An unexpected decision of the Swiss Central Bank taken on 15 January 2015 to discontinue maintaining a minimum exchange rate of CHF to EUR at the level of 1.20 resulted in significant appreciation of CHF against PLN. The official average exchange rate of NBP as of 14 January 2015 was PLN 3.5712 for 1CHF, while as of 27 February 2015 the average exchange rate of NBP was PLN 3.8919 for 1CHF.
As the Group has a substantial portfolio of mortgage loans denominated in CHF, the weakening of PLN against CHF as described above will cause an increase in risk-weighted assets and consequently decrease of the total capital ratios and Common Equity Tier 1 capital ratios of the Bank and the Group.
The Group estimates that having exchange rate 1 CHF = PLN 4.20:
- Consolidated Common Equity Tier 1 capital ratio would fall by 0.41 pp,
- Consolidated total capital ratio would fall by 0.36 pp,
- Stand-alone Common Equity Tier 1 capital ratio would fall by 0.54 pp,
- Stand-alone total capital ratio would fall by 0.50 pp.
Above estimates are based on financial data as of 31 December 2014.
With regard to the capital ratios of the Bank and the Group, a negative impact of weakening of PLN against CHF will be offset by recognizing PLN 750 000 thousand of subordinated bonds into supplementary capital in accordance with the decision of the Polish Financial Supervision Authority from 8 January 2015 as described in Note 31.
In addition, an increase of the PLN value of mortgage loans denominated in CHF, together with unchanged value of collaterals, will have a one-off moderately negative impact on the profit and loss account due to the necessity to create additional provisions for a part of this loan portfolio that is impaired.