the customers and other entities.

These principles regulate e.g. the responsibilities of the members of the Bank’s bodies with respect to reporting potential and actual conflicts of interest and limiting the involvement of persons who have a potential conflict of interest in the matters to which such conflict of interest relates. In accordance with the rules and regulations of the Management Board and the Supervisory Board, their members have the right to express dissenting opinions, which are recorded in the minutes of the Management or Supervisory Board meeting.

The principles of conflict management also apply to preventing preference of some shareholders over the others - all transactions and agreements must be concluded on an arm’s length basis, in compliance with the generally applicable laws and the Bank’s internal regulations.

Remuneration

The Bank has a remuneration policy for members of the Supervisory Board and the Management Board adopted by the Annual General Shareholders’ Meeting in 2020.

According to this policy, the total remuneration of a member of the Bank’s Management Board consists of a fixed part and a variable part. The variable remuneration depends on the level of achievement of management objectives such as: achieving the net financial result of the Bank and the Bank’s Group, achieving the indicated economic and financial indicators (including the customer satisfaction indicator), implementing the strategy of the Bank and the Bank’s Group and maintaining the market position of the Bank. The Supervisory Board defines objectives for the individual Management Board members, which should also include such criteria as acting in the public interest, taking part in environmental protection and preventing potential adverse social effects of the Bank’s operations.

PKO Bank Polski S.A. also adopts rules on the remuneration of employees whose activities have a significant impact on the Bank’s risk profile (Material Risk Takers; hereinafter: MRT). The variable remuneration of MRT is directly linked to the Bank’s financial situation and the growth of its value, with the reservation that the managers of the internal audit unit, compliance unit, legal unit and the organizational units responsible for second level risk management and HR matters receive variable remuneration for the achievement of the objectives resulting from their functions, and their remuneration shall not depend on the financial performance of the areas of the Bank’s operations controlled by them.

The variable remuneration of employees whose activities have a significant impact on the Bank’s risk profile depends on the level of achievement of their bonus targets, which, depending on their individual responsibilities, may include e.g. customer satisfaction index or the level of execution of the Bank’s strategy.

The level of remuneration of members of the Bank’s authorities and MRT is adequate to the scope of tasks entrusted to particular persons. The work in committees of the Bank’s Supervisory Board is taken into account in the remuneration of the members of these committees. The amount of remuneration of the Supervisory Board members does not depend on the Bank’s short-term results.

CORPORATE GOVERNANCE PRINCIPLES FOR SUPERVISED INSTITUTIONS ISSUED BY THE POLISH FINANCIAL SUPERVISION AUTHORITY

The Corporate Governance Principles are a set of rules defining the internal and external relations for institutions supervised by the Polish Financial Supervision Authority (PFSA), including the relations with the shareholders and customers, the organizational structure, the functioning of internal audit, the key internal systems and functions, the statutory bodies and the principles for their cooperation.

In 2014, the Bank accepted for use the “Principles of Corporate Governance for Supervised Institutions” (adopted by the PFSA on 22 July 2014) with respect to the competences and obligations of the Management Board, i.e. managing the Bank’s affairs and its representation, in compliance with the generally binding laws and the Bank’s Articles of Association. Nevertheless, the Bank assumed that § 8 section 4 of the “Principles of Corporate Governance for Supervised Institutions” (hereinafter: the Principles) will not be applied insofar as it relates to allowing the shareholders the possibility of electronic participation in the meetings of the decision-making bodies. Chapter 9 of the Principles, concerning the managing of assets at the customer’s risk, will not be applied due to the fact that the Bank does not conduct such activities.

The Supervisory Board adopted for use the “Corporate Governance Principles for Supervised Institutions” concerning the responsibilities and obligations of the Supervisory Board, i.e. supervising the conduct of the Bank’s affairs in compliance with the generally binding laws and the Bank’s Articles of Association.

In a resolution passed in 2015, the General Shareholders’ Meeting of the Bank (GSM) declared that, acting in line with its competences, it will follow the “Corporate Governance Principles for Supervised Institutions” issued by the Polish Financial Supervision Authority, although it ruled out the application of the principles set out in:

• § 8 section 4 of the Principles, within the scope pertaining to ensuring the possibility of the electronic participation of shareholders in meetings of the decision-making body;

• § 10 section 2 of the Principles, with respect to the introduction of personal rights or other special rights for shareholders;

• § 12 section 1 of the Principles pertaining to the responsibility of shareholders for immediate recapitalization of the supervised institution;

• § 28 section 4 of the Principles with respect to assessing by the decision-making body whether the determined remuneration policy promotes the development and security of the supervised institution.

Waiving the application of the principle set out in § 8 section 4 was in line with a prior decision of the Annual General Shareholders’ Meeting of PKO Bank Polski S.A. of 30 June 2011. The decision was reflected in not passing the resolution on amendments to the Bank’s Articles of Association, the aim of which was to enable participation in the General Shareholders’ Meeting through electronic means of communication. The decision not to apply this principle was taken because of the legal, organizational and technical risks, which could jeopardize the proper conduct of the General Shareholders’ Meeting. The application of the other Principles specified in the resolution of the General Shareholders’ Meeting was waived in accordance the proposals made by an eligible shareholder of the Bank – the State Treasury.

In accordance with the justification presented by the State Treasury together with the proposed draft resolution of the Annual GSM of 2015, waiving the application of the principle specified in § 10 section 2 and § 12 section 1 of the Principles was due to the incomplete process of the Bank’s privatization by the State Treasury.

Waiving the application of the principle set out in § 28 section 4 was justified, in accordance with the motion of the State Treasury, by the excessive scope of the remuneration policy in question, which is subject to the assessment by the decision-making authority. In the opinion of the aforementioned shareholder, the policy for remunerating employees who perform key functions but are not members of the supervisory or management bodies should be assessed by their employer or principal (i.e. the Bank represented by the Management Board whose activities are supervised by the Supervisory Board).

In June 2021, the General Shareholders’ Meeting of the Bank changed the scope of the Corporate Governance Principles for Supervised Institutions by resigning from the waiver of the principle set out in § 8 section 4 of the Principles, concerning the possibility of the electronic participation of shareholders in meetings of the decision-making body.

Other good practices

The Code of Ethics of PKO Bank Polski S.A. (the Code of Ethics), adopted by resolution of the Management Board in 2014 and subsequently amended in 2017 and 2019, is another set of values, principles, standards of conduct and ethical attitudes, which was applied at PKO Bank Polski S.A. in 2021. The Code of Ethics defines the mutual relations between persons working for the Bank and between the Bank’s employees and persons performing actions for the Bank. The Code is directly related to the Bank’s organizational culture; it supplements this culture and is a tool supporting the popularization and implementation of ethical values at the Bank. All employees of the Bank are obliged to comply with the Code.

11.2.2 Control systems in the process of preparing financial statements

Internal control system

PKO Bank Polski S.A. has an internal control system functioning as part of the Bank’s management system. Designing, implementing and ensuring the functioning of the adequate and effective internal control system is the responsibility of the Management Board. The Supervisory Board supervises the implementation and the functioning of the internal control system and assesses its adequacy and effectiveness, including the adequacy and effectiveness of the control functions, the compliance unit, and the internal audit unit. The assessment of the internal control system is based on specific criteria and takes into account:

• information provided by the Bank’s Management Board, Audit Committee of the Bank’s Supervisory Board, compliance unit and internal audit unit;

• findings made by the statutory auditor and resulting from the supervisory activities of authorized institutions;

• other information and documents relevant to the adequacy and effectiveness of the internal control system.

In this respect, the Supervisory Board is supported by the Supervisory Board Audit Committee that is responsible, in particular, for the monitoring of the effectiveness of the internal control system on an ongoing basis.

The objectives of the internal control system are to ensure:

• efficiency and effectiveness of the Bank’s operations;

• reliability of the financial reporting;

• compliance with risk management principles at the Bank;

• compliance of the Bank’s activities with the generally binding legal regulations, internal regulations of the Bank, supervisory recommendations and market standards adopted at the Bank.

The internal control system is arranged at the Bank on three independent levels:

• the first level consists of organizational structures of the Bank that carry out operational activities, in particular: sales of products and customer service, as well as other organizational structures of the Bank which perform risk-generating operational tasks and operate under separate internal regulations of the Bank;

• the second level comprises the activities of:

– the compliance unit;

– the specialized organizational structures of the Bank responsible for identification, measurement, control, monitoring and reporting of risks, threats and irregularities in order to ensure that the activities implemented at the first level are properly designed and the second level structures effectively manage the risks and support the effectiveness of the Bank’s operations;

• the third level comprises the activities of the internal audit unit, which performs independent audits of elements of the Bank’s management system, including the risk management system and the internal control system.

The levels are independent, i.e.:

• the second level is separate from the first level in creating systemic solutions;

• the third level is separate from the first and the second level.

The internal control system at the Bank comprises:

• the control function;

• the compliance unit;

• the independent internal audit unit.

The control function ensures compliance with controls relating, in particular, to risk management at the Bank; this function covers all of the Bank’s units, and the organizational positions in these units responsible for the performance of tasks allocated to a particular function.

The control function comprises:

• controls;

• independent monitoring of compliance with controls;

• reporting within the control function.

PKO Bank Polski S.A. identifies material processes which have a significant impact on the performance of the internal control system objectives and the Bank’s business goals, and ensures periodical reviews of the processes with regard to their materiality.

Controls are embedded in the processes, systems and IT applications in place at PKO Bank Polski S.A. These controls are tailored to the objectives of the internal control system and the specific nature of the Bank’s operations. These controls are subject to independent monitoring on all internal control system levels, which includes testing and ongoing review of controls.

The compliance unit is an organizationally independent unit. It plays a key role in ensuring compliance and management of compliance risk. Compliance risk is understood as the risk of facing legal penalties, incurring financial losses or a reputation loss as a result of non-compliance with the generally applicable laws, internal regulations of the Bank and the market standards adopted by the Bank on the part of the Bank, the Bank’s employees or entities operating on the Bank’s behalf. The compliance unit is responsible for developing solutions aimed at ensuring compliance and compliance risk management, as well as identification, assessment, control, monitoring and reporting of this risk at the Bank.

The internal audit carries out independent and objective assurance and advisory activities in order to:

• assess the adequacy and effectiveness of the risk management system and the internal control system at the first and the second level of the internal control system, taking into account the adequacy and effectiveness of risk controls and controls selected for the audit (assurance activities);

• create value through identifying potential improvements of processes at the Bank (advisory activities).

The assessment of individual areas of the Bank’s operations is carried out regularly and in an organized manner. Suggestions and recommendations issued as part of the audit are aimed at eliminating identified gaps and increasing the quality and effectiveness of the functioning of the Bank and the other entities of the Bank’s Group.

Information on irregularities, results of assessments and other material issues identified by individual components of the internal control system are presented in periodical reports addressed to the Management Board, the Supervisory Board Audit Committee, the Supervisory Board Risk Committee or the Supervisory Board.

Other entities of the Bank’s Group have internal control systems adapted to the specific nature of their activities. These entities develop and implement internal regulations defining, in particular, control tasks performed within the framework of the internal control system and the allocation of responsibility for these tasks. The manner of functioning of internal control systems depends on the business entity’s size and scope of its operations. The audit units in the Bank’s Group operate on the basis of a long-term cooperation model aimed at ensuring common internal audit standards.

The majority of the entities have separate organizational units or positions that report directly to the Management Board or the Supervisory Board of the particular entity. If this is justified by the operating profile of the company and its organizational structure (small entities with a limited scope of business), the internal control functions are performed by the management staff, without structurally separating the internal control function or unit.

Controls in the process of preparing financial statements

In order to ensure the reliability and correctness of the process of preparing the financial statements, the Bank designed and implemented a number of controls. These are embedded in the functions of reporting systems and internal regulations concerning this process. These controls involve among others things the use of continuous verification and reconciliation of reporting data to the accounting records, sub-ledger accounts and other documents providing the basis for financial statements, and with binding accounting and reporting standards.

The process of preparing financial statements is subjected to regular multi-level verification, in particular with regard to the correctness of the account reconciliation, substantive analysis and reliability of the information. The annual financial statements are reviewed by the Audit Committee of the Supervisory Board and adopted by the Supervisory Board, and are then approved for publication by the Management Board of PKO Bank Polski S.A.

Moreover, the Supervisory Board performs annual assessments of the compliance of the annual consolidated financial statements of the Bank’s Group, the annual financial statements of the Bank and the Directors’ Report on the operations of the Bank’s Group and of the Bank with the books, documents and facts, pursuant to Article 382 (3) of the Commercial Companies Code.

The tasks of the Supervisory Board Audit Committee include monitoring the financial reporting process, including the review of separate and consolidated interim and annual financial statements, with particular emphasis on:

• information on substantial changes in the accounting and reporting policy and in the method of making significant management estimates and judgements for the purposes of financial reporting, as well as compliance of the financial reporting process with the applicable law;

• significant adjustments resulting from the audit and the auditor’s opinion on the audit of the financial statements, discussion of any issues, qualifications and doubts resulting from the audit of financial statements and analysis of the independent auditor’s recommendations addressed to the Management Board and responses of the Management Board in this regard.

The description and assessment of cooperation between the Supervisory Board Audit Committee and the audit firm are provided in the annual report on the activities of the Audit Committee, which is attached to the report on activities of the Supervisory Board.

Audit firm

On 13 December 2018, pursuant to § 15 clause 1 point 2 of the Bank’s Articles of Association, the Bank’s Supervisory Board selected PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k. (PwC) as the audit firm to audit and review the financial statements of the Bank and of the Bank’s Group for the years 2020-2021. PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k. with its registered office in Warsaw, ul. Polna 11, is entered in the list of audit firms maintained by the National Board of Registered Auditors under the number 144. On 24 January 2019, the Bank concluded an agreement with PwC for the audit and review of the financial statements of the Bank and the Bank’ Group for the years 2020-2021.

Information on the audit firm’s fees payable for the financial year and the previous financial year, separately for the audit of the financial statements and for other assurance services, including the review of the financial statements, is provided in note 80 of the financial statements of the Bank’s Group for the year 2021.

Furthermore, on 23 September 2021, the Bank’s Supervisory Board selected PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k. as the audit firm to audit and review the financial statements of the Bank and of the Bank’s Group for the years 2022-2023.

11.2.3 Share capital, significant blocks of shares and control powers

As at 31 December 2021, the share capital of PKO Bank Polski S.A. amounted to PLN 1,250,000,000 and was divided into 1,250,000, 000 shares with a nominal value of PLN 1 each. All the Shares have been fully paid. The amount of the Bank’s share capital did not change in 2021.

Table 23. Structure of the share capital of PKO Bank Polski S.A.

Series	Type of shares	Number of shares	Nominal value of 1 share	Nominal value of a series
A Series	ordinary registered shares	312,500,000	PLN 1	PLN 312,500,000
A Series	ordinary bearer shares	197,500,000	PLN 1	PLN 197,500,000
B Series	ordinary bearer shares	105,000,000	PLN 1	PLN 105,000,000
C Series	ordinary bearer shares	385,000,000	PLN 1	PLN 385,000,000
D Series	ordinary bearer shares	250,000,000	PLN 1	PLN 250,000,000
		1,250,000,000		PLN 1,250,000,000

According to the best knowledge of PKO Bank Polski S.A., as at 31 December 2021 the following three shareholders held, directly or indirectly, significant blocks of shares (at least 5%): the State Treasury, Nationale-Nederlanden Open Pension Fund and Aviva Open Pension Fund.

Table 24. Shareholding structure of PKO Bank Polski S.A.

Shareholder	As at 31.12.2021			As at 31.12.2020		Change in the share in the number of votes at the GSM
Shareholder	Number of shares	Share in the number of votes at the GSM and in the share capital	Number of shares		Share in the number of votes at the GSM and in the share capital	Change in the share in the number of votes at the GSM
State Treasury	367,918,980	29.43%	367,918,980		29.43%	-
Nationale-Nederlanden Open Pension Fund1)	103,500,000	8.28%	107,198,023		8.58%	- 0.30 p.p.
Aviva Open Pension Fund1)	90,810,319	7.27%	93,610,319		7.49%	- 0.22 p.p.
Other shareholders2)	687,770,701	55.02%	681,272,678		54.50%	0.52 p.p.
Total	1,250,000,000	100.00%	1,250,000,000		100.00%

1) Calculation of shareholdings as at the end of the year published by Universal Pension Fund Management Companies (PTE) in annual information about the structure of fund assets and quotation from the securities exchange official list (Ceduła Giełdowa).

2) Including Bank Gospodarstwa Krajowego, which as at 31 December 2021 and 31 December 2020 held 24,487,297 shares carrying 1.96% of the votes at the GSM.

The shares of PKO Bank Polski S.A. and other securities issued by the Bank do not carry any specific control rights.

The Bank is not aware of any agreements concluded in 2021, based on which any changes could occur in the future in the proportions of the shares held by the current shareholders or bond holders.

Table 25. Exposure of Open Pension Funds to the shares of PKO Bank Polski S.A.

Shareholder	Number of shares	Share in the number of votes at the GSM and in the share capital	Number of shares	Share in the number of votes at the GSM and in the share capital
Shareholder	As at 31.12.2021		As at 31.12.2020
Nationale-Nederlanden OFE	103,500,000	8.28%	107,198,023	8.58%
Aviva OFE	90,810,319	7.26%	93,610,319	7.49%
PZU OFE	52,915,942	4.23%	54,780,422	4.38%
Aegon OFE	32,878,074	2.63%	33,078,074	2.65%
Metlife OFE	30,298,318	2.42%	30,993,318	2.48%
UNIQA OFE	23,513,483	1.88%	23,513,483	1.88%
Generali OFE	19,928,593	1.59%	19,913,271	1.59%
Allianz OFE	15,844,332	1.27%	15,844,332	1.27%
Pocztylion OFE	6,293,630	0.50%	6,293,630	0.50%

11.2.4 Restrictions imposed on shares of PKO Bank Polski S.A.

All shares of PKO Bank Polski S.A. carry the same rights and obligations. No shares are preference shares, in particular with respect to voting rights (one share carries one vote) or dividend.

The Articles of Association of PKO Bank Polski S.A. limit the voting right of shareholders holding more than 10% of the total number of votes at the General Shareholders’ Meeting and prohibit these shareholders from exercising more than 10% of the total number of votes at the General Shareholders’ Meeting. The above restriction does not apply to:

– those shareholders who on the date of passing the resolution of the General Shareholders’ Meeting introducing the limitation of the voting rights had rights from the shares representing more than 10% of the total number of votes in PKO Bank Polski S.A. (i.e. the State Treasury and BGK);

– shareholders who have rights from A-series registered shares (the State Treasury);

– shareholders acting jointly with the shareholders referred to in the second bullet point based on agreements concluded concerning the joint execution of voting rights on shares.

The limitations to the voting rights of the shareholders expire at the moment when the share of the State Treasury in the Bank’s share capital drops below 5%.

In accordance with:

• § 6 (2) of the PKO Bank Polski S.A.’s Articles of Association, the conversion of A-series registered shares into bearer shares and the transfer of these shares requires the approval of the Council of Ministers in the form of a resolution. The conversion into bearer shares or transfer of A-series registered shares, after obtaining such approval, results in the expiry of restrictions in respect of the shares subject to conversion into bearer shares or transfer, to the extent to which this approval was given;

• Article 13 (1) (26) of the Act of 16 December 2016 on the principles for public property management (apart from the statutory exceptions), the shares of PKO Bank Polski S.A. held by the State Treasury or rights from these shares cannot be sold,

• Article 77 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, amending Regulation (EU) No 648/2012, any reduction, redemption or repurchase of Common Equity Tier 1 instruments issued by the Bank is only possible with the prior permission of the PFSA.

The Bank has not identified any other restrictions relating to transfer of the ownership rights arising from the Bank’s securities.

11.2.5 Principles of appointing and dismissing members of the Management Board of PKO Bank Polski S.A.

The Management Board of PKO Bank Polski S.A. consists of three to nine members. Management Board members, including the President and Vice-Presidents, are appointed and dismissed by the Supervisory Board for a joint three-year term.

The powers of the Supervisory Board include suspending the Management Board members and temporarily delegating the responsibilities of the Management Board members to Supervisory Board members. The Management Board members should meet the requirements of Article 22aa of the Banking Law, i.e. have higher education, at least five years of experience in employment or business activity, including at least three years on a management or independent position or as a person running business activity on their own.

In accordance with the suitability policy concerning the Management Board members and key officers of the Bank and suitability assessment at the Bank’s Group companies:

– Management Board members are appointed after completing the qualification process;

– the process of their selection ensures appointment of competent persons and guarantees their suitability and proper performance of their obligations.

Suitability of the candidates and members of the Management Board is verified in the form of assessment of their individual suitability and the collective suitability of the Management Board as a whole. The suitability assessment is performed by the Nominations and Remuneration Committee of the Supervisory Board each time a new Management Board member is appointed and once a year as part of the periodical assessment. The results of the suitability assessment are approved by the Supervisory Board. The Supervisory Board may also perform an additional suitability assessment in other, justified situations, which affect the requirements addressed to the Management Board or its individual members.

Before a Management Board member is appointed for another term, the assessment of his/her performance during the previous terms (including the previous suitability assessments) is taken into account.

Appointing the President of the Management Board and the Board Member responsible for managing material risk in the Bank’s operations requires the consent of the PFSA.

The term of office of a Management Board member expires not later than on the day of the General Shareholders’ Meeting approving the financial statements for the last full financial year of his/her term. The term of office of a Management Board member also expires upon his/her death, resignation of dismissal. The mandate of a Management Board member appointed during a term of office of the Management Board expires at the end of the term of office for which he/she was appointed.

Pursuant to the Commercial Companies Code, the General Shareholders’ Meeting also has the right to dismiss or suspend a Management Board member.

The rights of the Management Board members, including those relating to decisions concerning the issue or redemption of shares, are described in section 11.2.9.

11.2.6 Principles for amending the articles of association of PKO Bank Polski S.A.

An amendment to the Articles of Association of PKO Bank Polski S.A. (the Articles) requires a resolution of the General Shareholders’ Meeting of PKO Bank Polski S.A., the approval of the PFSA and entry in the National Court Register.

Pursuant to the provisions of the Commercial Companies Code, resolutions on amendments to the Articles require a qualified majority of three-fourths of the votes. Resolutions regarding an amendment to the Articles increasing benefits for shareholders or limiting the rights granted personally to the individual shareholders require the consent of all the shareholders concerned.

Amendments introduced to the Bank’s Articles in 2021

On 11 February 2021, the District Court in Warsaw, the 13th Business Department of the National Court Register, registered an amendment to the Bank’s Articles made pursuant to § 1(2) of resolution 3/2019 of the Extraordinary General Shareholders’ Meeting of PKO Bank Polski S.A. dated 17 September 2019. The amendment concerns extending the scope of the Bank’s activities by adding the services relating to Employee Capital Plans (PPK). The PFSA approved this amendment to the Articles.

11.2.7 General shareholders’ meeting of PKO Bank Polski S.A. and the shareholders’ rights

The General Shareholders’ Meeting of PKO Bank Polski S.A. is the highest authority of the Bank. The rights of the General Shareholders’ Meeting, the manner of convening it and the principles for participation in the General Shareholders’ Meeting are set out in: the Code of Commercial Companies, the Bank’s Articles (in particular, § 9-10) and the Rules and Regulations of the General Shareholders’ Meeting. The text of the Articles and the above Rules and Regulations are available on the Bank’s website in the Investor relations section at Corporate governance principles – PKO Bank Polski (pkobp.pl).

The General Shareholders’ Meeting of PKO Bank Polski S.A. is held as the annual or extraordinary meeting, in accordance with the provisions of the Commercial Companies Code, the Bank’s Articles and the Rules of the General Shareholders’ Meeting.

An amendment to the Rules and Regulations of the General Shareholders’ Meeting requires a resolution of the General Shareholders’ Meeting passed by an absolute majority of the votes in a vote by open ballot. Amendments are applied for the first time during the General Shareholders’ Meeting convened after the GSM that introduced such amendments, unless the resolution provides otherwise.

The General Shareholders’ Meeting is convened by the Bank’s Management Board; the annual GSM is convened once a year within six months of the end of the year. The Supervisory Board may convene the Annual General Shareholders’ Meeting if it has not been convened by the Management Board within the statutory deadline and it may convene the Extraordinary General Shareholders’ Meeting as it sees fit. In the situations defined in the Commercial Companies Code, also the shareholders have the right to convene the Extraordinary General Shareholders’ Meeting or demand that it be convened.

The principles of functioning and competences of the General Shareholders’ Meeting

In addition to matters stipulated in generally binding legal regulations, the competences of the General Shareholders’ Meeting include passing resolutions on:

• appointing and dismissing members of the Supervisory Board;

• approving the Rules of the Supervisory Board;

• purchasing shares of the Bank for the purpose of their redemption and determining consideration for the shares redeemed;

• establishing and releasing special funds created from net profit;

• disposal of real estate, share in real estate or perpetual usufruct right by the Bank if the value of the real estate or the right being subject to such an act exceeds 25% of the share capital; such consent is not required if the real estate, share in real estate or perpetual usufruct right has been purchased within the framework of enforcement, bankruptcy or restructuring proceedings, or based on another agreement with the Bank’s debtor;

• issuance of convertible bonds, bonds with a pre-emptive right or subscription warrants;

• laying down the principles for remuneration of members of the Management Board and Supervisory Board;

• approval of: financial statements (of the Bank and the Bank’s Group), Directors’ Reports (on the operations of the Bank and the Bank’s Group) and reports on the activities of the Supervisory Board;

• approving the proper discharge of duties by members of the Management Board and the Supervisory Board;

• profit distribution or offset of loss;

• determining the dividend day and the date of dividend payment;

• disposal and leasing out of the enterprise or an organized part thereof and creation of a limited property right thereon,

• amendments to the Bank’s Articles of Association;

• increase or decrease in the Bank’s share capital.

Unless the Commercial Companies Code provides otherwise, the General Shareholders’ Meeting is valid irrespective of the number of shares represented.

In accordance with the Bank’s Articles and within the scope specified in the Rules of the Supervisory Board, the Supervisory Board should express an opinion on matters placed on the agenda of the General Shareholders’ Meeting, and the shareholders should be given enough time to understand that opinion.

Resolutions of the General Shareholders’ Meeting shall be passed by an absolute majority of votes unless generally binding legal provisions or provisions of the Bank’s Articles of Association provide otherwise.

In accordance with the Bank’s Articles:

• removing a matter from the agenda or desisting from further consideration of a matter placed on the agenda at the request of shareholders shall require a resolution of the General Shareholders’ Meeting passed by a three-quarter majority of the votes after obtaining the consent of all shareholders present at the General Shareholders’ Meeting who requested that the matter be placed on the agenda.

• resolutions of the General Shareholders’ Meeting on share preferences and issues concerning the Bank’s merger by transfer of all of its assets to another company, its liquidation, decrease of the share capital by redeeming a part of the shares without a simultaneous share capital increase or changing the scope of the Bank’s activities resulting in the discontinuation of its banking activities require a 90% majority of the votes cast.

The General Shareholders’ Meeting may adjourn sessions by a majority of two-thirds of the votes. Such adjournment may not exceed a total of thirty days.

The General Shareholders’ Meeting passes resolutions in an open vote, with the reservation that a secret ballot shall be ordered in respect of:

• elections of members of the Bank’s authorities;

• motions to dismiss members of the authorities or liquidators of PKO Bank Polski S.A.;

• motions to bring members of the authorities or liquidators of PKO Bank Polski S.A. to justice;

• personnel matters;

• at the request of at least one shareholder present or represented at the General Shareholders’ Meeting;

• in other situations specified in generally binding legal regulations.

The General Shareholders’ Meeting is convened by announcement published on the Bank’s website and in the manner specified for the disclosure of current information by public companies. An announcement, including the materials presented to the shareholders, is available on the Bank’s website in the section “Investor relations” at General Shareholders’ Meeting – PKO Bank Polski (pkobp.pl) from the date of convening the General Shareholders’ Meeting.

The General Shareholders’ Meetings are held in the registered office of PKO Bank Polski S.A. or in another location in Poland, which is indicated in the announcement on convening the meeting. The meetings are broadcast online in real time. Representatives of the media are allowed to participate in the General Shareholders’ Meetings.

The General Shareholders’ Meetings may be recorded with the use of devices recording sound or sound and image. Personal data is processed in compliance with the principles defined in the announcement on convening the General Meeting. The recordings of the General Shareholders’ Meetings are published by the Bank on its website in the section “Investor relations” at Video conferences and teleconferences – PKO Bank Polski (pkobp.pl).

Rights of the shareholders

The most important rights of the shareholders of PKO Bank Polski S.A. include:

• participation in profit recognized in the Bank’s financial statements (audited by a registered auditor) and earmarked by the General Shareholders’ Meeting for payment to the shareholders;

• the possibility of participation in the General Shareholders’ Meeting, including the right to vote, put forward motions, make objections and ask questions.

Shareholders representing at least half of the share capital or the total number of votes at the Bank can convene the Extraordinary General Shareholders’ Meeting.

A shareholder or shareholders representing at least one-twentieth of the total number of votes or the total number of shares may request that the Extraordinary General Shareholders’ Meeting be convened and certain matters be placed on its agenda. They also may, before the date of the General Shareholders’ Meeting, submit to the Bank in writing or via electronic means of communication draft resolutions on matters placed on the agenda or matters which are planned to be placed on the agenda.

Additionally, during the General Shareholders’ Meeting the shareholders have the right to present draft resolutions or propose amendments or supplements to draft resolutions included in the agenda of the General Shareholders’ Meeting.

Each shareholder’s right to vote is limited to 10% of the total number of votes existing at the Bank on the day on which the General Shareholders’ Meeting is held. The exemptions from this limitation and its principles are described in § 10 of the Bank’s Articles.

The right to participate in the General Shareholders’ Meeting is granted to the persons who were shareholders of the Bank sixteen days before the date of the GSM.

Pledgees and users with voting rights have the right to participate in the General Shareholders’ Meeting if the limited property right established in their favour is registered in the securities account on the date of registering participation in the General Shareholders’ Meeting.

Shareholders may participate in the General Shareholders’ Meeting and exercise their voting rights in person (or, in the case of shareholders who are not natural persons, through a person authorized to make statements of intent on their behalf) or by proxy.

A power of attorney to participate in the General Shareholders’ Meeting and exercise voting rights must be given in writing or in an electronic form.

A Member of the Management Board, a member of the Supervisory Board, a liquidator and an employee of PKO Bank Polski S.A. or a member of the governing bodies or an employee of a company or cooperative which is a subsidiary of the Bank may act as the shareholders’ proxies at the General Shareholders’ Meeting of PKO Bank Polski S.A.

A shareholder may not, either personally or by proxy, or as a proxy of another person, vote on resolutions concerning his/her liability to PKO Bank Polski S.A. on whatever account, including the acknowledgement of the fulfilment of his/her duties, exemption from any duty towards PKO Bank Polski S.A., or any dispute between him/her and PKO Bank Polski S.A.

Shareholders shall have the right to ask questions, through the Chairman of the General Shareholders’ Meeting, to the members of the Management Board and Supervisory Board and the key registered auditor of PKO Bank Polski S.A. If it is necessary for assessing a matter placed on the agenda of the General Shareholders’ Meeting, the Management Board (subject to statutory exceptions) shall be obliged to present information about the Bank to the shareholder on request. In justified cases, the Management Board may provide information in writing within two weeks of the end of the General Shareholders’ Meeting.

The questions asked at the Annual General Shareholders’ Meeting on 7 June 2021 and the answers to these questions are published on the website in the section “Investor relations” at Report no. 26/2021 – Answers to the shareholder’s questions asked during the Annual General Shareholders’ Meeting on 7 June 2021. (pkobp.pl).

11.2.8 Supervisory Board of PKO Bank Polski S.A. – composition, powers and principles of functioning

The Supervisory Board of PKO Bank Polski S.A. consists of 5 to 13 members appointed for a three-year joint term of office.

The number of Supervisory Board members is set by the Eligible Shareholder (as defined below), also in the case of putting forward a motion for electing the Supervisory Board by voting in separate groups.

The State Treasury, as the Eligible Shareholder, pursuant to § 11 clause 1 of the Bank’s Articles of Association, set the number of members of the Supervisory Board at 11.

A shareholder having the right to exercise the biggest number of votes arising from the shares in the Bank’s share capital at the General Shareholders’ Meeting electing the Supervisory Board members, hereinafter called “the Eligible Shareholder”, shall present the candidates for the number of Supervisory Board members determined in accordance with the formula described below. The candidates for the other seats on the Supervisory Board may be presented by all shareholders, including the Eligible Shareholder.

The number of seats on the Supervisory Board reserved for the candidates presented by the Eligible Shareholder shall be calculated in accordance with the following formula:

N = 13*S, where:

N - is the number of seats on the Supervisory Board reserved for candidates presented by the Eligible Shareholder. If N is not a whole number, the number of seats on the Supervisory Board is equal to N rounded up to the nearest whole number; at the same time, the total number of seats on the Supervisory Board reserved for the candidates presented by the Eligible Shareholder must not exceed 8 (eight);

S - is the share of the Eligible Shareholder in the share capital of the Bank, calculated as the quotient of the number of shares from which the Eligible Shareholder may vote at the General Shareholders’ Meeting electing the Supervisory Board members and all shares in the Bank’s share capital outstanding as at the date of the General Shareholders’ Meeting.

If the General Shareholders’ Meeting appoints a smaller number of Supervisory Board members than the number resulting from the above formula, the Eligible Shareholder shall have the right to present and put to the subsequent votes at the same General Shareholders’ Meeting a number of candidates not bigger than twice the difference between the number of Supervisory Board members calculated in accordance with that formula and the number of members appointed from among the candidates previously presented by the Eligible Shareholder.

Members of the Supervisory Board shall be appointed and dismissed by the General Shareholders’ Meeting. The process of their selection shall ensure the appointment of competent persons and guarantee their suitability and proper performance of their obligations. The Supervisory Board members shall be selected taking into account the requirements of the individual and collective suitability assessment described in the “Policy for the suitability assessment of candidates for members and members of the Supervisory Board of Powszechna Kasa Oszczędności Bank Polski S.A.”. The suitability assessment of the candidates and members of the Supervisory Board is performed taking into account in the first place the requirements of Article 22aa of the Banking Law.

The General Shareholders’ Meeting performs the suitability assessment of the individual Supervisory Board members and the collective assessment of the whole Supervisory Board each time a new Supervisory Board member is appointed and once a year as part of the periodical assessment. The General Shareholders’ Meeting may also perform an additional suitability assessment in other, justified situations, which affect the requirements addressed to the Supervisory Board or its individual members. Such additional assessments shall be initiated by the Bank.

The Chair and Deputy Chair of the Supervisory Board shall be appointed by Eligible Shareholder from among the Supervisory Board members, also if the Supervisory Board has been elected by voting in separate groups.

The current term of office of the Supervisory Board commenced on 26 August 2020.

As at 31 December 2021, the Supervisory Board consisted of 11 persons.

Changes in the composition of the Supervisory Board in 2021

The following changes in the composition of the Supervisory Board of the Bank took place in 2021:

• Mr Marcin Izdebski resigned on 6 June 2021;

• On 7 June 2021, the Annual General Shareholders’ Meeting of the Bank:

– dismissed Grażyna Ciurzyńska from the position of Supervisory Board member,

– appointed Dominik Kaczmarski, Maciej Łopiński and Agnieszka Winnik–Kalemba to the Supervisory Board;

• Mr Piotr Sadownik resigned on 11 October 2021;

• On 12 October 2021, the Extraordinary General Shareholders’ Meeting of the Bank:

– dismissed Zbigniew Hajłasz from the position of Supervisory Board member,

– Appointed Tomasz Kuczur and Bogdan Szafrański to the Supervisory Board.

The General Shareholders’ Meeting, when making changes in the composition of the Supervisory Board, confirmed the individual suitability of the new Supervisory Board members in connection with their election for the current joint term and the collective suitability of the whole body, taking into account the changes in its composition. Moreover, the GSM confirmed the suitability of the existing members remaining on the Supervisory Board as part of the annual suitability assessment.

Pursuant to section 2.3 of Good Practices for WSE Listed Companies 2021, at least two Supervisory Board members satisfy the independence criteria referred to in the Act on registered auditors, audit firms and public oversight of 11 May 2017 and have no real and significant relationships with any shareholder holding at least 5% of the total number of votes.

Due to adopting the aforementioned principle by the Bank, each Supervisory Board member made a declaration of compliance or non-compliance with such independence criteria. In accordance with their declarations, eight Supervisory Board members (i.e. Mariusz Andrzejewski, Grzegorz Chłopek, Andrzej Kisielewicz, Rafał Kos, Maciej Łopiński, Tomasz Kuczur, Bogdan Szafrański, Agnieszka Winnik–Kalemba) satisfy the independence criteria set out in the Good Practices 2021, and three Supervisory Board members (i.e. Wojciech Jasiński, Dominik Kaczmarski, Krzysztof Michalski) do not satisfy the independence criteria.

