Raport

Independent Statutory Auditor’s Report on the Audit

of Annual Financial Statements of

BNP Paribas Bank Polska S.A.

for the financial year ended

31 December 2020

Mazars Audyt Sp. z o.o.

ul. Piękna 18

00-549 Warsaw

Mazars Audyt Sp. z o.o.

Sąd Rejonowy dla m. st. Warszawy, XII Wydział Gospodarczy KRS nr 0000086577, kapitał zakładowy: 1 268 000,00 PLN,

NIP: 5260215409, REGON: 011110970

INDEPENDENT STATUTORY AUDITOR’S REPORT

ON THE AUDIT OF ANNUAL FINANCIAL STATEMENTS

Translation of the document originally issued in Polish

To the General Meeting and the Supervisory Board of BNP Paribas Bank Polska S.A.

Report on the Audit of Annual Financial Statements

Opinion

We have audited the annual financial statements of BNP Paribas Bank Polska S.A. (“the

Bank”) which comprise the statement of financial position as at 31 December 2020, and the

income statement, statement of comprehensive income, the statement of changes in equity,

the statement of cash flows for the financial year from 1 January to 31 December 2020 and

notes, comprising a summary of significant accounting policies and other explanatory notes

(“the financial statements”).

In our opinion, the accompanying financial statements:

• give a true and fair view of the Bank’s property and financial position as at 31

December 2020, and of its financial performance and its cash flows for the financial

year then ended in accordance with the applicable International Financial Reporting

Standards as adopted by the European Union and the adopted accounting principles

(policy);

• comply with the applicable legislation and with the provisions of the Bank’s Articles of

Association as to the form and content;

• have been prepared based on the accounting books kept properly, in accordance with

Chapter 2 of the Accounting Act of 29 September 1994 (“Accounting Act” – Journal of

Laws of 2021, item 217).

This opinion is consistent with the additional report to the Audit Committee that we issued

on 26 February 2021.

Mazars Audyt Sp. z o.o. 3

Basis for Opinion:

We conducted our audit in accordance with National Standards on Auditing as per

International Standards on Auditing adopted by resolution no. 3430/52a/2019 of the National

Council of Statutory Auditors of 21 March 2019 regarding national standards on auditing and

other documents (as amended) (National Standards on Auditing “NSA”), as well as according

to the Act on Statutory Auditors, Audit Firms and Public Supervision of 11 May 2017 (“the Act

on Statutory Auditors” - Journal of Laws of 2020, item 1415) and Regulation (EU) No 537/2014

of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities

(“EU Regulation” - Official Journal of the European Union L 158 of 27 May 2014 p. 77, as

amended). Our responsibility under those standards has been further described in “Statutory

Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report.

We are independent of the Bank in accordance with the International Code of Ethics for

Professional Accountants (including International Independence Standards) issued by the

International Ethics Standards Board for Accountants (“the IESBA Code”), adopted by

resolution of the National Council of Statutory Auditors No. 3431/52a/2019 of 25 March 2019

on the principles of professional ethics for statutory auditors and other ethical requirements

which are applicable to the audit of financial statements in Poland. We have fulfilled our other

ethical responsibilities in accordance with these requirements and the IESBA Code. During

the audit the key statutory auditor and the audit firm remained independent of the Bank in

accordance with the independence requirements specified in the Act on Statutory Auditors

and EU Regulation.

We believe that the audit evidence that we have obtained is sufficient and appropriate to

provide a basis for our audit opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most

significance in the audit of the financial statements of the current period. These include the

most significant assessed risks of material misstatement, including the assessed risks of

material misstatement due to fraud. These matters were addressed in the context of our audit

of the financial statements as a whole and in forming our opinion thereon, and we summarized

our responses to these risks, and, where deemed appropriate, presented the most important

observations related to these risks. We do not provide a separate opinion on these matters.

Key audit matter

How the matter was addressed in our

audit

Allowance for expected credit losses on

the portfolio of loans and advances to

customers

In accordance with International Financial

Reporting Standard 9 Financial Instruments

("IFRS 9"), the Bank's management should

We critically reviewed the design and

implementation of the credit risk

assessment and expected credit loss

estimation process and evaluated the

controls in these processes.

