mBank Group is an active participant and often a leader of changes introduced in expectation of and in response to developments in its environment, including the area of regulations and technology.

The Group employees spare no effort in proactively adjusting the offer and principles of operation to new challenges, always with an eye on building top quality relationships with stakeholders. Some of the requirements imposed on mBank and the Group subsidiaries do not affect clients directly, but still involve a heavy workload connected with adjusting internal processes. Below we discuss selected key developments significantly affecting mBank Group observed in 2019 or expected in the nearest future. Capital requirements and regulations on accounting and reporting standards have been addressed in dedicated sections of the report.

Ruling of the Court of Justice of the European Union dated October 3, 2019, in case C-260/18 (Dziubak vs Raiffeisen Bank International AG)

On October 3, 2019, the Court of Justice of the European Union issued the ruling in the prejudicial mode regarding a mortgage linked to the Swiss franc granted by a Polish bank. The submitted prejudicial questions were to determine, among other things, if a generally applicable custom can be used where there is no provision in domestic law that could replace an abusive exchange rate clause. In accordance with CJEU’s ruling, the question of abusiveness will be decided by Polish courts. CJEU did not refer to this issue. In addition, CJEU did not make a clear-cut decision regarding the consequences of an exchange rate clause being considered abusive by a domestic court. However, the possibility of a credit agreement being performed further in PLN and with interest calculated according to LIBOR was found doubtful by the Court. If an exchange rate clause is found abusive, a domestic court must decide whether the agreement in question can be performed further or should be declared invalid, taking into account the client’s will and the consequences of invalidity for the client. CJEU approved the application of a disposable norm (in the bank’s opinion article 358 of the Polish Civil Code referring to the NBP fixing rate can be considered to be a disposable norm), if the invalidity of the agreement would be unfavourable for the client. CJEU rejected the application of general provisions referring to a custom or equity principles.

There are individual court proceedings initiated against mBank by its customers in connection with CHF loan agreements. Out of the individual proceedings, 2,902 proceedings with the total value of claims amounting to PLN 430.1 million related to indexation clauses in CHF loan agreements and include claims for declaring invalidity of the loan agreements in part (i.e. to the extent that the agreement contains contractual provisions related to indexation) or in whole. The final rulings to-date in the indexation clauses proceedings are favourable to the Bank in the majority of the cases.

As far as the legal proceedings relating to indexation clauses in mortgage and housing loans in CHF are concerned, in the opinion of the Management Board of the bank, the current state of judicial decisions is unstable and the line of verdicts is not consistent, hence it is extremely difficult to estimate the level of provisions for the legal risk associated with this portfolio of loans. The bank believes that currently observed market practice of implementing of portfolio approach towards creation of provisions for legal risk relating to such cases is to some extent the response to ongoing public debate and position of audit firms. These methodologies are burdened with numerous doubts and assumptions that reflect current court cases statistics and the level of understanding of extremely diversified judgments that cannot yet be interpreted as a shaping line of verdicts at this stage. In the opinion of the Management Board of the bank a large part of court judgments unfavourable to banks results from misunderstanding of the essence of banking activity, which is reflected in the content of justifications for judgments issued. They undermine the basic paradigms of banking activity and regulatory directives to which banks are subject, which can lead to a deep redefinition of banking activity and questioning the current understanding of such categories as loan and interest.

Detailed information concerning proceedings before a court, arbitration body or public administration authority are described in the Note 32 of the mBank S.A. Group IFRS Consolidated Financial Statements 2019. mBank Group’s approach to the calculation of legal risk provisions related to the indexation clauses in the CHF loans agreements is described in greater detail in Note 4 Major estimates and judgments made in connection with the application of accounting policy principles.

Real estate financing – Recommendation S of PFSA

On December 3, 2019, the Polish Financial Supervision Authority (PFSA) passed amendments to Recommendation S, a best-practice guideline for the management of mortgage-backed credit exposures. The amended recommendation sets out new principles for offering fixed rate or semi-fixed rate mortgages by banks and allows clients to change their existing floating rate loans into fixed rate (or semi-fixed rate) loans. In addition, the recommendation introduces a new “key for debt” option, under which a client who transfers the ownership of a real property financed by a bank loan to the bank has his/her debt cancelled by the lender. However, the new Recommendation S does not oblige banks to offer this new solution, but only sets out the best practice for its application. When launching a new product, in particular fixed rate (or semi-fixed rate) loans, banks are obliged to provide clients with full information about the product and the risk it carries as well as to sell the product to clients according to their needs and understanding. Commercial banks must comply with the amended Recommendation S by December 31, 2020.