COMPOSITION OF THE SUPERVISORY OF PKO BANK POLSKI S.A. AS AT 31 DECEMBER 2021

Maciej Łopiński – Chair of the Supervisory Board
Appointed to the Supervisory Board for the current term of office on 7 June 2021 and on the same day the State Treasury appointed him Chair of the Supervisory Board.	A graduate of the University of Wrocław. Editor-in-chief of Tygodnik Gdański, journalist at Głos Wybrzeża and Tygodnk Czas. Deputy to the Sejm (the Polish Parliament) of the 7th term. In the years 2005-2010, Secretary of State at the Chancellery of the President of Poland, Lech Kaczyński, and in the years 2015-2016 – at the Chancellery of the President of Poland, Andrzej Duda. Mr Łopiński has many years of experience in corporate law and corporate governance gained at the supervisory bodies of various companies, including PZU S.A., KGHM Polska Miedź S.A., PZU Asset Management S.A., Telewizja Polska S.A. Independent member of the Supervisory Board.
Year of birth: 1947
Wojciech Jasiński – Deputy Chair of the Supervisory Board
Member of the Supervisory Board since 25 February 2016. On 26 August 2020, he was appointed to the Supervisory Board for the current term of office. On 7 June 2021 he was appointed Deputy Chair of the Supervisory Board by the State Treasury.	A graduate of the Faculty of Law and Administration of the University of Warsaw (1972). From 1972 to 1986, he worked in Płock, among other things, at the National Bank of Poland, the Branch in Płock, at the Town Hall, also as legal counsel in the Tax Chamber. In 1990-1991, he organized the local government structures in the Płockie Voivodeship, as a Representative of the Government Plenipotentiary for Local Government Reform. From 1992 to 1997 he worked in the Supreme Audit Office (NIK) as director of the NIK Branch Office in Warsaw, Finance and Budget Team, and State Budget Department. In 1997-2000, he was a member and then President of the Management Board of Srebrna, a company with its registered office in Warsaw. He was a member of the Supervisory Board of Bank Ochrony Środowiska S.A. in 1998-2000. From September 2000 to July 2001 he was Undersecretary of State at the Ministry of Justice. In 2006-2007, he was Minister of the State Treasury. Since 2001, he has been a member of the Polish Parliament (during the 4th, 5th, 6th, 7th and 8th terms) where he was Chairman of the Standing Subcommittee for the Banking System and Monetary Policy, Chairman of the Economy Committee, and Chairman of the Public Finance Committee. He was also a member of the State Treasury Committee in the Sejm. President of the Management Board of PKN ORLEN S.A. from 16 December 2015 to 5 February 2018. From June 2018 to July 2019 – plenipotentiary of the Management Board of Energa S.A. for the development of investments and energy markets. Since 5 March 2020, Chair of the Supervisory Board of PKN ORLEN S.A. Dependent member of the Supervisory Board.
Year of birth: 1948
Dominik Kaczmarski – Secretary of the Supervisory Board
On 7 June 2021, he was appointed to the Supervisory Board for the current term of office. On 8 June 2021 he was appointed Secretary of the Supervisory Board.	Dominik Kaczmarski graduated from the Faculty of Law and Administration of the University of Warsaw with a Master of Arts degree in law. He has a tax advisor qualification. He has an MBA in Finance & Technology from the School of Business of the Warsaw University of Technology. He passed the first level of the CFA programme in November 2021. He gained professional experience working in the largest international advisory firms (PwC in 2012-2014 and Deloitte in 2014-2016) as an expert in taxation of the financial sector. From February 2016 to January 2020, he worked at the Ministry of Finance as Deputy Director of the Sectoral, Local and Gambling Taxes Department, and subsequently as the Deputy Director and Department Director of the Tax System Department. He dealt with tax on certain financial institutions and participated in the sealing of the tax system in the area of CIT and VAT, among others through the STIR (Clearing House Data Communications System) regulation. He performed the following functions: Secretary of the Anti-Tax Avoidance Council, member of the State Examination Board for Tax Advisors, member of the General Tax Law Codification Commission, and member of the team of corporate law experts working as part of the Commission for Corporate Governance Reform. From March 2020 to June 2021, Mr Kaczmarski was a member of the Supervisory Board of PKN Orlen S.A., and since June 2020 he has been a member of the Supervisory Board of Giełda Papierów Wartościowych w Warszawie S.A. (the Warsaw Stock Exchange) (and its chair since July 2020). At present, he performs the function of Director of the Analyses and Reporting Department at the Ministry of State Assets. Dependent member of the Supervisory Board.
Year of birth: 1989
Mariusz Andrzejewski – member of the supervisory board
Member of the Supervisory Board since 22 June 2017. On 26 August 2020, he was appointed to the Supervisory Board for the current term of office.	He works as a university professor at the Kraków University of Economics, where he also serves as the head of the Department of Financial Accounting. He served as Dean of the Faculty of Finance and Law from 2016 to 2019 and as Dean of the College of Economics, Finance and Law from 2019 to 2020. He holds a full doctoral degree in economics. In 2013-2019, he worked as associate professor at the School of Banking and Management in Kraków. In the years 2003-2013, he worked in the Bielsko-Biała School of Finances and Law, where he was also head of the Finance Department. He graduated from three faculties, studied accounting at the Faculty of Management at the Kraków University of Economics, automatics and robotics, specializing in artificial intelligence, and computer science at the Faculty of Electrical Engineering, Automatics and Electronics at the AGH University of Science and Technology in Kraków. During his studies, he received a scholarship of the Minister of National Education three times. In 2001, during the execution of a grant by the State Committee for Scientific Research, he wrote and defended his doctoral thesis, which was published as a book by Wydawnictwo Naukowe PWN under the title “Accounting and Disclosure of Information by Listed Companies”. He obtained business experience while sitting on supervisory boards of companies including: Zakłady Chemiczne Alwernia S.A., Kombinat Koksochemiczny Zabrze S.A., Północ Nieruchomości S.A. (a company listed on NewConnect), PolRest S.A. (a company listed on the WSE), Media Nieruchomości S.A., Przedsiębiorstwo Inżynierii Miejskiej sp. z o.o. w Czechowicach–Dziedzicach, AWSA Holland II BV. He was also President of the Management Board of Altair Sp. z o.o., member of the Management Board in charge of finance of TBS Złocień Sp. z o.o. and advisor to the Management Board at the Institute of Business Law and Foreign Investments (Instytut Prawa Spotek i Inwestycji Zagranicznych – IPSiZ Sp. z o.o.). He was an Arbitrator at the Arbitration Court at the Polish Financial Supervision Authority. Currently he is the Chair of the Supervisory Board of PKP Polskie Linie Kolejowe S.A., Chair of the Supervisory Board of INSTAL Kraków S.A. and Deputy Chair of the Supervisory Board of Tauron Sprzedaż sp. z o. o. He holds a professional title of registered auditor. In 2005-2006 he was Undersecretary of State in the Ministry of Finance. He is a member of the European Accounting Association (EAA) and the International Association for Accounting Education & Research (IAAER). He also is a member of the Polish Economic Society (PTE) and the Scientific Council of the Accountants Association in Poland. Author or co-author of over 150 academic publications and several dozen expert opinions on economics. Independent member of the Supervisory Board.
Year of birth: 1971
Grzegorz Chłopek – Member of the Supervisory Board
On 26 August 2020, he was appointed to the Supervisory Board for the current term of office.	He graduated from the Faculty of Electronics and Information Technology of the Warsaw University of Technology. Holder of the CFA title and securities broker licence. He started his professional career in 1994, from the very beginning tying it to the capital market. Until 1998 he worked at the Brokerage Office of Bank Gdański, Commercial Union Towarzystwo Ubezpieczeń na Życie (Polska) and American Bank in Poland. From December 1998, for over 21 years, he worked for Nationale-Nederlanden Powszechne Towarzystwo Emerytalne S.A. managing assets of the biggest open pension fund in Poland. In 2004 he was appointed to the Management Board of the company and from 2012 he was President of the Management Board. In the area of asset management, he was responsible for the management of interest rate market instruments and then for the entire investment portfolio, which exceeded PLN 72 billion in 2013. He was also responsible for the corporate governance area of the equity portfolio, which exceeded 5% of the market capitalization of all Polish companies listed on the Warsaw Stock Exchange. Since June 2020, he has been employed at iWealth Management sp. z o.o. as Managing Director, where he is responsible for developing cooperation with wealthy clients and institutions, as well as supporting free investment advisory services provided to the company’s clients. A member of the Supervisory Board of P.A. NOVA S.A. Since June 2021. He has extensive experience in managing large financial institutions, implementing new products in the financial sector, corporate governance of listed companies, analysis of financial statements and capital market instruments. He is an experienced expert in the pension, investment and insurance sectors. Independent member of the Supervisory Board.
Year of birth: 1971
Andrzej Kisielewicz – member of the supervisory board
Member of the Supervisory Board since 25 February 2016. On 26 August 2020, he was appointed to the Supervisory Board for the current term of office.	Professor of mathematical sciences. He works at the Wrocław University of Technology, at the Faculty of Mathematics. He obtained his full doctoral degree from the University of Wrocław, and was awarded a PhD. in mathematics from the Polish Academy of Sciences. A graduate of the University of Wrocław. He gained his professional experience in various academic centres, including: Vanderbilt University (Nashville, USA), Polish Academy of Sciences, Technische University (Darmstadt, Germany), The University of Manitoba (Winnipeg, Canada), Blaise Pascal University (Clermont-Ferrand, France). He has experience as a member of supervisory boards. At present he is the Chair of the Supervisory Board of KGHM Polska Miedź S.A. He is the author of more than 75 academic publications in foreign journals on mathematics, logic and computer science as well as many books (e.g. Sztuczna inteligencja i logika [Artificial Intelligence and Logic], Wprowadzenie do informatyki [An Introduction to Computer Science], etc.). He is also the author of many opinions, reviews and expert opinions, including for the National Science Centre and the European Commission. His professional interests include the application of mathematics, logic and computer science in practice, artificial intelligence, business intelligence, digitization and argumentation theory. Independent member of the Supervisory Board.
Year of birth: 1953
Rafał Kos – Member of the Supervisory Board
On 26 August 2020, he was appointed to the Supervisory Board for the current term of office	Attorney at Law, partner in the law office Kubas Kos Gałkowski. Doctor of Laws (Jagiellonian University), studied International Business Law at UC Davies (California), completed postgraduate studies in American Business Law at CUA Columbus School of Law (Washington, DC). Vice-President of the Court of Arbitration at the Lewiatan Confederation in Warsaw. Appointed a Permanent Arbitrator and Conciliator of the Court of Arbitration at the General Counsel to the Republic of Poland (since 2020). Member of the Commission for Arbitration of the Supreme Bar Council (since 2015) and The Board of Visitors CUA Law (since 2017). Expert of the Parliamentary Committee on Justice and Human Rights on the draft law on the enforcement of claims in class actions (2009), member of the Team for amendments to the Bankruptcy and Reorganization Law of the Minister of Justice (2012), Team for systemic solutions in the field of amicable methods of resolving economic disputes, facilitating the performance of economic activity of the Minister for the Economy (2013) and the Team for Economic Law of the Minister for Development (2015). Currently a member of the Commission for Corporate Governance Reform and expert teams of the Minister of State Assets: on increasing the effectiveness of supervisory boards and on corporate law. Recommended as an expert in litigation and arbitration by, among others, Who’s Who Legal, Chambers and Partners, Rzeczpospolita daily. Independent member of the Supervisory Board.
Year of birth: 1971
Tomasz Kuczur – Member of the Supervisory Board
On 12 October 2021 he was appointed to the Supervisory Board for the current term of office.	Lawyer and expert in political science. A graduate of the Faculty of Law and Administration of the University of Warmia and Mazury and the Bydgoszcz Academy (now the Kazimierz Wielki University in Bydgoszcz). He obtained a PhD in law from the Faculty of Law and Administration of the University of Warmia and Mazury. He obtained a full doctorate in social science (specialization: political systems) at the University of Wrocław. Professor at the Department of Humanities of the Kazimierz Wielki University in Bydgoszcz. Member of the Local Government Board of Appeals in Bydgoszcz. Member of the Scientific Council of the Przegląd Sejmowy magazine. Appointed by the Minister of Science and Higher Education to the Interdisciplinary Team for projects submitted for the programme “Support for Scientific Magazines”. Independent member of the Supervisory Board.
Year of birth: 1973
Krzysztof Michalski – Member of the Supervisory Board
Member of the Supervisory Board since 17 September 2019. On 26 August 2020, he was appointed to the Supervisory Board for the current term of office.	Graduate of the Law and Administration and Political Science faculties at the Marie Curie-Skłodowska University in Lublin and the Faculty of Economic Sciences at the University of Warsaw. He has also obtained an MBA in Innovation and Data Analysis from the Institute of Computer Science of the Polish Academy of Sciences (PAN) and the Woodbury School of Business at Utah Valley University. Mr Michalski began his professional career in 2009 at an international trade company operating globally, where he was responsible for market research, creating new products, marketing and sales development on foreign markets. Since 2017 he has been the leader of the investor relations team at the Ministry of Development. He was responsible for various operations in the area of private investment, cooperation with Polish and foreign investors and financial institutions and supporting the execution of large investment projects. At present he directs the work of the expert team at the Chancellery of the Prime Minister. He is responsible for analyses and advice on tax, business and financial issues. He is also involved in matters concerning international relations. Dependent member of the Supervisory Board.
Year of birth: 1985
Bogdan Szafrański – Member of the Supervisory Board
On 12 October 2021, he was appointed to the Supervisory Board for the current term of office.	An economist and Americanist, expert in strategic financial management, capital market, US politics and economy and Polish-American relations. He obtained a PhD in management science at the Faculty of Management of the Warsaw University and passed the Chartered Financial Analyst (CFA) exam at level 2. A graduate of the University of California Irvine (UCI), where he obtained an MBA in finance from the Merage School of Business. Before that he studied at the Faculty of Management of the University of Warsaw and the Faculty of Foreign Trade of the Warsaw School of Economics (SGH). He also took a PhD course in economics at the University of California Los Angeles (UCLA). He worked in California, USA for high tech companies, such as Digital Corporation, Advanced Photonics, Inc. ans Xsirius Superconductivity, Inc. He was a member and then the chair of the Supervisory Board of Polam Credit Union in Los Angeles (the Polish credit unions SKOK are based on the CU model). Subsequently, he was President of the ZEM Celma S.A. Group, Vice-President for Finance and Administration of Kapsch Telecom Sp. z. o.o., Vice-President of the Management Board for Strategic Shareholder Cooperation at a telecommunications joint venture Energis Polska Sp. z o.o. (National Grid, Energis, PKP), Strategy and Development Director at Tel-Energo S.A., Vice-President for Finance of PKP Cargo S.A., advisor to the Management Board of Petrolot Sp. z o.o. for financial restructuring, and Management Board member for Finance and Business at PLK S.A. In 1994, he passed the exam for candidates for supervisory board members, and since then he has been a member of a number of supervisory boards, including the supervisory boards of companies with the participation of the State Treasury (PFR S.A., Lotos Terminale S.A., ZEM Celma S.A., KWB Konin S.A., PKP PLK S.A.). He carried out independent consulting activities at MetaStrategy Consulting in the area of strategic management, economic value added (EVA) management, valuation of enterprises and M&A consultancy. Recently he has been a lecturer in finance at the Faculty of Management and the Centre for American Studies at the University of Warsaw and at the Lazarski University. He is a commentator of economic and political events in Telewizja Republika, TVP Info, TVN24 BiS, Radio Wnet, and author of articles on management, privatization and finance. A member of the Polish-US think tank Polonia Institute. Independent member of the Supervisory Board.
Year of birth: 1958
Agnieszka Winnik-Kalemba – Member of the Supervisory Board
On 7 June 2021, she was appointed to the Supervisory Board for the current term of office.	Ms. Winnik-Kalemba graduated from the Faculty of Law and Administration of the University of Wrocław in 1995. In the years 1995-1997, she participated in the post-graduate scholarship programme funded by the US government at Gergeotown University in Washington D.C. and the University of Kentucky the James W. Martin School of Public Policy and Administration. In the years 1999-2003, she trained to become an attorney-at-law. Since 2003, she has run her own law firm – Kancelaria Adwokacka Adw Agnieszka Winnik-Kalemba. In the years 1986-1989, she cooperated with the Regional Executive Committee of the “Solidarity” Trade Union – the Lower Silesia Region (Regionalny Komitet Wykonawczy NSZZ Solidarność Region Dolny Śląsk) and the “Solidarity” Committee for Interventions and the Rule of Law (Komisja Interwencji i Praworządności NSZZ Solidarność) run by Zofia and Zbigniew Romaszewski. In the years 1989-2000, she worked for: the Executive Office of the “Solidarity” Trade Union - the Lower Silesia Region; the Law Offices of Bowles, Keating, Matuszewich & Fiordalisi a Partnership of Professional Corporation, Chicago USA (as a legal assistant); the Chairman of the Chamber of Regions of the Council of Europe (as a legal assistant); the Vivodeship Sejmik of Wrocław Voivodship; the Legal Office of the Lower Silesian Marshal Office in Wrocław (as its director). In the years 2006-2008, Ms. Winnik-Kalemba was a member of the Supervisory Board of PKO Bank Polski S.A., and in 2016 she was Deputy Chair of the Supervisory Board of PKO Bank Polski S.A. At present she is a member of the Supervisory Board of KGHM Polska Miedź S.A. Independent member of the Supervisory Board.
Year of birth: 1969

Principles of the functioning of the Supervisory Board

The Supervisory Board functions based on generally applicable legal regulations, the Articles of Association and the Rules passed by the Supervisory Board and approved by the General Shareholders’ Meeting. Meetings of the Supervisory Board are held at least once a quarter.

The Supervisory Board passes resolutions by an absolute majority of votes, in the presence of at least half of the members, including the Chair or Deputy Chair, except for resolutions specified in the Bank’s Articles, which require (apart from the quorum indicated) a qualified majority of 2/3 of the votes. The members of the Supervisory Board to whom the given voted matter relates do not participate in the vote.

The work of the Supervisory Board is managed by the Chair, and in his/her absence – by the Deputy Chair. The Chair represents the Supervisory Board before the other authorities of PKO Bank Polski S.A., regulatory authorities and other persons.

Meetings of the Supervisory Board may be convened with the possibility of participation (and passing of resolutions) via remote communication channels, in accordance with the “Rules for participation in a meeting of the Supervisory Board of Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna by means of direct remote communication” adopted by the Supervisory Board (the Rules of e-meetings).

With the exception of matters specified in the Bank’s Articles of Association, the Supervisory Board may also pass resolutions outside the meeting in writing (by circulation) or using means of direct remote communication, in particular e-mail.

In 2021 the Supervisory Board held 15 meetings and passed 194 resolutions.

The participation of the Supervisory Board members in the meetings in 2021 is presented in the following table.

Table 26. Attendance of members of the Supervisory Board of the Bank in 2021
Name	Attendance *
Mariusz Andrzejewski	15/15
Grzegorz Chłopek	15/15
Grażyna Ciurzyńska	5/5
Zbigniew Hajłasz	11/11
Marcin Izdebski	5/5
Wojciech Jasiński	13/15
Dominik Kaczmarski	10/10
Andrzej Kisielewicz	13/15
Rafał Kos	15/15
Tomasz Kuczur	4/4
Maciej Łopiński	10/10
Krzysztof Michalski	15/15
Piotr Sadownik	11/11
Bogdan Szafrański	4/4
Agnieszka Winnik-Kalemba	9/10

* Attendance at meetings / number of meetings in the period of performing the function.

All absences were considered justified by resolutions of the Supervisory Board.

Competences of the Supervisory Board

In addition to authorizations and duties stipulated by generally applicable legal regulations and the provisions of the Articles of Association of PKO Bank Polski S.A., the competences of the Supervisory Board include passing resolutions pertaining, in particular to:

• approving the following documents adopted by the Management Board: policies, rules and regulations, including: the Bank’s strategy, the risk management strategy, the Bank management strategy, the dividend policy, the remuneration policy, the policy for internal capital assessment and capital management, and review of strategies and procedures for internal capital assessment and capital management, the compliance policy of the Bank, internal control rules, regulations of the Management Board, regulations for the management of special funds created from net profit, organizational rules of the Bank, compliance and internal audit unit regulations;

• approving the annual financial plan adopted by the Management Board;

• approving the overall risk tolerance level determined by the Management Board;

• appointing an audit firm to conduct the audit or review of the Bank’s financial statements and the consolidated financial statements of the Bank’s Group;

• passing the Rules:

– of the Supervisory Board;

– for granting loans, advances, bank guarantees and warranties to members of the Management Board and Supervisory Board, persons holding managerial positions in the Bank and to entities related to these persons by capital or organizational links;

• appointing and dismissing the President of the Management Board, Vice-Presidents and other members of the Management Board, as well as suspending members of the Management Board and seconding members of the Supervisory Board to temporarily carry out the duties of the Management Board members who have been dismissed, resigned or are unable to perform their duties for other reasons;

• giving its prior consent for actions fulfilling statutory criteria, including, among other things, disposal of non-current assets (intangible assets, property, plant and equipment, long-term investments), taking up, the purchase or sale of shares in another company, subscription or purchase of bonds convertible to shares, concluding a material agreement by PKO Bank Polski S.A. with a shareholder holding at least 5% of the total number of votes in the Bank or with a related entity, concluding a contract for legal services, marketing services, public relations and social communication services or management consultancy services, donation agreements or similar agreements, debt release agreements and other similar agreements whose value exceeds the amount indicated in the Bank’s Articles;

• applying to the Polish Financial Supervision Authority for consent for the appointment of the President of the Management Board and a Management Board member supervising the management of risk material to the Bank’s activities, and for entrusting the function of Management Board member supervising the management of risk material to the Bank’s activities to a current Management Board member who has not supervised the management of this risk to date;

• evaluation of the functioning of the Bank’s remuneration policy and presentation of a relevant report to the Annual General Shareholders’ Meeting;

• opinion on the application of the “Principles of corporate governance for supervised institutions” by the Bank;

• granting approval for opening or closing a foreign branch.

Committees of the Supervisory Board

In accordance with the Bank’s Articles, the Supervisory Board appoints from among its members committees which it is required to appoint under the binding legislation. The Supervisory Board may also appoint other committees from among its members.

The Nominations and Remuneration Committee appointed by the Supervisory Board functions in accordance with the provisions of Annex I to the Commission Recommendation 2005/162/EC on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board.

The Supervisory Board has appointed the following committees:

Audit Committee of the Supervisory Board

Tasks

Monitoring the financial reporting process, including the review of interim and annual financial statements (separate and consolidated).

Monitoring the effectiveness of the internal control system, including with respect to financial reporting.

Monitoring the effectiveness of the risk management system with respect to financial reporting, in particular by analysing information received from the Risk Committee.

Monitoring the audit activities, in particular performance of the audit by the audit firm, taking into account all conclusions and findings of the Audit Oversight Commission, which is referred to in the Act on registered auditors, resulting from inspections carried out in the audit firm.

Controlling and monitoring the independence of the registered auditor and the audit firm carrying out the audit of the financial statements, in particular when the audit firm also provides services other than audit to the Bank’s Group.

Informing the Supervisory Board of the audit results and explaining how the audit contributed to the fairness of the Bank’s financial reporting and explaining the role of the Committee in the audit process.

Assessing the independence of the registered auditor and consenting to the provision of permissible services other than audit to the Bank and the Bank’s Group by the audit firm’s related entities or a member of the audit firm’s network, in accordance with the policy.

Developing a policy for selecting the audit firm to conduct an audit and providing the Supervisory Board with recommendations as to adopting the policy.

Developing a policy for the provision of services other than audit by the audit firm performing the audit, its related entities and a member of the audit firm’s network, and providing the Supervisory Board with recommendations as to adopting the policy.

Developing a procedure for selecting an audit firm to conduct an audit and providing the Supervisory Board with recommendations as to adopting the policy.

Providing the Supervisory Board with recommendations as to the appointment of the audit firm to conduct the audit.

Submitting recommendations aimed at ensuring the fairness of the Bank’s financial reporting to the Supervisory Board.

Submitting recommendations to the Supervisory Board with regard to the statement concerning the audit firm conducting the audit of the annual financial statements of the Bank and consolidated financial statements of the Bank’s Group.

Developing the rules for the process of disclosing and exchanging data and information between the PFSA, the audit firm, the key registered auditor and the Bank, and recommending their adoption to the Supervisory Board.

Composition

of the

committee

in 2021

As at 31 December 2021, the Audit Committee consisted of:
		date of appointment to the Committee during the present term of the Supervisory Board
Chair:	Agnieszka Winnik-Kalemba	15 June 2021
Deputy Chair:	Mariusz Andrzejewski	24 September 2020
Members:	Grzegorz Chłopek	24 September 2020
	Dominik Kaczmarski	15 June 2021
	Rafał Kos	24 September 2020
	Bogdan Szafrański	16 December 2021

The following persons were also members of the Audit Committee in 2021:

– Marcin Izdebski until 6 June 2021 (resignation date);

– Grażyna Ciurzyńska until 7 June 2021 (dismissal date).

Independence

criteria

and

competences

As part of the assessment of the suitability of candidates for Supervisory Board membership made in connection with their election for a new term of office (in accordance with the Policy on suitability assessment of candidates and members of the Supervisory Board of Powszechna Kasa Oszczędności Bank Polski S.A.), it was assessed whether the candidates meet the requirements necessary to serve on the Audit Committee of the Supervisory Board (hereinafter: the Audit Committee).

According to the assessment, the appointed members of the Audit Committee jointly meet the conditions of independence and qualifications in accordance with the requirements of the Act on statutory auditors, audit firms and public oversight of 11 May 2017.

As at 31 December 2021:

•	Chair of the Audit Committee Agnieszka Winnik-Kalemba and Mariusz Andrzejewski, Grzegorzz Chłopek, Rafał Kos and Bogdan Szafrański, i.e. the majority of the Audit Committee members, are independent;
•	The following members have the most adequate knowledge and experience in the scope of the Audit Committee’s activity, including competences in accounting and auditing of financial statements:
	-	Mariusz Andrzejewski – competences confirmed by a PhD. in economics and qualifications of a registered auditor; member of Polish and international accounting and bookkeeping associations; additionally, skills resulting from professional experience related to performing management and supervisory functions and working as a registered auditor;
	-	Grzegorz Chłopek – competences confirmed by the knowledge gained within the educational programme connected with the title of Chartered Financial Analyst and the title of stockbroker; additionally, skills resulting from professional experience connected with managing a Universal Pension Fund Management Company;
	-	Dominik Kaczmarski – competences resulting from knowledge and skills gained within the educational programme connected with the title of tax advisor, completed MBA Finance & Technology studies and professional experience in tax reviews and calculations for banks and in the process of auditing financial statements (in the area of their tax components);
	-	Bogdan Szafrański – knowledge and skills gained within the educational programme at the University of California Irvine (UCI), where he completed MBA studies at the Merage School of Business in the area of finance, as well as resulting from his experience as a lecturer in the Faculty of Finance and Banking of the Lazarski University in Warsaw (mainly in the area of financial and management accounting);
•	all members of the Audit Committee collectively have knowledge and skills in the area of banking resulting from, among other things, their education, professional experience and functions performed (as more fully described in the biographical notes in this chapter).

The General Shareholders’ Meeting performs an assessment of the suitability of the Supervisory Board members (including an assessment of their independence), in accordance with the aforementioned Policy at the time of selecting the candidates for the Supervisory Board members and periodically once a year.

Number of

meetings

In 2021 there were nine meetings of the Audit Committee of the Supervisory Board.

Policy for

selecting the

audit firm

and policy

for providing

the services

The main purpose of the Policy for selecting the audit firm to audit the financial statements of the Bank and the Bank’s Group (hereinafter: the Selection Policy) and the Policy for the provision of permissible services other than audit to the Bank and the Bank’s Group companies by the audit firm performing the audit, its related entities or members of its network (hereinafter: the Policy for providing the services), is to ensure the compliance of the audit firm selection process and the provision of services by this firm to the Bank and the Group with the applicable laws and recommendation L of the Polish Financial Supervision Authority, in particular in terms of ensuring the audit firm’s independence and objectivity and satisfaction of the requirements concerning mandatory rotation and cooling off periods.

The Selection Policy defines the following principles of mandatory rotation and cooling off periods with respect to the audit firm and the key registered auditor.

1.	The maximum period of uninterrupted performance of statutory audit engagements by the same audit firm, an audit firm related to that firm or any member of a network operating in the European Union of which these audit firms are members is 10 audited financial years. This period may be extended (with PFSA’s approval) by two years, to a maximum of 12 audited financial years, if more than one audit firm is engaged in the joint audit formula, provided that the statutory audit results in the preparation of a joint audit report.
2.	An agreement for audit of the financial statements shall be concluded for a period not shorter than 2 financial years and not longer than 3 financial years, with an option of extending it for the following audited period of at least two financial years.
3.	After the end of the maximum period of uninterrupted performance of engagements referred to in item 1, the audit firm may perform a statutory audit again not earlier than 4 years after the end of the previous audit of the financial statements of the Bank and the Bank’s Group.
4.	A key registered auditor must not perform a statutory audit of the financial statements for a period longer than 5 audited financial years..
5.	A key registered auditor may perform a statutory audit of the financial statements again not earlier than three years after the end of the last statutory audit of the financial statements of the Bank and the Bank’s Group.

In accordance with the Selection Policy, the Supervisory Board conducts the proceedings for signing an agreement for the audit of the financial statements of the Bank and the Bank’s Group in the form of an open tender. Having completed the selection procedure organized by the Bank, the Audit Committee provides to the Supervisory Board a recommendation concerning the audit firm selection. Unless it is recommended to renew the audit engagement, the recommendation presents at least two audit firms to be selected from and an indication of the preferred one (with a justification). The Supervisory Board selects the audit firm based on the Audit Committee’s recommendation. Clear and unbiased criteria are applied in the selection of the audit firm on the basis of the proposals submitted.

The Audit Committee recommendations for the selection of the audit firm to audit the financial statements for the years 2020-2021 and 2022-2023 satisfied the applicable requirements and were prepared based on the selection procedures organized by the Bank, which satisfied the applicable criteria.

In accordance with the Policy for providing the services, the provision of permissible services other than audit by the audit firm performing the audit, its related entities or members of its network to the Bank requires approval of the Audit Committee of the Supervisory Board of the Bank. The approval of the Audit Committee of the Supervisory Board is also required in the case of permissible services other than audit provided to a company of the Bank’s Group (on the request of such company). The company requesting such approval must present the approval of its Audit Committee or its Supervisory Board.

In 2021, the audit firm PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. K. provided to the Bank permissible services other than audit, comprising the review of financial statements and the assessment of the report on remuneration of the members of the Bank’s Management Board and Supervisory Board prepared by the Supervisory Board. Before signing the agreement for the provision of permissible services other than audit, the Audit Committee of the Bank’s Supervisory Board assessed the independence of the audit firm and gave its consent for the performance of those services.

Nominations and Remuneration Committee

Tasks

Expressing opinions and monitoring the Remuneration Policy adopted by the Bank and supporting the Bank’s authorities in developing and implementing this policy.

In particular, the Committee is responsible for the performance of the following tasks:

- expressing opinions on the general rules for remunerating persons whose professional activities have a material impact on the Bank’s risk profile to be approved by the Supervisory Board;

- conducting periodical reviews of the Remuneration Policy and presenting their results to the Supervisory Board;

- presenting to the Supervisory Board proposals of principles for remunerating members of the Management Board;

- evaluating MbO targets pursued and achieved by the members of the Management Board;

- assessing tools and systems adopted to guarantee that the remuneration system in the Bank’s Group properly accounts for all types of risk, liquidity and equity levels and that the Remuneration Policy complies with the proper and effective risk management principles, supports such management and is consistent with the business strategy, goals, corporate culture and values, and the long-term interests of the Bank’s Group;

- supervising fixed remuneration of the leader of the Bank’s compliance unit;

- providing opinions and monitoring variable remuneration components of leaders of the legal, compliance, internal audit, risk management and human resources units;

- presenting opinions to the Supervisory Board on the settlement of MbO targets for members of the Management Board approved by the Supervisory Board;

- preparing a draft report on the evaluation of the functioning of the Remuneration Policy in the Bank, which is presented by the Supervisory Board to the General Shareholders’ Meeting.

Additionally, the Committee’s tasks include:

- expressing opinions on the diversity policy relating to the composition of the Management Board;

- recommending candidates to the Management Board to the Supervisory Board;

- recommending the scope of duties for the candidate to the Management Board specified by the Supervisory Board, as well as the requirements concerning the knowledge and competences and the expected involvement in terms of the amount of time necessary to perform the function;

- recommending to the Supervisory Board the target representation of the gender which is under-represented in the Management Board;

- periodically (at least once a year) assessing the structure, size, composition and effectiveness of the functioning of the Management Board and recommending respective changes to the Supervisory Board;

- periodically (at least once a year) assessing the knowledge, competences and experience of the Management Board as a whole and of its individual members, and informing the Management Board of the results of the assessment;

- periodically assessing the Management Board’s policy in respect of the selection and appointment of persons to managerial positions at the Bank and submitting respective recommendations to the Management Board.

Composition

of the

Committee

in 2021

As at 31 December 2021, the Nominations and Remuneration Committee consisted of:
		date of appointment to the Committee during the present term of the Supervisory Board
Chair:	Wojciech Jasiński	24 September 2020
Deputy Chair:	Dominik Kaczmarski	8 June 2021
Members:	Andrzej Kisielewicz	24 September 2020
	Tomasz Kuczur	14 October 2021
	Bogdan Szafrański	14 October 2021

The following persons were also members of the Nominations and Remuneration Committee in 2021:

– Marcin Izdebski until 6 June 2021 (resignation date);

– Grażyna Ciurzyńska until 7 June 2021 (dismissal date);

– Zbigniew Hajłasz until 12 October 2021 (dismissal date).

Number of

meetings

In 2021 there were 12 meetings of the Nominations and Remuneration Committee of the Supervisory Board.

Risk Committee

Tasks

Evaluating the overall current and future readiness of the Bank to take risks, taking into account the risk profile of the Bank Group.

Expressing opinions on the Bank’s operational risk management strategy adopted by the Management Board and information on the implementation of this strategy submitted by the Management Board, as well as other periodic reports on risk management and capital adequacy.

Expressing opinions on other resolutions of the Management Board in respect of risk management and capital adequacy which are subject to approval by the Supervisory Board.

Supporting the Supervisory Board in overseeing the implementation of the Bank’s operational risk management strategy.

Reviewing whether the prices of assets and liabilities offered to customers fully envision the Bank’s business model and its strategy in terms of risk and suggesting corrective actions to the Management Board.

Assessing the risks associated with the financial products and services offered.

Expressing opinions on solutions for reducing business risk with the use of the Bank’s property insurance and civil liability insurance for members of the Bank’s authorities and proxies.

Ongoing monitoring of the risk management system and providing the Supervisory Board with information on the results of this monitoring.

Expressing opinions on the information on the risk management strategy and risk management system disclosed by the Bank to the general public.

Conducting an annual review of the employees’ remuneration policy of the Bank and the Bank’s Group.

Ongoing monitoring of the implementation of risk management strategy and providing recommendations to the Supervisory Board.

Advising on the selection of external advisors, experts and consultants in the event that the Supervisory Board wishes to use their services.

Evaluating recommendations of external and internal auditors and follow-up in the form of appropriate implementation of the respective measures.

Performing other tasks specified by the Supervisory Board with regard to risk management at the Bank.

Composition

of the

committee

in 2021

As at 31 December 2021, the Risk Committee consisted of:
		date of appointment to the Committee during the present term of the Supervisory Board
Chair:	Mariusz Andrzejewski	24 September 2020
Deputy Chair:	Grzegorz Chłopek	24 September 2020
Members:	Wojciech Jasiński	24 September 2020
	Dominik Kaczmarski	15 June 2021
	Andrzej Kisielewicz	24 September 2020
	Krzysztof Michalski	24 September 2020
	Bogdan Szafrański	14 October 2021

Number of meetings

In 2021 there were 8 meetings of the Risk Committee of the Supervisory Board.

Strategy Committee

Tasks

Expressing opinions on the Bank’s strategy adopted by the Management Board, the approval of which is the competence of the Supervisory Board.

Supporting the Supervisory Board in overseeing the implementation of the strategy, in particular by analysing periodic information on the implementation thereof presented by the Management Board.

Expressing opinions on strategic activities of the Bank, which require the prior consent of the Supervisory Board, in particular on their compliance with the binding strategy of the Bank.

Performing other tasks specified by the Supervisory Board with regard to the implementation of the strategic goals and key projects of the Bank.

Composition

of the

committee

in 2021

As at 31 December 2021, the Strategy Committee consisted of:
		date of appointment to the Committee during the present term of the Supervisory Board
Chair:	Dominik Kaczmarski	15 June 2021
Members:	Mariusz Andrzejewski	24 September 2020
	Andrzej Kisielewicz	24 September 2020
	Tomasz Kuczur	14 October 2021
	Krzysztof Michalski	24 September 2020
	Bogdan Szafrański	14 October 2021

The following persons were also members of the Strategy Committee in 2021:

– Grażyna Ciurzyńska until 7 June 2021 (dismissal date);

– Piotr Sadownik until 11 October 2021 (resignation date);

– Zbigniew Hajłasz until 12 October 2021 (dismissal date).

Number of

meetings

In 2021 there were three meetings of the Strategy Committee of the Supervisory Board

11.2.9 The management board of PKO Bank Polski S.A. – composition, powers and principles of functioning

The Management Board of PKO Bank Polski S.A. consists of three to nine members. The Management Board members are appointed by the Supervisory Board for a joint three-year term. Appointing the President of the Management Board and the Board member responsible for overseeing the management of material risk in the Bank’s operations requires the consent of the PFSA.

The current term of office of the Management Board began on 30 July 2020.

Changes in the composition of the Management Board in 2021

In 2021 there were the following changes in the composition of the Management Board of the Bank:

• On 11 May 2021, Zbigniew Jagiełło filed his resignation from the position of President of the Management Board and membership in the Management Board with effect as of the closing of the Annual General Shareholders’ Meeting of the Bank, which was convened for 7 June 2021;

• On 8 June 2021, the Bank’s Supervisory Board:

– appointed Jan Emeryk Rościszewski, Vice-President of the Management Board, to the position of President of the Management Board, on the condition of obtaining PFSA approval and as of the date of such approval; it also entrusted to Jan Emeryk Rościszewski the management of the work of the Management Board (until the date of granting the PFSA approval);

– appointed Marcin Eckert to the Management Board;

• On 15 June 2021, the Bank’s Supervisory Board:

– dismissed Rafał Kozłowski from the Management Board;

– appointed Bartosz Drabikowski to the Management Board;

• On 26 July 2021, Adam Marciniak resigned from his function of Vice-President of the Management Board and membership in the Management Board with effect from 13 August 2021;

• On 3 September 2021, the PFSA approved the appointment of Jan Emeryk Rościszewski for the position of President of the Management Board;

• On 14 September 2021, the Bank’s Supervisory Board appointed Artur Kurcweil to the Management Board;

• On 14 October 2021, Jan Emeryk Rościszewski resigned from the position of President of the Management Board and membership in the Management Board with effect from 22 October 2021;

• On 14 October 2021, the Bank’s Supervisory Board:

– dismissed Rafał Antczak and Jakub Papierski from the Management Board;

– appointed Iwona Duda to the position of Vice-President of the Management Board effective from 23 October 2021; at the same time, Iwona Duda was appointed President of the Management Board on the condition of obtaining PFSA approval and as of the date of such approval; it also entrusted to Iwona Duda the management of the work of the Management Board (in the period from 23 October 2021 to the date of granting the PFSA approval);

– appointed Wojciech Iwanicki to the Management Board.