Mazars Audyt Sp. z o.o. 4

determine the amount of expected credit

losses that may occur within 12 months or

over the remaining life of the financial asset,

depending on the classification of each

asset into risk categories ("stages",

"phases") taking into account the impact of

future macroeconomic conditions on the

level of expected credit losses.

Determining the amount and timing of the

recognition of expected credit losses

requires the use of significant judgment and

significant and complex estimates, including

primarily with respect to the credit risk

parameters in the expected credit loss

calculation models.

The estimate of the allowance for expected

credit losses includes consideration of the

impact of the global COVID-19 pandemic.

This estimate required the Bank's

management to apply additional

assumptions and expert adjustments that

account for uncertainties associated with

the current and future macroeconomic

environment and reflect risk factors not

included in the Bank's models.

Note 3.a Impairment of financial assets,

Note 21 Loans and advances to customers

measured at amortized cost and Note 55.2

Credit risk provide details on the methods

and models used and the level of allowance

for expected credit losses in the portfolio of

loans and advances to customers.

We performed a reconciliation of the loans

and advances to customers database to the

Bank's accounting records to confirm the

completeness of the recognition of loans

and advances to customers underlying the

allowance for expected credit losses, as

well as the value of the allowance.

We assessed the Bank's impairment

methodology for compliance with the

requirements of IFRS 9, in particular with

respect to the application of the criteria for

identifying a significant increase in credit

risk, the definition of a default, the credit risk

parameters adopted and the consideration

of the impact of future macroeconomic

conditions on the level of expected credit

losses.

For the portfolio of loans and advances to

customers assessed under the collective

method:

• we analyzed the methodology used for

calculation of allowances for expected

credit losses for exposures evaluated

using the collective method, including

adequacy of risk parameters used by

the Bank,

• we verified the calculation of write-offs

for expected credit losses for selected

exposures,

• we assessed the verification of models

based on historical data (back-tests).

For the portfolio of loans and advances to

customers assessed on an individual basis:

• we conducted an analysis of the

correctness of the impairment

identification process and classification

into stages,

• on a selected sample of significant

credit exposures, we reviewed

documents related to the borrower's

financial situation and verified the

Mazars Audyt Sp. z o.o. 5

correctness of assignment to the

appropriate stage,

• we assessed the correctness of the

estimation of write-downs for a selected

sample of exposures with identified

evidence of impairment as regards the

correctness of collateral values and

assumptions concerning other cash

flows.

With respect to the impact of Pandemic

COVID-19 on expected credit losses on

loans and advances to customers, our

procedures covered:

• inclusion in the selected sample of

material credit exposures of industries

with increased risk due to a pandemic,

• analysis of estimated impact of future

macroeconomic conditions and other

expert adjustments,

• analysis of the credit base including

borrowers who benefited from moratoria

as at year-end.

We assessed the quality and verified the

accuracy of the disclosures regarding the

allowance for expected credit losses in the

Bank's financial statements.

Provisions for risk associated with the

foreign currency mortgage loan portfolio

The estimation of provisions for risk related

to the foreign currency mortgage loan

portfolio is complex and requires a

significant degree of judgment in

determining the possible scenarios, as well

as with respect to the assumptions made

regarding the number of lawsuits expected

to be filed, the likelihood of their resolution

and the amount of loss if the Bank loses a

lawsuit.

The Bank's estimates in this regard are

based on historical observations indicating

significant uncertainty as to the number of

lawsuits that will be filed in the future, as

During our audit, we performed the

procedures described below.

We performed a critical analysis of the

design and implementation of the process

for calculating litigation reserves and

contingent liabilities and evaluated the

controls in these processes.

We reviewed the list of litigation to which the

Bank is a party and the attorneys'

assessment of the resolution of such

litigation. We reviewed independent

confirmations received from law firms

representing the Bank.

We verified the methodology for estimating

provisions for litigation related to foreign

currency loans, including an analysis of the

Mazars Audyt Sp. z o.o. 6

well as the lack of a consistent line of

existing court decisions.

