On 31 March 2015 the Management Board of PKO Bank Polski SA adopted the new text of “Principles for managing the capital adequacy and the internal capital in PKO Bank Polski SA and in the PKO Bank Polski Capital Group”, including among others the dividend policy.
The general assumption of the Bank’s dividend policy is to maintain a stable level of dividend payments in the long term, in compliance with the principle of prudent management of the Bank’s and the Bank’s Capital Group and with consideration of the financial capacity of the Bank and the Bank’s Capital Group as determined on the basis of the adopted criteria. The aim of the dividend policy is an optimization of the own funds of the Bank and the Bank’s Capital Group, taking into account the return on capital and its cost, capital needs for development, while ensuring an appropriate level of capital adequacy ratios. The dividend policy assumes the possibility of the Bank’s net profit distribution to shareholders in the long-term perspective in the amount of the surplus of capital above minimal capital adequacy ratios considering the additional capital buffer. The dividend policy takes into account factors related to the operations of the Bank and the Bank’s Capital Group companies, in particular, the requirements and supervisory recommendations concerning capital adequacy. Capital adequacy ratios specifying the criteria for the dividend payment are as follows:
- total capital ratio above 12.5 per cent and
- common equity Tier 1 ratio above 12 per cent.
The above mentioned Principles were approved by the Bank’s Supervisory Board on 6 May 2015.
On 31 March 2015 the Bank also received from the Polish Financial Supervision Authority (PFSA) the recommendation to withhold the entire net profit earned by PKO Bank Polski SA for the period from 1 January 2014 till 31 December 2014 - until the supervision authority determines the additional capital requirement for the Bank. The PFSA expects the statement of the Bank’s Management Board and Supervisory Board position.
On 7 April 2015 the Management Board and on 8 April 2015 the Bank’s Supervisory Board adopted the resolution on going by the Recommendation of the PFSA in the scope concerning the their competences. The Bank also informed that according to article 395 §2.2 of the commercial companies code the decision of the net profit distribution is determined by the Annual General Meeting.
On 25 June 2015, the Bank’s Annual General Meeting decided to appropriate the Bank’s profit for financial year 2014 and unappropriated profit of previous years, allocating it (in line with Bank’s Management Board recommendation) for the reserve capital, other reserves and unappropriated part of the profit in an amount of PLN 1 250 000 thousand, without any amount for the dividend payment. The resolution of the Bank’s Annual General Meeting on the distribution of the profit for 2014, is comprehensive with the Recommendation of the PFSA.
On 23 October, 2015, the Management Board received from the Financial Supervision Authority ( "PFSA") recommendation on the amount of the additional requirement of the own funds. The PFSA recommended the maintenance of the Bank's own funds to cover the additional capital requirement at the level of 0.76 p.p. in order to hedge risk arising from foreign currency mortgage loans, which should consist of at least 75% of Tier1 capital (equivalent to 0.57 pp.). This means that:
- Minimum capital ratios of the Bank including the additional capital requirement recommended by the PFSA are:
(Tier1) T1=9+0.57= 9.57%
(Total Capital Requirement) TCR =12+0.76=12.76%
- Capital ratios of the Bank including the additional capital requirement in the context of dividend policy recommended by the PFSA are:
- criteria for the payment up to 50% of the profit for 2014 year:
(Common Equity Tier 1) CET1=12+0.57=12.57%
(Total Capital Requirement) TCR=12.5+0.76=13.26%
- criteria for the payment up to 100% of the profit for 2014 year:
(Common Equity Tier 1) CET1=12+0.57=12.57%
(Total Capital Requirement) TCR=15.5+0.76=16.26%.
This recommendation should be respected by the Bank from the date of receiving to the day of cancellation - ie. until the PFSA considers - based on the analysis and supervisory evaluation - the risks associated with foreign currency mortgage loans, being cause of the imposition of the Bank additional capital requirement changed significantly. PFSA also recommended the retention by the Bank at least 50% of the profit generated in the period from 1 January 2014 to 31 December 2014.
Moreover, banks have been informed in a separate letter of recommendation to maintain – from the 1 January 2016 - capital ratios of at least T1=10.25%, TCR=13.25%.