In connection with the changes in the composition of the Management Board and the related changes in the division of powers within the Bank’s Management Board, the Nominations and Remuneration Committee of the Supervisory Board performed:

• preliminary suitability assessments – associated with the appointment of new Management Board members;

• periodical suitability assessments – associated with a suitability assessment of the existing members who remained on the Management Board;

• additional suitability assessments – associated with changes of the internal division of powers within the Management Board (concerning the Management Board members whose powers changed);

• collective suitability assessments of the Management Board – taking into account the changes in the composition of the Management Board and in the internal division of powers.

The suitability assessments were performed in accordance with the “Suitability policy concerning the Management Board members and key officers of the Bank and suitability assessment at the Bank’s Group companies”. As a result of the above assessments, the Nominations and Remuneration Committee confirmed the individual suitability of the newly appointed and existing members of the Bank’s Management Board and the collective suitability of the Management Board. The above suitability assessments were approved by the Supervisory Board of the Bank.

On 26 January 2022, the PFSA unanimously approved the appointment of Iwona Duda as President of the Management Board of PKO Bank Polski S.A.

As at 31 December 2021, the Management Board consisted of 8 persons.

Composition of the Management of PKO Bank Polski S.A. as at 31 December 2021

Iwona Duda – Vice-President of the Management Board managing the work of the Management Board and in charge of the Function of the President of the Management Board
Member of the Management Board since 23 October 2021	Manager, economist with twenty years of experience on financial markets. Currently President of the Management Board of PKO Bank Polski S.A. From 23 October 2021 to 25 January 2022, Vice-President of the Management Board managing the work of the Bank’s Management Board. Previously, President of the Management Board of Alior Bank S.A. She also worked as advisor to the President of the National Bank of Poland and member of the Supervisory Board of Bank Ochrony Środowiska. In the years 2006-2008, she was Vice-President of the Polish Financial Supervision Committee. Previously, as the Plenipotentiary of the Prime Minister, she organized the PFSA Office, which was established as a result of the combination of the Insurance and Pension Funds Supervision Authority (Komisja Nadzoru Ubezpieczeń i Funduszy Emerytalnych) and the Securities and Stock Exchange Commission (Komisja Papierów Wartościowych i Giełd). Ms Duda was also Vice-President of the Insurance and Pension Funds Supervision Authority and director of the Financial Market Development Department at the Ministry of Finance. She also worked as an advisor at the Strategic Management Department of the National Bank of Poland. From 1998 to 2005, she worked as a department director at the Office for Supervision of Pension Funds (Urząd Nadzoru nad Funduszami Emerytalnymi), and then she supervised the market of insurance brokers at the Insurance and Pension Funds Supervision Authority Office. Before that she worked at the Ministry of Finance as a specialist in public debt issues; she also worked for the Office of the Committee for European Integration. Ms Duda performed various functions in the financial market institutions, such as e.g. Deputy Chair of the Supervisory Board of Bank Gospodarstwa Krajowego, member of the Supervisory Board of the National Depository of Securities (KDPW), deputy member of the Payment System Council at the National Bank of Poland and member of the Supervisory Board of PTE PZU S.A. Ms Duda is an economist. She graduated from the Warsaw School of Economics and the National School of Public Administration. She also completed the Studies for Investment Advisors – Securities Analysts at the Koźminski University. Author of expert publications on the financial market and the pension system. She completed a number of professional programmes in the USA, Germany and other countries. She was awarded the badge of honour “For merit in banking”.
Year of birth: 1967
Functions performed in Committees as at 31 December 2021	Strategy Committee (Member).
Bartosz Drabikowski – Vice-President of the Management Board of the Bank in charge of the Finance and Accounting Area
Member of the Management Board since 15 June 2021.	Vice-President of the Management Board in charge of Finance (CFO) since June 2021. He previously performed this function in the years 2008-2017. Deputy Chair of the Supervisory Board of Bank Pocztowy S.A. Since August 2021. Member of the Board of Directors of VISA Europe and the Risk, Audit and Finance Committee (2015-2016). In the years 2006-2008 he was a member of the Management Board of Krajowa Izba Rozliczeniowa S.A. in charge of finance, new electronic payment products, security and risk management. He has many years of experience in the management of financial institutions. He chaired the Supervisory Boards of the PKO Bank Polski S.A. Group companies: Inteligo Financial Services S.A., CEUP eService sp. z o.o., PKO Faktoring S.A. He was a member of the Supervisory Board of Krajowy Depozyt Papierów Wartościowych S.A. (the National Depository of Securities), a member of the Board of the Bank Guarantee Fund and a member of the Supervisory Board of Polska Wytwórnia Papierów Wartościowych S.A.; in the years 2018-2021 he advised the President of the Management Board of PHN S.A. Mr Drabikowski started his professional career at the Ministry of Finance where he worked on the financial market regulations and supervision, focusing in particular on the banking sector and the capital market. He also prepared development strategies for the financial services sector both in Poland and for the common market of the European Union. He worked in the following positions at the Ministry of Finance: advisor to the Minister, deputy director and director of the Department of Financial Institutions. For a few years, he was a member of the Banking Supervision Authority and the Securities and Stock Exchange Commission, and a deputy member of the Payment System Council at the National Bank of Poland. He was also a member of a number of European institutions, such as the Financial Services Committee (the European Council), the European Banking Committee and the European Securities Committee (the European Commission). Bartosz Drabikowski completed the Advanced Management Programme at the Harvard Business School. He also completed the Executive MBA programme at the University of Illinois at Urbana–Champaign, graduated from the Warsaw School of Economics, the Łódz University of Technology, the National School of Public Administration and the Academy of Diplomacy (at the Polish Institute of International Affairs).
Year of birth: 1970
Functions performed in Committees as at 31 December 2021	Data Quality Committee (Deputy Chair); Assets and Liabilities Management Committee (Deputy Chair); Risk Committee (Member); Operational Risk Committee (Member); Strategy Committee (Member); Transformation Committee (Member).
Marcin Eckert – Vice-President of the Management Board of the Bank in charge of the Corporate Banking and Investment Area
Member of the Management Board since 8 June 2021.	Marcin Eckert completed the Advanced Management Program at the Harvard Business School. He also completed the Leadership Academy for Poland programme and graduated from the Faculty of Law and Administration at the Nicolaus Copernicus University in Toruń. Previously he worked for the PZU Group as the Managing Director for Corporate Matters (from 2017). In the years 2019-2021, he was a member of the Management Board of PZU S.A. and PZU Życie S.A. At the PZU Group, he was responsible for the strategy and projects, the Administration Office, the Corporate Governance Office, the Office of Supervision of Foreign Companies and the Information Technology Function. In the years 2018-2020, he was a member and Deputy Chair of the Supervisory Board of Alior Bank S.A. and Chair of the Supervisory Board of PZU Zdrowie S.A.; from June 2020 to June 2021 he was Deputy Chair of the Supervisory Board of Bank Pekao S.A. At present, Mr Eckert is the Chair of the Supervisory Board of Totalizator Sportowy Sp. z o.o. He has been an attorney-at-law since 2001, specializing in commercial law, tax law and labour law. Before joining the PZU Group he worked as Senior Associate at Bird & Bird Szepietowski i Wspólnicy (as the Benefits & Compensation practice leader). Before that, he worked for TGC Tax Advisers sp. z o. o. (as director of the Tax Department), Mazars Audyt Sp. z o. o. (as director of the Tax and Legal Department) and Ernst & Young (Senior Manager).
Year of birth: 1971
Functions performed in Committees as at 31 December 2021	Assets and Liabilities Management Committee (Deputy Chair); Loan Committee of the Bank (Member); Risk Committee (Member); Strategy Committee (Member).
Wojciech Iwanicki – Vice-President of the Management Board of the Bank in charge of the the Administration Area
Member of the Management Board since 14 October 2021.	He graduated from the Faculty of Philosophy and Sociology of the Maria Curie-Skłodowska University (UMCS) in Lublin. He obtained the Executive Master of Business Administration title. Mr Iwanicki has more than 10 years of professional experience in the management of administration, logistics, infrastructure, human resources and IT. In 2017 he joined the PZU Group, where he performed the functions of director of the Administration Office at PZU S.A., PZU Życie S.A., PZU Centrum Operacji S.A., TUW PZUW. He was also a director in charge of administration and finance in the Public Procurement Office. In the years 2014-2016, director of the Office of the President of the General Counsel to the State Treasury. From 2006 to 2010, deputy director in the office of the President of the Republic of Poland. Deputy Chair of the Supervisory Board of Sigma BIS S.A. since October 2019.
Year of birth: 1974
Functions performed in Committees as at 31 December 2021	Strategy Committee (Member).
Maks Kraczkowski - Vice-President of the Management Board of the Bank in charge of the Retail Market and Enterprises Area and International Banking
Member of the Management Board since 4 July 2016.	He graduated from the University of Warsaw’s Faculty of Law and Administration. He completed the Advanced Management Program 194 at the Harvard Business School and holds an EMBA diploma. Currently he is Chair of the Supervisory Board of the following companies: KREDOBANK S.A., PKO Leasing S.A., PKO Życie Towarzystwo Ubezpieczeń S.A. And PKO Towarzystwo Ubezpieczeń S.A. From September 2016 to October 2021 he was Deputy Chair of the Loan Committee of the Bank. From July 2016 to October 2021 he was in charge of the Cooperation with Local Government Authorities and Government Agencies Area. From January to December 2018 he supervised the Legal and Compliance Area. He has many years of experience in establishing laws and knowledge of Polish and international business matters. A lawyer, manager and Member of Parliament of the 5th, 6th, 7th, 8th term.
Year of birth: 1979
Functions performed in Committees as at 31 December 2021	Risk Committee (Member); Strategy Committee (Member).
Mieczysław Król - Vice-President of the Management Board of the Bank in charge of the Operations Area
Member of the Management Board since 6 June 2016.	A graduate of the Faculty of Finance and Statistics of the Warsaw School of Economics and the International School of Management. He completed his post-graduate studies at the Warsaw School of Economics (Collegium of Management and Finance). He has been working in banking and finance for more than thirty years. He has worked, among others, at the National Bank of Poland. Associated with PKO Bank Polski S.A. for many years; from 2006 to 2010 he was Director of the Audit Department and, at the same time, Chairman of the Audit Committee of KREDOBANK S.A. Then, from 2011 to 2015, he was Director of the Audit Department at Bank Ochrony Środowiska S.A. in Warsaw. In 2006-2007, he combined his work at PKO Bank Polski S.A. with his function on the Supervisory Board of Centrum Finansowo-Bankowe in Warsaw. In 2007, he was Chairman of the Supervisory Board of Zakłady Chemiczne Organika Sarzyna in Nowa Sarzyna and of the Monument Preservation and Conservation Workshops. He lectured at the Academy of Business Activity in Warsaw. He has authored many articles about banking and economics. In 1998-2002, he was a councillor for the District [powiat] of Warsaw. He was Deputy Chairman of the Budget Committee and member of the Audit Committee. In 2002-2014, he was a councillor at the City Council of the Capital City of Warsaw, where he was Chairman and then Deputy Chairman of the Budget and Finance Commission and a member of the Health Commission. As part of his social activities, he managed the Social Council of the Father Jerzy Popiełuszko Hospital in Warsaw - Bielany. He is the Chair of the Supervisory Board of PKO Bank Hipoteczny S.A. and Deputy Chair of the Supervisory Boards of: PKO Leasing S.A., PKO Towarzystwo Ubezpieczeń S.A. and PKO Życie Towarzystwo Ubezpieczeń S.A.
Year of birth: 1958
Functions performed in Committees as at 31 December 2021	Operational Risk Committee (Member); Strategy Committee (Member).
Artur Kurcweil - Vice-President of the Management Board of the Bank in charge of the Technology Area
Member of the Management Board since 14 September 2021.	Artur Kurcweil has more than 20 years of experience in IT management. In the years 2011-2021 he worked for the PZU Group: until 2019 as IT director, and from 2020 as the managing director for digitization. He was in charge of digital transformation of the PZU Group services, IT projects, ensuring business continuity and cyber security implementations. He also performed the function of director in charge of the Innovations Lab, a unit of the PZU Group dealing with cooperation with international start-ups, testing and implementing innovations. Before 2011, he worked at IBM for 5 years and at the Siemens Group for 8 years. During three years of work in the Siemens head office in Munich he gained international project experience and knowledge of consulting and international IT management. In his work, Artur Kurcweil is focused on innovation, digitization and effectiveness of processes and dynamic development of multi-channel business. Thanks to his professional experience gained both as a customer and a service provider, he understands the needs of the market and fast changes in the area of new technologies. He graduated from the Warsaw School of Economics, where he completed studies in cyber security management, and from the West Pomeranian Business School in Szczecin, where he obtained BSc in information technology and econometrics and M.A. in economics.
Year of birth: 1973
Functions performed in Committees as at 31 December 2021	IT Architecture Committee (Chair); Data Quality Committee (Chair); IT Security Committee (Deputy Chair); Risk Committee (Member); Operational Risk Committee (Member); Strategy Committee (Member); Transformation Committee (Member).
Piotr Mazur – Vice-President of the Management Board of the Bank in charge of the Risk Management Area
Member of the Management Board since 8 January 2013.	He is Vice-President of the Management Board of PKO Bank Polski S.A. in charge of the Risk Management Area, upon the approval of the PFSA granted on 8 January 2013. He graduated from the Faculty of Organization and Management at the Academy of Economics in Wroclaw. He has more than 30 years of experience in banking – mainly in the areas of risk, restructuring and loans, and in international financial groups operating in Europe, the USA and South America. A member of supervisory boards, creditors’ committees, a member and chairman of key risk management committees. He participated in the development of the strategy of Bank Zachodni WBK S.A., was directly responsible for risk management, optimization of debt collection and restructuring processes, and cooperated with the regulators in Poland and abroad. He started his professional career in 1991 at Bank BPH S.A., in the loans area. In 1992, he joined Bank Zachodni S.A. and, following the merger with Wielkopolski Bank Kredytowy S.A., he joined BZ WBK S.A. In 1992-2000, he worked in the Capital Investments Department and in 2000-2005 he held the position of Director of the Credit Quality Control Department. In the years 2005-2008 he was the Director of Business Intelligence and Risk Management Area, and in the years 2008-2010 - Deputy Chief Risk Officer. From January 2011 he was Chief Credit Officer and from March 2012 also Deputy Chief Risk Officer. Moreover, he was Chair of the Loan Committee at BZ WBK S.A., Deputy Chair of the Credit Risk Forum, and Deputy Chair of the Risk Model Forum. He was a member of the Supervisory Boards of the following PKO Bank Polski S.A. Group companies: PKO Bank Hipoteczny S.A., PKO Leasing S.A. and PKO Faktoring S.A. He is a member of the Supervisory Board of Biuro Informacji Kredytowej S.A.
Year of birth: 1966
Functions performed in Committees as at 31 December 2021	The Bank’s Loan Committee (Chair); Operational Risk Committee (Chair); Risk Committee (Deputy Chair); Assets and Liabilities Management Committee (Deputy Chair); IT Security Committee (Member); Data Quality Committee (Member); Strategy Committee (Member).

Principles of operation of the Management Board

The Management Board of the Bank operates on the basis of generally applicable laws, the Bank’s Articles and the Rules of the Management Board adopted by the Management Board and approved by the Supervisory Board.

The Management Board manages the Bank’s affairs and represents the Bank. The Bank informs the Supervisory Board of all significant issues concerning the Bank’s operations.

The Management Board performs its activities at the Management Board meetings. The Management Board meetings are organized on an as needed basis, not less frequently than once a week.

The President of the Management Board manages the work of the Management Board, i.e. convenes the Management Board meetings and presides over them and presents the Management Board’s position to other bodies of the Bank and third parties.

The Management Board makes decisions in the form of resolutions at meetings or outside meetings by circulation (in writing). The Management Board may make decisions with the use of the means of direct remote communication, including in particular e-mail.

Resolutions of the Management Board are required with respect to all matters exceeding the scope of the Bank’s ordinary business. From 16 December 2021, resolutions concerning risk management may be passed in the absence of the Management Board member in charge of material risk in the Bank’s operations in exceptional cases only. If the vote of the Management Board member in charge of the material risk in the Bank’s operations on a resolution concerning risk management is different from the vote of a majority of the Management Board members or from the preliminary proposal included in the draft resolution, such member should provide a written explanation of his/her decision. The Management Board shall be obliged to notify the Supervisory Board of this fact immediately and provide it with a written explanation of the reasons behind the votes of the Management Board and the Management Board member in charge of the material risk in the Bank’s operations.

Resolutions of the Management Board are passed by an absolute majority of votes. In the event of an equal number of votes, the President of the Management Board has the casting vote.

The Management Board’s working procedures and matters that require a Management Board resolution are specified in the Rules of the Management Board.

In 2021 the Management Board held 70 meetings and passed 552 resolutions.

Declarations on behalf of the Bank shall be made by:

• the President of the Management Board acting independently;

• two members of the Management Board acting jointly or one member of the Management Board acting jointly with a proxy;

• two proxies acting jointly;

• attorneys acting independently or jointly, within the framework of the power of attorney granted.

As at 31 December 2021, there were four proxies at the Bank. One proxy was revoked in 2021.

Competences of the Management Board

The competences of the Management Board include all matters related to managing the affairs of PKO Bank Polski S.A. that do not fall within the competences of the General Shareholders’ Meeting or the Supervisory Board in accordance with the provisions of the generally applicable law or the Articles.

In accordance with the Management Board Rules, the competences of the Bank’s Management Board include in particular:

• defining the Bank’s strategy and the Bank management strategy, taking into account the risk of the operations and the principles of prudent and stable management of the Bank;

• defining the risk management strategy and the overall risk tolerance level;

• establishment and liquidation of the Bank’s standing committees and defining their characteristics;

• establishing, transforming and liquidating the Bank’s entities in Poland and abroad;

• defining the Rules for managing special funds created from net profit, the Bank’s Organizational Rules and the Management Board Rules;

• appointing proxies and defining the rules for appointing attorneys at the Bank;

• defining the principles for the functioning of the management system, including in particular: the principles for the functioning of the internal control system, the principles for management of specific risks, the compliance risk management policy assumptions, the principles of the information policy with respect to capital adequacy, the principles for capital adequacy and equity management concerning the processes of internal capital estimation, capital planning and dividend policy;

• defining the annual financial plan for the Bank and the Bank’s Group;

• defining the principles for the identification of business models and performing tests of contractual cash flow characteristics;

• defining accounting policies;

• adopting annual and interim financial statements of the Bank, consolidated financial statements of the Bank’s Group and quarterly reports of the Bank’s Group;

• defining bancassurance policies;

• defining the remuneration policy, which is also applicable to the Bank’s subsidiaries;

• defining bank products and other banking and financial services;

• defining the principles of the Bank’s participation in companies and other organizations;

• making decisions on the payment of interim dividend to the shareholders.

Decisions on the acquisition of the Bank’s shares for the purposes of their redemption and determining the value of remuneration for shares redeemed, and on increasing or reducing the Bank’s share capital are not within the competences of the Management Board – they are taken by the General Shareholders’ Meeting.

In particular, the President of the Management Board is in charge of the matters relating to the functioning of the Bank’s bodies and supervision of the functioning of the Bank’s standing committees in the areas of internal audit, security, communication and promotion, strategy and human resources management.

Members of the Management Board supervise the areas of activities allocated to them and make decisions on matters of ordinary management within the areas supervised by them. The areas of responsibility of the individual Management Board members are presented in the organizational chart which is available on the Bank’s website in the Investor relations section at Corporate governance principles – PKO Bank Polski (pkobp.pl).

Committees of the Management Board

As at the end of 2021, the following standing committees functioned in the Bank with the participation of members of the Management Board:

Assets and Liabilities Management Committee of PKO Bank Polski S.A
Purpose	Managing assets and liabilities by influencing the structure of the balance sheet of PKO Bank Polski S.A. and its off-balance sheet items in a manner conducive to achieving the optimum financial result.
Tasks	Supporting the Management Board in the following activities of the Bank and its Group: - shaping the structure of the Bank’s balance sheet; - capital adequacy management; - managing profitability, taking into account the specific nature of the individual areas of activity and the respective risks; - managing financial risk, including market and liquidity risks, business risk, and credit risk (settlement and pre-settlement risk) of the transaction on the wholesale market.
Risk Committee
Purpose	Setting strategic directions and tasks with respect to banking risk in the context of the Bank’s strategy, the macroeconomic situation and the regulatory environment, analysing periodic reports related to banking risks and developing appropriate guidance based thereon, as well as preparing the banking risk management strategy and its periodic reviews.
Tasks	Monitoring the integrity, adequacy and effectiveness of the banking risk management system, capital adequacy and allocation of internal capital to individual business lines and implementing the risk management policy pursued as part of the Bank’s Strategy. Analysing and evaluating the utilization of strategic risk limits set in the Banking Risk Management Strategy. Expressing opinions on periodic risk reports submitted for approval to the Supervisory Board and taking into account information from these reports when issuing opinions..
Loan Committee of the Bank
Purpose	Management of credit risk occurring when taking lending decisions or decisions concerning liabilities managed by responsible units of the Bank, as well as management of the risk of incurring losses as a result of taking wrong business decisions on the basis of the credit risk models.
Tasks	Making decisions on the segregation of duties to make credit or sales decisions and claims management decisions. Making lending decisions concerning the biggest matters of the Bank’s Customers, as well as issuing recommendations for the Bank’s Management Board in lending matters. Making decisions in matters concerning restructured receivables. Setting industry limits, limits concerning appetite for portfolio credit risk and exposure concentration risk. Making decisions concerning the implementation of credit risk models and anti-fraud models in lending processes, in particular with respect to scoring or rating. Making decisions on the implementation of a model for determining allowances for expected credit losses on financial assets. Accepting reports on the monitoring or review of models and loan portfolio quality, in which credit risk models are used. Accepting monthly and quarterly credit risk reports.
Operational Risks Committee
Purpose	Effective management of operational risk to improve the safety of the Bank’s operations.
Tasks	Determining the directions of operational risk management development. Supervising the functioning of operational risk management, including the tasks concerning continuity of the Bank’s operations. Coordination of operational risk management. Determining measures to be taken in the event of an emergency which exposes the Bank to reputational risk and results in operating losses.
Transformation Committee
Purpose	Ensuring the effective transformation of the Bank in line with its development directions, including ensuring the consistency of business objectives and maximization of the business value of changes in the Bank (e.g. within formations and projects).
Tasks	Operational management of the Bank’s Strategy implementation. Performing key roles in the New Management Model (NMM) in accordance with the Bank’s internal regulations concerning the New Model of Work and the New Management Model. Making decisions on the implementation of and changes to projects, as well as decisions pertaining to material costs and other operating costs. Allocation of funds for urgent purchases resulting from the business continuity plan in the event of a crisis. Overseeing projects and development initiatives, particularly work progress, project budgets, financial and non-financial benefits. Initiating activities enhancing the Bank’s effectiveness. Managing the annual financial limit for the implementation of projects; and development initiatives. Solving disputes within the area of competences of the Committee, on lower decision-making levels
Strategy Committee
Purpose	Oversight of the strategic planning process and management of the Bank’s strategy.
Tasks	Managing the activities relating to strategy development and implementation. Approving the strategy development schedule and the strategy implementation schedule. Making key decisions necessary to ensure the implementation of the strategy, including the implementation of strategic initiatives. Solving potential disputes arising when working on individual strategic initiatives
IT Architecture Committee
Purpose	Development of the IT architecture ensuring the implementation of the Bank’s Strategy..
Tasks	Development of key assumptions of the IT architecture of the Bank (principles). Periodic evaluation of the IT architecture functioning at the Bank. Development of a target architecture model. Initiating activities aimed at implementing the target architecture model.
IT Security Committee
Purpose	Increasing the effectiveness of supervision and control over the IT system safety at PKO Bank Polski S.A. (SIB).
Tasks	Issuing recommendations on the SIB safety, in particular related to: - coordination and monitoring of work related to the SIB safety; - setting the directions of the activities of the Bank with respect to SIB safety; - specifying actions, which should be taken in the event of emergency situations which put the Bank’s image at risk and cause operating or financial losses in the area of SIB safety; - monitoring the risk related to SIB safety.
Data Quality Committee
Purpose	Setting strategic directions of the activities relating to data quality management and data architecture at the Bank in the context of the Data Management System (DMS), oversight of its functioning and assessment of its effectiveness and the activities undertaken by the individual organizational units of the Bank.
Tasks	Taking decisions on data management in the Bank, including in particular decisions pertaining to: - DMS development directions; - recommendations to organizational units of the Bank regarding data management activities; - detailed data management solutions; - assessing the effectiveness of the operations of the DMS, determining priority measures as part of the DMS, and drawing up periodical action plans; - allocation of the ownership of data groups; - solving disputes pertaining to the DMS at the request of the Committee members; - approving – especially in cases justified by the need to ensure the continuity of the Bank’s operations – deviations from data quality criteria and rules as well as data quality solutions standards.

In addition to the aforementioned functions, members of the Bank’s Management Board were also members of non-standing committees established within the framework of projects. PKO Bank Polski S.A. also has the Investment Committee and the Sponsorship Committee. Members of the Management Board are not members of these committees.

11.2.10 Policy for ensuring diversity in the composition of the Bank’s Management Board and Supervisory Board

The implemented diversity policy

The diversity policy for the members of the Bank’s Management and Supervisory Boards is an important part of the Bank’s suitability assessment policies, i.e.:

• The suitability policy concerning the Management Board members and key officers of the Bank and suitability assessment at the Bank’s Group companies;

• The policy on assessing the suitability of candidates for members and members of the Bank’s Supervisory Board.

The provisions implemented by the Bank set the directions for selecting, appointing and planning succession, including staff resources and suitability assessment of the Management Board members and key officers of the Bank. These persons are assessed in terms of their competences, knowledge and skills, experience adequate to the position and reputation understood as sufficiently unblemished opinion, honesty and ethical behaviour. Based on the regulations implemented, the General Shareholders’ Meeting makes decisions on the selection and suitability assessment of the candidates and members of the Bank’s Supervisory Board, the Supervisory Board makes decisions on the selection and suitability assessment of the Management Board members, and the Management Board members make decisions on the selection and suitability assessment of the MRT (Material Risk Takers). The Bank’s Supervisory Board monitors the effectiveness of the policy applied and, if appropriate, makes changes taking into account the recommendations of the Nominations and Remuneration Committee.

In 2021, the aforementioned policies were adjusted to the changes resulting from the new Good Practices for WSE Listed Companies (2021) by adding additional criteria supporting diversity in the composition of the Bank’s Management Board and Supervisory Board in terms of age and gender, and indicating the expected minimum participation of the less numerous gender in these bodies (30%).

Diversity policy assumptions

• The policies for assessing the suitability of candidates and members of the Bank’s Management Board and candidates and members of the Bank’s Supervisory Board include the Bank’s/General Shareholders’ Meeting’s commitment to take into account the principles of diversity in selecting candidates for members of the aforementioned bodies.

• The principle of diversity in selecting the Bank’s Supervisory Board and Management Board members is based on objective substantive criteria in terms of education, skills and professional experience. The additional criteria which support diversity in the composition of these bodies are age and gender.

• The policies contain the commitment to monitor the effectiveness of their application, including in terms of diversity objectives.

• The suitability assessment policy contains an obligation for the Bank’s subsidiaries to introduce regulations regarding the principles of suitability – such regulations are being implemented gradually in the Group entities.

Structure of the management and supervisory bodies and MRT (Material Risk Takers)

Table 27. Diversity by gender, age and experience – statistics as at 31 December 2021 [GRI 405-1]

Gender	Women	Men
Supervisory Board	1	10
Management Board	1	7
*MRT (Material Risk Takers)	16	55

Age	30-41 years	41-51 years	51-60 years	above 60 years
Supervisory Board	2	4	1	4
Management Board		4	3	1
MRT (Material Risk Takers)	9	42	19	1

Years of service at the Bank	up to 5 years	5-10 years	10-15 years	15-20 years	above 20 years
Supervisory Board	9	2	-	-	-
Management Board	5	3	-	-	-
MRT (Material Risk Takers)	6	-	3	12	50

*change in presentation: key management was replaced by MRT - Material Risk Takers.

Years of service at the Bank: for members of the Management Board and Supervisory Board there are years at the position in the Management Board and Supervisory Board.

Objectives of diversity of the composition of the Management Board and Supervisory Board

• The application of the diversity policy is aimed at ensuring appropriate selection of the Management Board and Supervisory Board members in order to obtain a wide range of competences, knowledge and skills adequate to a particular position and ensure that the Management Board and Supervisory Board members (both individually and collectively) issue top quality, independent opinions and decisions in all areas of the Bank’s operations.

• In their selection of members of the Bank’s bodies, the General Shareholders’ Meeting and the Supervisory Board of the Bank try to achieve gender balance in the composition of the Bank’s Supervisory Board and Management Board, respectively, or at least to achieve a minimum representation of the less numerous gender at 30%, taking into account the results of the suitability assessments.

• The diversity targets relating to the composition of the Supervisory Board and the Management Board of the Bank are considered in the selection of members of these bodies only to the extent that it does not have an adverse effect on their functioning and suitability.

11.3 Shares of PKO Bank Polski S.A. and its related entities held by members of the Bank’s authorities

The table below presents the shares in the Bank held by members of the Management Board as at 31 December 2021.

Table 28. Shares of PKO Bank Polski S.A. held by Management Board members

Name	As at 31.12.2021		As at 31.12.2020
Name	Number of shares	Total nominal value of shares held in PLN	Number of shares	Total nominal value of shares held in PLN
Management Board of the Bank
Iwona Duda, Vice-President of the Management Board	0	0	-	-
Bartosz Drabikowski, Vice-President of the Management Board	0	0	-	-
Marcin Eckert, Vice-President of the Management Board	0	0	-	-
Wojciech Iwanicki, Vice-President of the Management Board	0	0	-	-
Maks Kraczkowski, Vice-President of the Management Board	0	0	0	0
Mieczysław Król, Vice-President of the Management Board	6,000	6,000	6,000	6,000
Artur Kurcweil, Vice-President of the Management Board	0	0	-	-
Piotr Mazur, Vice-President of the Management Board	8,000	8,000	8,000	8,000

As at 31 December 2021 and 31 December 2020, the Supervisory Board members did not hold any shares of PKO Bank Polski S.A.

Due to potential or actual access to confidential information, members of the Management Board and Supervisory Board and persons closely related to them are required to notify the Bank and the PFSA of any transactions concluded on their own account involving the Bank’s shares, the Bank’s debt instruments or derivative instruments and other related financial instruments of the Bank.

Members of the Management Board and Supervisory Board are also prohibited from concluding transactions on their own account or on the account of a third party, directly or indirectly, concerning the Bank’s shares, the Bank’s debt instruments or derivatives and other related financial instruments during the 30 days prior to the date of publication of its interim report by the Bank (closed period).

As at 31 December 2021, the members of the Management Board and Supervisory Board did not hold shares in companies related to PKO Bank Polski S.A., i.e. its subsidiaries, joint ventures and associates.

12. Other information

Purchase and sale of treasury shares

Information required based on Article 111a of the Banking Law Act

Published forecasts of financial results for 2021

Employee share plan

Significant agreements and material agreements with the central bank or supervisory authorities

Issues of securities of PKO Bank Polski S.A. in 2021

Underwriting agreements and guarantees granted to subsidiaries

Information on proceedings at court, before a competent arbitration tribunal or a public administration body

Loans incurred and loan, guarantee and surety agreements

Financial liabilities and guarantees granted

Value of collateral set up on accounts or assets of the borrowers

Seasonality of cyclicality of activities in the reporting period

Significant post-balance sheet events

Purchase and sale of treasury shares

W PKO Bank Polski S.A. did not purchase or sell any treasury shares on its own account during the period covered by the report.

Information required based on Article 111a of the Banking Law Act

Table 29. Activities of the Bank’s Group by EU member states and third countries

in PLN million	Turnover (revenues)*	Profit/loss before tax	Income tax expense	Profit/loss after tax	Number of employees in FTEs **
In EU member states:
- Poland	16,221	6,871	-1,580	4,975	23,511
- Czech Republic	10	1	-200	1	8
- Germany	16	-14	0	-14	6
- Slovak Republic	0	-4	0	-4	2
- Sweden	193	1	62	63	0
- Ireland	37	0	0	0	0
In third countries:
- - Ukraine	506	136	-25	111	1,761

* Turnover (revenues) defined as the sum of interest income, fee and commission income and other operating income.

** Information on the number of employees is provided according to the guidance published by the Central Statistical Office in 2018 in “Methodical principles of labour market and salary statistics”. Number of employees is calculated based on employment contracts, excluding employees on child care leave and unpaid leave granted for periods longer than 3 months continuously.

The above summary includes data of PKO Bank Polski S.A. and subsidiaries included in consolidation within the meaning of Article 4(1)(48) of the European Parliament and Council Regulation No 575/2013 (i.e. in prudential consolidation). Prudential consolidation, unlike consolidation in accordance with the International Financial Reporting Standards, covers only subsidiaries which meet the definition of an institution, a financial institution or an ancillary services undertaking.

PKO Bank Polski S.A. and subsidiaries of the Bank which are included in the prudential consolidation have their registered offices in the territory of Poland (where they mainly conduct the following activities: banking, asset management, investment and pension fund management, leasing and factoring, and provide brokerage and transfer agent services as well as provide technological solutions), Ukraine (banking and debt collection activities), Sweden (leasing and raising funds from bond issues) and Ireland (securitization of lease receivables). PKO Bank Polski S.A. also provides services through its branches in the Czech Republic, Germany, and Slovakia.

The presented values are the sum total of items in the separate financial statements of these entities (according to the data as at the date of the summary).

In 2021, PKO Bank Polski S.A. did not sign any agreements mentioned in Article 141t section 1 of the Banking Law, i.e. financial support agreements with entities that are subject to consolidated supervision, which operate within the same holding, or with closely related entities.

Rates of return on assets of the Bank’s Group and the Bank are presented in table no. 4 and table no. 6, respectively.

Published forecasts of financial results for 2021

PKO Bank Polski SA did not publish forecasts of financial results for 2021.

Employee share plan

No employee share plan is in place at PKO Bank Polski S.A.

Significant agreements and material agreements with the central bank or supervisory authorities

PKO Bank Polski S.A. is obliged to inform in the current reports about all agreements meeting the definition of confidential information provided in Regulation (EU) no. 596/2014 of the European Parliament and of the Council on market abuse. The Bank did not sign any agreements meeting the definition of confidential information in 2021 and therefore did not publish any information on such agreements.

In 2021, the Bank did not conclude any material agreements with the central bank or with the supervisory authorities. The Bank is not aware of the fact of signing or of the content of any agreements between its shareholders that are in force in 2021.

In 2021, KREDOBANK S.A. signed an annex to the general refinancing loan agreement of 2018 with the National Bank of Ukraine on long-term financing secured with Treasury bonds, according to which the amount of the agreement was increased from UAH 2,300 million to UAH 3,000 million. As at 31 December 2021, the indebtedness of KREDOBANK S.A. under the aforementioned agreement amounts to UAH 3,000 million (PLN 446.1 million at the average exchange rate of the National Bank of Poland as at 31 December 2021).

Other subsidiaries of PKO Bank Polski S.A. did not conclude any material agreements with the central bank or with the supervisory authorities.

Issues of securities of PKO Bank Polski S.A. in 2021

In 2021, PKO Bank Polski S.A. did not issue any securities.

Underwriting agreements and guarantees granted to subsidiaries

On 30 August 2017, PKO Bank Hipoteczny S.A. concluded an agreement with PKO Bank Polski S.A. amending the agreement signed in 2015 on the National Mortgage Covered Bond Issue Programme. In accordance with the amending agreement, Brokerage Office of PKO Bank Polski S.A. had the role of underwriter (until August 2017, mortgage covered bonds were offered as standard issue bonds). In 2021, PKO Bank Hipoteczny S.A. did not issue any mortgage covered bonds. The aggregate nominal value of all mortgage covered bonds issued as part of firm commitment underwriting was PLN 2,590 million. The Brokerage Office’s portfolio as at the end of 2021 contained mortgage-covered bonds with a total nominal value of PLN 6.5 million.

As at 31 December 2021, issues of bonds of PKO Bank Hipoteczny S.A. under the Bond Issue Programme were governed by the Agreement on the Bond Issue Programme of 30 September 2015, with subsequent annexes, signed with PKO Bank Polski S.A., pursuant to which the maximum value of bonds issued and not redeemed based on the programme is PLN 6 billion, and the Guarantee Agreement of 30 September 2015, with subsequent amendments, pursuant to which PKO Bank Polski S.A. undertakes to be the underwriter of the bonds issue up to a total value of PLN 2 billion. In 2021 the amount of the Programme was increased by PLN 2 billion. At the same time, on the basis of separate agreements, PKO Bank Hipoteczny S.A. authorized the Bank’s Brokerage Office to act as Issue Agent and PKO Bank Polski S.A. to act as Dealer.

The liability of PKO Bank Hipoteczny S.A. in respect of the bonds issued as part of the aforesaid programme as at the end of December 2021 (in nominal terms) amounted to PLN 3.7 billion. The PKO Bank Polski S.A. portfolio as at the end of 2021 contained bonds issued as part of this programme in the total nominal amount of PLN 57 million.

On 12 October 2020, PKO Bank Hipoteczny S.A. concluded a Program Agreement with PKO Bank Polski S.A. and the Bank’s Brokerage Office concerning the Public Bond Issue Programme. The agreement was signed in connection with the approval of a new prospectus by the PFSA. Under the Programme, PKO Bank Polski S.A. acts as the Organizer and Calculation Agent, whereas the Bank’s Brokerage Office acts as the Offering Agent, Technical Agent and the Issue Guarantor. As at the end of 2021 there were no bonds issued under this programme.

