The principles applicable to foreign exchange transactions, derivative transactions as well as credit limit granting, use and
monitoring for transactions subject to counterparty risk limits have been laid down in dedicated procedures. According to the policy
in place at the Bank, all transactions are entered into considering individual limits and knowledge of the customer. The Bank
diversifies availability of products, which are offered to customers depending on their knowledge and experience. The Bank has
transparent rules applicable to hedging the counterparty credit risk exposure in place.
At the end of December 2024, the Bank's exposure to the counterparty risk due to concluded derivative transactions was PLN 3.1
billion. Corporate and financial clients constituted 78% of the exposure, while the remaining 22% were banks.
In connection with the ongoing war in Ukraine and the economic sanctions issued against Russia and Belarus, the Bank observes
increased volatility in market risk parameters, which translates into fluctuations in counterparty risk exposure. The Bank assesses
counterparty risk on an ongoing basis by conducting reviews of the portfolio of clients in case of whom this risk exists. The Bank
maintains the application of its basic principle of "Know Your Customer". Due to the non-standard situation, some clients were
asked for additional information related to the change in business. The Bank also takes into account the higher volatility of the
above parameters in risk assessment when entering into new transactions.
The Bank have not observed significant changes in the materialisation of counterparty risk.
54.4. Market risk (interest rate risk in the trading book and currency risk)
Market risk management organization
The operations of BNP Paribas Bank Polska S.A. are recorded in the trading and in the banking book. In relation to market risk,
covering interest risk in the trading book and the currency risk, the Bank is sensitive for changes in market interest rates, foreign
exchange rates, security prices and implied volatility of option instruments leading to changes in the result on measurement of the
financial instruments present value. The risk of adverse changes in the value, driven by the aforesaid factors, is recognised by the
Bank as market risk. The risk is monitored and managed with the use of the defined and specially designed tools and measures.
In order to reflect the characteristics of financial market transactions appropriately, i.e. the intentions of the parties entering into
the transactions, the major risks and the accounting treatment, the Bank allocates all on- and off-balance sheet items to the banking
or trading book. Detailed allocation criteria are established in the documents (“policies” and “methodologies”) adopted by
resolutions of the Management Board of the Bank and defining the purpose of keeping each book, the profile and types of risks
assumed by the Bank, the measurement and mitigation methods as well as the authorizations and place of each organizational
unit of the Bank in the risk generation, measurement, mitigation and reporting process.
The process of concluding transactions and their recording, as well as risk level supervision and adoption of risk limits is performed
by independent units. In line with the long-term strategy adopted by the Bank, as well as with its financial plan, the Supervisory
Board determines the Bank’s risk tolerance, i.e. an acceptable risk level and profile, which is subsequently allocated by the Risk
Management Committee. The Financial Markets Division takes responsibility for daily operational management of the risk inherent
in trading book in line with the defined market risk limits, including limits related to interest rate in the trading book and the currency
risk, which is managed at a centralized level for the entire Bank. The Integrated Risk Management Department are in charge of
measuring and reporting risk and limit overrides. Additionally, the Integrated Risk Management Department ensures that financial
instruments are measured properly. The management result is calculated by the Financial Market Transactions Monitoring Unit,
while transactions are recorded and settled by the Financial Market Transactions Processing Department. The system of limit
override acceptance is hierarchical. It depends on the period of such override and its scale, and is managed by the Division head
or Members of the Bank’s Management Board exercising supervision of the Risk Function and the function responsible for the risk
override. Irrespective of the process, all limit overrides are reported immediately after they occur and discussed at monthly Risk
Management Committee meetings.
Interest rate risk in the trading book
The Bank’s trading activities are supplementary, as they support sales of financial products to corporate customers, non-banking
financial customers (directly) and retail customers (through structured products, which are officially classified into the banking
book). The Bank opens its own positions, thus generating income on short-term changes in price parameters (foreign currency
rates or interest rates), while maintaining the exposure within the adopted risk limits. The Bank offers commodity instruments but
does not maintain open position in commodity market.
As part of the interest rate risk exposure, which is the key exposure in the trading portfolio, the Bank could enter into IRS, OIS,
CIRS, FRA and basis swap transactions and purchase and sale of foreign currency options on interest options. The interest rate
risk was also determined by positions resulting from FX swap and FX Forward transactions.
In 2024, as part of internal risk limits, the Bank maintained an open option position in order to optimize the result, i.e. generate
additional benefits due to the lack of immediate closing of customer positions by reverse transactions on the interbank market. The
priority of the Bank is to hedge the interest rate risk and currency risk.