In addition, as described in Note 54

Litigation, in estimating the scenarios and

their likelihood of realization, management

has not included the potential impact of the

resolution of the Supreme Court's Civil

Chamber, scheduled to meet on March 25,

2021, due to the inability to predict the

shape of the Supreme Court's resolution of

specific issues. In addition, because, as

described in Note 54 Litigation,

management has not made a decision

regarding potential out-of-court settlements,

including settlements with customers, this

has not been taken into account in the

scenarios used to estimate the level of

provisions as at 31 December 2020.

Note 3 Estimates and Note 54 Litigation

provide details of the assumptions used to

calculate the provisions for the foreign

currency mortgage portfolio and the

possible alternative outcomes presented as

part of the sensitivity analysis of the

estimate.

correctness of input data and calculation of

provision estimates, an analysis of the

reasonableness and reasonableness of the

assumptions made.

We analyzed the register of customer

complaints, with particular emphasis on

issues related to foreign currency mortgage

loans.

We reviewed correspondence, reports and

analyses addressed to the Bank by

regulatory authorities.

We assessed the quality and verified the

accuracy of disclosures regarding risk

provisions related to the foreign currency

mortgage loan portfolio.

Other Matters

The Bank’s financial statements for the year ended 31 December 2019 have been audited by

a statutory auditor acting on behalf of another audit firm. This auditor expressed an unqualified

opinion on these financial statements on 31 March 2020.

Responsibilities of the Management Board and Supervisory Board for the

Financial Statements

The Bank's Management Board is responsible for preparing, based on the accounting books

properly kept, the financial statements that give a true and fair view of the Bank’s property and

financial position and its financial performance in accordance with International Financial

Reporting Standards as adopted by the European Union and adopted accounting principles

(policy), as well as with the relevant legislation and with the provisions of the Bank’s Articles

of Association. The Bank’s Management Board is also responsible for such internal control as

the Management Board determines is necessary to enable the preparation of financial

statements that are free of material misstatement, whether due to fraud or error.

Mazars Audyt Sp. z o.o. 7

When preparing the financial statements, the Bank's Management Board is responsible for

assessing the Bank’s ability to continue as a going concern, as well as for disclosing, if

applicable, matters related to going concern and for adopting the going concern assumption

as an accounting basis, unless the Management Board either intends to liquidate the Bank or

to cease operations, or has no realistic alternative but to do so.

The Bank's Management Board and members of the Supervisory Board are obliged to ensure

that the financial statements meet the requirements set out in the Accounting Act. Members

of the Supervisory Board are responsible for supervising the financial reporting process of the

Bank.

Statutory Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as

a whole are free from material misstatement, whether due to fraud or error, and to issue an

auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance

but is not a guarantee that an audit conducted in accordance with the National Standards on

Auditing will always detect a material misstatement when it exists. Misstatements can arise

from fraud or error and are considered material if, individually or in the aggregate, they could

reasonably be expected to influence the economic decisions of users taken on the basis of

these financial statements.

The scope of audit does not include assurance as to the future profitability of the Bank and

effectiveness or efficiency of running the Bank’s affairs by the Management Board at present

or in the future.

According to National Standards on Auditing, we exercise professional judgement and

maintain professional skepticism throughout the audit, as well as:

• we identify and assess risks of material misstatement of financial statements, whether

due to fraud or error, we design and perform audit procedures responsive to those

risks and we obtain audit evidence which is sufficient and appropriate to provide a

basis for our audit opinion. The risk of not detecting a material misstatement resulting

from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control;

• we obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the internal control in the Bank;

• we evaluate the appropriateness of the accounting principles (policy) used and the

reasonableness of the accounting estimates and related disclosures made by the

Management Board of the Bank;

• we conclude on the appropriateness of the Bank’s Management Board’s use of the

going concern basis of accounting and, based on the audit evidence obtained, as to

whether a material uncertainty exists related to events or conditions that may cast

significant doubt on the Bank’s ability to continue as a going concern. If we conclude

that a material uncertainty exists, we are required to draw attention in our auditor’s

report to the related disclosures in the financial statements or, if such disclosures are