In 2021, PKO Bank Polski S.A. issued, with regard to activities of its subsidiaries:

• two guarantees for the repayment of loans with an aggregate value of EUR 165 million (up to February 2029);

• three guarantees relating to the payment of liabilities resulting from agreements with suppliers and performance bonds with Customers with an aggregate value of PLN 2.2 million (up to August 2022),

• four guarantees for repayment of liabilities arising from the rental of office space and parking lots with a total value of PLN 114 thousand and EUR 170 thousand (up to February 2023)

and counter guarantee for KREDOBANK S.A.

Information on proceedings at court, before a competent arbitration tribunal or a public administration body

As at 31 December 2021, the total value of the subject matter of litigation in court proceedings (trials) pending in which the companies belonging to the PKO Bank Polski Group S.A. (including the Bank) were defendants amounted to PLN 4,350 million (as at 31 December 2020: PLN 2,064 million), and the total value of the subject matter of litigation in court proceedings (trials) pending in which the companies belonging to the PKO Bank Polski Group S.A. (including the Bank) were claimants as at 31 December 2021 was PLN 2,792 million (as at 31 December 2020: PLN 2,607 million).

Taking into consideration the value of and an increase in the number of court proceedings, the Bank considered as material the court proceedings relating to mortgage loans in convertible currencies. As at 31 December 2021, 12,349 legal proceedings were pending against the Bank (as at 31 December 2020: 5,372) relating to mortgage loans granted in previous years in foreign currency with a total value in dispute of PLN 3,855 million (as at 31 December 2020: PLN 1,404 million), including one group proceeding. The Bank’s Customers’ claims concerned mainly demands to determine the invalidity of all or part of the agreements or to receive refunds of allegedly undue benefits in connection with the abusive nature of the foreign currency clauses. None of the clauses used by the Bank in the agreements was entered in the register of prohibited contractual provisions.

A description of the main disputes, including those relating to mortgage loans in convertible currencies, is presented in Note 51 of the Financial Statements of the PKO Bank Polski S.A. Group for 2021.

Loans incurred and loan, guarantee and surety agreements

The following Bank’s subsidiaries received loans from banks and other financial institutions in 2021:

• PKO Leasing S.A. of EUR 50 million maturing in February 2026, and in the amount of EUR 100 million, maturing in November 2026;

• KREDOBANK S.A. of UAH 750 million maturing in August 2024, and of UAH 100 million maturing in October 2023.

In 2021, the Bank’s Group did not incur any loans or advances, and did not receive any guarantees or sureties that would not be related to operating activities.

Financial liabilities and guarantees granted

As at 31 December 2021, net financial and guarantee liabilities of the Bank’s Group amounted to PLN 79.5 billion, of which 85.5% were financial liabilities. The overall dynamics of financial and guarantee liabilities granted was 11.5% y/y, mainly as a result of an increase in business credit lines and limits, guarantees granted to financial entities.

Table 30. Off-balance sheet liabilities granted (in PLN millions)

	31.12.2021	31.12.2020	Change in PLN million)	Change (in %)
Financial liabilities granted:	67,987	61,608	6,379	10.4%
housing credit lines and limits	5,246	4,416	830	18.8%
business credit lines and limits	46,638	41,791	4,847	11.6%
consumer credit lines and limits	10,605	10,266	339	3.3%
factoring credit lines and limits	2,116	2,015	101	5.0%
finance lease credit lines and limits	712	149	563	4.8X
other	2,670	2,971	-301	-10.1%
Guarantee commitments granted:	11,539	9,733	1,806	18.6%
financial entities	2,353	1,196	1,157	96.7%
non-financial entities	8,752	8,323	429	5.2%
public sector	434	214	220	2x
Total	79,526	71,341	8,185	11.5%

Description of guarantees and sureties granted by the Bank

PKO Bank Polski S.A., including foreign branches of the Bank, grant guarantees to secure liabilities resulting from the current activities of Customers. These are mainly guarantees for: payment, due performance of contract (performance bond), statutory warranty (rękojmia), tenders (bid bond)), return of advance payment, loan repayment and customs duty guarantee. The Bank also grants counter guarantees and opens standby letters of credit. The guarantees are issued both on paper and in an electronic form.

The guarantees are granted based on the provisions of the Banking Law and Civil Code. Guarantees issued in international trading can be subject to the Uniform Rules for Demand Guarantees (if the parties so decide) or the provisions of a foreign law (if the guarantee is subject to such jurisdiction).

When granting a guarantee, the process of Customer evaluation and the scope of information required is analogous to the one applicable to loans. The Bank uses the same approach to the evaluation of the credit risk as in the case of balance sheet exposures.

Value of collateral set up on accounts or assets of the borrowers

At the end of 2021, the value of collateral set up on accounts or assets of the borrowers as part of the PKO Bank Polski S.A. Group was PLN 500 billion. The aforementioned amount concerns loan agreements, leases and loans.

Seasonality or cyclicality of activities in the reporting period

PKO Bank Polski S.A. is a universal bank, which provides services on the whole territory of Poland, and thus its activities are exposed to seasonal fluctuations similar to those affecting the entire Polish economy. The operations of the other PKO Bank Polski S.A. Group companies do not show any material traits of seasonality or cyclicality either.

Significant post-balance sheet events

1. On 26 January 2022, the Polish Financial Supervision Authority unanimously agreed to the appointment of Iwona Duda as President of the Management Board of PKO Bank Polski S.A. From 23 October 2021 Iwona Duda served as Vice-President of the Management Board of PKO Bank Polski S.A. and led the work of the Bank’s Management Board.

2. The Bank’s Management Board monitors on an on-going basis the political and economic situation in Ukraine, and the significant risk of increased tensions in relations with Russia, not only between Russia and Ukraine, but also UE/USA relations with Russia which may have a significant impact on the activities of the Bank’s Group/ Bank in 2022. In the opinion of the Bank/ Bank’s Group these events do not affect the financial statements of the Bank/ Bank’s Group for the year ended 31 December 2021.

13. Statement on non-financial information

13.1 The process of the Statement preparation

[GRI 102-1] The Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna (the PKO Bank Polski S.A. Group or the Bank’s Group) and Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna (PKO Bank Polski S.A. or the Bank) have prepared a Statement on the non-financial information (the Statement), which forms a separate part of the Directors’ Report. The Bank and the Bank’s Group satisfy the criteria of an entity that is required to draw up the Statement. The individual issues have been presented in the Statement with regard to the Group, with the Bank highlighted. [GRI 102-52] The Bank’s Group publishes such statements annually. [GRI 102-50] The Statement presents the operations of the PKO Bank Polski S.A. Group in the period from 1 January to 31 December 2021. [GRI 102-51] The previous Statement was prepared for the year 2020 and published on 29 April 2021. At the end of 2021, the Bank’s Group comprised the parent entity, i.e. PKO Bank Polski S.A., 12 direct subsidiaries and indirect subsidiaries. [GRI 102-54] The Statement was prepared in accordance with the GRI Standards: Core option and in accordance with the non-financial reporting requirements defined in the Accounting Act. [GRI 102-10, GRI 102-49] The Statement for 2021 does not contain any significant changes in reporting of the organization and its supply chains or other changes in the reporting methods.

[GRI 102-56] The Statement on non-financial information for 2021 is not subject to an external audit.

[GRI 102-48] The Statement does not contain any adjustments of information from the previous reports.

[GRI 102-42, GRI 102-46] The preparation of the Statement by the Bank was preceded by an analysis of the materiality of the issues specified in the Accounting Act. In the first stage, the analysis of materiality conducted in the autumn of 2021 was based on a review of the stakeholder groups of the Bank’s Group, including the Bank, defined to date, and the areas of the interactions between the Group entities and the environment. In the second stage, the Bank analysed the scope of management of the areas encompassed by the Statement and reviewed the policies in place (the results are available at: https://www.pkobp.pl/investor-relations/esg-at-pko-bank-polski-group/policies-and-principles/).

The following tools were used in the study of materiality:

• in-depth interviews with representatives of the Bank’s Headquarters;

• analysis of contacts with ESG rating agencies and other stakeholders;

• stakeholders’ opinion surveys regarding the significance of the issues for the company’s image;

• enquiries addressed by the Bank to the subsidiaries;

• a review of the internal regulations of the Bank and provisions of the law.

[GRI 102-43] The Bank studies the approach of its stakeholders to its charitable and sponsorship activities on a continuous basis. In 2021, the ratings of the companies engaged in sponsorship returned to pre-pandemic levels. Support for charity and social campaigns receives the highest ratings. The Bank is among the most recognizable sponsors in the market.

The study of materiality showed that the Bank and most of the subsidiaries have appropriate policies in all areas encompassed by the Statement, while the risks, which are considered to be key, have already been identified in the risk management process. The Statement contains descriptions of the risks identified in the Bank’s Group to which the principle of “comply or explain” was applied: an explanation was added to information on the lack of full coordination of selected policies at Group level.

The Bank’s Group, including the Bank, identify the following significant groups of stakeholders and material non-financial issues:

Significant stakeholder groups [GRI 102-40]	Key non-financial issues [GRI 102-47]
	Environmental 1) Expanded environmental responsibility
1) Customers 2) Employees 3) Social environment, including local communities 4) Shareholders and investors	Social and employment 2) Impact on the social environment 3) Human rights 4) Relationships with subcontractors and suppliers 5) Employees relations
	Governance 6) Customer relations 7) Ethics 8) Prevention of corruption 9) Product safety and Customer security 10) Protection of privacy 11) Prevention of money laundering

13.2 Business model and management structure

Organizational profile

PKO Bank Polski S.A. was established in 1919. The Bank’s Group consists of 12 direct subsidiaries, in which the Bank holds 100% of the shares (or, in the case of investment funds, investment certificates, Chapter ‎‎11.2.3).

[GRI 102-2] The Bank is a universal bank providing deposit and lending services to individuals and legal entities. Through its subsidiaries, the Bank’s Group offers, among other things, mortgage loans, specialist financial services including leasing, factoring, investment funds, pension funds and insurance, fleet management services, transfer agent services, provides technological solutions and manages real estate. It also conducts banking operations and provides debt collection and financial services in Ukraine. [GRI 102-3] The Bank’s head office is located in Warsaw. [GRI 102-4, 102-6] The Bank’s Group operates in the territory of the Republic of Poland. Moreover, through its subsidiaries it operates in the territory of Ukraine, Sweden and Ireland. It also operates through branches in the Federal Republic of Germany, the Czech Republic and the Slovak Republic. [GRI 102-5] The Bank is a joint-stock company entered into the National Court Register under number KRS 0000026438. The Bank has been listed on the Warsaw Stock Exchange (WSE) since 2004. The significant shareholders holding more than 5% of the share capital are the State Treasury and the open pension funds Aviva and Nationale Nederlanden. [GRI 102-7] The Bank offers its services through a network of 975 own locations (branches, offices, centres) and 447 agencies in Poland to 11 million retail Customers and 17 thousand corporate Customers. [GRI 102-8] The Bank’s Group provides jobs to 25.7 thousand people.

[GRI 102-9] The Bank’s Group cooperates with business partners as a buyer of goods and services and a client for agency and outsourcing services. As part of its charitable and sponsorship activities, it cooperates with various public benefit organizations.

[GRI 102-13] The Bank is a member of many organizations, both industrial and regional (e.g. the Polish Bank Association (Związek Banków Polskich), NATO Industry Cyber Partnership, The Institute of International Finance) and many business organizations, such as chambers of commerce and business associations (e.g. the Polish Association of Listed Companies (Stowarzyszenie Emitentów Giełdowych), the Association of Entrepreneurs and Employers (Związek Przedsiębiorców i Pracodawców), the Federation of Polish Entrepreneurs (Federacja Przedsiębiorców Polskich)).

Market position of the Bank’s group

The Bank’s Group is a leading financial institution in Central and Eastern Europe. The Bank, the parent entity of the Bank’s Group, is the largest commercial bank in Poland in terms of the value of assets and equity, the value of loans and deposits, the size of the distribution network, as well as the number of Customers served and the number of employees.

PLN 418 billion

Assets of the Bank’s Group

as at the end of 2021

17.4%

share of PKO Bank Polski S.A. and PKO Bank Hipoteczny S.A. in the Polish loan market as at the end of 2021

1,422

number of branches

of PKO Bank Polski S.A. at the end of 2021

PLN 56.2 billion

Market value of PKO Bank Polski S.A. at the end of 2021 (the highest capitalization in the group of polish companies quoted at the Warsaw Stock Exchange)

11 million

Retail segment customers of PKO Bank Polski S.A. at the end of 2021

25.7 thousand

employees of the Bank’s Group

at the end of 2020 (FTEs)

Management structure

The management structure of PKO Bank Polski S.A. and its subsidiaries is based on standard, market principles of management. The Bank’s organizational structure is divided into 8 areas, which reflect the Bank’s areas of operations.

Management structure of PKO Bank Polski S.A. (31.12.2021) [GRI 102-18]

A new organizational unit was set up in the Finance and Accounting Area in 2019 – the Group Integrated Reporting Office, whose tasks include collecting, analysing and disclosing information on social and environmental topics. This means that the environmental and social issues gained recognition in the management structure of the Bank. At the beginning of 2020, the Bank launched the ESG project. Its aim is to improve the quality of non-financial reporting and the Bank’s reputation as an institution whose objectives are not limited to financial matters but also address the social, environmental and corporate governance areas. The project work is coordinated by the steering committee consisting of three Management Board members. The roles of the other committees are discussed in chapter ‎11.2.

13.3 Key Non-financial Performance Indicators

In June 2021, the Management Board and the Supervisory Board of the Bank adopted ESG indicators to be achieved and incorporated them in the non-financial objectives of the Bank’s Group for the following years. The Bank will continue working on new indicators and non-financial objectives relating to the ESG area and will incorporate the challenges related to sustainable development more broadly in its next strategy.

Key non-financial performance indicators in the area of the environment

COMMITMENT/INDICATOR	2021	2020	2019
Reduction in the Bank’s greenhouse gas emissions (Scopes 1 and 2) of 60% by 2025 (the base year 2019)	-61.8%	-40.7%	Base year
Elimination of the exposure to the coal mining sector by 2030/ Indicator: the share of financing for the coal and lignite mining sectors in total assets	0.13%	0.27%	0.27%
Increase in the Bank’s green financing of 5% y/y	83%	X	X
Value of exposure to green financing at least 3 times higher than the value of exposure to high emission financing for the Bank’s Group (the data relates to the Bank only)	3.5	1.6	1.4

Key non-financial performance indicators in the area of employment (in per cent)

COMMITMENT/INDICATOR	2021	2020	2019
At least 35% of women employed in key managerial positions in the total number of managers in the Bank’s Group by 2025	38	42	X
At least 35% of women employed in other material managerial positions in the total number of managers in the Bank’s Group by 2025	37	42	X
Employee rotation rate of no more than 14% in the Bank’s Group by 2025	13.1	12.5	15.3
Voluntary employee resignation rate of no more than 7% in the Bank’s Group by 2025	8.1	5.3	X
Implementation of systemic projects to support the employment of people with disabilities in the Bank’s Group/ Indicator: the share of employment of people with disabilities in the total number of employees (in per cent)	1.4	1.0	X

Key non-financial performance indicators in the area of procurement

COMMITMENT	IMPLEMENTATION
Updating the Procurement Policy in keeping with the ESG principles by the end of Q3 2021	The Procurement Policy was updated and agreed in Q3 2021 and subsequently implemented by decision of the Procurement Department Director on 11/10/2021.
Conducting an ESG survey among the Bank’s key suppliers by the end of 2021	The Bank conducted ESG surveys among its key suppliers in Q2 2021. The purpose of conducting the ESG surveys was to determine the level of familiarity with ESG issues among the Bank’s suppliers, mainly with regard to the experience gained from participating in procurement proceedings organized by other entities, but also with regard to own practices and internal policies. The conclusions drawn from the surveys were used in updating the Procurement Policy, and in the future they will be used to prepare a Supplier Code of Ethics.
Preparation of a Supplier Code of Ethics by the end of Q1 2022	In progress

13.4 Policies

The Bank’s Group has adopted policies for the most important social and employee-related issues, the natural environment, respect for human rights and prevention of corruption and has regulations in the following areas (a full description is available at: https://www.pkobp.pl/investor-relations/esg-at-pko-bank-polski-group/policies-and-principles/):

• Code of Ethics

• Information policy and communication with investors

• Dividend policy

• Security policy (incl. cybersecurity)

• Policy on the assessment of suitability of the Supervisory Board members

• Diversity policy in respect of the Management and Supervisory Board

• Sponsorship and charity policy

• Policy for appointing an audit company

• Policy for counteracting money laundering and financing of terrorism

• Principles for ensuring compliance and managing non-compliance risk

• Employment regulations of the bank and recruitment principles

• Remuneration policy

• Principles for employee development

• Principles for counteracting bullying and discrimination

In 2021, the Bank’s Procurement Policy was updated and the Bank’s Tax Strategy was adopted.

Procurement policy

The procurement processes are described in the following internal regulations: the Principles for purchasing goods and services, the Procedures for purchasing goods and services, the Bank’s Procurement Policy. The Policy was updated in 2021 and implemented by decision of the Procurement Department Director. The changes concern, among other things, taking ESG factors into account in the procurement process. The Policy encompasses the entire procurement process: from the moment when a need is planned, through the procurement proceedings with the assessment of its quality. A material assumption behind the policy is the implementation of initiatives offering ethical satisfaction, minimizing the risks of a negative impact on the environment, climate and sustainable development and ensuring the security of the supply chain. The average annual strategic objectives of the procurement organization have been set, which include obtaining information from suppliers regarding ESG issues (surveys for key suppliers) and formulating principles in the form of a Supplier Code of Ethics. The Code should define social and ethical standards, among other things, occupational safety guarantees, prohibition of child labour, environmental protection, data privacy and security, prevention of corruption, managing conflicts of interests, etc. The final measurement of the objectives is scheduled for 2024. The Policy introduces the possibility of establishing product requirements relating to ESG issues. The results of the pursued policy are presented in chapter ‎13.3.

Tax strategy

In 2021, the Bank’s Management Board adopted and the Supervisory Board approved the Tax Strategy of the Bank as an entity operating in a responsible and transparent manner. The Tax Department Director is obliged to review the Strategy at least once a year and, if necessary, to present recommendations for updating or revising it.

The tax strategy contains the following tax objectives of the Bank with a brief description of how to achieve them:

• fulfilling tax obligations in accordance with the binding regulations;

• acting in compliance with the intentions of the legislator;

• applying the arm’s length principle in related party transactions;

• active involvement in legislative initiatives;

• mitigating the tax risk;

• maintaining high standards in relations with authorities;

• using modern technologies in fulfilling tax obligations.

In accordance with the statutory obligation, the Tax Group of Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna (hereinafter: the TG), which consists of: the Bank, PKO Bank Hipoteczny S.A. and PKO Leasing S.A., has prepared Information on the pursued tax strategy for 2020. The Bank’s Tax Strategy and the Information on the pursued tax strategy prepared by the TG is available on the Bank’s website (https://www.pkobp.pl/grupa-pko-banku-polskiego/pko-bank-polski/strategia-podatkowa/).

Having regard to the documents referred to, in the Bank’s activities attention is paid to, among other things:

• implementing and applying internal regulations which ensure the correct fulfilment of tax obligations and correct documentation of transactions

The Bank’s Management Board has adopted resolutions on: the principles for fulfilling tax obligations, reporting tax schemes (MDR) and meeting transfer pricing obligations. Based on the above resolutions, decisions were issued on: the tax settlements of the Bank as a taxpayer and tax remitter (including those relating to the Bank’s foreign branches), fulfilling information duties, reporting tax schemes (MDR), fulfilling transfer pricing obligations, fulfilling the obligations arising from the FATCA and CRS. The internal regulations are reviewed and updated regularly to ensure their compliance with the generally applicable laws.

• oversight and control over the fulfilment of tax obligations, including the internal control system

Managing the fulfilment of the Bank’s tax obligations:

a) A Vice-President of the Management Board exercises oversight over the Finance and Accounting Area, including the Tax Department;

b) The Tax Department, together with other relevant Bank units, is responsible for fulfilling tax obligations and ensuring that the tasks relevant to the Bank’s tax obligations are properly performed by other units of the Bank;

c) The high quality of the tasks performed is ensured by the expertise of the Bank’s employees, including its tax advisors;

d) The Bank also hires external tax advisors;

e) The process of fulfilling tax obligations is covered by the Bank’s internal control system.

• mitigating the tax risk using the Bank’s risk management system

The Bank’s tax risk management mechanisms and principles:

a) The Bank regularly analyses and minimizes its tax risk using instruments permitted by the generally applicable laws and regulations. Among other things, the Bank seeks to obtain individual tax rulings and advance opinions.

b) The Bank has a low tax risk appetite. The Bank limits the activities in which it is not possible to eliminate the tax risk using tools permitted by law.

c) Fulfilment of the Bank’s tax obligations is a separate process which is subject to assessments from the perspective of operational and compliance risk, among other things.

• avoiding structures used for aggressive tax planning or tax evasion (including tax havens) and avoiding solutions that are contrary to the intention of the legislator or the spirit of the law (the principle of tax honesty)

The Bank does not engage in tax planning based on regulations which allow the artificial or ostensible lowering of the effective tax burden. Before deciding to engage in a specific activity, the Bank performs a risk analysis with regard to the general anti-avoidance rule (GAAR) and the specific anti-avoidance rules (SAAR).

• promoting tax awareness among employees

The Bank’s employees are informed of the applicable tax law, its planned amendments and interpretations. The Bank prepares specialist training and guidelines for its employees, as well as analyses of the tax implications of new products, the Bank’s business processes, investment projects, and contracts.

13.5 Non-financial risks and management methods

Risk management system

[GRI 102-11] In accordance with the Risk Management Strategy at the Bank and in the Bank’s Group, the Bank oversees the risk management systems at the other entities of the Bank’s Group and supports the development of these systems, as well as takes into account the risk profile of the operations of the individual entities in the monitoring and reporting of risk at the Bank’s Group level. The principles and method of assessment of the individual types of risk in the other entities of the Bank’s Group are specified in the internal regulations developed taking into account the opinions and recommendations formulated by the Bank, as well as the provisions of the Risk Management Strategy at the Bank and in the Bank’s Group.

The risk management system is adapted to the nature, scale and complexity of the operations of the Bank’s Group, as well as the regulatory, social and natural environment. The Bank’s Management Board is responsible for the functioning of an effective risk management system. The Management Board regularly monitors whether the methods of identifying, measuring or estimating risk, controlling, monitoring and reporting risk are adjusted to the size and profile of the risk at the Bank and in the Bank’s Group as well as the external environment. The Management Board guarantees the operation of the risk management system, monitors and evaluates its functioning and informs the Supervisory Board thereof.

By managing risk appropriately, the Bank ensures the stability of its financial result and strengthening of the Bank’s market position.

The Bank’s Group has identified the risks which are to be managed and found some of these risks to be material. The Bank assesses the materiality of the risks at least once a year. The following risks are considered material in the Bank: credit risk, the risk of mortgage loans in foreign currencies for households, foreign exchange risk, interest rate risk, liquidity risk (including financing risk), operational risk, business (strategic) risk, the risk of macroeconomic changes and model risk. Due to the cross-cutting dimension of socio-environmental risks, which are not separate risks but which form part of the classic risk categories, the Bank’s Group did not set them apart as a separate category. Other entities of the Bank’s Group may consider other types of risk to be material. The Bank then verifies the materiality of such risks at the Bank’s Group level.

In 2021, the Bank analysed the ESG risk management process and developed an operational plan for integrating ESG risks with the Bank’s risk management system. Firstly, the key elements related to ESG risk were taken into account in the Risk Management Strategy, including the impact of ESG risk in credit risk appetite. Further work will be focused on collecting the necessary data, developing risk management processes and preparations for ESG disclosures.

In 2021, the ESG risk was taken into account in the risk management strategy at the Bank and in the Bank’s Group. The ESG risk is understood as the risk of negative financial implications which are the result of the impact of ESG factors on Customers and counterparties or balance sheet items. The purpose of ESG risk management is to support sustainable development and building the long-term value of the Bank through integrated management of the impact of ESG factors. The ESG risk management takes into account the perspective of double materiality: the impact of ESG factors on the activities, financial result and development of the Bank as well as the impact of the Bank’s activities on society and the environment. The Bank manages the ESG risk as part of managing other types of risk. The ESG risk is not a separate type of risk but a cross-cutting one which affects the individual risk types. The ESG risk management is supported by all committees functioning at the Bank within the scope of their activities and competences related to the ESG risk.

As the first step in preparing the Statement, the Bank reviewed the social and environmental risks in the Bank’s Group, which were identified in 2021. Among the key risks, the following risks were identified:

• risk of a negative impact on the social environment;

• employment risk;

• OHS risk;

• risk of a negative impact on the natural environment;

• climate risk;

• risk of violation of human rights;

• corruption risk;

• risk of unethical business conduct;

• supply chain risk;

• product compliance risk;

• risk of a breach of security of Customers and their funds;

• risk of incorrect communication;

• risk for sustainable development.

13.5.1 Risk of a negative impact on the social environment

A. Social products and initiatives

Financing of housing needs

In 2021, PKO Bank Polski S.A. and PKO Bank Hipoteczny S.A. granted housing loans to private individuals of PLN 16.6 billion (a 19.8% share of sales of new mortgage loans in 2021).

Since 2014 PKO Bank Polski S.A. has been involved in a nationwide initiative supporting large families: a reduced commission for granting a Własny Kąt Hipoteczny [My Own Place Mortgage] housing loan to holders of a Large Family Card.

Supporting the development of local government units by financing public investments (e.g. schools, hospitals, roads, environmental protection)

Table 31. The share of loans in the portfolio for corporate and public entities by selected Polish NACE codes (%)

		BANK			GROUP
NACE codes:	2021	2020	2019	2021	2020	2019
O. Public administration and national defence, mandatory social security, including LGUs	4.9	5.4	6.6	4.3	4.8	4.8
Q. Healthcare and social welfare	1.3	1.3	1.3	1.6	1.5	1.4
R. Cultural, entertainment and recreational activities	0.5	0.5	0.5	0.6	0.5	0.5
Sections O, Q, R in total:	6.8	7.2	8.4	6.4	6.8	6.8

Supporting education

Preferential student loans for students and doctoral students (the Bank offers forgiveness of a part of the loan for the best graduates). At the end of 2021, the value of preferential student loans was PLN 489.3 million.

Counteracting financial exclusion

The Bank has the largest network of branches and agencies of all banks operating in Poland. The coverage of the Bank’s network provides access to banking services also to people living in places where the Bank’s main competitors do not have any branches. Electronic banking is an important addition to the branch network.

Since 2020, selected locations of the Bank offer their Customers online self-service points (for persons who do not have a computer or Internet access).

The Simple Communication project involves, among other things, making the messages presented on the e-banking platforms and in the product documentation more comprehensible for the Customers.

Supporting the acquisition of digital skills: at every branch of the Bank, Customers were offered individual support from a Bank employee in using ATMs/cash deposit machines and using their bank products through electronic channels – the iPKO computer application and IKO mobile application. Such education was provided with the help of modern technological tools, such as the demo versions of the applications, interactive videos and so-called Customer screens. Such solutions will continue to be developed in the following years.

The Bank educates its Customers in how to use the electronic channels for banking services and has a special sales model for elderly people. In the 51+ age group, the share of persons using remote channels only is growing systematically.

Supporting long-term savings

The possibility of investing in investment funds (PKO TFI S.A.) and in savings Treasury bonds, including long-term ones. The offer of ROD and ROS bonds for the beneficiaries of the 500+ programme.

Preferences for pupils who have turned 18 and students up to the age of 25: a free of charge investment account until their 25th birthday and special commissions on purchase or sale orders in respect of financial instruments listed on the WSE, submitted through the Internet system (including the mobile application) until the end of the calendar year in which they turn 25.

Education of the youngest

The offer of educational products for children under the age of 13 and their parents. The PKO Junior offer includes: PKO Konto Dziecka [PKO Child’s Account], ROR Rodzica [the parent’s current account], Pierwsze Konto Oszczędnościowe [First Savings Account], NNW PKO Ubezpieczenie dziecka [PKO Accident Insurance for Children] (0-20 years of age), PKO Junior payment cards, as well as online services and telephone applications: junior.pkobp.pl, junior.inteligo.pl.

The Bank has been conducting the Szkolne Kasy Oszczędności [School Savings Accounts] programme in cooperation with schools for more than 86 years. It is currently the oldest, largest and at the same time the most innovative financial education programme in Poland, with more than 4,500 primary schools (one in three such schools in Poland) participating in this programme (under the agreement with the Bank). The SKO offer includes three types of accounts: for pupils (with online access through www.sko.pkobp.pl), schools and parents’ councils. The Bank also offers a social media platform SzkolneBlogi.pl, where over 830 schools participating in the SKO programme have their blogs. Overall, nearly 900 thousand children used the PKO Junior and SKO offers (accounts for children and accounts for pupils. An important educational novelty in 2021 was the launch of the National SKO Knowledge Test (one of the criteria in the SKO Competition for schools and teachers) in the spring, which was performed more than 60 thousand times (education about finances, a healthy lifestyle, cybersecurity).

Education of senior citizens

Meetings with the employees of the Bank and the Police in the regions as part of the Bezpieczny Senior [Safe Senior Citizen] Campaign. The topics include security in its broadest sense: on the road, while shopping online or on mobile phones, as well as financial security.

Supporting the development of small enterprises (microfinancing)

Loans with BGK guarantees: de minimis (https://www.pkobp.pl/firmy/kredyty/gwarancje-bgk/gwarancja-de-minimis-z-bgk/) and COSME (https://www.pkobp.pl/firmy/kredyty/gwarancje-bgk/gwarancja-cosme/)

and FG POIR (BIZNESMAX) guarantees [Guarantee Fund, Intelligent Development Operational Programme] (https://www.pkobp.pl/firmy/kredyty/gwarancje-bgk/gwarancje-fg-poir/)

Overdraft of up to PLN 20 000 without a security (https://www.pkobp.pl/firmy/konta/debet-w-koncie/)

Credit card PKO EURO BIZNES of up to PLN 50 000 (https://www.pkobp.pl/firmy/karty/karty-kredytowe/karta-kredytowa-pko-euro-biznes/)

Financing of invoices (https://www.pkobp.pl/firmy/finansowanie-faktur/)

SME working capital loan (https://www.pkobp.pl/firmy/kredyty/produkty-kredytowe/kredyt-obrotowy-msp/)

SME all-purpose loans (https://www.pkobp.pl/firmy/kredyty/produkty-kredytowe/pozyczka-msp/)

Leases (https://www.pkobp.pl/firmy/leasing/leasing-dla-firm/)

Investment loan for companies (https://www.pkobp.pl/firmy/kredyty/produkty-kredytowe/kredyt-inwestycyjny-msp/)

Mortgage loan for companies (https://www.pkobp.pl/firmy/kredyty/produkty-kredytowe/pozyczka-hipoteczna-msp/)

Factoring (https://www.pkobp.pl/firmy/faktoring/)

Low-value loans granted on the basis of the Customer’s declaration on income (https://www.pkobp.pl/klienci-indywidualni/pozyczki/szybka-pozyczka-gotowkowa/)

Availability of the services to the Customers with disabilities

Preventing financial exclusion of persons with disabilities through:

• Appropriate selection of locations (along a main pedestrian route, with access to parking spaces, accessible to persons with disabilities) and appropriate arrangement of space in the branches. By the end of 2021, 864 branches (i.e. 94% of the total number of own branches) had been adapted to the needs of persons with disabilities (in 811 branches, i.e. 84% in 2020).

• The possibility of individual service adapted to the type and degree of a Customer’s disability – if required, in a dedicated, comfortable and safe room.

• Adapting the portals and applications to the needs of the visually impaired, the blind and persons with manual disabilities in compliance with the WCAG 2.1 standard at the AA level.

• The Talk2IKO voice assistant: increasing the accessibility of the application to persons with manual disabilities, regular addition of new processes – among other things, voice support for persons withdrawing cash from ATMs using a card and BLIK codes.

• Expanding the range of services that are available online – including increasing the number of documents that can be submitted online regularly (among other things, documents for an application for a mortgage loan and loans for entrepreneurs).

• Introducing the possibility of using the sales services provided by branch advisors by telephone or online (video chats) in all business lines, among other things, for persons with reduced mobility.

• Offering the possibility of opening a personal account without having to visit a branch (the so-called selfie account).

• Introducing the possibility of making an appointment with an advisor at a specific time via the website – for physical meetings at the branches, telephone meetings and online meetings (video chats).

• Development of alternative forms of transaction authorization (text messages, Customer screens which offer the possibility of signing an order on an electronic pad and receiving copies of documents by e-mail available in all of the Bank’s branches).

• Providing services to persons with hearing impairments and the deaf in the Polish Sign Language in every branch and agency (through a smartphone) – all advisers have been trained to provide professional services to deaf Customers.

• Availability of ATMs. At the end of 2021, 2,504 machines (85% of the Bank’s network) were equipped with audio modules. Information on the location of such devices can be found on the Bank’s website and on the Dostępny Bankomat [Available ATM] interbank platform.

B. Impact on the budget

Table 32. Central and local taxes constituting revenues of the state budget and local budgets (in PLN millions)

	BANK			GROUP
	2021	2020	2019	2021	2020	2019
Central taxes, including:	3,348	3,019	2,978	3,464	3,279	3,477
corporate income tax	1,508	1,452	1,339	1,526	1,388	1,525
tax on certain financial institutions	985	957	931	1,077	1,055	1,022
personal income tax	292	258	281	333	293	316
flat-rate personal income tax	298	310	366	306	311	371
flat-rate corporate income tax	26	6	28	26	7	29
tax on goods and services (VAT)	239	36	33	196	225	214
Local taxes, including:	16	17	20	75	78	91
tax on vehicles	0	0	0	45	44	55
real estate tax	13	14	13	24	27	24
fee for perpetual usufruct	2	2	6	4	5	9
other taxes and fees	1	1	1	2	2	3
Total:	3,364	3,036	2,998	3,539	3,357	3,568

Note: The table presents data of the subsidiaries which were a part of the Bank’s Group at the year-end and had tax liabilities to the Polish state budget.

According to data provided by the Ministry of Finance, the Tax Group of the Bank was the second largest CIT payer among the tax groups in Poland in 2020.

The Bank did not pay a dividend in 2021.

Table 33. Taxes paid by the Bank’s subsidiaries to the Ukrainian budget (in UAH millions)

	2021	2020	2019
Total	501	441	419
including:
central	372	323	314
local	129	118	105

C. Involvement in pro-social activities

[GRI 102-12] For many years, the Bank has been initiating and implementing social projects combining business objectives with initiatives for all stakeholder groups. In accordance with its Mission, the Bank conducts activities whose aim is to have a positive impact on Poland, its people, companies, culture and the environment. The Bank builds its capital based on the national values and traditions. It conducts and supports activities aimed at commemorating important historic events, promoting pro-social attitudes and popularizing the Polish tradition and culture. The Bank is actively involved in educational and sports projects. Its experience and leading position in the financial market also require it to promote entrepreneurship and support the Polish economy. The Bank participates actively in organizing economic congresses and industry conferences enabling the exchange of experience and building Polish and international business relations. The Bank carries out projects both at national and local levels, supporting initiatives that are important to local communities. Such activities facilitate the integration of communities, the development of entrepreneurship among the region’s inhabitants and its promotion.

Both the Bank, as part of its sponsorship activities, and the PKO Bank Polski Foundation, as part of its charity activities, verify every partner and beneficiary of the support provided. No negative impact on the Bank’s image was identified in 2021 in these areas. The Bank and the Foundation implement projects jointly or separately in the most important programme areas in terms of image, such as sport, culture and education. Furthermore, the Foundation is involved in activities which are focused on social welfare, protection of life and health, and ecology. On the one hand, such division of commitment to programme areas strengthens the Bank’s image-related benefits, while on the other, it broadens their range.

Sponsorship activities

Objectives

The sponsorship activities of the Bank are aimed at promoting the image of the Bank as a trustworthy financial institution, socially involved, innovative and open to its Customers’ needs.

The Bank implements sponsorship projects at both national and local level and focuses on the following areas:

• sport – encouraging physical activity, promoting mass sports, including football (through the Bank’s partnership with the Ekstraklasa and running (often combined with charity events) as part of the programme “PKO Biegajmy Razem” (PKO Let’s Run Together);

• culture and art – protecting the Polish cultural heritage, popularizing high culture;

• science and education – promoting sciences, paying attention to the education of young Poles, supporting educational projects that promote digital solutions in finance;

• innovations – supporting projects in the area of innovative solutions relating to IT and new technologies;

• business – presenting the Bank as a banking leader, supporting Polish entrepreneurs, promoting Polish business in the international markets, developing entrepreneurship.

• The Bank’s sponsorship policy is governed by the principles set out in its internal regulations and a several-stage process of reviewing and accepting applications that are submitted. In 2021, 196 sponsorship projects received financial support.

• In 2021, due to the ongoing COVID-19 pandemic and the resultant restrictions, many cultural institutions and entities cooperating with the Bank carried out projects in an online or hybrid format, which, in certain cases, offered easier access to interesting cultural events and increased their reach.

Examples of support in the most important areas

Sport: PKO Bank Polski Ekstraklasa

In 2021, the Bank was the Titular Partner for the Ekstraklasa and the Official Bank of the Ekstraklasa. Thanks to this, the Bank’s brand appeared in many publications and programmes. As part of the cooperation, many initiatives were taken, among other things, engaging profiles “Grajmy Razem” (Let’s Play Together) in the social media and numerous competitions. By entering into long-term cooperation with the Ekstraklasa, the Bank was involved in activities aimed at developing the league and young football talent in Poland. One of the activities that support this objective was the election of the PKO Bank Polski Young Player of the Month, i.e. the best Polish football player in a given month under 21 years of age. The Bank’s involvement was communicated in the social media in the “Grajmy Razem” profile and on Youtube – as part of a series of programmes “Ekstra kibic” [Super Football Fan] and “Kandydat na Gwiazdę” (Candidate for a Star), as well as in television programmes on Canal+. Moreover, the Bank continued the Partnership Programme for the Ekstraklasa clubs – a pro-development and innovative project relating to sports marketing and promoting banking products among football fans.