Act on Amending the Act on Assistance to Home Loan Borrowers in a Difficult Financial Situation and Certain Other Acts

On July 4, 2019, the Sejm passed the Act on Assistance to Home Loan Borrowers in a Difficult Financial Situation, which entered into force on January 1, 2020. The new regulation modifies the eligibility criteria for borrowers, in particular, by raising the minimum income entitling borrowers to apply for assistance, increasing the monthly support from the Fund from PLN 1,500 to PLN 2,000, and extending the period of assistance from 18 to 36 months and the period of interest-free repayment from 8 to 12 years. In addition, the act provides for a partial cancellation of debts owed to the Fund, in particular, for borrowers who repay their instalments in a timely manner. Moreover, a borrower who sells a property financed by a bank loan may apply to the Borrower Support Fund for an interest-free loan when the proceeds from the sale are too low to cover the borrower’s debt in whole, on the terms and conditions applicable to borrowers applying for assistance in the repayment of credit instalments. The said regulations apply to borrowers who took out loans in the Polish złoty and in foreign currencies.

Ruling of the Court of Justice of the European Union dated September 11, 2019, in case C-383/18, announcement of the Polish Bank Association on starting work on amending the Consumer Credit Act, resolution of the Supreme Court dated December 12, 2019

In its judgement of September 11, 2019, the Court of Justice of the European Union ruled that Article 16 (1) of Directive 2008/48/EC of the European Parliament and of the Council on credit agreements for consumers and repealing Council Directive 87/102/EEC must be interpreted as meaning that the right of the consumer to a reduction in the total cost of a credit in the event of early repayment of the credit includes all the costs imposed on the consumer. The CJEU ruling, its consequences, and their implications are currently subject to economic and legal analyses. Detailed information about actions taken by mBank to comply with the ruling is provided in Note 4 to the mBank S.A. Group IFRS Consolidated Financial Statements 2019.

Act of August 30, 2019, on Amending the Bankruptcy Act and Certain Other Acts

The purpose of amendments to the Bankruptcy Act passed in 2019 is to simplify and facilitate the consumer bankruptcy process. The amended regulations apply to consumers unable to repay their debts. They serve to write off the debts of insolvent debtors and help creditors recover (collect) their receivables. Most of the new regulations will enter into force on March 24, 2020. The potential consequences of their introduction include a rising number of consumers declaring bankruptcy and new restrictions on debt collection under bankruptcy proceedings that may be imposed on banks.

Strong customer authentication under PSD2

On September 14, 2019, banks implemented strong customer authentication in accordance with the Payment Services Act of August 19, 2011 and EU regulations on payment services and strong customer authentication. It introduces an additional security step for clients logging in to their accounts and for payment transactions. Strong authentication uses at least two of the following three elements: something the user knows (e.g. PIN), something the user has (e.g. phone app) and something the user is (biometric data). For more information about mBank’s actions taken to implement the new regulations, go to our website.

Register of Beneficial Owners

The Ministry of Finance has published on its website a Central Register of Beneficial Owners (Polish: CRBR) in accordance with the Act of March 1, 2018 on Anti-Money Laundering and Counter-Terrorism Financing. The purpose is to collect and process information on beneficial owners of companies, i.e. natural persons controlling companies, either directly or indirectly. By April 13, 2020 selected companies are obliged to register in CRBR, while information on new companies and changes in data registered in CRBR must be provided within seven days from the date of incorporation or the date of registration in the National Court Register (KRS), whichever applies. The purpose of maintaining a public register offering free access to information on beneficial owners is to improve confidence in the financial market and participants of business transactions.

Act of August 30, 2019, on Amending the Code of Commercial Partnerships and Companies and Certain Other Acts

The act provides for mandatory dematerialisation of shares of non-public joint-stock companies and limited joint-stock partnerships. It means that every shareholder will be mandatorily entered in registers kept by entities indicated in the act, e.g. banks or brokerage houses. The amendments serve to improve the transparency of the capital market, give tax authorities enhanced access to shareholder information, and to counteract money laundering. In addition, the act obligates joint-stock companies and limited joint-stock partnerships to run their own websites for the required communication with shareholders.

Stance of the PFSA on the application of EBA Guidelines on outsourcing arrangements

On September 16, 2019, the Office of the Polish Financial Supervision Authority (PFSA) announced its intention to apply the Guidelines on outsourcing arrangements published by the European Banking Authority (EBA) on February 25, 2019 (EBA/GL/2019/02). The guidelines set out principles for managing outsourcing arrangements, in particular critical or important functions outsourced to service providers. Among others, the guidelines set out detailed requirements concerning the minimum content of outsourcing arrangements as well as principles of selecting service providers, developing exit plans, and managing risk inherent in the process. Banks have been obliged to comply with the guidelines by June 30, 2020 with the exception of cloud outsourcing, which will be governed by a national framework. Apart from facilitating the management of outsourcing arrangements at banks, the revised guidelines also seek to address the technological development and digitalisation in the sector.

Act on Strengthening Financial Market Supervision and Protection of Investors

July 1, 2019, was the effective date of new tighter regulations on bond issues and the resulting disclosure obligations introduced under the Act of November 9, 2018 on Amending Certain Acts in Connection with Strengthening Financial Market Supervision and Protection of Financial Market Investors. Aiming at greater transparency and security of bond issues, the regulations stipulate, among others, mandatory dematerialisation of securities and their registration in the securities depository, and oblige issuers to involve an issue agent in the process, i.e. a professional entity tasked with verifying whether an issue complies with law.

