Acquisition of SKOK “Jaworzno”  

On 31 January 2019, Alior Bank was authorised by the Polish Financial Supervision Authority (KNF) to acquire Spółdzielcza Kasa Oszczędnościowo-Kredytowa “Jaworzno” (SKOK Jaworzno). The integration process took place with support provided by the Bank Guarantee Fund (BFG). The Management Board of the bank assumed the management of assets of SKOK Jaworzno as of 1 February 2019, and on 1 April 2019 SKOK Jaworzno was legally merged with the Bank. The operational merger was successfully completed in June 2019. As a result, the Bank acquired assets with fair value of PLN 233.6 million, and the book value of the acquired accounts receivable from customers was PLN 137.2 million. As a result of the merger, the amounts due to customers, acquired by the Bank, were PLN 319.8 million. 

Extension of licence for the Bank using the AMA approach  

On 14 February 2019, the Bank has been authorised by the Polish Financial Supervision Authority to implement a significant expansion for the AMA approach by encompassing with this method historical consequences of the acquired business of Bank BPH SA and for combined use by the Bank of: 

• AMA approach – regarding Alior Bank SA’s activity taking into account historical consequences of Bank BPH SA’s business for the acquired part of BPH SA without the branch business in Romania. 
• standardised approach regarding the Romanian Branch,  for the calculation of own funds requirements for operational risk since 14 February 2019

Entering into an agreement regarding transactions involving RUCH SA, a company in restructuring  

On 11 April 2019, an agreement was made for the terms of transaction between the Bank, Polski Koncern Naftowy Orlen SA and Powszechny Zakład Ubezpieczeń SA, regarding RUCH S.A. in restructuring. Under the provisions of that agreement, the Bank intends to take over 100% shares of the RUCH SA share capital (in a way agreed between the Bank and PKN Orlen upon legal and valid approval of the composition under fast-track composition procedures) for the subsequent re-sale of the same to PKN Orlen.  

PKN Orlen will acquire the shares of RUCH S.A. upon meeting the conditions provided for in the agreement, i.e., among others:  

• legal and valid confirmation of successful performance of the arrangements agreed by fast-track composition procedures of RUCH S.A.,  
• obtaining corporate approvals by the parties to this agreement, and  
• issuance by the President of the Office of Competition and Consumer Protection or the European Commission of their consent for the purchase of shares of RUCH S.A. by PKN Orlen.  

On 29 May 2019, the Bank received information that the District Court for the Capital City of Warsaw, its X Commercial Division for bankruptcy and restructuring did not accept the composition agreements adopted by creditors’ meetings under fast-tract composition procedure of RUCH S.A., for procedural reasons related to formal legal deficiencies. Consequently, the company (RUCH S.A.) submitted complaints against these decisions, and the files with the complaints were transferred to the Court of second instance. 

On 30 August 2019, the Bank received information that the Regional Court in Warsaw, its Commercial Court, XXIII Commercial Appellate Division approved partial composition agreements with the following proposals for write off: 

• 85% of claims under fast-tract composition procedure for RUCH S.A. in restructuring, covering the publishers being the company’s creditors whom the company owed at least one million zloty as at the date of opening that procedure (“PPU1”) and  
• 50% of claims under fast-tract composition procedure for the company, covering the publishers being the company’s creditors whom the company owed more than 100,000 zloty as at the date of opening that procedure (“PPU2”). 

For the implementation of PPU1 and PPU2 on 2 December 2019, the District Court for the Capital City of Warsaw received three requests for cancellation of the partial composition agreement approved by the Regional Court in Warsaw on 29 August 2019. 

The parties to the agreement continue to cooperate on Ruch restructuring and have entered into negotiations to determine the final structure of the transaction which will take place once the conditions are met connected with obtaining corporate approvals and a concentration clearance for PKN Orlen.  

Changes to the Management Board of the Bank 

On 1 July 2019, Mr Maciej Surdyk – Vice-President of the Management Board resigned as Member of the Management Board of Alior Bank S.A. with effect from 1 July 2019. 

Notification of collective dispute 

On 15 July 2019, the Bank informed that four trade-union organisations reported a collective dispute regarding pay rises for all those employed under the Labour-Code employment contract. The parties conduct negotiations to resolve the dispute. On 13 February 2020 the parties concluded of the agreement terminating the collective dispute 

Opening the Second Programme of Issuance of Banking Securities of Alior Bank S.A. 

n 30 August 2019, the Supervisory Board of the Bank, upon request of the Management Board of the Bank, agreed for opening the Second Programme of Issuance of Banking Securities of Alior Bank S.A., and authorised the Management Board of the Bank to incur multiple times financial commitments under the Programme, by issuance by the Bank of banking commercial papers with nominal value equal to or more than PLN 100, or an equivalent amount in foreign currencies. The combined nominal value of the Programme shall not exceed PLN 5,000,000,000. 

Provision for loan cost refund – the judgement of the Court of Justice of the European Union (CJEU) of 11 September 2019 

On 11 September 2019, the judgement of the Court of Justice of the European Union (CJEU) in the case C-383/18 (the Lexitor case) was issued. In determining the case, the CJEU decided that Article 16(1) of Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC should be interpreted in such a way that the consumer’s right to a reduction of the total cost of a loan in the event of early repayment applies to all costs imposed on the consumer. 

The Court unequivocally determined that in the event of early repayment the consumer was entitled to a reduction of all costs included in the total cost of the loan. This judgement, however, did not determine how this reduction should be calculated with regard to one-off costs, such as commissions and arrangement fees. 

Based on legal interpretations held, the Bank’s Management Board decided to apply the linear formula for settling loan costs with borrowers, which refers proportionality to the period between the actual date of loan repayment and the date of repayment stipulated in the agreement, and orders an equal division of one-off costs to particular payment dates. Such a position was presented by the President of the Office for Competition and Consumer Protection (UOKiK) and by the Financial Ombudsman. 

Following its analysis of the effects of the CJEU ruling, the Bank changed its approach regarding refund of the part of total consumer loan costs pertaining to the period from the early repayment date to the original maturity date. For all early loan repayments made after the CJEU judgement date, the Bank has made refunds on an ongoing basis, and their effect reduces the net interest income.  

In addition, the Bank estimated the amounts of expected payments resulting from early repayments of consumer loans made before the date of the CJEU judgement and, in line with IAS 37, it created a provision for this purpose in the amount of PLN 243 099 thousand, charged to other operating expenses. The provision amount was estimated based on complaints filed with the Bank regarding loan cost refund, taking into account their number and rate of inflow starting from the CJEU judgement date, as well as distribution of the refund amount.  

Additionally, the Bank estimated the difference between the interest income recognised until the balance sheet date based on the effective interest rate method and the income which should have been recognised taking into account the effect of possible future early repayments of consumer loans and refunds related thereto calculated using the linear formula. As a result, the Bank reduced the relevant interest income by PLN 49 708 thousand. 

Cancellation of the decision of the Polish Financial Supervision Authority regarding the identification of Alior Bank S.A. as other institution of systemic importance and imposition of a buffer of other institution of systemic importance 

By decision of 14 October 2019, the Polish Financial Supervision Authority cancelled the decision of the Polish Financial Supervision Authority of 31 July 2018 ref. DAZ-W5.751.1.2018 identifying Alior Bank S.A. as other institution of systemic importance, and removed the duty to maintain a buffer (on stand-alone and consolidated basis) of other institution of systemic importance, at the equivalent of 0.25% of the total risk exposures, calculated in accordance with Article 92(3) of the EU CRR Regulation (no. 575/2013).