Sport: runs and other sport events

In 2021, the Bank supported 21 runs which took place in compliance with the applicable restrictions, among others, PKO Poznań Półmaraton (PKO Poznań Half Marathon), PKO Białystok Półmaraton (PKO Białystok Half Marathon), PKO Rzeszów Półmaraton (PKO Rzeszów Half Marathon), Bieg Piastów, as well as the run that took place in a virtual form – Wings for Life. During those events, in cooperation with the PKO Bank Polski Foundation, charity runs were organized, thanks to which financial assistance was given to people in need.

The Bank also encouraged people to look after their health and lead a healthy lifestyle by supporting the programme BiegamBoLubię (IRunBecauseILikeTo). It is a series of free of charge running practices for runners at all fitness levels. In 2021, almost 30 thousand runners in nearly 100 stadiums all over Poland took part in the training.

In addition to the running events, the Bank supported yet again a series of international, indoor horse riding competitions known as Cavaliada Tour and the Warsaw Jumping competitions taking place in the Służewiec Racecourse in Warsaw.

Culture and art

The Bank provided support to many cultural institutions, carrying a total of 65 projects. The key ones are as follows:

Philharmonic orchestras/operas

The National Philharmonic in Warsaw – the Bank continued its strategic patronage of the National Philharmonic in Warsaw, celebrating an unusual Jubilee. On 5 November, exactly 120 years since the first concert with the participation of Ignacy Jan Paderewski, a gala concert was held, conducted by the last three Conductors of the Philharmonic.

Moreover, the Bank cooperated with philharmonic orchestras and operas all over Poland, such as: the Philharmonic Hall of Podkarpacie, the Polish Wieniawski Philharmonic Orchestra in Lublin, the Poznań Philharmonic, the Zielonogórska Philharmonic Concert Hall, the Pomeranian Philharmonic and the Kraków Opera, the Wrocław Opera, the Silesian Opera, and the Podlasie Opera and Philharmonic – European Art Centre in Białystok.

Museums

As part of the cooperation with the National Museum in Warsaw, the Bank took the patronage of the exhibition “Artystka. Anna Bilińska 1854–1893” (Artist. Anna Bilińska 1854–1893). Anna Bilińska-Bohdanowiczowa was the first Polish artist educated in Paris and renowned internationally. The exhibition was visited by 43 thousand people.

In December 2021, the Stanisław Wyspiański Museum was opened in Kraków, and the Bank became its Patron. The Museum, which is a branch of the National Museum in Kraków, is housed in the Old Granary building in Kraków and is perfectly in line with the space of the city in which and for which Wyspiański created his works. By the end of the year, the exhibition that was opened on 3 December was visited by more than 2 thousand people.

As part of supporting Polish art and national heritage, the Bank also initiated cooperation with the National Museum in Wrocław. In the Four Domes Pavilion (the Museum of Contemporary Art), on 19 December 2021 the exhibition “Abakanowicz. Total” was opened, dedicated to the works of one of the most eminent Polish artists of the 20th century, whose installations are well-known all around the world. During the first 8 days the exhibition was visited by approx. 1 000 people.

Last year, the Bank also cooperated with the Polish Army Museum in organizing the exhibition “The Battle of Warsaw” and continued supporting the exhibition “Jaki znak twój?” (What Is Your Sign?) at the Warsaw Rising Museum.

Theatres

In 2021, the Bank also sponsored several theatres, such as: the Old Theatre in Lublin, the Music Theatre in Poznań, Polish Theatre in Warsaw, the Music Theatre in Gdynia, the Music Theatre in Lublin and other institutions, such as: the Centre for the Meeting of Cultures in Lublin or the Academy of Art in Szczecin.

Film festivals

Since 2011 the Bank sponsors projects that aim to consolidate, promote and popularize Polish cinematography.

The 39th International Young Audience Film Festival Ale Kino! – the Bank was the main partner of the festival organized by the Children’s Art Center in Poznań for the seventh time. The mission of Ale Kino! is to promote valuable world films for children and young people, film education and creating a discussion forum for young audiences, artists and educators. The Festival’s priority is its general accessibility. The Festival also enables children from excluded and disadvantaged backgrounds to participate free of charge. As every year, as part of the promotion of the SKO programme, primary schools that were particularly active in saving were awarded. The SKO leaders (the schools indicated by the Bank) received a total of 1,350 virtual tickets for online shows to be watched in class. In 2021, during the Festival 102 films from 38 countries were presented. Together with the accompanying events, the Festival was watched by approx. 28 thousand cinema-goers, including, among others, the youngest viewers in children’s hospitals.

The 13th “Niepokorni Niezłomni Wyklęci” Film Festival in Gdynia – yet again the Bank was a sponsor of the international festival dedicated to the recent history of Poland and the entire Central and Eastern Europe. This is a place of dialogue for many generations, meetings of young people with the passing generation of the Witnesses to History, who fought for freedom. During the 4-day festival, 104 films were shown to approx. 5.5 thousand physical and online viewers, and many workshops and discussion panels were organized.

Science and education

In 2021, the Bank cooperated with universities and academic centres, such as: the Adam Mickiewicz University in Poznań, the SGH Warsaw School of Economics, the Jagiellonian University, Kazimierz Wielki University in Bydgoszcz or the WSB University in Wrocław. The most important educational projects:

• Polish Academic Team Programming Championships – the Bank has been supporting the competition since 2013; this year the event was organized by the Jagiellonian University.

• Colourful University – an educational project which is aimed at popularizing learning and developing the creative and intellectual potential of children aged 7-12 years. The project is carried out by the lecturers of the Adam Mickiewicz University in Poznań. Approx. 1 200 people took part in its latest online edition.

• “Best Polish Speaker” and “Best Young Speaker” – these are educational projects initiated in 2020 for which the winners were announced in 2021. The competitions promote the art of beautiful speech and the ability to present arguments effectively. The latest editions attracted nearly a total of 900 participants from all over Poland.

• National Early Music Festival “Schola Cantorum” in Kalisz is a project in a contest format, aimed at children and young people from all over Poland and abroad, who are passionate about music and old time dances since the Middle Ages, as well as reflecting them using the fine arts. During the festival, seminars and workshops are held.

• “Meeting with a Masterpiece” – the Bank continued supporting the Raczyński Library in Poznań which presents extremely valuable old prints and books free of charge twice a year. For the Raczyński Library, the series of Meetings with a Masterpiece is one of the most important events combining history and legacy of the past with knowledge.

Business

As one of the leaders in the financial market in Poland, PKO Bank Polski S.A. participated actively in organizing congresses and conferences enabling the exchange of experience and solutions among various business environments. Examples of projects with the Bank’s participation:

• Economic events: the European Financial Congress, the Development Vision Forum and many industry projects such as, e.g.: Impact Connected Edition, Congress 590, the Congress “Poland the Great Project”, the Local Government Capital and Finance Forum.

• Industry competitions: the Retail Banking Congress, the Conference of the Chamber of Brokerage Houses, the EY Entrepreneur of the Year Competition, the Polish Firm – International Champion Competition, the GPC Polish Entrepreneur Competition, the Man of the Year of Gazeta Polska, the Power Sector Congress, Civil & Military Aeromixer in Wrocław.

• Chambers of Commerce: the Bank also supported local chambers of commerce all over Poland and bilateral chambers of industry and commerce such as, e.g.: the Scandinavian-Polish Chamber of Commerce, the Polish Canadian Chamber of Commerce or the Polish-German Chamber of Industry and Commerce with which it carried out projects for Foreign Corporate Banking.

PKO Bank Polski S.A., being aware of the challenges which result from climate changes, gradually eliminates activities that are harmful to the natural environment, it supports ecological education and, in its everyday operations, it follows the principle of social responsibility. In 2021, it supported initiatives which were aimed at discussing the social and economic problems of the planet, i.e.: TOGETAIR (Climate Summit and Polish Multimedia Climate Report), Climate Positive or #MakeAnImpact.

The Bank also participated in many smaller projects – with a local reach but of great importance to the community in a given region of the country. Such activities facilitate the integration of communities, building a platform for sharing experience, and they also contribute to the development of entrepreneurship among the region’s inhabitants. Examples of such initiatives are: meetings with entrepreneurs, cooperation with chambers of commerce and industry, local cultural centres and schools, as well as supporting mass events: harvest festivals, days of cities or other local jubilees and cultural events.

Innovations/new technologies

The Bank took an active part in events promoting the development of innovations used in banking and actively supported projects which were aimed at promoting the digital transformation and the development of new technologies:

• Infoshare – the largest conference in Central and Eastern Europe focused on technology, new media and support for young companies. On five scenes, specialists from 57 countries, operating in the areas of IT, AI and Big Data, e-commerce, advertising, and finances presented themselves.

• UX Poland – one of the largest UX conferences in Europe, concerning broadly understood User Experience & Product Design, which brings together specialists in: UX & HX Designers, Product Designers, Interaction Designers, Digital Transformation Specialists, and Developers.

• Hack4LEM – a hackathon co-organized by the Bank and Microsoft in cooperation with the Stanisław Lem Poland of the Future Foundation as part of celebrating the Year of Lem. The narrative of the hackathon presented the participants as Lem’s helpers who, together with him, tried to solve the riddles of the future. The participants were to solve a business and technological task “Bank of the Future” and a CSR task “Cybersecurity”. The participants were assisted by mentors – representatives of the Bank and Microsoft in the studio arranged at the Rotunda.

• AgileByExample – an international event for developers, testers and project managers using the Agile methodology in their daily practice.

• Day of Women’s Careers in IT – the third edition of the event online for all women who wish to enter the IT industry. This year, it was divided into two thematic blocks: RE:START for women who are planning to begin working in the IT area and the block UP&GREAT dedicated to women who already work in IT and wish to improve their skills.

Support for the Polish National Foundation (PFN)

The Bank is one of the founders of the Polish National Foundation (PFN) which organizes, supports and subsidizes projects submitted in accordance with its statutory objectives, among other things, of upholding and popularizing the national tradition, cultivating the Polish identity and developing the national, civic and cultural awareness, shaping and promoting patriotic attitudes, promoting Poland and its cultural heritage abroad. Furthermore, the PFN is also involved in initiatives supporting entrepreneurship, science and innovation, as well as activities relating to education, schooling, environmental protection, sport and health care.

Charitable activities

The Foundation substantively and financially supports projects of importance to the development of Poland, implemented for and in consultation with local communities, serving the purpose of building the civic society.

The scope of the Foundation’s activities is specified in the Foundation’s Statutes, while the principles of cooperation between the Bank and the Foundation are governed by the agreement. Grants awarded by the Bank were the main source of financing for the Foundation’s statutory objectives in 2021. Additionally, the Bank transfers to the Foundation a part of the profit generated on non-cash transactions with charity cards Inteligo Visa payWave “Dobro procentuje” (Goodness pays interest). The support is designated to one of the four charity initiatives, selected by the Customer.

In 2021, 243 projects out of 724 applications for financial donations for social activities were approved. Donations are transferred based on an agreement concluded between the Foundation and the project partner. In addition, in 2021 the charity work of the Foundation was also aimed at assisting in fighting the coronavirus pandemic and protecting the society from the effects of the pandemic.

The Foundation also transfers donations in kind to non-governmental organizations in the form of computer hardware and furniture withdrawn from use from various units of the Bank. In 2021, furniture and computer hardware were donated to 60 organizations.

Examples of support in the most important areas

• Tradition: supporting initiatives that consolidate national awareness, support the development of national heritage and develop civic attitudes (cooperation with the Warsaw Rising Museum, the Maciej Frankiewicz Foundation and others);

• Education: cooperation with the “Siemacha” Association, the Youth Initiatives Foundation, the Generation of Columbuses Foundation and others;

• Hope: help for people at risk of exclusion, victims and persons with disabilities in cooperation with the Disabled Drivers Association “SPiNKa”, Fundacja Dorastaj z Nami (the Grow Up With Us Foundation), the Friends of Integration Association and others;

• Health: supporting activities aimed at the protection of life and health and prophylactics (financial support for the purchase of equipment for rehabilitation following Covid-19, a grant to the Pulse Foundation which organized meals for the employees of the Temporary Field Hospital in Wrocław fighting – as part of their duties – the pandemic and looking after the patients’ health; apart from the activities related to combating Covid-19 support was provided to the Warsaw Hospice for Children Foundation, the Foundation at the Central Clinical Hospital of the Ministry of Interior and Administration in Warsaw and others).

Assistance to individuals

In 2021, the Foundation provided support to more than 100 people – the assistance related to, among other things, helping in treatment and rehabilitation. The Foundation’s assistance was also aimed at supporting socially the families which, as a result of random incidents, including the Covid-19 disease, have lost their closest family members (the families of PKO Bank Polski S.A.’s employees).

Despite the ongoing pandemic, in 2021 the Foundation carried out the following projects of its own:

• the Banking Honorary Blood Donation Campaign, which is aimed at raising new generations of honorary blood donors (in 2021, 3,100 people joined in the campaign, thanks to whom nearly 2 thousand litres of blood were donated to people in need);

• the Charity running campaign “I am running for...” – in 2021, 26 campaigns were organized, with the participation of 8,456 runners and PLN 290,000 was collected for 30 beneficiaries: 24 children and 6 adults. Since the beginning of the programme, i.e. 2013, a total of 487 such campaigns were conducted, with the participation of nearly 216,879 people, and the Foundation has supported 553 beneficiaries with over PLN 6.5 million;

• the Bank’s Art Collection – as part of a programme promoting the works of young artists, the Foundation carries out a number of activities aimed at supporting and promoting Polish contemporary art. PKO Bank Polski, as one of the largest patrons of culture in Poland, supports and promotes the newest Polish art and the works of young artists. This is reflected in the creation of a collection of works under the motto “A new collection for the new centenary of PKO Bank Polski” for which nearly 200 works were purchased. The collection presents a broad spectrum of artistic forms of expression from paintings to textiles, and its task is to open up a space for meeting and promoting young artists as well as showing the energy of the current Polish art. The collection includes the works of 35 young artists including Irmina Staś, Sebastian Krok, Robert Kuśmirowski and Krzysztof Franaszek. An exhibition of the entire collection is scheduled for May 2022, at the “Prześwit” gallery in Warsaw.

Ecological grant competition

In December 2021, an ecological grant competition titled Pozwólmy Ziemi Oddychać (Let the Earth Breathe) was also announced, the results of which will be known at the beginning of 2022. The amount reserved for this purpose is PLN 1 million. The competition is aimed at primary and secondary schools, non-governmental organizations and local government cultural institutions operating in the territory of the Republic of Poland. The purpose of the project is to raise ecological awareness and the knowledge of climate and clean air among children, young people and local communities as well as selecting the best ecological projects aimed at protecting clean air and climate.

c) Involvement of the other entities of the Bank’s Group in pro-social activities

• KREDOBANK S.A., as a supporter of Ukrainian culture, supported again the international classical music festival “Music in Old Lviv” and provided charitable support, contributing to, among others, the construction of the National Museum of the Holodomor-Genocide in Kyiv or the purchase of furniture for the school in the village of Podhajczyki.

• PKO Życie Towarzystwo Ubezpieczeniowe S.A. and PKO Towarzystwo Ubezpieczeń S.A. took part in social campaigns dedicated to healthcare and helping people in need, e.g. by joining the fight against the coronavirus pandemic by donating funds for establishing an additional call center of the Chief Sanitary Inspectorate, providing support to the Kids with Cancer Foundation, supporting the organization of the charity campaign of the Foundation of Polish Knights “Opłatek Maltański” (Christmas Wafer of Malta). The Company also took part, as the titular sponsor, in organizing the road cycling races “PKO Ubezpieczenia Via Lower Silesia” – including the Kornel Morawiecki Memorial and PKO Ubezpieczenia Junior Race. Moreover, the Company sponsored the Sports Club MKS Unia Hrubieszów.

• PKO Leasing S.A. took part in a social educational campaign “Elektromobilni.pl”. The sponsorship initiatives undertaken in 2021 included, among others, #eRajd Punta Marroquia 2021, the New Mobility Congress or the National Congress of Car Dealers.

• Last year, PKO BP Finat sp. z o.o. sposored professional football matches for amaterurs – Ligowiec.

Volunteering:

The Foundation encourages the employees of all entities of the Bank’s Group to take part in working for local communities. Since 2013, 1,634 people signed up to the employee volunteering database, and in 2021, due to the ongoing pandemic-related restrictions, 18 new volunteers registered.

The volunteers not only join in the projects initiated by the Foundation, but they also often initiate them themselves. The year 2021, just as the year 2020, involved many limitations and restrictions due to the pandemic, however, the employees’ dedication and their activity for people in need in the regions before the holiday season resulted in an invitation from the PKO Bank Polski Foundation to participate in a Christmas charity campaign. The Foundation responded to the needs communicated to it by extending an invitation in December to undertake charitable activities for selected organizations and communities (children’s homes, care and educational institutions, homes for Senior Citizens, nursing homes, etc., canteens, night shelters for homeless people, etc.) in all regions “Christmas Campaign 2021”. The campaign took place in all regions throughout Poland and involved volunteers – PKO Bank Polski S.A.’s employees who took part in support activities in their regions, and nearly 60 of them joined in the campaign by directly coordinating the collections in their regions. Throughout Poland, 3 122 employees of the Bank took part in the Christmas collection. As a result of the volunteers’ dedication, aid-in-kind was provided to 50 institutions across Poland, selected by the employees.

13.5.2 Employee risk

A. Employment and employee benefits

Employment

Table 34. Total number of employees (in FTEs)

	2021	y/y (%)	2020	y/y (%)	2019
Bank	21,686	-1.2	21,939	-7.2	23,639
Other entities	3,970	1.3	3,920	-3.7	4,069
Bank's Capital Group	25,657	-0.8	25,859	-6.7	27,708

Table 35. Employees by position, age, working time and gender [GRI 405-1] GRI 102-8]

	BANK						GROUP
	2021			2020			2021			2020
	total	women	men	total	women	men	total	women	men	total	women	men
by position and gender
regular employees	86%	76%	24%	88%	76%	24%	86%	75%	25%	87%	75%	25%
middle management	9%	66%	34%	7%	68%	32%	9%	64%	36%	7%	65%	35%
managers	5.2%	58%	42%	5.2%	59%	41%	6%	54%	46%	6%	54%	46%
MRT (Material Risk Takers)	0.3%	23%	77%	0.3%	19%	75%	6%	54%	46%	6%	54%	46%
total	100%	74%	26%	100%	75%	25%	100%	72%	28%	100%	73%	27%
by age group and gender
up to 30 years	11%	72%	28%	11%	72%	28%	13%	70%	30%	12%	72%	28%
from 30 to 50 years	60%	71%	29%	61%	71%	29%	62%	70%	30%	63%	70%	30%
above 50 years	29%	81%	19%	28%	83%	17%	25%	80%	20%	25%	81%	19%
total	100%	74%	26%	100%	75%	25%	100%	72%	28%	100%	73%	27%
by full-time and part-time employment and gender
Full-time	99%	74%	26%	99%	75%	25%	97%	73%	27%	97%	73%	27%
Part-time	1%	81%	19%	1%	80%	20%	3%	65%	35%	3%	65%	35%
Total employment	100%	74%	26%	100%	75%	25%	100%	72%	28%	100%	73%	27%

The share in the number of employees of a given gender or in the total number of employees

Table 36. Newly hired employees and turnover rate in the Bank and the Bank’s Group by age group and gender [GRI 401-1]

	BANK				GROUP
	newly hired		turnover rate		newly hired		turnover rate
	2021	2020	2021	2020	2021	2020	2021	2020
<30	47.9%	48.6%	3.1%	3.3%	45.0%	43.4%	3.3%	3.5%
30-50	49.1%	48.7%	6.0%	5.6%	51.7%	52.5%	7.1%	6.4%
>50	3.0%	2.7%	3.2%	2.8%	3.3%	4.0%	2.9%	2.7%

women	69.0%	68.3%	9.3%	9.1%	67.1%	67.1%	9.7%	9.4%
men	31.0%	31.7%	3.0%	2.6%	32.9%	32.9%	3.6%	3.1%
Total	11.1%	4.7%	12.3%	11.7%	12.5%	6.2%	13.1%	12.5%

Share in the total number of employees

The turnover rate calculated as the ratio of the number of employees terminated in 2021 to the number of employees at the end of 2020. The ratio of voluntary resignations at the Bank was 7.02%, retirement - 1.91%, and planned group redundancies - 0.95% of the number of employees at the end of the year. For the Group, these values were 8.13%, 1.64% and 0.84%, respectively.

Table 37. Returns to work after parental leave in 2021 [GRI 401-3]

	BANK		GROUP
	women	men	women	men
Employees eligible for parental leave in the reporting year (2021)	600	160	709	172
Employees who took parental leave in 2021	531	8	725	9
Employees who returned to work in the reporting year after parental leave ended in 2021	531	6	687	7
Employees who returned to work after parental leave ended, that are still employed 12 months after their return to work	472	2	529	2
Return to work rate: share of return to work after the parental leave	100%	75%	95%	78%
Retention rate: share of employees who returned to work after the parental leave and stayed employed	86%	67%	86%	67%

Table 38. Additional information on the employment at the Bank in 2021

	2021	2020
Permanent contract employment (share in total employment)	88.2%	89.5%
Fixed-term contract employment (share in total employment)	11.8%	10.5%
in this contract for replacement	1.9%	1.5%
Employees with duration of employment>10 years (share in total employment)	74.0%	74.9%
Average duration of employment for women (years)	16	16
Average duration of employment for men (years)	11	11
Number of women employed (ths.)	16	16.4
*Number of persons on management positions (ths.)	1.2	1.2
*Number of women on management positions (ths.)	0.7	0.7
Number of newly hired (in ths.)	2.4	1.0
Number of women among newly hired (in ths.)	1.7	0.7
Number of employed foreigners	36	21
Share of employment with disabilities in total employment	1.2%	1.2%

*change of wording: “senior management” was replaced with the phrase “on management positions”

The employment policy at the Bank and in the Bank’s Group is based on the principle that every employee is important, regardless of their gender, age, health condition, sexual orientation, religion, marital status or country of origin.

The Bank and the entities of the Bank’s Group use their best efforts to ensure diversity among the employees at every level in accordance with the applicable internal policies (chapter ‎F).

Salaries

Table 39. The relationship between the weighted average salary of women and men by group of positions in Bank (%)

	2021
Distribution network	97
Other non-managerial positions	93
Middle management	95
Managers	97
MRT	84
Total:	95

[GRI 405-2] The global ratio of women’s salaries to men’s salaries calculated as the total weighted average salary of women to that of men was 95% at the Bank and 92% in the Bank’s Group.

The calculation of the ratio of women’s salaries to men’s salaries is based on average salaries weighted by the number of employees of the homogeneous groups identified. These groups bring together employees with the same valuation levels (the valuation of work in individual positions), families of positions and the same geographical location.

Replacing the arithmetic mean with the weighted average described above led to a change in the level of both the global ratio and the ratios for individual employment categories compared with the prior year disclosures.

The gender pay gap calculated on the basis of the weighted average salary was 5% at the Bank and 8% in the Bank’s Group. The gender pay gap at the Bank based on the median was 3.9%.

The presented pay gap level does not indicate any unfounded inequalities in the amounts of women’s and men’s salaries, and the reasons for the small deviations owing to gender are the result of the nature of the organization in which female employees are more numerous.

The Bank’s remuneration policy does not discriminate employees based on their gender. The process of determining the salaries at the Bank is based on the valuation of positions. The salary is related to the complexity of the tasks within a given organizational structure, the level of responsibility associated with a given position and the necessary skills.

The Bank performs regular salary reviews for different positions, which also analyse the relationship between the salaries of women and men, taking into account internal benchmarks and data provided in remuneration reports and studies in the process of determining and optimizing the remuneration strategy.

In order to ensure that the same positions are compared and to eliminate the total effect of other elements on the salary level, the Bank also uses the so called “Comparatio” (CR) which compares the salary offered to an employee with an appropriate market benchmark. The internal analyses performed using this ratio show that there are no differences between the remuneration of women and men at the Bank and that both groups receive remuneration at the market level.

The “Policy for remunerating the employees of the Bank and the Bank’s Group”, which is applied in the Bank’s Group, ensures a consistent salary system by:

• applying a salary system which is in line with market trends;

• acquiring optimal job candidates;

• adjusting mechanisms, tools and salary levels to the strategy and goals of the Bank and the Bank’s Group;

• taking into account the ability of the Bank’s Group to determine the desired mechanisms and salary levels;

• determining fixed salaries on the basis of the valuation of positions;

• determining the remuneration structure on the basis of performance at work and the appraisal of the employees’ skills;

• building responsibility in the employees for their tasks which are assessed on the basis of objective criteria;

• ensuring that the variable salary components are parameterized so that they take into account the long-term cost of risk, cost of capital and liquidity risk of the Bank and the Bank’s Group;

• establishing a system in which the forms of remuneration do not encourage the people involved to favour their own interests or the interests of the Bank and the other entities of the Bank’s Group to the detriment of Customers.

[GRI 102-41] A Collective Bargaining Agreement concluded with the company trade union organizations is in force at the Bank. It governs, among other things, salary-related issues. According to the Collective Bargaining Agreement, the Bank’s employees are entitled to the following salary components: (i) the base salary, (ii) allowances for working overtime and at night and in conditions which are particularly onerous and harmful to their health, (iii) bonuses and rewards for special achievements at work.

Base salaries and additional benefits granted to the employees are determined on the basis of the valuation of positions and the analysis of market salaries.

The Bank has a bonus system under which the amount of a bonus depends on the achievement of the targets set. The targets set for the employees are related to the Bank’s key management indicators.

Apart from the bonus system, there is a system for awarding the Bank’s employees. The employees may receive awards:

• individually – when they achieve outstanding performance at work or for accomplishments which have produced important results for the Bank;

• for recommending candidates for employment with the Bank;

• for taking measures related to employee retention.

The key activities related to the Bank’s employee remuneration system in 2021 included:

• systemic regulation of salaries;

• campaign of awards for the Bank’s financial results;

• sales support campaigns for employees of selected organizational units – in particular for employees of the retail network units. The competition winners were awarded financial prizes and additional training to raise their professional qualifications.

In the entities of the Bank’s Group, depending on the level of employment, the principles of remunerating employees are defined in the payroll regulations and in the employment contracts or in the employment contracts only. In the individual entities of the Bank’s Group, there are separate bonus systems for the employees.

Additional benefits

Table 40. Major non-salary benefits for the employees [GRI 401-2]

	Share in total employment (%)			y/y (%)
BANK	2021	2020	2019	2021/2020
Medical packages	100	100	100	+0 p.p.
Employee pension programme	78	81	78	-3 p.p.
Subsidization of organized recreation	10	11	18	-1 p.p.
Welfare payments	3	3	4	+0 p.p.
Housing advances	14	13	15	+1 p.p.
Benefits available from MyBenefit platform or special social benefits, such as Christmas bonuses	100	100	100	+0 p.p.
Sports cards	5	8	19	-3 p.p.
GROUP
Medical packages	99	99	98	+0 p.p.
Employee pension programme	69	73	70	-4 p.p.
Subsidization of organized recreation	9	11	16	-2 p.p.
Welfare payments	3	4	4	-1 p.p.
Housing advances	17	11	13	+6 p.p.
Benefits available from MyBenefit platform or special social benefits, such as Christmas bonuses	88	90	90	-2 p.p.
Sports cards	5	8	19	-3 p.p.

[GRI 401-2] All non-salary benefits are available to the employees irrespective of their type of contract or working time (full time or part time).

MEDICAL CARE

Additional medical care: varied packages of benefits assigned to specific groups of positions;

“Zdrowie jak w Banku” [Guaranteed health] – a preventive programme focused on the early detection of diseases and the promotion of a healthy lifestyle;

Support in the pandemic – additional medical check-ups aimed at detecting post-COVID complications;

Other entities of the Bank’s Group (operating in Poland) provide medical care to their employees under the terms negotiated with the healthcare provider by the Bank, based on separate agreements.

EMPLOYEE PENSION

PROGRAMME (EPP)

The Bank’s EPP has been operated since 2013 in the form of an agreement under which the Bank makes a Basic Contribution (3.5% of an employee’s salary) and an Additional Employee Contribution to the Investment Funds managed by PKO TFI S.A. Other major companies in the Bank’s Group also have EPPs in place.

OTHER

Additional benefits from the Company Social Benefits Fund: the MyBenefit cafeteria system. The amount of funds received depends on the gross income per person in a given family. Some of the Group companies also offer the possibility of using the MyBenefit platform to their employees.

Vouchers, offers and discounts, group insurance, supporting sports initiatives and activities as well as charitable activities of the employees.

B. Recruitment policy

The recruitment policy of the Bank’s Group is focused on employing persons with different types of professional experience and skills based on high standards of counteracting discrimination and personal data protection. The employees are selected without taking into account discriminatory criteria (including: age, gender, disability, race, religion, nationality, political views, trade union membership, ethnic origin, religion, sexual orientation). Recruitment processes are supported by modern IT tools and systems.

The Bank actively supports and promotes internal employee mobility through in-house information campaigns, internal job fairs and consultations with recruiters aimed at encouraging its employees to take part in internal recruitment (across the entire Bank’s Group) as part of professional development in other business areas. Moreover, it provides an optimum amount of time for the transfer of an employee selected in internal recruitment to the new entity. This makes the process fast and simple.

The Bank cares about the candidates’ experience in the recruitment process by diversifying the channels of reaching different groups of candidates, using modern selection methods. The transparency of the recruitment process is supported by modern technologies, including the ATS. To reach the candidates, the Bank conducts dedicated campaigns in the social media, takes part in job fairs and industry conferences, cooperates with the academic community, supports selected initiatives and takes active measures to reach passive candidates directly.

The Bank regularly analyses the experience of external and internal candidates to improve the recruitment process.

The Bank also has an internal recommendation programme. As part of this programme, the employees may recommend candidates for work. If the candidate recommended by an employee is hired and satisfies the conditions specified in the rules, the recommending employee will receive a cash reward. In 2021, the Programme was extended to cover more positions for which the employees may recommend candidates with suitable qualifications.

At the end of 2021, the Bank conducted an audit of recruitment announcements and a workshop on inclusive language for recruiters. Its purpose was to present the best practices in drafting announcements and formulating their content in a manner that is simple and comprehensible to the reader, paying attention to inclusivity and avoiding discrimination. The project also included the provision of recommendations which will be successively implemented in job announcements, internal regulations and the Bank’s “Career” tab.

For years, internship programmes such as #StażNaDzieńDobry (#InternshipForAStart) have been one of the Bank’s strengths. The programme is addressed to students and young graduates who may carry out tasks in one of the following five paths: Sales, IT, Data Analytics, Cybersecurity and Business Support.

Cooperation with universities is an important aspect of building the image of an employer. In response to business needs, the Bank cooperates with the academic community by taking part in many events organized at universities. It cooperates actively with career offices in promoting job offers and internships. It organizes workshops and lectures and takes selected courses of study under its wing as part of sharing knowledge and strengthening cooperation with the academic community.

C. Freedom of association and trade union organizations

Employees are represented at the Bank by the trade unions and the Bank Employee Council.

The employer does not prevent the employees from joining the trade unions and the Bank Employee Council or acting as their members in any way. The employee organizations at the Bank have the right to determine their own internal rules, are free to elect their representatives and appoint authorities, operate and prepare the programme for their operation. This is consistent with the principles of freedom of association referred to in Convention No. 87 of the International Labour Organization on Freedom of Association and Protection of the Right to Organize.

There are two trade union organizations at the Bank:

• The National Trade Union of PKO BP S.A. Employees;

• “Solidarity” Independent Self-Governing Trade Union of PKO BP S.A. Employees,

with only the former being a representative union.

As at 31 December 2021, trade union members constituted approx. 10.4% of the total number of employees.

Meetings with trade unions and the Bank Employee Council are organized when necessary, at least a few times a year. The social partners are informed about the planned organizational changes without undue delay [GRI 402-1]. In 2021, the most frequently discussed issues concerned the new business solutions being implemented at the Bank.

The social partners actively seek information they need to conduct their activities. Both the trade unions and the Bank Employee Council have the opportunity to obtain the information they need to conduct their activities. In order to make it easier for the social partners to act, special communication channels have been developed for the trade unions and the Bank Employee Council to provide information about their activities. For this purpose, a special tab – “Employee Representation” – has been added to the INTRA Portal. The Employee Council uses this tool for regular communication with the employees.

Trade union members are Social Labour Inspectors at the Bank. The Social Labour Inspection is a function performed by employees on a voluntary basis. Its aim is to ensure that the workplace offers safe and healthy working conditions and respects the employee rights specified in the labour law. The Bank provides space for the performance of the tasks of the Social Labour Inspection.

The Bank cooperates with these social partners in accordance with the applicable regulations. In accordance with the generally applicable laws, the Bank provides the social partners with information about:

• the employment-related aspects of the employer’s activities and economic situation and the changes anticipated in this respect;

• the level, structure and anticipated changes in employment and the measures aimed at maintaining the employment level;

• measures that may cause significant changes in the organization of work or the basis of employment.

If the law so requires, the Bank holds consultations or negotiations with the social partners. Consultations are held, among other things, in the event of planned organizational changes which lead to significant changes in the organization of work, the level of employment and the type of employment contracts. On the other hand, negotiations with the trade unions are conducted, among other things, with respect to the rules of remuneration and social benefits.

The employees may report their objections, opinions, suggestions and comments through the trade unions. Alternatively, they may do so without the intermediation of the trade unions, using a dedicated e-mail address. This is regulated by a procedure for reporting complaints and irregularities. An employee is entitled to additional support in the process of clarifying a complaint; namely, he/she may indicate a representative of a trade union organization or an employee representative appointed in accordance with other internal regulations, who will participate in meetings with the employee or submit opinions on the validity of the claim.

The Bank Employee Council also operates at the Bank. The principles of cooperation with the Bank Employee Council have been set out in a separate agreement. Under this agreement, the Bank Employee Council has, among other things, the right to receive information from the employer within 7 days of requesting it. The members of the Bank Employee Council may also use the equipment, devices and materials provided by the employer in carrying out the Employee Council’s tasks.

At the entities of the Bank’s Group, a trade union organization is present at KREDOBANK S.A. Trade union organizations do not operate at the other entities of the Bank’s Group.

At the entities of the Bank’s Group, the dialogue with the employees takes place in accordance with the applicable regulations. Its form is adapted to the size of the entity and its specificity. In the larger subsidiaries, the dialogue with the employees is conducted, among other things, through elected employee representatives and using the forms of communication with the employees adopted in a given entity: directly, by e-mail and/or through the intranet. The employees have the opportunity to lodge complaints about a breach of employee rights and other irregularities.

No collective disputes were recorded at the entities of the Bank’s Group.

[GRI 407-1] No operations or suppliers characterized by a high risk of restricting the freedom of association and collective agreements were identified at the Bank in 2021.

D. Development and education

Table 41. Basic data on training at the Bank in 2021 [GRI 404-3, GRI 404-1]

	BANK			GROUP
	total	women	men	total	women	men
Number of training days in a year	81,030	64,482	16,550	84,984	66,477	18,509
Share of employees subject to regular annual performance evaluation (as of 1.04.2021) in the group of employees eligible for evaluation (%)	92	92	92	81	82	80
Average number of hour of trainings in a year per employee*	15	16	12	13	14	10

* average number of hours was estimated by multiplying the registered training days by 4 (during pandemic majority of trainings was carried out remotely)

[GRI 404-2] Development activities are adjusted to the specific nature of the Bank and the individual entities of the Bank’s Group and regulated by internal regulations, which guarantees a flexible approach to the development policy.

“The principles of employee development and succession planning in PKO Bank Polski S.A.” set out the goals, directions and activities of the Bank in the area of management of the development of the Bank’s employees or other co-workers. The main assumption of the adopted training policies is:

• supporting the pursuit of the strategic goals of the entities of the Bank’s Group and the business objectives;

• onboarding of new employees;

• ensuring the professional qualifications of the employees and adapting their knowledge and skills to the changing requirements of the market in which a given entity operates;

• preparing the employees for the implementation of new solutions and products offered by an entity of the Bank’s Group or for introducing changes to the existing solutions or products offered.

All employees, regardless of their age or gender, may benefit from training activities in the Bank’s Group. Individual entities may apply the criterion of the position held, when referring employees to specific training, such as participation in education at University level (various levels of education at the individual entities of the Bank’s Group) or foreign language courses. The employers finance training activities in whole or in part.

In 2021, due to the pandemic situation, most development activities were still conducted online.

The Bank updates the List of Training Courses every quarter and communicates it on the intranet portal. The list contains a number of development activities for employees and managers, along with a description of individual activities and an easy to use tool for signing up for individual training sessions. Newly implemented training courses are related to cloud technologies or cybersecurity.

The Bank conducts projects to develop both hard and soft skills. A team of several dozen internal trainers conducts group training, on-the-job training and internal workshops (also for interns). Group training is provided by external companies on selected projects. The Digital Transformation employees have access to both internal training courses in agile methodology and to certified training courses. The employees also participate in foreign language courses.

The Bank’s employees use the internal e-learning platform very actively, mainly for providing training in product knowledge, the knowledge of processes and the use of IT applications.

As part of their professional development, the employees may apply for a subsidy to the costs of their education in the form of post-graduate studies, Master of Business Administration (MBA) courses or solicitor’s training. The Bank also conducts adaptation programmes for new employees, which are adjusted to the specific nature of individual business areas. Training courses organized at the Bank are available to all employees regardless of the form of employment (an employment contract or a fixed-term contract (interns)).

E. Employee satisfaction survey

The Bank attaches a great deal of importance to the opinions of employees on matters related to their work, the opportunities for individual development and the company’s organizational culture. The surveys of the organizational culture, employee satisfaction and commitment are conducted at the Bank every few years. The most recent one took place in 2019. The Bank presents the results of the satisfaction surveys to the employees, as well as to the Management Board and the Supervisory Board to provide them with an additional tool for analysing and forming proper relations with the employees.

The last survey demonstrated that, as far as “commitment” is concerned, the following aspects are valued the most: relations with the immediate superior, quality of cooperation or a sense of purpose in the work performed. The overall commitment index of 70.6% (out of 100%) indicates that positive opinions prevailed in the evaluations of the individual aspects of commitment (the direct superior, sense of work, cooperation, remuneration and benefits, development and the working environment). It means that, in the employees’ opinion, the Bank creates good working and development conditions.