Act on Employee Capital Plans

On January 1, 2019, the Act on Employee Capital Plans (Polish: PPK) entered into force. It establishes legal framework for a universal and voluntary pension savings system. In line with the assumptions of the government’s Strategy for Responsible Development, PPK may increase not only the individual pension savings of employees, but also the overall savings in Poland and give a positive boost to the capital market. On July 1, 2019, employees of the largest companies were the first to join the programme. The act affects the operation of banks both directly (with banks being employers withholding PPK contributions) and indirectly (via its presence on presumably revived the capital market, on which financial institutions play an active role).

Recommendation B restricting banks’ investment activity

On March 26, 2019, the Polish Financial Supervision Authority released the amended recommendation on investment risk management at banks. The recommendation reflects supervisory expectations and good practices regarding banks’ proprietary investments in financial instruments or shares in companies, but not in derivatives. Among others, the recommendation outlines expectations about investment strategy and policy, staff qualifications and internal procedures that banks must have in place, in keeping with the proportionality principle.

Act of January 17, 2019, on Amending the Act on the Bank Guarantee Fund, Deposit Guarantee Scheme and Resolution and Certain Other Acts (the “BFG Act”)

On March 7, 2019, the amended BFG Act setting out detailed principles of banks’ resolution entered into force. Its purpose is to streamline the resolution procedure and strengthen the deposit guarantee scheme. In particular, a new category of claims satisfied from the bankruptcy estate of a bank was added to Bankruptcy Law in order to improve the effectiveness of the bail-in tool. Moreover, the PFSA was further empowered to decide on the takeover of a bank by another bank when the conditions set out in law materialise (e.g. when a bank’s own funds fall below the required minimum) and the BFG was authorised to support this process. At the same time, mortgage banks were exempt from certain provisions of the act and the obligation to include the bail-in clause in the terms and conditions of issue and in financial instruments agreements was limited.

In April 2019, the PFSA permitted the BFG to set up the first bridge bank in Poland (“Pierwszy Bank BFG”) as its sole owner. In December 2019 another bridge bank was set up, under the name “Bank Nowy BFG”. In accordance with the BFG Act, a bridge bank, being one of the resolution tools, allows for continuing the critical functions of a bank placed under resolution and protects the financial stability of the banking sector after the resolution procedure has been instigated. In January 2020 a dedicated part of cooperative bank Podkarpacki Bank Spółdzielczy, which is under resolution, was moved to Bank Nowy BFG.

CRR 2 and CRD 5

On June 7, 2019, a package including CRR 2 and CRD 5 was published in the Official Journal of the European Union. The regulations govern long-term liquidity (introduction of NSFR), market risk in the trading book, leverage ratio, interest rate risk in the banking book, proportionality principle and special approach to financing SMEs and infrastructure projects. The broad scope covered by the package requires banks to make numerous adjustments, e.g. as far as measurement of capital used by products or stress testing are concerned, but the transitional provisions give banks time to gradually adjust to the new regulatory framework. At the same time, discussions about the Basel IV areas not covered by the CRR 2/CRD 5 package, in particular the revision of the standardised approach and the IRB approach for credit risk, are underway. Banks take active part in analysing the proposed solutions.


Starting from January 1, 2019, institutions applying the International Financial Reporting Standards are obliged to comply with IFRS 16 Leases. The obligation to recognise lease contracts in the balance sheet (not in the off-balance sheet as before) affects the level of financial ratios. At mBank we have analysed all contracts falling within the scope of the standard. We adjusted our accounting policy and operational procedures. Moreover, we modified our IT systems to improve data collection and processing.

Commission Implementing Regulation (EU) 2019/482 of March 22, 2019, amending Commission Implementing Regulation (EU) 2016/1368 establishing a list of critical benchmarks used in financial markets pursuant to Regulation (EU) 2016/1011 of the European Parliament and of the Council

On March 26, 2019, Commission Implementing Regulation (EU) 2019/482 entered into force. Under the regulation, the Warsaw Interbank Offered Rate (WIBOR) was recognised by the European Commission as a critical benchmark. The decision was an element of a broader reform of benchmarks used to determine the price of many financial instruments and financial contracts. Since WIBOR was recognised as a critical benchmark, the period for bringing it into compliance with the EU Benchmarks Regulation (Regulation 2016/1011 of June 8, 2016 or BMR) was extended by two years. As a result, GPW Benchmark S.A. (WIBOR administrator) is obliged to implement all necessary modifications by the end of 2021. On July 19, 2019, the PFSA published its stance on the standard for the provision of benchmarks arising from Regulation 2016/1011 in which it emphasized the need to remain flexible in determining benchmarks due to the volatility of financial markets. In accordance with the PFSA’s stance, lenders are obliged to inform consumers about the names of benchmarks and their administrators, while the responsibility for defining and formulating the method for determining benchmarks rests with benchmark administrators.

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