Bank Polska Kasa Opieki S A : Disclosure of delayed inside information concerning submission of a binding offer to take over the enterprise and liabilities of Idea Bank S.A.

UNOFFICIAL TRANSLATION

Disclosure of delayed inside information concerning submission of a binding offer to take over the enterprise and liabilities of Idea Bank S.A.

In view of the fact that the conditions justifying a delay in the publication of inside information have ceased to exist, the Management Board of Bank Polska Kasa Opieki S.A. (the 'Bank'), acting based on Article 17(1) and 17(4) and Article (7) of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 12.6.2014, p. 1 - 61, as amended, hereinafter the 'MAR'), hereby discloses the inside information, the publication of which was delayed on 21 December 2020 based on Article 17(4) of the MAR.

Inside information delayed on 21 December 2020

On 21 December 2020, the Bank submitted a binding offer to the Bank Guarantee Fund (the 'BGF') to acquire the assets, rights and liabilities of Idea Bank S.A. (the 'Binding Offer') following the application by the BGF of a resolution tool involving the sale of a business, as referred to in Article 174(1)(1) and 174(1)(2) of the Act of 10 June 2016 on the Bank Guarantee Fund, the Deposit Guarantee Scheme and the Resolution (the 'BGF Act').

The Binding Offer was submitted by the Bank in the manner specified by the BGF Act. Prior to the submission of the Binding Offer by the Bank, it was approved by the Management Board and the Supervisory Board of the Bank.

In its Binding Offer, the Bank made a commitment to acquire the assets and rights constituting an enterprise of Idea Bank S.A. within the meaning of Article 551 of the Civil Code of 23 April 1964 (the 'Enterprise') and the liabilities of Idea Bank S.A. (the 'Liabilities') (jointly, the 'Acquired Business'), with certain exclusions, such as, inter alia:
1. assets, rights and liabilities associated with actions, legal acts or unlawful activities connected with:
(e) activities related to trading in financial instruments and other activities concerning (i) financial instruments issued by GetBack S.A. and its related parties; (ii) investment certificates, in particular the investment certificates issued by Lartiq (formerly: Trigon) (Profit XXII NS FIZ, Profit XXIII NS FIZ, Profit XXIV NS FIZ) represented by Lartiq TFI S.A. (formerly: Trigon TFI S.A.); Universe NS FIZ, Universe 2 NS FIZ and other investment funds represented by Altus TFI S.A.;
(f) providing insurance coverage, performing insurance intermediation, performing insurance distribution with regard to the distribution of unit-linked insurance, and life insurance where the benefit of the insurance undertaking is determined on the basis of defined indices or other base values;
(g) the rendering of services as an agent of an investment firm;
(h) the business of Idea Bank S.A. in terms of the activities that may be incompatible with the Bank's scope of business presented in the Bank's articles of association;
and any claims or obligations that result, or could result, therefrom, including those that are subject to civil law and administrative proceedings, regardless of the date of the commencement thereof;
2. the shares in the subsidiaries and affiliates of Idea Bank S.A.;
3. the corporate bonds issued by GetBack S.A.

The Bank made a commitment to acquire the Acquired Business by: (i) acquiring the assets and rights in the form of the Enterprise; and (ii) simultaneously assuming the Liabilities. Based on an assessment prepared by the Bank as at 31 August 2020 the value of the Liabilities being assumed amounts to 14.628,10 PLN million.

Given the fact that the value of the Liabilities being assumed exceeds the value of the acquired Enterprise, under the Binding Offer the Bank made a commitment to acquire the Acquired Business, provided that the BFG will grant a subsidy to the Bank referred to in Article 112(3)(2) of the BGF Act, in order to cover the difference between the value of the Liabilities being assumed and the value of the Enterprise, as determined as part of the valuation referred to in Article 137(2) and 137(3) of the BGF Act, to the extent such difference is not covered by the funds referred to in Article 179 of the BGF Act (the 'Subsidy').

As required under Article 174(5) of the BGF Act, the payment of compensation for the Acquired Business will be effected through the assumption of the Liabilities corresponding to the value of the acquired Enterprise, subject to the provided Subsidy.

In the Binding Offer the Bank committed to acquire the Acquired Business, subject to the satisfaction of, among others, the following conditions,:
1. the conclusion of a loss-coverage guarantee agreement;
2. the conclusion of a subsidy agreement; and
3. the conclusion of a cooperation agreement concerning the acquisition of the Enterprise.

In accordance with the provisions of the pertinent agreement, the Loss-Coverage Guarantee provides for: (i) a guarantee to cover the losses resulting from the credit risk related to the acquired loan assets (the 'CRM Guarantee') and a guarantee to cover the losses (other than the losses resulting from credit risk) related to the Acquired Business (the 'Guarantee covering other risks').

Such acquisition will involve the acquisition of credit assets constituting part of the Acquired Business and will result in an increase in the amount of risk-weighted exposures (which is calculated by multiplying the amounts of exposure and the risk weights specified in applicable laws). An increase in the level of such risk-weighted exposure will have an impact on the capital requirements applicable to the Bank.

Consequently, the CRM Guarantee will be used by the Bank as 'eligible unfunded credit protection' within the meaning of Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012 (the 'CRR'). This will enable, with regard to the credit risk, the assigning to the assumed exposures of the relevant risk weights applicable with respect to exposures to the entity providing coverage, i.e. the BGF, which qualifies as a public sector entity, in accordance with the opinion referred to in Article 116(4) of the CRR. Consequently, obtaining the opinion referred to in Article 116(4) of the CRR and in the case the CRM Guarantee meets the conditions for 'unfunded credit protection' the exposures covered by the Loss-Coverage Guarantee agreement will qualify as exposures to the central government, thus resulting in a significant reduction of the capital requirements of the Bank on account of the credit risk.

The Acquired Business, after the BGF has accepted the Binding Offer, will be acquired on the date specified in the decision of the BGF.

The Bank has the financial and organisational resources allowing it to acquire the business of Idea Bank S.A. and continue its operations. Specifically, the Bank is able to ensure the safety of both the guaranteed assets being acquired and the guaranteed funds accumulated in the Bank.

The submission of the Binding Offer is consistent with the Bank's announced and pursued strategy, which, while based on organic growth, does not preclude acquisition initiatives consistent with the Bank's operating profile, and to the extent such acquisition may lead to the growth of the scale of operations of the Bank's key growth areas.

The potential commencement of a resolution process has the effect of mitigating the risk of potential bankruptcy of Idea Bank S.A., and, as a result, mitigating any adverse impact on the banking sector in the event of potential bankruptcy, should such eventuality occur.

The implementation of the sale of the business comprising the Acquired Business of Idea Bank S.A. will not have a material impact on the Bank's financial profile and, in particular, the capital and liquidity parameters of the Bank and the Bank's Capital Group, which will remain significantly above the required regulatory levels.

Legal basis: Article 17(4) in conjunction with Article 17(1) of the MAR - inside information