No such survey was conducted in 2021 due to the pandemic. However, pulse check surveys titled “How is your work?” were conducted. The employees were asked for their opinions on work-related experience – satisfaction, well-being, efficiency and willingness to recommend the Bank as an employer. The results show that most of the employees declare that they are satisfied with work and perceive increasing work efficiency. At the same time, at the level of the Bank’s Headquarters and specialist organizational units, the percentage of people who would recommend the Bank as a workplace is higher than the percentage of those who would not recommend the Bank. The conclusions from those surveys made it possible to implement facilities and solutions tailored to current needs in this regard on an ongoing basis.

F. Diversity

Promoting diversity is present in many aspects of the activities of the Bank and the entire Bank’s Group. It assumes, among other things, respect for others, equal treatment and using the potential of employees. Diversity means that people are important irrespective of any differences between them, such as their gender, age, health condition, sexual orientation, religion, marital status or country of origin. In building teams, we understand that diversity is their asset both in creating innovations and in smooth operations.

We aim to ensure, promote and popularize diversity at the Bank and in the entire Bank’s Group. We take care that diversity as a value, but also as a practice, is present in our organizational culture, initiatives and measures taken, as well as in the relevant policies, regulations and processes in force at the Bank.

Principles of equal treatment, anti-discrimination and respect for human rights

Objectives and commitments

The obligation of equal treatment in employment is a fundamental principle at the level of policies, regulations and processes developed and carried out at the Bank. Therefore, the Bank’s internal acts adopted at Management Board level include crucial commitments pertaining to:

• counteracting discrimination in employment and non-discrimination of employees, in particular due to gender, age, disability, race, religion, nationality, political views, trade union membership, ethnic origin, denomination or sexual orientation or due to employment for a limited or unlimited period or on a full-time or part-time basis;

• application of objective criteria and transparent rules at the Bank in the processes of recruitment, remuneration, employee development, access to training and access to employee benefits;

• guaranteeing equal treatment of employees performing the same type of work or work of equal value;

• applying objective and fair criteria for performance appraisal.

The above commitments are based, among other things, on the Conventions of the International Labour Organization (Conventions Nos. 100 and 111).

Methods of implementing the objectives and commitments

The Bank has introduced internal regulations, including the Bank’s Code of Ethics, in which it indicates and promotes the desirable values. In particular, the Bank:

• identified important values, as well as attitudes and behaviour promoted in relations among employees, with Customers, in business activities and in relations with the Bank’s environment;

• defined powers and methods of proceeding in the area of counteracting discrimination and bullying at work, including methods of reporting violations, clearly and precisely;

• created mechanisms for reporting, including anonymous reporting, and investigating all types of irregularities noticed by employees in the workplace;

• monitors and reports regularly (also to the relevant members of the Bank’s Management Board) instances of violations of the adopted values and principles.

In addition, the Bank:

• supports employees in their integration at the company and facilitates the creation of interest groups;

• ensures freedom of speech by organizing publicly available forums, provided that ethical principles and culture of expression are properly respected, and by organizing chats with key managers of the Bank;

• undertakes educational initiatives to promote the Bank’s values (also among the companies of the Bank’s Group and cooperating entities), as well as to counteract discrimination and bullying, among other things, by organizing training courses, workshops and information campaigns;

• regularly initiates training courses for managers in effective communication and providing feedback, taking into account the diversity aspect.

In order to guarantee equal treatment of employees who perform the same type of work or work of equal value, the Bank applies:

• objective principles of the valuation of positions based on an international methodology, with the participation of independent consulting firms and related guarantees of remuneration levels contained in the Company Collective Bargaining Agreement;

• monitoring of remuneration in individual employee categories, including a breakdown by gender, the results of which are reported to the Bank’s management;

• regular remuneration reviews aimed at diagnosing and counteracting differences in remuneration resulting from criteria other than objective criteria.

Policy on bullying and discrimination

The Bank strongly opposes any forms of discrimination that contradict the organization’s values and promotes attitudes based on mutual respect among employees. Any conduct that can suggest the presence of bullying is unacceptable.

The Bank’s policy regarding bullying and discrimination is regulated in the internal regulations:

• the Bank’s Working Regulations;

• the Principles for counteracting bullying and discrimination, and the procedure for handling complaints concerning the violation of employee rights.

The Bank’s Code of Ethics also contains significant provisions concerning the attitudes and values promoted among the employees.

The Bank has internal regulations in place for counteracting bullying and discrimination and for handling complaints concerning the violation of employee rights. These principles guarantee counteracting unfavourable phenomena in employee relations and specify how to react to situations of interpersonal conflicts. Based on these principles, an employee of the Bank may report a complaint about any breach of the employee rights defined in the legal acts or internal regulations without worrying about the consequences. Moreover, the employee is entitled to additional support in the process of investigating the complaint. He/she can indicate a representative of a trade union organization or an employee representative (appointed based on the Bank’s internal regulations) who will participate in meetings with the employee or submit opinions on the validity of the claim. Ongoing support for the employees is offered by the HR Contact Center. Thanks to this, the employees may obtain up-to-date information also about the way to report complaints and anonymous notifications of breaches of employee rights.

Complaints concerning broadly understood breaches of employee rights are considered individually. For each of them, the optimal manner of handling is determined, which enables formulating appropriate conclusions and recommendations or taking additional measures or HR-related decisions, if necessary. In the course of verifying the complaints, various methods are used (among other things, anonymous surveys, in-depth interviews with employees, verification of turnover ratios and other HR/business data). Each time, when deciding what measures should be taken, care is taken to ensure the highest possible impartiality of the assessment. Therefore, many times representatives of different units participate in the process of investigating the matter, in line with the Bank’s organizational structure.

Other entities of the Bank’s Group also have the necessary solutions in their internal regulations, which guarantee compliance with the law regarding the prevention of bullying and discrimination. These solutions function in separate regulations or as appropriate provisions in the working regulations, codes of ethics and other regulations adequate to a given entity.

Training in the subject of diversity

Appropriate diversity management increases team work efficiency, improves the atmosphere at work, helps retain valuable and experienced employees, enhances innovation and creativity. For these reasons, such training is organized at the Bank during which managers acquire knowledge and skills in the management of diverse teams, which makes it possible to eliminate undesirable behaviour and situations and support the valuable and positive ones.

In 2021, webinars were mostly dedicated to the organization of remote work, team communication, and emotions and stress management. For managers, training courses were prepared in managing dispersed teams, working with people in change or effective communication of the boss in the remote working mode.

Diversity initiatives

The diversity policy is also composed of various initiatives undertaken at the Bank, including strategic projects aimed at creating a friendly work environment and cooperation with external entities to support diversity in the workforce.

Strategic projects

Friendly work environment. The strategy of building a friendly environment includes such aspects as a functional workplace, implementation of a hybrid work model, or the digitization and simplification of processes. Creating a standardized, modern workplace, provided with tools, equipment and properly arranged space, makes work easier. Hybrid work allows a flexible approach to the completion of tasks. All these facilities allow both managers and employees to select a set of tools or use a range of information that will meet their needs related to professional goals.

Within the Bank’s Digital Transformation structures, there are teams with very diverse skills and competences, working based on the Agile methodology. The participants focus on each other, on interaction and cooperation; they respond to changes efficiently, and they approach changes in the project in a flexible manner. These assumptions allow them to express their opinions openly and produce deliverables efficiently, and they ensure the integration of task teams.

The knowledge of the Agile methodology was also made widely available to the employees of the entire Bank, outside the Digital Transformation structures, through, e.g., training provided according to the needs, or by organizing Agile Days which were aimed at promoting team work focused on interaction, cooperation, responding to change quickly and full transparency.

#FokusNaCiebie (#FocusOnYou). In 2021, a well-being programme was organized, under which each employee of the Bank had the chance to select and use an entire range of instructions and materials according to his/her preferences, needs or availability. Out of care for the work-life balance, as well as both emotional and physical well-being, the employees had the opportunity to watch online events and video materials and to listen to podcasts concerning such events as a healthy spine, the role of and ways to relax, the impact of diet and sleep on our well-being or ways to reduce stress levels.

#CzasNaFeedback (#TimeForFeedback). There is a process at the Bank as part of which the deliverables, competences, achievements, feedback or development goals of employees are summarized on a regular basis. They are aimed at supporting the employee in individual professional development. The expected attitudes and behaviour towards employees are included in a competence model based on the Bank’s values. This model is universal, it applies to all employees and promotes, among other things, communication and cooperation which have an impact on building harmonious, diverse teams. As part of this solution, employees also receive feedback from their co-workers throughout the year.

Collaboration with external entities

Collaboration with external entities that supports diversity in the workforce includes:

• internship and training programmes offering the opportunity of development to pupils, students and graduates of secondary schools and universities with various profiles;

• professional development programmes for people with disabilities, including the provision of workstations adapted to the needs of such people (the principles for carrying out tasks relating to occupational health and safety as well as standards in technological and technical solutions require taking the necessary measures to adjust workstations to the needs of persons with disabilities);

• cooperation with universities and secondary schools as part of which workshops are organized at selected universities in Poland and at the Bank, during which students have an opportunity to learn about selected areas of the Bank’s operations.

Due to the pandemic, in 2021 cooperation programmes with external entities were carried out to a limited extent, in an online format.

Other initiatives supporting diversity at the Bank

The Bank organizes integration programs and supports employee initiatives to strengthen the integration of employees from different areas of operation and representing different social groups. These include sports initiatives and activities and charitable activities of the employees as volunteers. These initiatives help to create a friendly organizational culture and build relationships based on the diversity of the employees’ interests.

Due to the pandemic, in 2021 the above programmes were partially reduced. The aforementioned well-being programme #FokusNaCiebie (#FocusOnYou) was implemented.

The policy of diversity in the composition of the Management Board and the Supervisory Board of the Bank was discussed in chapter ‎11.2.10.

13.5.3 OHS Risk

Table 42. OHS indicators

Bank	bank’s group
[GRI 403-1] OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEM
The OHS Service at the Bank has been organized as an Office for Occupational Health and Safety (OHS) and forms part of the structures of the Administration Centre. The unit is divided into field teams supporting all of the Bank’s facilities in Poland. The employees of the Office perform the tasks specified in the “Regulation of the Council of Ministers (...) on the OHS Service” on a daily basis. These tasks include: • periodical assessment of occupational risk; • analysis of accidents and incidents that have occurred to date and monitoring events that may potentially lead to accidents; • ongoing and periodical OHS inspections in all locations and units of the Bank; • conducting introductory and periodical OHS training; • observing OHS principles in connection with the SARS-CoV-2 hazard. Moreover, the OHS Office seeks to improve occupational health and safety on an ongoing basis by popularizing prevention, good practices and prophylaxis in the broad sense, thus complying with the legal requirements defining the fulfilment of the employer’s obligations towards employees.	All subsidiaries of the Bank perform OHS tasks in accordance with the applicable laws. These laws are so clear that, in fact, it means applying the same OHS rules across the entire Bank’s Group. Entities located outside Poland operate under the rules specific to the country in which they are registered.
[GRI 403-2] HAZARD IDENTIFICATION, RISK ASSESSMENT AND INCIDENT INVESTIGATION
The Bank identified job hazards and found out that there were no jobs that would entail a risk classified as high (i.e. there are no jobs that would require action to reduce the risk level). Occupational risk for 100% of the positions at the Bank was assessed using the Risk Score method. Each assessment is subject to ongoing monitoring and periodical verification. The main hazards include: • falls on the same level (slipping, stumbling); • fall to a lower level (stairs); • inappropriate lighting or glare; • hitting against fixed objects; • overload of the musculoskeletal system or sight (working at the computer); • electrocution (operation of devices powered with electricity); • traffic accidents (business trips); • mental strain associated with the exposure to Covid-19.
[GRI 403-3] OCCUPATIONAL HEALTH SERVICES
The Bank has a contract for providing occupational health services with Luxmed. Employees have medical check-ups at the start of their employment and regular check-ups afterwards at Luxmed branches or cooperating clinics. Every employee may also use specific medical care services free of charge outside the scope of occupational health. The contract also provides for a possibility of extending the scope of medical services for the employee and his/her family.	All other entities of the Bank’s Group have contracts with external medical service providers for providing occupational health services. Medical examinations are financed or reimbursed by the employer.
[GRI 403-4] WORKER PARTICIPATION, CONSULTATION AND COMMUNICATION ON OCCUPATIONAL HEALTH AND SAFETY
Communication between the employees and the employer is carried out in the form of an open dialogue through the trade unions which operate at the Bank in a robust and representative manner. An employee representative always participates in the OHS Commissions and has the opportunity to communicate directly with an occupational health and safety representative.
[GRI 403-5] WORKER TRAINING ON OCCUPATIONAL HEALTH AND SAFETY
Occupational Health and Safety training at the Bank is organized by the internal OHS service. Introductory training is carried out on an ongoing basis in all locations in Poland, using information and communications technology, proprietary materials and teaching aids. Periodical OHS training in accordance with the Act of 18 April 2020 on special solutions related to preventing, counteracting and combating COVID-19 has been suspended due to the extension of the period of its validity until the 30th day from the date of lifting the state of epidemic emergency. The dynamics of the OHS service and the number of its members allow it to maintain the percentage of newly-hired people who have received at 100%. Moreover, the OHS Office staff includes qualified paramedics who regularly train employees in first aid (the process of first aid training was temporarily suspended in 2021 due to the restrictions associated with the pandemic).	All employees participate in the system of OHS training. Such activities are organized in compliance with the law and, depending on the number of employees in a given company, they are carried out by: - the internal OHS service; - a properly qualified external provider.
[GRI 403-6] PROMOTION OF WORKER HEALTH
All entities of the Bank’s Group, including the Bank, take voluntary (other than legally required) action to promote employee health. Popularization of a healthy lifestyle contributes to an increased interest in the following benefits offered by the employers in the Bank’s Group: • free of charge preventive check-ups (e.g. an annual health package, mammography, flu or Covid-19 shots); • training courses promoting a healthy lifestyle (e.g. exercise tutorials for office workers, including those working remotely); • access to many sports and leisure facilities as part of the employee benefit package; • organization of sports clubs, competitions and events supporting physical activity and protecting the natural environment; • organization of regular campaigns promoting health. Moreover, the Bank was active in external sports events as their organizer, patron or sponsor, which builds its image of an entrepreneur promoting a healthy lifestyle.
[GRI 403-7] PREVENTION AND MITIGATION OF OCCUPATIONAL HEALTH AND SAFETY IMPACTS DIRECTLY LINKED BY BUSINESS RELATIONSHIPS
Preventive measures taken at the Bank to improve safety and working conditions: • support and definition of measures to be taken in the event of occurrence or psychological or social hazards, such as stress or bullying; • information campaigns concerning ergonomics and safety at work (leaflets, brochures, subject-specific intranet sites); • additional, non-obligatory training in first aid and safe driving courses for employees using company cars; • prevention of problems with vision: access to eyesight tests, reimbursement of the purchases of eye glasses and corrective lenses; • accident prevention is carried out by the OHS services during induction and periodical training. Prevention of work-related accidents is carried out in consultation with the employees; • the employer provides personal protective equipment for workstations that are exposed to external factors; • continuity of measures aimed at preventing and controlling the working conditions in view of the Covid-19 crisis.
[GRI 403-8] EMPLOYEES COVERED BY THE OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEM
The basic occupational health and safety managment system arising from the generally applicable laws covers 100% of the employees.
[GRI 403-9] WORK-RELATED INJURIES
In 2021, 69 accidents were reported (66 in 2020). As a result of the proceedings conducted, 3 of them were not classified as accidents at work, and 12 are still pending. The most common work-related injuries include: fractures, bruises, sprains and dislocations, and other bodily injuries.	The total number of accidents reported in 2021 in the other entities of the Bank’s Group was 13 (11 in 2020). Two of them concerned persons working based on contracts other than the contract of employment. All proceedings were completed. None of the reported accidents was classified as an accident at work.
[GRI 403-10] WORK-RELATED ILL HEALTH
5 instances of suspected work-related ill health in the Bank’s employees were reported in 2021, 4 of which concerned former employees (3 in 2020). In 2021, the ruling authority issued 8 decisions concerning cases reported in prior years, including 6 decisions in which it was concluded that there were no grounds for classifying the illness as a case of work-related ill health, and 2 decisions in which the ruling authority identified the presence of an occupational disease. The other proceedings are still pending.

13.5.4 Risk of the adverse impact on environment

A. Direct environmental impact

Scale of the direct impact on the natural environment

The nature of the business activities means that the direct impact of the Bank and the Bank’s Group on the natural environment is limited.

The Group entities have procedures and structures in place for monitoring the legal changes regarding the environment, which are significant for their operations. In 2021, none of the Group entities conducted any projects that could significantly affect the environment. [GRI 307-1] No administrative proceedings relating to a breach of the environmental regulations were conducted with respect to the Group that resulted in any financial penalties (in one subsidiary, waste collection fees were increased due to failure to meet the obligation of selective collection of municipal waste).

Direct impact on the environment depends on the manner of consumption of limited natural resources. The Group monitors the consumption of such resources and engages in activities aimed at reducing their consumption. In previous years, a number of entities of the Bank’s Group performed energy efficiency audits. On the basis of the results of such audits, the Group entities identified the areas with the highest energy saving potential and drew up action plans which are currently being successively implemented.

In 2021, in accordance with the requirements of the Act on energy efficiency the Bank conducted an energy efficiency audit. During the audit tasks were defined the implementation of which should lead to a reduction in energy consumption. These tasks are mainly focused on the optimization of the use/ modernization of the automatic control of heat sources and technical installations in properties (HVAC, heating). Investment tasks were also defined for a few properties. Some of the tasks concern properties which may be withdrawn from use in the near future, therefore the Bank is focused on carrying out only those tasks the completion of which will bring actual savings.

[GRI 303-1] For the purposes of this report, the Group tried to estimate its water consumption. In 2021, water consumption at the Bank amounted to approx. 216.9 mega litres (258.2 mega litres in 2020). The change in consumption in 2020 is the result of the greater accuracy of the adopted model for estimating and calculating consumption. Water consumption at the other entities of the Bank’s Group amounted to 41.7 mega litres.

Consumption of energy and fuels and greenhouse gas emissions

Table 43. Energy consumption within the organization (in MWh) [GRI 302-1], [GRI 302-4]

	BANK	OTHER ENTITIES	GROUP	GROUP	BANK	OTHER ENTITIES	GROUP	BANK	OTHER ENTITIES	GROUP
	2021			y/y (%)	2020 (recalculated)			2019 (recalculated)
Fuel used in buildings	22,122	3,889	26,011	-2.3	22,765	3,871	26,636	24,122	3,095	27,216
natural gas	19,706	3,749	23,455	-4.6	20,866	3,732	24,598	20,465	2,940	23,405
heating oil	2,188	98	2,286	29.4	1,672	94	1,767	3,368	132	3,500
diesel oil	49	12	61	-7.2	56	10	66	81	17	98
LPG	0	30	30	-13.1	0	34	34	0	6	6
lignite	0	0	0		0	0	0	0	0	0
coal	179	0	179	4.6	171	0	171	208	0	208
Fuel used in vehicles	19,356	10,224	29,579	3.5	18,400	10,180	28,580	28,697	9,903	38,600
diesel oil	1,124	4,097	5,221	-1.4	815	4,479	5,295	1,211	4,093	5,304
LPG	0.2	0	0.2		0	0	0	0	0	0
gssoline	18,231	6,127	24,358	4.6	17,585	5,701	23,285	27,486	5,810	33,296
Energy purchased	143,181	19,831	163,012	-1.4	147,788	17,473	165,261	150,450	19,973	170,422
electricity	75,494	11,125	86,618	-4.6	80,829	10,004	90,832	81,675	11,034	92,709
heat	67,687	8,706	76,394	2.6	66,959	7,469	74,428	68,774	8,939	77,713
Total energy consumption	184,658	33,944	218,602	-0.9	188,953	31,524	220,477	203,268	32,971	236,239

Table 44. Intensity of energy consumption by the Bank's Group [GRI 302-3]

INDICATOR	UNIT	2021	2020	y/y (%)	2019
Total energy consumption per employee	MWh / person	8.4	8.4	-0.2	8.4
Total energy consumption per PLN 1 mln assets	MWh / PLN 1 mln assets	522.9	584.9	-10.6	679.0

Table 45. Emissions by source in MgCO2e by market-based method [GRI 305-1], [GRI 305-2], [GRI 305-3], [GRI 305-5]

	BANK	OTHER ENTITIES	GROUP	GROUP	BANK	OTHER ENTITIES	GROUP	BANK	OTHER ENTITIES	GROUP
	2021			y/y (%)	2020 (recalculated)			2019 (recalculated)
Scope 1 – direct emissions from:	10,000	3,388	13,388	-0.8	10,096	3,405	13,501	12,728	3,671	16,399
fuels used in buildings	4,681	797	5,478	-1.2	4,751	792	5,543	5,185	638	5,823
fuels used in vehicles	4,757	2,591	7,348	2.4	4,562	2,613	7,175	6,631	3,033	9,664
refrigerants	562	0	562	-28.2	783	0	783	912	0	912
Scope 2 – indirect emissions from:	28,101	9,203	37,304	-35.1	49,125	8,312	57,438	87,067	10,045	97,112
purchase of electricity	4,590	6,305	10,895	-65.6	25,864	5,836	31,700	62,482	6,949	69,431
purchase of heat	23,511	2,898	26,409	2.6	23,262	2,476	25,738	24,585	3,096	27,681
Total emissions (Scope 1 + 2)	38,101	12,591	50,692	-28.5	59,221	11,717	70,939	99,795	13,716	113,511
domestic and foreign business travel	195	-	195	-32.4	289	-	289	-	-	-
employee commuting	3,341	-	3,341		0	-	0	-	-	-
Scope 3	3,536	-	3,536	1125.0	289	-	289	-	-	-
Total emissions (Scope 1 + 2 + 3)	41,637	-	41,637	-41.5	59,510	-	71,227	-	-	-

Table 46. GHG emissions intensity indicators in the Bank's Group [GRI 305-4]

Unit	2021	2020	r/r (%)	2019
Mg CO2e / person	2.0	2.7	-28.1	4.1
kg CO2e / person	4.8	6.8	-29.1	10.9
kg CO2e / PLN 1 million assets	121.2	188.2	-35.6	326.3

Table 47. Emissions by method in MgCO2e [GRI 305-1], [GRI 305-2], [GRI 305-3]

Scope 1	Scope 2	Scope 3
[GRI 305-1]	[GRI 305-2]	[GRI 305-3]
13,388	85,396 (location based)	3,536
	37,304 (market based)
Direct emissions of the Bank's Capital Group as a result of fuel combustion in sources owned by it	Indirect emissions of the Bank's Capital Group resulting from the use of purchased electricity and heat	The Bank's indirect emissions from domestic and foreign business travel

The boundaries of the reported emissions include: (1) in the case of data concerning the Bank, this entity only (100% of the emissions); (2) in the case of data concerning the Group: the Bank and all the subsidiaries of the Bank according to operational control (100% of the emissions of each entity). The reported emissions comprise Scope 1 and Scope 2. Scope 3 emissions comprise domestic business trips of the Bank (since 2020) and business trips abroad as well as employee travel to work (for the Bank since 2021).

The Bank calculated the emissions in accordance with the Greenhouse Gas Protocol (GHG) Corporate Accounting and Reporting Standard (revised) using the market-based and location-based methods. As a result of the calculations performed, the Bank achieved a data reliability index (the percentage of data obtained from data sources in all data used in the calculations, which comprise data obtained from data sources and estimations) on a good level according to the GHG Protocol methodology.

The Bank recalculated the base year (2019) and the previous year (2020) for the following reasons:

• including emissions from fugitive refrigerants;

• more precise calculation of the consumption of energy estimated for properties for which actual data was not available;

• changes in the emissions indicator used for electricity;

• adjustments to actual data (consumption of diesel oil by power generators) for the Bank;

• adjustments to actual data (consumption of system heat and diesel oil for power generators) for the Group companies in Ukraine.

Detailed information on the method used to calculate emissions and the comparison with the base year are presented in the Inventory of greenhouse gas emissions of PKO Bank Polski S.A. for 2021 (https://www.pkobp.pl/investor-relations/esg-at-pko-bank-polski-group/greenhouse-gas-emissions/).

The Bank calculated GHG emissions intensity ratios for the purpose of comparison with the market. Total 1+2 Scope emissions for the Bank’s Group were used in the calculation. In this way, a full picture was obtained of the carbon footprint generated as a result of the operating activities.

In 2021, the biggest drop in the emissions was recorded by the Group in Scope 2 with respect to the emissions from purchased electricity. One of the reasons behind the big reduction in greenhouse gas emissions in this area is the fact that the Bank has purchased guarantees of origin for the electricity from water sources in a RES installation (68.9 GWh).

The emission amounts by method and type of energy are presented in the above-mentioned inventory.

[GRI 302-4] The total energy consumption in the Bank’s Group in 2021 was 0.9% lower than in 2020, with a 2.3% drop for the Bank and a 7.7% increase for the other Group entities.

The Group purchased electricity, heat and cooling; no purchases of technological steam were recorded.

Optimization of energy consumption at the Bank

[GRI 302-4] The Bank continues to work on the implementation of the Energy Management System in accordance with ISO50001 in order to optimize energy consumption at the enterprise, introduce a single energy consumption control system and intensify the measures aimed at reducing the consumption of energy carriers.

In 2021:

• continuation of equipping properties with LED lighting, including emergency and evacuation lighting and elements of exterior signage (illumination only at night);

• use of lighting control for certain rooms;

• replacement of windows with ones in compliance with the current heat transfer coefficients;

• energy efficiency certificates (the so-called White certificates) were obtained for two investment projects of 197.26 toe;

• development of a model of a branch with a smaller surface area;

• installation of heat recovery ventilation systems in five locations.

Waste

Table 48. Non-municipal waste produced by the Bank (in tonnes)

	2021	2020	y/y (%)	2019
Total	901	736	22	843
hazardous*	21	15	40	16
other	880	721	22	827
including:
bulky waste	303	261	16	532
electronic and electric	366	243	51	136
magnetic and optical data carriers	1	1	0	2
paper and cardboard waste (binders)	32	37	-14	4
iron and steel waste	178	179	-1	152
* electric and electornic appliances, such as air conditioners, used monitors, refrigerators

In 2021, the Bank had an agreement for the collection of non-municipal waste with the same service provider as previously. The service provider holds ISO 9001:2015 and 14001:2005 certificates. The waste collected from the Bank is handed over by the service provider to other waste management companies, in accordance with the decisions held and the applicable regulations.

[GRI 306-2] Hazardous electrical and electronic waste is handed over by the Bank to a specialized company, where it is processed and recycled (100%).

Paper bank documentation is collected by a specialist company and shredded.

Moreover, in 2021 the Bank and the Group conducted the selective collection of municipal waste.

The increase in the quantity of electronic waste produced in 2021 is the result of the implementation of replacement projects and emergency equipment replacement, the liquidation and relocation of branches. The increase in the quantity of bulky waste is the result of the liquidation of branches, including large branches, relocations to smaller locations, and modernization of old branches.

Mitigating the adverse effect on the environment – measures taken in 2021

Waste

Measures taken to reduce the quantity of waste produced:

-Repair of electronic and electrical devices instead of handing them over for scrapping

-Repair of furniture fittings

-Resale of redundant assets instead of handing them over for scrapping

-Elimination of paper correspondence in favour of electronic correspondence

-Elimination of plastic waste (discontinuation of the use of coffee capsules, bottled water, plates, cutlery and cups).

Emissions

-Liquidation of the coal-fired boiler room in Wieruszów

-Modernization of the central heating system, replacement of boilers with more energy efficient models

-8 new PV installations which enabled the production of 18,395.2 kWh (own use: 13,918.2 kWh)

-Purchase of 68,900 MWh of electricity from RES -> reduction in CO2 emissions of 49,539 t

Transport

Use of bicycles at branch offices

Space management

The Bank carried out a pilot project Flexidesk which was aimed at creating a new working environment and enabling work rotation/remote office work by adapting office space to a flexible working model and providing standard IT equipment. The implementation of the project resulted in reducing office space by 10.7% in the Bank’s tested location.

The Bank leases a property at Chmielna 89 in Warsaw for the purposes of conducting office activities. Following the completion of the necessary modernization works, the building was commissioned for use in 2021. The selection of the building was influenced by its environmental characteristics confirmed with a BREEAM certificate at the Excellent level.

B. Indirect environmental impact

Policies

One of the tools for managing credit risk for selected industries/sectors is lending policies. The Bank has the following policies: Renewable Energy Sources, Carbon Intensive Energy Sector, Real Estate, Trade, Construction and building materials, Chemistry-Oil-Gas, Car Dealers and CFM companies, Public Healthcare.

Apart from the aforementioned policies, the Bank (in the corporate segment) monitors changes and market trends in various industries/sectors on an ongoing basis, publishes internal materials and organizes industry meetings. These measures have a direct impact on the high quality of the loan portfolio.

Policy for financing the renewable energy sector

Adopted and implemented in 2020 for the Bank’s Group.

Purpose: gradually increasing the share in the financing of renewable energy. Motivation: supporting the natural environment, preventing global climate change, transformation of Poland into a zero-emission economy.

The policy defines the preferred directions of development of the loan portfolio in the renewable energy segment. It is focused in particular on the financing of photovoltaic farm and wind turbine projects. However, other projects can also receive financing based on individual decisions. Project assessments performed by the Bank include an analysis of the following issues: formal documents, transaction parameters, sources of repayment (e.g. a successful renewable energy auction, PPA), as well as the investor’s capital resources and experience.

Policy for financing the carbon intensive energy sector

Adopted and implemented in 2019 for the Bank’s Group, updated in 2020 (introduction of more stringent criteria).

Purpose: a gradual change in the loan portfolio structure by reducing the exposure to Customers and transactions based on coal as an energy carrier (in line with the European climate policy and aiming for net zero emissions by 2050).

The policy covers, among other things, the following industries: coal and lignite mining, coal-related sectors (e.g. production of mining machinery, trading in coal and similar products), generation of electricity/heat (with the exception of renewable energy sources) and supplementary activities in the power sector (transmission, distribution, heat and power plants). The main policy assumptions:

• with respect to coal and lignite mining, production of boilers, fireplaces and burners (coal-fired) – reducing the exposure (with the exception of coke as a raw material entered on the EU list of critical raw materials);

• with respect to energy/heat production – not financing any new coal- or lignite-based sources and gradual reduction in the existing exposure;

• reducing general purpose financing and transforming it into ESG financing, aimed at improving energy efficiency, changing the energy mix or modernization of transmission networks (coal-based projects can be financed on the condition that the funds are spent on modernization aimed at meeting the environmental requirements; in such cases, the purpose of financing must be precisely defined and the use of funds must be controlled);

• with respect to coal-related industries (e.g. production of mining machinery, trading in coal and coal-based products) - gradual reduction in exposure, precise definition of the purposes of financing and control of its use; financing of entities with diversified customer or product/service portfolios (i.e. generating significant revenues from other sources not related to mining) or those transforming their operations is acceptable.

Policy for financing the chemistry, oil and gas sector

The Policy for Financing the Chemistry, Oil and Gas Sector defines, among other things, the framework for financing entities operating in the sectors of oil and natural gas extraction, production and distribution of liquid and gaseous fuels, production and trading in chemicals/chemical products, and production and sales of rubber and plastic goods. The Bank has adopted a strategy of reducing exposure to operations covered by the EU Single-Use Plastic Directive and a prudent approach to the sectors of oil and gas extraction or production of chemicals, chemical goods and rubber goods. The prudent approach is reflected in, among other things, an assessment of compliance with environmental standards and the impact on the environment and an evaluation of the business model with regard to the concept of sustainable business development. The future shape of this policy may be affected by changes in EU law, e.g. with regard to the approach to the use of natural gas during the period of energy transformation, as well as the growing requirements in the ESG area.

ESG in the lending process

Since 30 June 2021 each time the Bank assesses the impact of environmental, social and governance-related factors (the so-called ESG factors) on a Customer’s creditworthiness, in the lending process for Customers in the corporate segment and Customers in the companies and enterprises segment evaluated using rating methods. The Bank also examines the impact of lending transactions on ESG issues and classifies them into four categories, starting from transactions with a positive effect on ESG issues through to those with a significantly negative impact. In assessing the ESG factors, the Bank takes into account, among others, the risk of climate change and the impact on a Customer’s activities, the Customer’s possible effect on climate change, factors related to human capital or those relating to health and security as well as factors related to the aspects of management (including the organization’s culture and internal supervision).

By using appropriate tools, the Bank estimates ESG risks, assesses and controls them. The identification of ESG risks allows the identification of projects which do not meet the increasingly high environmental and social requirements. By identifying these risks the Bank may support the financing of environmentally sustainable and socially responsible projects, as well as eliminate the financing of activities/projects with a negative impact on the environment.

As part of popularizing the knowledge of ESG, the Bank organizes internal meetings which are aimed at raising awareness and pointing to the role of ESG factors in today’s world. The Bank also organized such meetings at its Customers’ request.

“Green” products of the Bank’s Group

Green mortgage (offered jointly by the Bank with PKO Bank Hipoteczny S.A.)		The Customers may obtain a lower margin on the “Własny Kąt” mortgage loan based on the energy performance certificate for the property.
A loan for the thermal modernization of apartment buildings (for housing cooperatives and homeowner associations) offered by the Bank		Those who receive this loan may obtain non-refundable aid from the state budget in the form of a thermal modernization bonus or an overhaul bonus for repaying 20% of the loan amount. The performance of projects financed with the “Nasz remont” loan with a bonus provided by BGK makes it possible to reduce demand for energy.
The “PKO Ekologii i Odpowiedzialności Społecznej Globalny” investment fund offered by PKO TFI S.A.		The fund’s assets are invested in entities whose operations are environmentally friendly and which generate a positive impact on the society. First valuation: 23 October 2019, rate of return by the end of 2021: 25.51%.
A lease or a loan for the financing of photovoltaic devices (products included in the offer of PKO Leasing S.A. for enterprises)		This product is offered under a simplified procedure (there is no need to provide any financial documents) and the Customer may obtain financing for both photovoltaic panels and their installation (the financing of up to PLN 250 thousand may be provided for the entire photovoltaic installation for a period of up to six years). The company finances modules installed on roofs as well as on the ground.
Ekopożyczka, a loan for the purchase and installation of photovoltaic panels and other environmentally-friendly devices and vehicles of up to PLN 50 thousand (in the Bank’s offer for individuals)		The repayment period is from 2 to 120 months, the interest rate is 2.99%, and the commission for granting the loan is 0.99%. The Customer should provide an invoice documenting the purchase of photovoltaic devices for at least 85% of the loan amount within 3 months from the date of receipt of the loan. Otherwise, the interest is increased to the current maximum interest rate level. As from 2020, Ekopożyczka is also available to individuals who do not have bank accounts with the Bank.
Transactions on the CO2 emission rights market - commodity swaps and commodity forwards		Transactions addressed to the Bank’s corporate Customers who are obliged to redeem such rights every year in accordance with the EU ETS regulations. The Customers may trade in such transactions and hedge against changes in the prices of emission rights.
BIZNESMAX guarantees with BGK (in the Bank’s offer)		The possibility to secure loans for the so-called environmentally-friendly projects, such as a circular economy, electromobility, renewable energy sources.
Electric vehicle leasing (offered by PKO Leasing S.A.)		An agreement of PKO Leasing S.A. and Masterlease with Bank Ochrony Środowiska S.A. as part of the implementation of a government programme “Mój elektryk” (My Electrician). Provision of assistance to Customers in obtaining a subsidy under a programme for the purchase of an electric or hydrogen powered vehicle combined with an offer of lease services.
Green mortgage covered bonds of PKO Bank Hipoteczny S.A.		In 2019, PKO Bank Hipoteczny SA issued the first green mortgage covered bonds in Poland. The total value of the two issues carried out in 2019 was PLN 500 million. PKO Bank Hipoteczny is gradually building a portfolio of loans which qualify for being financed with the funds obtained from issues of green mortgage covered bonds. The value of this portfolio as at the end of 2021 was PLN 6,760 million, i.e. more than 13 times the value of the green mortgage covered bonds issued. The portfolio of loans financed with the issues of green mortgage covered bonds was verified by an external firm (Sustainalytics) which confirmed the correctness of the utilization of the funds. The portfolio of mortgage loans qualifying for being financed with proceeds from green mortgage covered bonds offers annual energy savings of 328,341 MWh and allows avoiding annual greenhouse gas emissions of 126,274 tCO2 (which is more than the combined annual greenhouse gas emissions of the entire Bank’s Group)..
The PKO Energii Odnawialnej Fund – fizan (PKO TFI S.A. and the Bank)		Launched at the beginning of 2021. In accordance with the investment policy, the fund acquires and sells companies whose core business activities comprise generation, sales, transmission or storage of energy from photovoltaic, wind or water installations located in Poland. As at 31 December 2021, the Bank did not have any investment certificates (no capital exposure).
Green loans		An agreement on financing a wind farm of PLN 228.6 million (production of energy for an average of 36 thousand households). As part of the project, 11 wind turbines with a total capacity of 42.6 megawatts will be installed. The launch of the farm is scheduled for 2023. Lending decisions on financing renewable energy sources (wind farms) totalling PLN 398 million. Participation in a syndicate which granted a loan related to sustainable development totalling EUR 225 million.
Sustainable development bonds		PKO Bank Polski S.A. co-organized the issuance of sustainable development bonds, Climate Awareness Bonds, by the European Investment Bank (the first ever public issue of this type of bonds, dedicated in whole to Polish investors). The bonds offer an annual coupon of 1% and a rate of return for the investors of 1.028%. The amount of the issue was PLN 1.25 billion, and the maturity date was set at February 2027. Issue of municipal bonds. The funds from the issue allow cities to finance sustainable investment projects (e.g. construction of a tram line). Taking up green bonds of a company in a renewable energy sector of PLN 35 million.

Value of Bank’s exposure

Table 49. The exposure (loans and debt securities and the balance sheet equivalent of treasury limits) to the corporate segment entities and SME as a percentage of the Bank’s total assets as at 31 December 2021

	2021	2020	2019
"Green" branches (e.g. energy production from renewable energy sources, sewage disposal, water treatment and supply, waste collection/ treatment, remediation etc.)	1.30	0.80	0.96
Loans for cooperatives and housing communities for the thermo-modernization of multi-family residential buildings	0.57	0.67	0.72
High carbon emissions energy sectors	0.37	0.51	0.70

Note: the adjustment to the shares for 2020 is the result of the adjustment to the value of the assets

In 2020, the Bank’s loan portfolio was marked in green or brown (identified as a high carbon emission industry) in an individual manner and concerned the credit exposures of Customers in the corporate segment. The analysis covered the largest credit exposures to corporate customers and exposures assigned to Customers whose core business activities were assigned to the sector of economic activities (Polish NACE codes) marked by the Bank as an industry which has a positive impact on the environment or a negative one from the perspective of high carbon emissions activities. In 2021, the Bank introduced changes consisting of the obligation to mark each credit exposure to a corporate Customer with an ESG colour, including recording this colour in the Bank’s central systems. In the process of assigning an ESG colour, factors relating to the environment, society and corporate governance are taken into consideration. In the case of SME Customers, the ESG colour of the lending transactions takes on the ESG colour assigned to the Customer’s core Polish NACE codes.

Due to the changes introduced in 2021, the presented portfolio marked with a green or brown ESG colour includes:

• all credit exposures of an institutional Customers (corporate Customer + SME) at the Bank;

• changes in the Bank’s loan portfolio due to the implementation of key ESG performance ratios;

• principles for assigning an ESG colour, incorporated in the Bank’s lending policy.

13.5.5 Climate risk

The Bank carefully monitors the information published on anthropogenic climate change and is aware of corporate responsibility for complying with the obligations recorded in the Paris Agreement. The Bank wants to achieve its business objectives by maintaining its impact on the climate change resulting from its operating and product activities and the impact of climate change on business activities at the lowest possible level.

Since 2019 the Bank has been calculating the level of greenhouse gas emissions from operating activities (for the Bank and for the Group). In 2021, it adopted ambitious short-term objectives concerning reduction in the Bank’s (Scopes 1 and 2) GHG emissions aligned with the objectives of the Paris Agreement. The Bank is focused on improving the measurement of GHG emissions generated by the Bank in all scopes. In addition, the Bank eliminates carbon-intensive energy sources (in 2021, it liquidated the last coal-fired boiler room on the premises used by the Bank) and takes measures to reduce energy consumption (e.g. photovoltaic installations in selected properties of the Bank).

The Bank is aware of the impact of its product portfolio on climate and the impact of the risk of climate change on its product portfolio. The Bank has adopted lending policies for the carbon-intensive sector, RES as well as the chemical, oil and gas industries. The aim of the policy for the carbon-intensive sector is to successively reduce the exposure to Customers and transactions based on coal as an energy carrier (consistency with the European climate policy and moving towards zero-carbon emissions in 2050) and to refrain from financing new energy production sources based on coal and lignite. On the other hand, the RES policy assumes increasing the financing of operations related to renewable energy in a successive manner.

The Bank has also made a commitment regarding the composition of its product portfolio (the relation of “green” financing to carbon-intensive financing, increasing the volume of green financing by 5% a year, eliminating the exposure to the coal-mining sector by 2030). Accounting for these objectives is presented in chapter ‎13.3.

In the lending process for institutional Customers rated using the rating methodology, each time the Bank assesses the impact of environmental, social and governance-related factors (the so-called ESG factors) on a Customer’s creditworthiness. The Bank also examines the impact of lending transactions on ESG issues and classifies them into four categories, starting from transactions with a positive effect on ESG issues through to those with a significantly negative impact. In assessing the ESG factors, the Bank takes into account, among others, the risk of climate change and the impact on a Customer’s activities, the Customer’s possible effect on climate change, factors related to human capital or those relating to health and security as well as factors related to the aspects of management (including the organization’s culture and internal supervision).

The Bank has begun work which is aimed at assessing its corporate portfolio according to the Taxonomy for sustainable activities.

In 2021, the Bank conducted a comprehensive gap analysis in relation to selected regulations and guidelines in the area of ESG risk management. The results of the analysis were used to prepare an operational plan for integrating ESG risk with the Bank’s risk management system. The plan is divided into tasks which will be implemented successively and will be reflected in disclosures under the TCFD (Task Force on Climate-related Financial Disclosures) recommendations.

In 2021, the Bank incorporated the management of ESG risks in the risk management strategy of the Bank and the Bank’s Group. It made a disclosure in CDP Disclosure Insight Action for the second time, using TCFD recommendations and, as one of five Polish banks, it received a grade for disclosures in the climate change area (“D”).

It presented the manner in which climate issues are managed at the Bank, emission ratios, objectives and a preliminary assessment of the risks and opportunities which result from climate change. The following risks were distinguished:

• regulatory risk associated with the prices of emission rights and the extension of the ETS system to other sectors;

• regulatory risk associated with the extension of the scope of reported emissions and making the reporting of greenhouse gas emissions obligatory rather than voluntary across the supply and value chain;

• the risk associated with the financing of investment projects on new environmentally-friendly technologies which may not succeed on the market;

• the risk of an increase in the frequency and severity of unusual weather phenomena.

The opportunities identified by the Bank include new possibilities for financing low emission products and services and the financing of energy transition. It expands its green product offer in a systematic manner.

13.5.6 Risk of violation of human rights, including children’s rights

In the process of developing regulations, procedures and policies relating to human rights, the entities of the Bank’s Group draw on the achievements of international organizations and respect the fundamental principles set out in the International Bill of Rights which is composed of the following documents:

• the Universal Declaration of Human Rights;

• the UN Convention: the International Covenant on Civil and Political Rights;

• the UN Convention: the International Covenant on Economic, Social and Cultural Rights.

Depending on the size and specificity of a given entity of the Bank’s Group, observing human rights is manifested both in the internal provisions, the initiatives undertaken and in everyday practice. This concerns, in particular, to the rights to:

• recognize the identity of every employee;

• proclaiming one’s views and opinions, freedom of thought, conscience and religion;

• protection of personal rights;

• equal treatment;

• access to information;

• access to healthcare;

• respect for privacy.

Internal documents related to human rights

Some of the entities of the Bank’s Group have included provisions relating to respect for human rights and the prohibition of discrimination in such documents as their working regulations or the Code (Principles) of Ethics. The Bank’s policy concerning respect for human rights is contained in the following documents:

• PKO Bank Polski S.A.’s Code of Ethics;

• Principles of counteracting bullying and discrimination and the procedure for handling complaints concerning the violation of employee rights;

• Principles of recruitment and the Standards of Recruitment;

• agreements concluded with service providers (applicable to personal data protection agreements).

Issues relating to forced labour and child labour are not directly reflected in the Bank’s regulations, because:

• the prohibition of forced labour arises from Article 4 of the Convention for the Protection of Human Rights and Fundamental Freedoms;

• the prohibition to employ people under the age of 15 arises from Article 190, para. 2 of the Labour Code.

In its practice, the Bank follows the rules contained in the Children’s Rights and Business Principles.

The other entities of the Bank’s Group incorporate the issues of respect for human rights in their processes, everyday practice and in the unwritten rules.

Respect for human rights

One of the most crucial elements/stages of the analysis is the identification of human rights in the context of the operations conducted. No cases of employment of minors or forced labour were identified in the Group entities operating in various countries.

A separate task is the issue of observing the human rights in the supply chain which, in the context of the Group entities, boils down to relationships with suppliers and the outsourcing of services (mainly banking services). The issues of observance of human rights are reflected in the procedures and agreements signed with these entities.

Examples of activities conducted within the Group entities, in which respect for human rights is manifested, are presented below:

• counteracting bullying and discrimination;

• basing the rules of the periodic appraisal/summary of performance on a dialogue with the employee, the employee’s participation in the process, collecting feedback from a variety of sources;

• use of recruitment principles that ensure equal treatment of candidates during the selection process for filling vacancies, without any discrimination, prejudice and without obtaining information that could violate the candidate’s rights and personal dignity;

• basing promotion decisions on an objective appraisal of qualifications, skills and performance;

• supporting diversity in management, in particular with respect to age, experience, style of work, thinking; promotion of diversity among managers as an asset and not a limitation;

• enabling employees to express their opinions and influence important issues regarding the organization and working conditions, management, the organizational culture, as well as enabling the provision of information about perceived crimes and fraud – ensuring anonymity and confidentiality for the reporting employees (the whistle-blower mechanism);

• protecting personal rights (personal data, sensitive data) of the employees and Customers through carefully prepared procedures and systems and the inclusion of restrictive provisions in contracts concluded with service providers who have access to such data;

• creating conditions for satisfying needs related to leisure and culture, as well as respect for the principle of work-life balance;

• ensuring freedom of association;

• creating a safe working environment – in view of the exceptional circumstances resulting from the pandemic, in 2021 the additional Intra websites: “Coronavirus”, “Remote work” and the website which replaced it (“Hybrid work”) were updated, as well as the dedicated newsletters in which the Bank provided the necessary information and guidelines on tools and the organization of work on an ongoing basis;

• Under the well-being programme #FokusNaCiebie (#FocusOnYou) a number of measures were organized to improve the “well-being” of employees. Numerous online events, video materials and articles concerned, among other things: preventive healthcare, physical activity, health diet, sleep or the emotional condition.

• The information materials under the initiative “Efficient at work” contain guidelines on how to take care of occupational health, including breaks, reducing unnecessary meetings in favour of specific tasks, or reconciling office work with remote work.

• The Bank’s Group applies the same standards in human rights across the entire supply chain in its business activities.

The Bank takes action to prevent violations of human rights, including employee rights, but it is not able to eliminate all conflicts. In 2021, 21 cases concerning employment relationships ended in the final termination of proceedings (15 cases were won, 6 cases were lost).

The entities in the Bank’s Group monitor the risks accompanying the individual human rights and manage them at the company level.

Communicating human rights

The basic internal communication tool is the Intra portal which contains information on benefits, privileges, rights and obligations of the Bank’s employees. On the Intranet portal of the Bank, the employees can find the following documents:

• PKO Bank Polski S.A.’s Code of Ethics;

• Principles of Recruitment;

• Recruitment Standards;

• The principles for counteracting bullying and discrimination and the procedure for handling complaints concerning breaches of employee rights (regulations updated and communicated within the organization in 2018; a clear presentation of the principles for counteracting bullying and discrimination and the procedure for handling complaints was attached to the text of the regulations to make it easier for the employees to use the procedure);

• Good practices in serving persons with disabilities, as well as a presentation of the Bank’s Values.

Human rights are communicated externally through the Bank’s publicly accessible website which contains information about the PKO Bank Polski Foundation, about the idea of charity it pursues as a measure of respect for the environment, in particular for other people.

13.5.7 Corruption risk

Anti-corruption system at the bank

PKO Bank Polski S.A. does not tolerate corruption and counteracts all corrupt practices. Such phenomena as nepotism and accepting or offering any physical goods in order to influence decisions or measures taken are in contradiction with the Bank’s values of credibility and trust.

The Bank has a number of internal regulations regarding the prevention of corruption, including accepting benefits, presents or gifts, in particular:

• PKO Bank Polski S.A.’s Code of Ethics;

• Code of Banking Ethics (Principles of Good Banking Practice) by the Polish Bank Association;

• Principles of compliance risk management and conduct risk management at the Bank.

These documents jointly define the Bank’s policy, and the last one defines the procedure to be followed in the event of identification of a risk of corruption.

The Bank follows internal anti-corruption rules and prevents the creation of an environment which is conducive to the commitment of the offences referred to in Articles 229, 230a, 296a and 305 of the Criminal Code (acts of corruption) by the Bank’s related entities. The solutions adopted ensure:

• counteracting the emergence of mechanisms for granting financial and personal benefits;

• familiarizing the Bank’s related entities with the principles of criminal liability for the crimes referred to above;

• observance, by the people related to the Bank, of the PKO Bank Polski S.A.’s Code of Ethics and the Bank’s internal regulations on reporting the acceptance of benefits, presents or gifts by the Bank’s employees;

• counteracting making decisions under the influence of corrupt activities and in conflicts of interests;

• immediate notification of the competent organizational units of the Headquarters and the Bank’s authorities by the Bank’s related entities of possible corrupt proposals received by those persons, regarding the operations of the Bank, as well as reporting them to the competent public administration authorities.

[GRI 205-1] Within the Bank’s Group, including the Bank, the risks related to corruption are identified in particular:

• in the individual and business Customer service areas;

• in the area of the supply of goods and services to the entities of the Bank’s Group, including the Bank, by external entities;

• in connection with donations and sponsorship agreements;

• in the area of relations of the employees of the entities of the Bank’s Group with state administration authorities.

These areas are subject to particular attention, the processes are regulated in detail, while decisions which have significant financial consequences are accepted, in principle, through the so-called “second hand” (they require dual acceptance).

The Bank’s internal regulations on the prevention of corruption with regard to the Bank’s employees and people acting on behalf of the Bank include:

• the prohibition to accept benefits, presents or gifts intended for personal use from Customers and prospective Customers, as well as from the representatives of the entities cooperating with the Bank or seeking to enter into cooperation with the Bank, which could:

- result in an informal obligation to a given Customer or person cooperating with the Bank;

- cause a conflict of interests;

- otherwise affect the manner in which the Bank’s employee performs his/her professional duties negatively.

• this prohibition applies, in particular, to cash or cash equivalents, donations in kind (presents and gifts) and other material benefits (in particular the financing of travel, leisure or training expenses, participation in events or lending an asset, e.g. a car, for free-of-charge use or use on terms that deviate from arm’s length terms), as well as the acceptance, by any person involved in the procurement proceedings organized by the Bank, of any gifts and benefits from entities which are bidders or prospective bidders in these proceedings;

• exclusion of the possibility of circumventing the above prohibition, in particular by persuading other people (e.g. people living in the same household, family members or relatives) to accept the gift on their behalf;

• under exceptional circumstances, it is acceptable to accept a benefit or present in business relations, under the terms and conditions set out in the Bank’s internal regulations regarding the acceptance of benefits, presents or gifts

• the prohibition to offer, on behalf of the Bank, Customers, counterparties, representatives of public administration authorities and other entities any benefits, presents, gifts or incentives which are not a part of the Bank’s product and service offer in order to persuade those persons to behave in a particular way, especially to take measures which are contrary to the legal regulations or good practices.

If a Bank employee has doubts as to whether the acceptance of a benefit, present or gift is allowed in a given situation, he/she is required to consult his/her supervisor or the Bank’s unit which manages compliance risk. Every new employee of the Bank receives information on the principles applicable in this regard.

Corrupt behaviour is treated as non-compliance and reported to the Bank’s Management Board and Supervisory Board. The risk of corruption is an element of the compliance risk assessment process.

In the other entities of the Bank’s Group, each subsidiary whose business activities are associated with the risk of corruption has appropriate regulations in place to prevent corrupt practices. Every employee is required to read and apply these regulations. Each entity formulates appropriate regulations taking into account the specific nature of its activities and its own assessment of the areas of risk of corruption and bribery, therefore the Bank’s Group does not have a standard policy in this respect.

In 2021, no critical events in this area were identified, and no corruption activities were identified in the entities of the Bank’s Group which could result in disrupting the operations of the Bank or the other entities of the Bank’s Group.

The Bank and the other entities of the Bank’s Group also apply their anti-corruption measures to their prospective counterparties. A bidder taking part in the procurement proceedings declares that “they do not offer or provide any financial benefits to influence the decision on the selection of their proposal. They do not affect the selection of the proposal in a manner which is contrary to the law or good practice and do not take part in any agreements or arrangements with other third parties which are aimed at influencing their selection”.

System of notifying breaches and reporting

Open reports

The Bank’s employees have the possibility to report irregularities openly. An open report should be submitted to the Compliance Department or to another unit or organizational unit of the Bank’s Headquarters, using the following communication channels: electronic, by surface mail, telephone and in person (at any location, also outside the Bank). The reporting person is fully protected, excluding cases which must be disclosed to courts and law enforcement bodies in connection with criminal proceedings pending. Should he/she suffer any repression, there is a possibility to seek the assistance of the President of the Management Board. The reporting person may receive feedback if this is without detriment to the interests of the Bank or third parties.

Anonymous reports

The Bank has a system for reporting breaches anonymously, introduced by resolution of the Management Board and the Supervisory Board (the institution of whistle-blower is applicable to all unethical acts which are illegal or contrary to the Bank’s internal regulations and to breaches of the recommendations of supervisory and audit authorities). Additionally, under the internal regulations, every employee of the Bank is obliged to report every suspected crime committed in connection with the Bank’s activities. A report regarding a member of the Management Board is addressed to the Chairman of the Supervisory Board, and all other reports are addressed to the President of the Bank’s Management Board. The Bank has internal regulations which define the manner of proceeding in such matters. There is a requirement at the Bank to report all identified cases of fraud, including those involving corrupt activities, to the Management Board on a regular basis.

Anonymous reports may be sent electronically or by surface mail. The Bank’s employees reporting irregularities anonymously are guaranteed full protection of their personal details and of the information they provide. If, based on the contents of the report, the reporting person’s identity can be established, such information is deleted by the recipient of the report before further action is taken. Employees reporting irregularities, even if the allegations they make are not confirmed, are protected in particular against any repressive measures, discrimination or other types of unfair treatment. Should they suffer any repression, there is a possibility to seek the assistance of the President of the Management Board. The reporting person’s identity is unknown, therefore there is no possibility to give him/her any feedback.

In the case of a breach of the applicable laws or the Bank’s internal regulations, including those regarding corruption, by an employee of the Bank, the Bank applies the solutions specified in the provisions of the labour law. If a specific case is qualified as grounds for instituting disciplinary proceedings, the Bank conducts such proceedings and, depending on their outcome, makes use of the list of consequences provided for in the above regulations, including the right to terminate the employee’s employment contract.

Reporting persons are protected. Nobody can be fired or punished otherwise for reporting a breach. Anonymous reports are verified by a limited number of persons appointed by the President of the Bank’s Management Board.

The Bank also has detailed procedures for conducting verification and rectification activities as a result of the reported breaches. At present, the Bank is working on the final implementation of a dedicated information tool used to report irregularities anonymously.

The Bank provides preliminary and regular training for its employees in reporting breaches and cases of non-compliance (including those showing signs of corruption) and gives them access to the necessary information and internal regulations in this area (also in electronic form in the intranet). Every employee of the Bank is required to undergo training in the principles for counteracting any corrupt practices.

Information on the reported breaches and the results of their verification is reported to the Management Board and the Supervisory Board of the Bank.

Similar solutions are applied at the selected companies of the Bank’s Group adequately to the scale and scope of their activities.

In 2021, the Bank received several dozen anonymous reports. They concerned primarily the relationships between the employees and superiors. Only in very few cases were the irregularities confirmed.

[GRI 205-3] In 2021, no cases of corruption were confirmed, as in 2020.

13.5.8 Risk of unethical business conduct

A. Ethics

[GRI 102-16] As one of the largest employers in Poland, the Bank undertakes to conduct and promote ethical business, build an ethical organizational culture and follow the principles of social responsibility.

The Code of Ethics was adopted by resolution of the Bank’s Management Board in 2014. The Code is a set of the most important values, principles, standards of conduct and ethical attitudes determining mutual relations in business and in the Bank’s relations with the outside world. In practical terms, the Code is a tool supporting the popularization and implementation of ethical values at the Bank. Its provisions are binding on the employees and all persons who perform business activities for or on behalf of the Bank or act as intermediaries in the Bank’s operations. According to the Bank’s Working Regulations, every employee of the Bank is obliged to observe the Code of Ethics. Initiatives are organized to promote the Code of Ethics and the Bank’s values.

In addition, training in ethics and the Bank’s values was prepared for all employees.

MEASURES TAKEN

• defining and promoting standards concerning business decisions and employee attitudes;

• increasing awareness of the significance of business ethics among employees by organizing training, workshops and dedicated information campaigns;

• defining and promoting key values which are necessary for the implementation of the Bank’s mission, such as reliability, Customer satisfaction, continuous improvement and entrepreneurship – these values constitute the basis for the employee competence model;

• ensuring that the whole of the Bank’s Group follows uniform standards of ethics;

• promoting firms which follow the principles of ethics in their relations with Customers, business partners and employees;

• social involvement in the initiatives addressed to local communities and global projects;

• taking steps to ensure a high standard of solutions in the area of ethics (confirmed by certificates);

• ensuring that employees have the right to associate and freedom of speech.

The Bank has analysed the ethical risks for each group of stakeholders and takes measures to mitigate such risks:

Stakeholders

Risks

measures

Employees

Corruption and bribery

Violating the trade secret

Bullying, harassment, other forms of discrimination

Violating the terms and conditions of employment

Chapter ‎13.5.7 (counteracting corruption)

The Bank mitigates the risks of violating the business secret, bullying, harassment and other forms of discrimination, as well as the risk of violating the terms and conditions of employment by defining the appropriate responsibilities of the employees in this respect and penalties for non-compliance in the Bank’s Working Regulations.

Customers

Unethical sales

Unauthorized access to Customer information

Unauthorized access to Customers’ funds

Social exclusion

Non-transparent relations with political parties

Chapter ‎13.5.10 (misselling)

Chapter ‎13.5.12A (filing complaints and reporting violations)

Chapter ‎13.5.11C (risk of unauthorized access to Customer information), data protection, observing bank secrecy)

Chapter ‎13.5.11B (risk of unauthorized access to Customers’ funds)

Chapter ‎13.5.1A (special measures supporting Customers with disabilities)

The Bank has internal regulations adopted by the Management Board, concerning relations with political parties and defining the principles for opening bank accounts and granting loans to political parties.

Counterparties

Corruption and bribery

Extortion of trade credit

Chapter ‎13.5.7 (counteracting corruption)

Chapter ‎13.5.9B (payments on time)

Social environment

Corruption and bribery

Adverse effect on the environment

Adverse effect on the communities

Chapter ‎13.5.7 (counteracting corruption)

Chapter ‎13.5.4 (monitoring impact)

Chapter ‎13.5.1C (charitable and sponsorship activities)

Counteracting the violations of the standards of ethics

In addition to the promotion of the Bank’s values and ethical conduct, the Bank finds it equally important to counteract all forms of violation of ethics in all aspects of the operations referred to above (including counteracting bullying and discrimination). Therefore, the following procedures have been defined in a clear and transparent manner:

• reporting any violations – this path is available to every employee in any form (also anonymously);

• proceedings to investigate the reported (potential) violations;

• monitoring and reporting (also to a competent member of the Bank’s Management Board) the violations identified.

These procedures and principles of conduct have been adopted by the Management Board of the Bank.

The Bank’s Code of Ethics and the Bank’s Working Regulations contain provisions concerning, among other things, counteracting discrimination due to gender, age, disability, religion and denomination, race, ethnic origin, nationality, political views, trade union membership, sexual orientation, employment for a limited or unlimited period and on a full-time or part-time basis.

Each employee is obliged to comply with the Bank’s Code of Ethics and participate in the development and promotion of the organizational culture and the related values.

In order to counteract breaches of the principles of ethics, the Bank applies other internal regulations: “The principles for counteracting mobbing and discrimination and the procedure for handling complaints concerning the violation of employee rights”. The employees report such cases to dedicated email addresses.

The Bank analyses the cases reported through dedicated internal channels also in terms of non-compliance and violations related to conflicts of interests.

In order to popularize ethics outside the Bank, among other things, training in ethics and the Bank’s values was implemented for agents cooperating with the Bank.

In addition to promoting values among the employees, the Bank also monitors employee complaints for potential violations of the standards of ethics. The competent Members of the Management Board of the Bank are informed quarterly about employee complaints in the areas they supervise and the way in which the case has been resolved. The Members of the Management Board are also entitled to review the documentation concerning the examination of the complaint. Moreover, the President of the Management Board of the Bank is informed quarterly about all complaints filed by employees.

Additionally, in 2021 legislative solutions were drafted (and approved by the Management Board and the Supervisory Board in January 2022). The aim of the prepared amendments to the Bank’s Code of Ethics is primarily to tailor the currently applicable regulations to Recommendation Z concerning the principles of internal governance in banks. Therefore, the drafted regulation, among other things, points to behaviour inconsistent with the ethical attitudes indicated in the Bank’s Code of Ethics as unacceptable. In addition, the drafted regulation defines the process of verification and assessment of compliance with the principles of ethics by the Bank’s Management Board and the process of informing the Bank’s Supervisory Board of the results of the assessment. The reporting system under construction will enable the Bank to identify areas requiring more extensive measures in this regard in a systemic manner. The draft regulation also specifies the assumptions concerning the process of popularizing ethics on the basis of, among other things, the Management Board’s conclusions from the assessment of compliance with the principles of ethics at the Bank.

In accordance with the regulations concerning the assessment of suitability of candidates for Management Board members and the members of the Management Board of PKO Bank Polski S.A. adopted by PKO Bank Polski S.A., in assessing suitability in terms of the guarantee of the proper performance of duties, the Supervisory Board takes into account the criteria of reputation, integrity and ethical conduct of candidates for the members of the Bank’s Management Board (as part of the preliminary assessment) as well as the members of the Bank’s Management Board (as part of the periodic assessment). If a candidate for a Management Board member or a Management Board member is found unsuitable in terms of the guarantee, the candidate may not be appointed to the body or measures may be taken to dismiss a member of the body from his/her position. Similar principles apply in the policy on the assessment of suitability concerning the members of the Bank’s Supervisory Board.

Ethics in the Bank’s Group

The entities of the Bank’s Group have implemented the Company’s Code of Ethics based on the template sent by the Bank, which means the application of uniform principles across the entire Bank’s Group.

B. Prevention of money laundering

On 1 October 2018 the Bank’s Management Board adopted a policy for preventing money laundering and financing of terrorism, which applies to all entities of the Bank’s Group. The purpose of this Policy is to prevent the use of the Group’s products in the activities related to money laundering or financing of terrorism. The Policy defines the standards that should be observed by the Bank, its subsidiaries and all persons working for them, including permanent and temporary associates, consultants, contractors, external agents and their employees (see https://www.pkobp.pl/investor-relations/esg-at-pko-bank-polski-group/policies-and-principles/, questionnaires: https://www.pkobp.pl/media_files/bcb01b2f-4247-4e74-8d85-2f8262788264.pdf and https://www.pkobp.pl/media_files/cec6bd5e-bed6-4693-9d1c-55bbcce47ddd.pdf).

The Policy is one of the internal procedures defining the scope of the transfer of data, regulations, obligations, standards and measures used to prevent money laundering and financing of terrorism. The Bank and the Group companies develop, implement, update and enforce the internal AML regulations which comprise, in particular:

• Customer identification and verification;

• monitoring of transactions in order to assess whether Customers’ transactions are consistent with the known Customer profile and the intended nature of business relationships (identification of unusual and suspicious transactions and examination of the source of funds where appropriate);

• recording of above-threshold transactions;

• monitoring of sanctions to prevent establishing prohibited relationships by checking whether the Customer is present on sanction lists;

• method of exchange and protection of information;

• financial security measures, including identification of beneficial owners;

• manner of storage of documents and information;

• manner of fulfilment of obligations comprising the provision of information about transactions and notifications to the General Inspector;

• manner of popularizing the knowledge of the regulations on preventing money laundering and financing of terrorism among the Bank’s employees;

• reporting of actual or potential violations of the regulations on preventing money laundering and financing of terrorism by the employees;

• internal control or oversight of the compliance of the operations with the regulations on preventing money laundering and financing of terrorism and the principles of conduct set out in the internal regulations;

• principles of documentation of the difficulties identified in connection with the verification of the identity of a beneficial owner and measures taken in connection with the identification of a natural person holding a senior managerial position as a beneficial owner;

• verification of financial institutions as part of the process of establishing correspondent relationships (LORO, exchange of RMA keys).

The Group applies financial security measures before establishing a business relationship with a Customer and then reapplies them during the relationship at the intervals adequate to a given Customer’s risk.

If the Group cannot apply one of the basic financial security measures, it takes appropriate steps in accordance with Article 41 of the Act on preventing money laundering and financing of terrorism, i.e. it does not establish business relationships, does not carry out an occasional transaction, does not conduct transactions via a bank account, terminates business relationships.

The Group identifies and verifies Customers and beneficial owners, determines the risk of money laundering and financing of terrorism, monitors Customers’ transactions and, in the event of identifying circumstances which may indicate money laundering or financing of terrorism or a well-founded suspicion of money laundering, it takes appropriate measures, including putting transactions on hold, blocking the account or freezing the funds. The Bank applies special mitigating measures in the form of freezing funds and not providing assets to persons or entities entered in the following lists:

• the lists published by the General Inspector based on the resolution of the United Nations Security Council passed under Chapter VII of the United Nations Charter, concerning threats to international peace and security caused by terrorist attacks, in particular the lists referred to in section 3 of resolution 2253 (2015) of the United Nations Security Council or in section 1 of resolution 1988 (2011) of the United Nations Security Council;

• the list of persons and entities subject to special mitigating measures, published by the General Inspector of Financial Information (GIIF);

• the lists published on the basis of the regulations of the Council of the European Union;

• and the lists published by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).

The persons performing AML duties participate in training programmes concerning the execution of such duties.

Within their organizations, the Bank and its subsidiaries appoint AML officers responsible for the exchange of information among the Group entities. The Bank performs periodic reviews of the Group policy at least annually. It also prepares quarterly information on counteracting money laundering and financing of terrorism, which is presented by the Security Department Director to the President of the Management Board of the Bank.

The Group operates in accordance with the laws of each country in which it conducts its activities and cooperates with institutions which are tasked with preventing money laundering and financing of terrorism (the GIIF in Poland, Bafin in Germany).

In 2021, the Group’s policy was modified towards the implementation of changes in the IT systems as regards the identification of Customers in the Central Register of Beneficial Owners, the manner of processing transactions with Customers from high-risk third countries and the methods of identification of Customers related to high-risk industries.

13.5.9 Risk in the supply chain

The entities of the Bank’s Group follow the principles of social responsibility in the supply chain by managing their relationships with external entities in the following manner:

• they follow the principles of fair competition;

• they settle their liabilities in a timely manner to ensure liquidity in the supply chain;

• as part of the procurement policy, at the stage of the letter of inquiry they oblige the suppliers to follow the principles of social and environmental responsibility;

• they support diversity in cooperation with external entities.

A. Operational risk related to outsourcing banking activities to external entities

The Bank conducts banking activities with the support of external entities. As a result, it is exposed to operational risk arising from outsourcing services to them.

REGULATIONS

Principles for operational risk management; Principles for outsourcing the activities of PKO Bank Polski S.A. to external entities other than agents or intermediaries (outsourcing); Principles for cooperation with agents, and Principles for cooperation with intermediaries and Internet intermediaries.

STAGES

Risk management is performed at all stages of outsourcing activities to external entities:

• before selecting an entity: assessment of the risks related to outsourcing activities, including the assessment of the critical nature of the activities planned to be outsourced;

• selecting an entity: the assessment of operations, technical and organizational measures to protect data, credibility, financial position of the entity and the possibility of ensuring continuity of the entrusted operations, identification and assessment of the existence of a conflict of interests;

• concluding an outsourcing contract: including contractual provisions in contracts with contractors which secure the interests of the Bank and its Customers (including securing data containing protected information, possibility of effective oversight of outsourcing contracts by the competent supervisory authorities and other required provisions), maintaining and ongoing updating of the records of contracts concluded and the entities which perform them;

• monitoring of cooperation: supervising the performance of contracts, regular review of contingency plans, regular risk assessment, including the critical nature of the activities outsourced, reporting irregularities in the performance of contracts, monitoring KRIs providing information about the scale of breaches in cooperation with external entities, annual review of the cooperation with external entities performing outsourcing contracts and presenting the results to the relevant bodies.

RISK IN THE GROUP

The procedures for managing operational risk, including the outsourcing risk at PKO Bank Hipoteczny S.A., correspond to the standards applied at the Bank. KREDOBANK S.A. has adopted its internal regulations: entering into cooperation is preceded by an assessment of the risk related to outsourcing a given activity.

B. Cooperation with suppliers of goods and services related to the ongoing procurement of the entities of the bank’s group

REGULATIONS

The task of the Bank’s Procurement Department is to oversee the procurement process in order to ensure the timely supply of the required goods and services of an appropriate quality. In addition to the Bank’s interest in the broad sense, the Procurement Department oversees compliance of the procurement processes with the principles of ethics, including the principle of equal treatment of all participants. When selecting suppliers, the Bank also takes into account certain criteria other than price, including compliance with business ethics and strives for transparent relationships with suppliers. The procurement policy is developed on the basis of the best market practices. The main regulatory provisions are the “Principles for purchasing goods and services”, “Procedures for purchasing goods and services at the Bank” and the “Procurement policy” updated in 2021. The policy takes into account the most important aspects of the procurement of goods and services at the Bank, offers the possibility of applying ESG criteria, and refers to the best business practices. It also sets strategic objectives for the procurement process.

PRINCIPLES

Relationships with suppliers are built on the basis of honesty, transparency of action, mutual respect and professionalism, including, in particular, through:

• honouring the accepted arrangements and obligations;

• making payments and settling other liabilities in a timely manner and in accordance with the contractual terms;

• resolving difficult situations and conflicts through dialogue;

• verifying suppliers solely on the basis of merit and business considerations;

• informing suppliers about the standards of conduct;

• efficient communication with suppliers at every stage of the procurement process.

CONFLICT OF INTERESTS

In 2021, in carrying out the procurement process the Bank analysed the situations which could cause a potential conflict of interests. During the approval of a request for proposals the employees handling the procurement process confirm the absence of a conflict of interests, whereas the request for proposals is accompanied by information for the suppliers: a map of the conflict of interests and a conflict of interests declaration form. The suppliers are obliged to disclose all situations/relationships which cause or could cause a conflict of interests in the future, with the bid. If such circumstances arise, at each stage of the procurement process, among others, after the bid has been submitted, at the stage of signing the contract or afterwards, the affected bidder or supplier is obliged to submit a declaration on the conflict of interests immediately.

TIMELY SETTLEMENT OF LIABILITIES

The Bank and other entities of the Bank’s Group approach the issue of settling their liabilities to suppliers in a timely manner with due care and diligence. In 2021, the value of invoices paid late, on which interest was charged as a result, constituted a marginal percentage of all the invoices paid. The list does not include payments in the case of which the delay (if any) was agreed with the supplier, because the collection of this information would be excessively laborious.

Table 50. Share of the value of invoices on which interest was paid in the total value of invoices paid

	BANK			GROUP
	2021	2020	2019	2021	2020	2019
Share in total value of invoices (%)	0.003	0.009	0.001	0.022	0.017	0.024

ESG CRITERIA

Suppliers interested in entering into cooperation with the Bank may register at the ‘PKO Zakupy’ procurement platform on their own. Each supplier must be approved by an employee of the Procurement Department. Suppliers who have been approved may take part in procurement proceedings.

The Bank and the Companies of the Bank’s Group have an impact on the suppliers with respect to socio-environmental issues at the stage of each request for proposals sent. In accordance with its content, when joining in the procurement proceedings, the suppliers must declare that, throughout the supply chain, they are guided by the overriding principle of respecting the law, a sense of justice and social responsibility and they understand the influence exerted by their activities on the natural environment, their surroundings, the other party, their employees, co-workers, subcontractors and business partners, and they are guided by the principles of ethics.

The subsequent part of the statement contains detailed declarations regarding:

• ensuring safety in the workplace;

• being guided by cooperation, trust, and a responsible and partnership approach to the other party;

• compliance with the rules on working time and remuneration for work;

• respect for human rights;

• counteracting corruption;

• protecting the natural environment.

The updated Procurement Policy of the Bank takes into account ESG-related aspects, among other things, it defines the strategic objectives of the procurement organization in this regard. These objectives include, among other things:

• conducting ESG surveys among key suppliers;

• drawing up a Supplier Code of Ethics which takes into consideration primarily occupational safety guarantees, prohibition of child labour, environmental protection, data privacy and security, prevention of corruption, managing conflicts of interests, etc.

PROCESS CERTIFICATION

In 2021, the Bank retained the Procurement Excellence certificate obtained in 2016. The Certificate is a quality mark awarded by the Chartered Institute of Procurement and Supply (CIPS), the largest procurement organization in the world. The certificate renewal process was completed in February 2021.

At present, PKO Bank Polski S.A. is the only financial institution with this certificate in Poland and the entire Central and Eastern Europe. The Procurement Excellence certificate is a globally recognized distinction awarded to organizations which demonstrate the highest standards of procurement processes.

GRI INDICATORS

[GRI 414-1] In 2021, all new suppliers (326) were verified by the Bank in terms of social criteria.

[GRI 414-2] The Bank did not record any negative social effects in the supply chain.

13.5.10 Product compliance risk

In terms of the products offered, PKO Bank Polski S.A. and the PKO Bank Polski S.A. Group pursue a policy which is to ensure: compliance of the products with the applicable regulations and their correct labelling. The scope of this policy at the Bank and in the Bank’s Group encompasses the stage of formulating a product offer, the presentation of the product to the Customer, the purchase (i.e. signing the agreement) and the stage of the product being used by the Customer. The principles and mechanisms of pursuing the compliance policy and appropriate labelling of products apply to the Bank and the entire Bank’s Group.

Compliance of the products with the applicable standards

The Bank and the Bank’s Group make every effort to ensure that the products offered meet the requirements set out in the legal regulations and the accepted market standards. These efforts are focused on ensuring that:

• the products offered are adequate to the needs of the Customers to whom they are addressed;

• the manner and proposed form of the purchase of products are adequate to their nature;

• before concluding the agreement, Customers are provided with reliable, transparent and comprehensive information about the product, in particular its nature, design, conditions, benefits and risks, as well as fees, commissions and other costs related to the conclusion, performance and potential early termination of the agreement (in a manner comprehensible to an average person).

These rules apply to all entities of the Bank’s Group, as well as the enterprises which the Bank has entrusted with the performance of specific operations related to the sale or handling of products.

Managing the risk of improper sales of products to Customers (misselling)

As part of ensuring compliance of the products with the regulations, the Bank manages the misselling risk at the stage of product development and launch, and then at the stage of offering the product to Customers. Each product undergoes a pre-implementation analysis with regard to the risks it generates and the identification of target Customer groups. The Bank also identifies the groups of Customers to which the Bank should not offer the purchase of a given product because of its inadequacy to the Customer’s needs or for other reasons (the so-called anti-groups). If there are any anti-groups, control mechanisms are implemented to mitigate the misselling risk. The misselling risk is also mitigated at the stage of commencing the sales activity – before offering the purchase of a specific product to a Customer, it is assessed whether a given product is adequate to the needs of this type of Customer (in order to eliminate the cases, for example, of selling unemployment insurance to pensioners or long-term investment products to elderly persons). Additionally, the Bank always provides reliable and exhaustive information to Customers about the products offered so that they can make an informed choice in this regard. The Bank informs Customers about both benefits and risks arising from the purchase of the individual products.

The Bank considers any irregularities reported by the Bank’s Customers (in particular complaints) within the deadlines arising from the legal regulations. Depending on the findings, the Bank takes measures to eliminate such irregularities, prevent their occurrence in the future and improve the quality of service (for more information, see chapter Complaints).

Similar solutions concerning misselling risk management, in keeping with the principle of proportionality, are also in place in the other entities of the Bank’s Group which develop or sell financial products.

Correct product labelling

[GRI 417-1] The Bank’s Group, including the Bank, fulfils the requirements concerning correct labelling of banking and investment products by providing the Customers with all the necessary information about them, especially at the pre-contract stage.

The scope of information provided about the products is specified in the applicable legal regulations and the recommendations of the PFSA. The general rule is that the highest level of protection is available to retail Customers – consumers. This information is formulated in such a way that it is comprehensible to the so-called “average consumer” within the meaning of the Act on counteracting unfair market practices, i.e. a consumer who is sufficiently well-informed, attentive and cautious; whereas the scope of the information provided to financial institutions and other professional buyers of financial products and services is narrower.

Proper product labelling also covers the Bank’s advertising messages which support its sales activities and shape its brand image. All marketing materials published by the Bank take into account the specific obligations arising from the legal regulations (e.g. the Consumer Credit Act – as regards the advertising of such loans) as well as market standards and the PFSA guidance formulated in the adopted “Rules of advertising banking services”.

13.5.11 Risk to security of customers and their funds

A. customer security while using the products

One of the Bank’s priorities is to set the highest security standards. Customer security in the process of using the products of the Bank and the Bank’s Group primarily includes the security of Customers’ funds and the physical security of the Customers at the Bank’s facilities. The question of security is governed in the Bank’s internal regulations, including the Security Policy at PKO Bank Polski S.A. and, in detail, the regulations regarding specific areas of security: (i) protection of people and property; (ii) IT System security; (iii) managing security incidents.

Security of Customers’ funds

The activities of the Bank and other entities of the Bank’s Group related to ensuring the security of Customers’ funds concern ensuring the security of both the funds entrusted and the funds invested using the products offered. The initiatives regarding ensuring a stable and secure infrastructure made it possible to achieve very high reliability indicators for the operation of the IT infrastructure.

Security of funds invested: the Bank makes every effort to ensure that its products do not generate the risk of the loss of funds by the Customers. This is particularly important in the case of investment products. Therefore, as part of the obligations imposed by the MiFID, the Bank informs its Customers before conducting a transaction on whether a given product is suitable for them.

Security of deposits entrusted: the main mechanism which guarantees the security of Customers’ funds is the stability of the Bank’s financial result and the results of the other entities of the Bank’s Group. An additional mechanism is the Bank’s participation in the obligatory deposit guarantee system operating under the Act on the Bank Guarantee Fund, the deposit guarantees system and special resolution.

The security of Customers’ funds is also guaranteed by the cybersecurity procedures.

Physical security of Customers

The Bank and the other entities of the Bank’s Group ensure the highest quality of direct Customer service in their locations, among other things, thanks to the security standards which meet the requirements of legal regulations and norms, implemented at the Bank. State-of-the-art systems, equipment and technical and organizational solutions adequate to the threats and risk identified are used in all facilities. They ensure physical security of Customers, employees, cash and deposits, as well as security of protected information, including bank secrecy and personal data.

Protection covers all locations and self-service equipment made available to the Customers and has the form of:

• physical safeguards (construction, mechanical and electronic, including burglary and robbery signalling systems, surveillance TV and access control);

• continuous direct physical protection of selected facilities of the Bank;

• monitoring of alarm signals by certified security firms and the arrival of the so-called intervention groups after receiving alarm signals.

Moreover, the employees of all branches and agencies of the Bank undergo training in security in the form of e-learning and directly with drills in “Counteracting robberies and dealing with security threats”. The provision of direct training has been suspended due to the pandemic, but as soon as it is over there are plans to resume successive training in all branches.

B. Cybersecurity

Management structure

The Bank has a security policy in place, which also relates to the principles of digital security. The policy was approved by the Management Board in 2015. The Bank has a Cybersecurity Department which deals with:

• ensuring the security of the Bank’s IT system;

• development of systems and monitoring of cybersecurity parameters and critical services;

• servicing cybersecurity events and incidents, including the events and incidents in the area of electronic banking.

The function of controlling the current level of infrastructure security is performed by the Department director who also supervises the Security Operations Centre (SOC). The director of the Cybersecurity Department is responsible for implementing the cybersecurity policy and for controlling cybersecurity. The Vice-President of the Management Board responsible for IT supervises the performance of these functions. The President of the Management Board oversees the implementation of the policy. In order to improve the methods of counteracting crime at the Bank, the Cybersecurity Department prepares analyses and presents the Management Board and the Supervisory Board of the Bank with conclusions and recommendations concerning the implementation or modification of specific solutions.

The monitoring of and responding to incidents are performed by the specialist CERT unit of the Bank.

In order to ensure IT security of the Bank’s services, incident response operates on a 24/7/365 basis. CERT PKO Bank Polski S.A. is a member of an international forum of responders (FIRST) and belongs to the task force of European response teams (TERENA TF-CSIRT) and the related Trusted Introducer organization.

In 2021, the Bank completed the project CyberSecurity Operations Center as part of which the processes of the Cybersecurity Department were streamlined and a strategy was drawn up for providing services to the Group companies. Moreover, as part of the project a SOAR class system was implemented, which allows the servicing of security incidents to be automated.

The Bank educates its employees regularly in ICT environment security and the security of information processed in that environment. The Bank’s employees are offered training in threats related to:

• using mobile devices;

• using personal IT equipment for professional purposes and using the Bank’s equipment for private purposes;

• publication of information concerning the Bank by employees in the Internet (especially in the social media);

• social engineering attacks.

This is a package of training courses which are obligatory for every newly hired employee. The Bank provides the training in accordance with an agreed schedule, and all employees must participate. The provision of training is monitored by the Bank on an ongoing and periodic basis as part of independent monitoring of controls.

In accordance with the Bank’s policy, the principles of cybersecurity must be complied with not only by the employees but also by third parties (contractors). The Bank sets security requirements for the providers of IT services with respect to the protection of the Bank’s information, access to the Bank’s buildings and rooms, and the protection of the Bank’s information systems.

Audit

The Bank identifies threats to cybersecurity on an ongoing basis. It monitors the sources of information, implements safeguards against potential threats, develops incident response plans, and simulates potential attacks (RedTeam) in a controlled manner to identify weaknesses even before they are exploited. The Bank has a formalized process in place for verifying the security and sensitivity of new or modified systems and applications before the launch of their production. The said process is performed in two dimensions: in connection with the process of software implementation and modification at the Bank and in connection with the project process. Every new project which changes a key system from the perspective of the business processes is subject to an IT security audit.

An internal audit of the IT processes is performed at least once every 3 years. The selection of IT processes to be audited in a given year depends, among other things, on the following factors: the results of the internal audits preformed, changes in the ICT environment, risks associated with identified internal and external frauds, and changes in internal and external regulations affecting the Bank’s functioning and operating activities. Internal audits of IT processes are performed by the IT and Security Audit Team of the Bank in accordance with a predefined schedule. External cybersecurity audits are outsourced to the audit firms with which the Bank has signed framework agreements.

Managing the risk of unauthorized access to Customers’ funds through electronic banking

The most important threat to the security of Customers identified by the Bank and PKO Towarzystwo Funduszy Inwestycyjnych S.A. is associated with potential criminal activities of third parties targeted at Customers using electronic channels of access to banking and investment services.

Firstly, the Bank uses the latest ICT security solutions which guarantee secure access to funds held by Customers. The Bank is constantly improving the quality of its IT systems security, in particular with regard to the applications used by the Bank’s Customers. This concerns, among other things, combating actively phishing websites pretending to be the Bank’s websites, identifying criminals intentions and ability, taking into account tactics, techniques and procedures (standardization and structuring of information about threats within a single data model), tracking the development of malware attacking the Bank’s Customers, developing mechanisms of detecting infected Customers’ computers, as well as improving the rules and extending the scope of monitoring of electronic transactions.

Secondly, the Bank attaches a great deal of importance to informing and raising Customers’ awareness of the safe use of electronic banking services and payment cards. This is because security in this respect depends to a large extent on the users’ actions. The Bank’s educational activities include, in particular:

• mass educational campaigns, e.g. initiating texts on the safe use of electronic banking (the educational portal www.bankomania.pkobp.pl);

• responding to Customers’ enquiries on an ongoing basis (e-mail, social media);

• ongoing communication of the Bank’s views on various issues and provision of educational materials on cybercrime and the principles of security to the media;

• responding to other signals regarding threats on an ongoing basis;

• provision of information on cybersecurity to Customers through the Bank’s websites, the transactional service and by e-mail.

In 2021, the Bank was improving its systems for detecting incidents, anomalies and advanced types of malware, and a large number of actions relating to incident handling was automated. It ensured the technological validity of the solutions used for computer forensics purposes in accordance with the current requirements profile.

Representatives of the Bank also engage in the work of the Banking Cybersecurity Centre (BCC) operating at the Polish Bank Association. The purpose of BCC is to take comprehensive and long-term measures which are aimed at improving the safety of mobile and electronic banking and preparing tools (structures, procedures, information exchange mechanisms) enabling crisis management (e.g. in the event of a massive attack).

The Bank does not have an ISO 27001 certificate; however, its cybersecurity processes and regulations are developed on the basis of the requirements of this standard. The high organizational maturity in the area of handling cybersecurity incidents is particularly important in the light of the PFSA’s decision issued in 2018 on recognizing PKO Bank Polski S.A. as a key service operator as defined in the Act on the national cybersecurity system.

C. Privacy risk

PKO Bank Polski S.A. follows the generally applicable regulations, including:

• Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation, GDPR);

• the Personal Data Protection Act of 10 May 2018,

and its own internal personal data protection regulations.

These internal regulations apply to the principles of personal data processing at the Bank, in particular the method of processing it and the technical and organizational measures ensuring the security of the process.

Additionally, the Bank applies internal regulations regarding, in particular:

• security of protected information;

• IT system security;

• protection of people and property;

• management of security incidents where the method of management of personal data protection violations has been defined;

• conducting investigations;

• designing and implementing security mechanisms.

Privacy and data security

The Security Standards for the Bank’s Group address the following issues: personal data protection, business continuity management, ICT security, counteracting money laundering, security incident management, outsourcing principles and security reporting principles.

The Bank processes personal data in keeping with the requirements of the generally applicable laws, including the principle of legality and data transparency, the principle of purpose limitation, the principle of data minimization, and the principle of maintaining the accuracy and integrity of processed data. In order to achieve these objectives, the Bank applies both procedural regulations and technological solutions which are designed to observe the personal data processing principles defined in the General Data Protection Regulation (GDPR).

The Bank has appointed a Data Protection Officer (IOD) whose tasks comprise supervision over the correctness of personal data processing. Customers may contact the IOD by sending letters to the Bank’s address or by e-mail: iod@pkobp.pl.

As required by the GDPR, the Bank has prepared Information on personal data processing and provides it to its Customers. They are informed about the applicable principles of personal data processing, the purpose of its processing and their rights, including the right to access, rectify and erase data.

If data is processed on the basis of the consent of the data subject, the data subject is informed about the right to withdraw consent.

The Bank has also defined the principles for informing Customers about a breach of their data security. Those principles are in compliance with the generally applicable laws.

Moreover, a dedicated website of the Bank https://www.pkobp.pl/pkobppl-en/gdpr/ presents information on personal data processing, including information on the appointed IOD, on the manner of personal data processing, the legal basis for the processing, and the rights of the data subjects.

The Bank’s Customers also have access to complaint paths for expressing doubts concerning data security. Internal regulations concerning the management of personal data breaches have also been developed. These regulations govern the principles for informing Customers about a breach of security of their data.

Ongoing exchange of information and improvement of security on the basis of the best practices are the permanent features of the cooperation and the Agreements in place in the Bank’s Group. Any irregularities are addressed in compliance with the law, which includes informing the competent authorities about breaches, as required by the internal regulations and the law.

Management of the risk of unauthorized access to Customer information

The risk of unauthorized access to Customer information is managed in accordance with the “Security Policy of PKO Bank Polski S.A.”. At the same time, the “Principles of security of protected information at PKO Bank Polski S.A.” regulate the issues of confidentiality of information and the maintenance of bank secrecy, as well as personal data security, including the liability of the Bank’s employees regarding personal data protection. Every employee is obliged to complete appropriate training in personal data protection in accordance with formal procedures. Such training courses are also organized regularly. Measures aimed at ensuring data security are taken with the participation of the Management Board. For this purpose, the best policies and system security solutions are implemented. Such solutions (in terms of both systems and policies) are constantly evaluated, audited and improved in accordance with the best market practices. The Security Department supervises the performance of duties associated with the protection of information at the Bank and prepares information on the state of security for the Bank’s Management Board and Supervisory Board in the form of semi-annual reports. The activities of the Security Department also include carrying out internal security inspections in the Bank’s organizational units, which also cover information security, and giving opinions on new solutions and projects implemented at the Bank in the area of the protection of information.

In accordance with these principles:

• access to protected information at the Bank is only given to employees within the scope of their corporate tasks and duties;

• the employees undergo training in security of protected information before starting to process protected information;

• if materials containing protected information are provided to external entities, a non-disclosure agreement is concluded by and between the parties, whereas in the case of entrusting the processing of personal data, an agreement is concluded on entrusting the processing of personal data. Such agreement includes, among other things, the obligations of the entities cooperating with the Bank to protect the entrusted data, use it exclusively for the purposes of performing the agreement and inform about any security breaches. The Bank defines the requirements concerning the protection of the processed data in accordance with the generally applicable laws. The Bank may also control the security of the processed data at the cooperating entities.

The Bank is obliged to maintain banking secrecy as defined in the “Banking Law”.

Any information constituting bank secrecy, including the personal data of the Bank’s Customers, may only be made available in compliance with the obligations arising from the generally applicable laws. Enquiries from entities authorized to demand access to the information constituting bank secrecy (e.g. government institutions) are considered by the Bank in accordance with the law. The information subject to bank secrecy is provided only in the situations specified in the aforementioned Act, once the conditions giving the Bank the right to provide such information have been satisfied.

The information on the legal basis for giving access to data can also be found on https://www.pkobp.pl/pkobppl-en/gdpr/.

Each of the other entities in the Bank’s Group which processes personal data has such regulations in place and applies them in practice. The companies have signed and implemented the Security Standards, including standards relating to personal data protection, which form part of the “Security Standard Guidelines for the PKO Bank Polski S.A. Group”. They are in line with the generally applicable regulations and the standards applied at the Bank and, to the necessary extent, they contain specific regulations which are adequate to the specific nature of the particular entity’s business.

In the event of a violation of personal data protection, the Bank takes measures in accordance with the adopted Principles for security incident management at PKO Bank Polski SA and the GDPR. If a violation is identified, immediate action is taken to analyse it and to mitigate its adverse effects, if any. Any violations of personal data protection resulting in a risk to the personal rights or freedoms of natural persons are immediately reported to the President of the Personal Data Protection Office (UODO). Moreover, if a violation of personal data protection could result in a high level of risk to the personal rights or freedoms of natural persons, the data subject is immediately notified of such violation.

13.5.12 Risk of incorrect communication

A. Complaints

The complaints process is an important part of building the positive experience of Customers and their satisfaction from cooperation with entities of the Bank’s Group. Every complaint brought by a Customer is considered individually, and every problem reported is carefully analysed and explained.

Complaint handling process at the Bank

The submission of complaints or appeals by Customers may take on various forms, depending on the Customer’s decision: written, oral or electronic.

The complaint handling process is conducted along two lines:

• the first line consists of units dealing with the first complaints of Customers in accordance with the tasks they perform, and with reports concerning personal data protection filed by the President of the Personal Data Protection Office;

• the second line is the Customer’s Ombudsman and the Office of the Customer’s Ombudsman. They consider:

 appeals of Customers against the decision of the Bank’s first line in the complaint handling process;

 reports concerning the Customers filed by:

 the PFSA;

 external institutions dealing with the protection of Customers’ rights (such as the Banking Consumer Arbitration, the Arbitration Court at the Polish Bank Association, the Arbitration Court at the Polish Financial Supervision Authority, the Municipal or District Consumer Ombudsman and the Financial Ombudsman);

 individual cases, in particular due to the significance of the reported issue.

The solution proposed by the Customer’s Ombudsman is the Bank’s final position in a given matter.

Complaints or appeals are handled with due care and diligence, fairly, thoroughly and as quickly as possible. The Bank’s Code of Ethics, the Principles of Good Banking Practice and the Standards of Customer service quality are applied in considering complaints.

Considering a complaint or an appeal involves, in particular:

• analysing and assessing its validity;

• taking appropriate steps to eliminate the irregularities identified;

• giving a comprehensive response.

Pursuant to the Act on the handling of complaints by financial market entities and on the Financial Ombudsman, the Bank follows the principle that a response to a Customer’s complaint should be formulated in a clear and understandable manner and that it should include:

• a factual and legal justification, unless the complaint is resolved in line with the Customer's wishes;

• information about the Bank’s position with regard to the Customer’s objections, including an indication of the relevant parts of the agreement or the product regulations;

• specification of the deadline within which the Customer’s claim that has been accepted by the Bank will be fulfilled.

The deadlines for replying are in line with the provisions of the law, in particular with the aforementioned Act and the agreements concluded with the Customers.

The Office of the Customer’s Ombudsman regularly monitors and reports, among other things, to the Operational Risk Committee and the Bank’s Management Board and Supervisory Board. The process of handling Customer complaints is supplemented by the initiation of positive changes at the Bank.

Every unit at the Bank which considers complaints and appeals of the Customers:

• analyses the reports received to identify possible irregularities, the reasons for them and the places of their occurrence and to identify possible changes to products, services or processes whose implementation would contribute to an improvement in the quality of the services provided by the Bank;

• initiates remedial or improvement measures.

The competent unit (in terms of its responsibilities and the subject matter of the initiative):

• takes remedial measures to eliminate irregularities;

• implements improvements in products, services or processes;

• provides information on the remedial or improvement measures taken and the deadline and method for their implementation to the Office of the Customer’s Ombudsman and to the unit handling the report.

This approach to the complaint handling process means that individual reports lead to the implementation of solutions that are beneficial not only for the person filing the report, but also for other Customers.

The implementation of remedial measures is monitored by the Office of the Customer’s Ombudsman.

Complaint handling process at the other entities of the Bank’s Group

The Bank’s subsidiaries manage complaints on their own, and they implement and follow their own procedures for receiving and considering Customer complaints. These procedures:

• have been specified in the form of internal procedures/ regulations of the entities;

• are included in the regulations and contained in the agreements with Customers or

• arise from the provisions of the generally applicable laws.

Complaints are handled in a reliable and objective manner, taking into account all the information and documents related to the problem reported by the Customer and in accordance with the provisions of the law and concluded agreements.

Most of the Bank’s subsidiaries are subject to the Act on the handling of complaints by financial market entities and on the Financial Ombudsman which regulates this process in detail.

Indicators describing the complaint handling process

In 2021, the entities of the Bank’s Group received nearly 315 thousand complaints in total (320.5 thousand in 2020), approx. 85% of which were handled within 14 days (80% in 2020). Approximately 55% of all cases were fully or partly settled in the Customer’s favour (58% in 2020).

B. Marketing communication

The Bank’s policy is regulated by the “Principles for the conducting of marketing and public relations (PR) activities and social communication by PKO Bank Polski S.A.” which were adopted by resolution of the Management Board in December 2019. The Principles govern, among other things, the “General requirements for creating advertising messages regarding trading in financial instruments” (appendix no. 3 to the Principles). The Bank’s internal regulations concerning the principles for conducting marketing activities define the features of appropriate advertising messages, as well as the list of undesirable actions. According to these principles, an advertising message, in particular:

• should be designed in a reliable manner, not be misleading, and should feature respect for the generally applicable laws, principles of fair trading and good practices;

• must not present benefits in a way that would diminish the significance of the costs and risks associated with the purchase of a product or service.

In addition to the Bank’s internal regulations, in its marketing communications the Bank follows:

• “The Code of Banking Ethics” prepared by the Polish Bank Association as part of the Principles of Good Banking Practice;

• “Good Practices in consumer credit advertising standards” developed jointly by the Polish Bank Association, the Conference of Financial Enterprises and the Association of Lending Companies;

• “The principles for advertising banking services” by the Polish Financial Supervision Authority;

• “The canon of good financial market practices” prepared by entities in the financial and insurance sector.

In its marketing activities, the Bank has mechanisms that prevent the creation of unethical and unreliable messages. Each time, the correctness of the communication is consulted with the units whose tasks include verifying the compliance of messages with the generally applicable laws. The principles of ethics in marketing communication and the mechanisms for preventing the risk of unethical communications also apply to materials prepared at the Bank’s request by external entities (advertising agencies, event agencies).

The same standards apply to all Customer groups. Each message should be formulated in a comprehensible, reliable and credible way, regardless of the Customer to whom it is addressed.

Within the Bank’s Group, the subsidiaries have internal regulations which require them to design messages in compliance with ethical standards (this does not apply to entities that do not actively conduct marketing activities). These standards coincide with those adopted by the Bank. In addition, the Bank’s subsidiaries which have signed agency agreements with the Bank for the provision of marketing services to the Bank’s Group are required to apply the internal regulations on marketing communications in force at the Bank.

In their marketing activities, all of the Bank’s subsidiaries have control mechanisms to prevent the risk of irresponsible or unethical communication from the company. The marketing communication is approved respectively by a given company’s supervisory units or, additionally, in the case of companies which have signed agency agreements with the Bank for the provision of marketing services to the Bank’s Group – by the Bank’s competent departments.

[GRI 417-3] In 2021, as part of the marketing activities conducted by the Bank’s Group and the Bank, no administrative proceedings concerning the violation of ethics in marketing communication were pending, and no inconsistencies were recorded in marketing communication.

C. Communication with investors and Customers

In order to maintain proper relations with all of its shareholders, the Bank has adopted the “PKO Bank Polski S.A. Information Policy with respect to contacts with investors and Customers” (the policy was approved by the Management Board on 9 December 2014). According to its provisions, the overriding aim of the Bank’s information activities is to guarantee high standards of communication with capital market participants, which are a sign of respect for the principles of universal and equal access to information. As part of its information policy, the Bank takes into account the interests of all investors, provided that they are not in conflict with the Bank’s interests. The objective of the information policy is to define the mechanisms of communication with capital market participants to ensure appropriate, fair and full access to information about the Bank for all investors, without giving preference to any of them.

Investors’ interest in ESG issues

[GRI 102-44] The Bank has noticed an increase in investors’ interest in ESG issues. In 2021, their questions usually concerned the Bank’s measures aimed at supporting the stakeholders in fighting the epidemic, especially in the context of ensuring the continuity of the Bank’s operations, i.e. the safety of the Customers and employees and participation in social initiatives. The investors were also interested in the Bank’s position on financing high emission industries and the mining sector, the range of the ESG objectives adopted by the Bank, the ESG management structure within the Bank, and plans for the Bank’s participation in international ESG-related initiatives. The Bank’s participation in the international disclosures such as CDP Disclosure Insight Action or the Coal Policy Tool was appreciated by the investors.

The Bank runs a section dedicated to ESG issues on its website, which is a response to the growing importance of sustainable development issues in the Bank’s activities and investor relations. The site is updated regularly: https://www.pkobp.pl/investor-relations/esg-at-pko-bank-polski-group/.

D. Customer satisfaction

[GRI 102-43] The Bank evaluates the stakeholders’ commitment based on regular Customer satisfaction surveys.

Retail Customer recommendation and satisfaction surveys

In 2021, the Customer satisfaction (CSI) and the NPS (Net Promoter Score) indices were incorporated again in the objectives of most of the organizational units of the Bank, including the Management Board. This means that Customer satisfaction and loyalty are of key importance to the Bank’s activities.

The Bank still conducts internal retail Customer surveys:

• relational surveys – conducted among Customers in the Primary Customer segment, measuring the level of Customers’ loyalty and their satisfaction with cooperation with the Bank, encompassing the whole of the Customer’s experience;

• transactional surveys – conducted at the key points of contact between the Customer and the Bank, immediately after the event, measuring satisfaction with a given interaction, which is defined in space and time, and the Bank’s NPS following the Customer’s recent experience in connection with that event.

As part of relational surveys, in 2021 internal relational surveys of Personal Banking Customers and SME Customers were carried out for the first time. Both surveys will be continued in 2022.

Tests were also conducted using a voicebot – this technique is used permanently to conduct relational surveys of Customers in the Primary Customer segment.

In the transactional survey area, the network of surveys on the iPKO transactional platform has been developed very strongly – currently, we are asking Customers for their opinions following the completion of over 40 requests and instructions. In 2021, questionnaires were also implemented in the IKO mobile application.

In addition, a questionnaire was implemented on the iPKO transactional platform, which is available to any Customer after logging in – the Customer may share his/her opinion at a convenient moment, on a topic that is important to him or her.

In total, in 2021 the Bank collected over 500 thousand surveys using various methods, including the remote channels (over 230 thousand interviews in 2020). There are plans to further increase the number of processes monitored, especially the service processes following the purchase of a product.

Corporate Customer satisfaction surveys

The Bank continued monitoring corporate Customer satisfaction and maintained high response rates in all surveys conducted at 65% and 64% in relational surveys with decision-makers. This shows that Customers’ willingness to participate in satisfaction surveys in the corporate Customer division has not decreased for over five years.

The largest increase in satisfaction compared with the previous years was recorded among Customers launching financing. The high ratings in this area were due to, on the one hand, Customers’ experience with the lending process last year and, on the other hand, appreciation for the Bank’s approach to their needs and specific nature in the first pandemic period.

The share of the Customer’s opinion in the product development process is growing each year. The Bank makes efforts to make it heard at every stage of product development. Therefore, it gradually increases the share of surveys which are aimed at supporting product development, testing concepts with Customers and participating in defining requirements, as demonstrated by the recruitment of a second qualitative researcher in the corporate area. At the same time, Customer satisfaction measures are an important element in the post-implementation evaluation of new solutions. The examples of new implementations in which objectives based on Customers’ opinions were planned and accounted for together with the revenue targets include, among others, a new mobile application interface, Express Elixir transfers or a new mass payment module.

13.5.13 Risk for sustainable development

A. SFDR

According to Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (Sustainable Finance Disclosure Regulation), in 2021 PKO TFI S.A. and the Bank’s Brokerage Office published their strategies for integrating sustainability risks and considering adverse impacts in their investment decision-making processes (https://www.pkotfi.pl/sfdr/, https://www.bm.pkobp.pl/media_files/9636be2e-3d5f-4b30-b4b6-a9936c8ee499.pdf).

B. Taxonomy

According to Article 8 of Regulation (EU) 2020/852 of the European Parliament and of the Council and Commission Delegated Regulation (EU) 2021/2178 (Article 10), the Bank’s Group is obliged to disclose its indicators for 2021 as regards two objectives of the Taxonomy for sustainable activities: climate change adaptation and climate change mitigation.

Since the Taxonomy for sustainable activities is still being developed (some of the delegated acts have not yet been adopted) and the disclosures of non-financial enterprises on the compliance of their activities with the Taxonomy are very limited, the Bank’s Group has only just begun working on incorporating the criteria of compliance with the Taxonomy into its business strategies, the establishing of objectives, into product building processes and into the principles of cooperation with its Customers and counterparties.

The ratios presented relate to Taxonomy-eligible activities. Determining a green asset ratio will require setting apart Taxonomy-aligned exposures.

Quantitative information

Table 51. Key performance indicators of the Bank’s Capital Group (%)

	INDICATOR	2021
1.	Exposures to taxonomy non-eligible economic activities in total assets	10.4
2.	Exposures to taxonomy eligible economic activities in total assets	3.1
3.	Exposures to central governments, central banks and supranational issuers in total assets	27.8
4.	Derivatives in total assets	2.8
5.	Exposures to undertakings that are not obliged to publish non-financial information in total assets	8.5
6.	Trading portfolio in total assets	3.6
7.	On demand inter-bank loans in total assets	3.3
8.	Total assets (PLN million)*	415,651

*Bank's Capital Group assets by prudential consolidation presented in FINREP report

Contextual information

In the process of qualifying its activities for the Taxonomy, the Bank’s Group analysed the portfolio of exposures to entities in the corporate Customer market segment (excluding local government units) concluding that entities reporting non-financial information should be sought in this set. It is these entities that will publish information on the compliance of their activities with the Taxonomy in the future, which will be used for qualifying the exposures of the Bank’s Group. The criteria of the Accounting Act, which concern the obligation of non-financial reporting (Article 49b) for public interest entities listed on EU markets were applied. The Bank verified whether a given entity is subject to the reporting obligation, and then it assessed whether the Customer’s leading Polish NACE codes are Taxonomy-eligible.

The group of the Bank’s Customers which are public interest entities also include financial sector entities. For financial sector entities which report non-financial information, the Bank verified the consistency of a Customer’s core Polish NACE codes with the types of activities for the first two objectives of the Taxonomy (climate change adaptation and mitigation). The exposures defined in this way were assessed by the Bank as not Taxonomy-eligible.

Entities which conduct business activities and report non-financial information have not yet published information about what proportion of their activities is Taxonomy-eligible. In this situation, the Bank made estimates based on generally available data, which means that the values presented are voluntary disclosures.

Additional disclosures

Apart from exposures to Customers conducting business activities, there is a group of exposures to households and local government units which may be assessed in the future in terms of eligibility and alignment with the Taxonomy. The share of exposures to households secured with residential properties and exposures to local government units is nearly 30% of total assets.

13.6 GRI content index

[GRI 102-55] GRI content index

Indicator	Description	Chapter	Page
102-1	Name of the organization	13.1	138
102-2	Activities, brands, products and services	13.2	139
102-3	Location of headquarters	13.2	139
102-4	Location of operations	13.2	139
102-5	Ownership and legal form	13.2	139
102-6	Markets served	13.2	139
102-7	Scale of the organization	13.2	139
102-8	Information on employees and other workers	13.5.2	153
102-9	Supply chain	13.2	139
102-10	Significant changes to the organization and its supply chain	13.1	138
102-11	Precautionary principle or approach	13.5	143
102-12	External initiatives	13.5.1C	147
102-13	Membership of associations	13.2	139
102-14	Statement from senior decision maker	Letter of the President of the Management Board is published on the Bank’s website along with the annual reports
102-16	Values, principles, standards, and norms of behaviour	13.5.8A	177
102-18	Governance structure	13.2	140
102-40	List of stakeholder groups	13.1	139
102-41	Collective bargaining agreements	13.5.2A	155
102-42	Identifying and selecting stakeholders	13.1	138
102-43	Approach to stakeholder engagement	13.1	138
102-44	Key topics and concerns raised	13.5.12C	191
102-45	Entities included in the consolidated financial statements	3.1	25
102-46	Defining the report content and topic boundaries	13.1	138
102-47	List of material topics	13.1	139
102-48	Restatements of information	13.1	138
102-49	Changes in reporting	13.1	138
102-50	Reporting period	13.1	138
102-51	Date of most recent report	13.1	138
102-52	Reporting cycle	13.1	138
102-53	Contact point for questions regarding the report	13.6	194
102-54	Claims of reporting in accordance with the GRI Standards	13.1	138
102-55	GRI content index	13.6	193
102-56	External assurance	13.1	194
205-1	Operations assessed for risks related to corruption	13.5.7	175
205-3	Confirmed incidents of corruption and actions taken	13.5.7	177
302-1	Energy consumption within the organization	13.5.4A	166
302-3	Energy intensity	13.5.4A	166
302-4	Reduction of energy consumption	13.5.4A	167
303-1	Water consumption	13.5.4A	166
305-1	Direct (Scope 1) GHG emissions	13.5.4A	166
305-2	Energy indirect (Scope 2) GHG emissions	13.5.4A	166
305-3	Other indirect (Scope 3) GHG emissions	13.5.4A	166
305-4	GHG emissions intensity	13.5.4A	166
305-5	Reduction of GHG emissions	13.5.4A	166
306-2	Management of significant waste-related impacts	13.5.4A	168
307-1	Non-compliance with environmental laws and regulations	13.5.4A	165
401-1	New employee hires and employee turnover	13.5.2A	153
401-2	Benefits provided to full-time employees that are not provided to temporary or part-time employees	13.5.2A	156
401-3	Parental leave	13.5.2A	154
402-1	Minimum notice periods regarding operational changes	13.5.2C	157
403-1	Occupational health and safety management system	13.5.3	163
403-2	Hazard identification, risk assessment, and incident investigation	13.5.3	163
403-3	Occupational health services	13.5.3	164
403-4	Worker participation, consultation, and communication on occupational health and safety	13.5.3	164
403-5	Worker training on occupational health and safety	13.5.3	164
403-6	Promotion of worker health	13.5.3	164
403-7	Prevention and mitigation of occupational health and safety impacts directly linked by business relationships	13.5.3	164
403-8	Workers covered by an occupational health and safety management system	13.5.3	165
403-9	Work-related injuries	13.5.3	165
403-10	Work-related ill health	13.5.3	165
404-1	Average hours of training per year per employee	13.5.2D	159
404-2	Programs for upgrading employee skills and transition assistance programs	13.5.2D	159
404-3	Percentage of employees receiving regular performance and career development reviews	13.5.2D	159
405-1	Diversity of governance bodies and employees	11.2.10	153
405-2	Ratio of basic salary and remuneration of women to men	11.2.10	154
407-1	Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk	13.5.2C	158
414-1	New suppliers that were screened using social criteria	13.5.9	182
414-2	Negative social impacts in the supply chain and actions taken	13.5.9	182
417-1	Requirements for product and service information and labelling	13.5.10	183
417-3	Incidents of non-compliance concerning product and service information and labelling	13.5.12B	190

[GRI 102-53] Contact: esg@pkobp.pl

14. Glossary

Interest-bearing assets – amounts due from banks, securities and loans and advances to Customers;

CPI– consumer price index;

Customer deposits – amounts due to Customers;

Financing granted to Customers – loans and advances granted to Customers (including finance lease receivables) and municipal and corporate bonds (excluding the bonds of international financial organizations) presented in securities, other than securities held for trading;

External financing – subordinated liabilities, liabilities in respect of issue of securities measured at amortized cost, and loans and advances received;

Other liabilities – hedging derivatives, other derivative instruments, liabilities in respect of insurance activities, other liabilities, current income tax liabilities, deferred income tax provisions, provisions, reverse repo transactions, amounts due to the Central Bank and amounts due to banks;

Operating expenses – operating expenses (including net regulatory charges);

Regulatory costs – net regulatory charges;

Total capital ratio – own funds to the total capital requirement multiplied by 12.5;

Securities (banking portfolio) – securities less municipal and corporate bonds (excluding bonds held for trading) and bonds international financial organizations;

Other assets – derivative hedging instruments, other derivative instruments, investments in associates and joint ventures, non-current assets held for sale, intangible assets, property, plant and equipment, insurance receivables, current income tax receivables, deferred income tax assets, other assets and repo transactions;

Risk-free rate – the average annual yield on 10-year Treasury bonds;

Average interest on loans – interest income on loans and advances to Customers on an annual basis to the average balance of loans and advances to Customers from the last 5 quarters;

Average interest on deposits – interest expense on amounts due to Customers on an annual basis to the average balance of amounts due to Customers from the last 5 quarters;

C/I ratio (costs to income ratio) – operating expenses (including net regulatory charges) to the result on business activities on an annual basis;

Tier 1 capital ratio – Tier 1 capital to the total capital requirement multiplied by 12.5;

Credit risk cost indicator – net impairment allowances on loans and advances to customers for the last 12 months to the average gross amounts due to Customers at the beginning and end of the reporting period and interim quarterly periods;

Interest margin ratio – net interest income on an annual basis to the average balance of interest-earning assets (including amounts due from banks, securities and loans and advances to Customers) from the last 5 quarters;

Net ROA – net profit for the year to the average balance of assets from the last 5 quarters;

Net ROE – net profit for the year to the average balance of equity from the last 5 quarters;

Net ROTE – net profit for the year to the average balance of equity less intangible assets from the last 5 quarters;

Share of exposures with recognized impairment – a portfolio with recognized impairment in the portfolio of loans and corporate and municipal bonds (not guaranteed by the State Treasury), including loans measured at fair value through profit or loss;

Net operating result – result on business activities, operating expenses and tax on certain financial institutions;

Result on financial transactions – result on financial transactions and gains or losses on derecognition of financial instruments less the result on loans measured at fair value through profit or loss;

Net write-downs and impairment – result on allowances for expected credit losses, result on impairment of non-financial assets and cost of legal risk associated with mortgage loans in convertible currencies and result on loans measured at fair value through profit or loss;

Result on business activities – result on business activities less result on loans measured at fair value through profit or loss;

Net profit – net profit recognized in the consolidated income statement understood as the net profit attributable to equity holders of the parent company.

Statement of the Management Board

The Management Board of PKO Bank Polski S.A. declares that in accordance with its best knowledge the annual Directors’ Report of the PKO Bank Polski S.A. Group for 2021 prepared jointly with the Directors’ Report of PKO Bank Polski S.A. includes an accurate description of the development and achievements, as well as the situation of the PKO Bank Polski S.A. Group and PKO Bank Polski S.A., including a description of the main risks and threats.

Signatures of all the Members of the Bank’s Management Board

23.02.2022	Iwona Duda	President of the Management Board
23.02.2022	Bartosz Drabikowski	Vice-President of the Management Board
23.02.2022	Marcin Eckert	Vice-President of the Management Board
23.02.2022	Wojciech Iwanicki	Vice-President of the Management Board
23.02.2022	Maks Kraczkowski	Vice-President of the Management Board
23.02.2022	Mieczysław Król	Vice-President of the Management Board
23.02.2022	Artur Kurcweil	Vice-President of the Management Board	.
23.02.2022	Piotr Mazur	Vice-President of the Management Board

Biblioteka czcionek:

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