Mazars Audyt Sp. z o.o. 8

inadequate, to modify our opinion. Our conclusions are based on the audit evidence

obtained up to the date of our auditor’s report. However, future events or conditions

may cause the Bank to cease to continue as a going concern;

• we evaluate the overall presentation, structure and content of the financial statements,

including the disclosures, and whether the financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

We communicate to the Supervisory Board information regarding, among other matters, the

planned scope and timing of the audit and significant audit findings, including any significant

deficiencies in internal control that we identify during our audit.

We make a representation to the Supervisory Board that we have complied with relevant

ethical requirements pertaining to independence and that we will communicate all

relationships and other matters that could reasonably be considered to pose a threat to our

independence, and, where applicable, the safeguards applied.

Among matters communicated to the Supervisory Board we have determined matters that

were of most significance in our audit of the financial statements of the current period and

therefore we have determined them to be key audit matters. We describe those matters in our

auditor’s report unless law or regulation preclude their public disclosure or when, in

exceptional circumstances, we decide that a given matter should not be presented in our

report as the adverse consequences of such communication would reasonably be expected

to outweigh the public interest benefits of communicating about the matter.

Other Information, including the Report on the Activities

Other information include the report on the Bank’s activities for the year ended 31 December

2020 (“Report on the Activities”) along with corporate governance statement which is a

separate part of this report and separate report on non-financial information referred to in

Article 49b (9) of the Accounting Act, which is a part of the document entitled "CSR and

Sustainability Report presenting non-financial information of BNP Paribas Bank Polska S.A.

and BNP Paribas Bank Polska S.A. Group in 2020 (jointly referred to as “Other Information”).

Responsibility of the Management Board and Supervisory Board

The Bank’s Management Board is responsible for preparing Other Information in accordance

with the applicable regulations.

The Management Board of the Bank and members of the Supervisory Board are obliged to

ensure that the Management Report along with separate part meets the requirements set out

in the Accounting Act.

Statutory Auditor’s Responsibility

Our opinion on the audit of the financial statements does not cover Other Information. Our

responsibility regarding the audit of the financial statements is to get acquainted with Other

Information and to consider whether it is not significantly incoherent with the financial

statements or with our knowledge obtained during the audit or whether Other Information

Mazars Audyt Sp. z o.o. 9

seems to be significantly misstated in other manner. If, based on work performed, we consider

that there are material misstatements in Other Information, we are obliged to inform about it

in our audit report. In accordance with the Act on Statutory Auditors, our responsibility is also

to give an opinion whether the Management Report has been prepared in accordance with

applicable regulations and whether it complies with information contained in the financial

statements. In addition, in accordance with requirements of Article 111a (3) of the Act of 29

August 1997 Banking Law (Journal of Laws of 2020, item 1896 as amended) (“Banking Law”),

our responsibility is to audit information specified in Article 111a (2) of the Banking Law

contained in the Management Report. Moreover, we are obliged to communicate whether the

Bank prepared a separate report on non-financial information and issue an opinion whether

the Bank included the required information in the corporate governance statement.

Opinion on the Report on the Activities

Based on the work performed during the audit, in our opinion, the Report on the Activities:

• has been prepared in accordance with Article 49 of the Accounting Act and paragraph

70 of the Regulation of the Minister of Finance of 29 March 2018 on current and

periodic information provided by issuers of securities and on conditions under which

information required by legal regulations of a third country may be recognised as

equivalent (“Regulation on current information” – Journal of Laws of 2018, item 757 as

amended) and Article 111a (1-2) of the Banking Law,

• is in line with information contained in the financial statements.

Moreover, according to our knowledge of the Bank and its environment obtained during the

audit, we declare that we have not identified any material misstatement in the Bank’s

Management Report.

Opinion on corporate governance statement

In our opinion, in its corporate governance statement the Bank included information specified

in paragraph 70 (6) item 5 of the Regulation on the current information. Moreover, information

indicated in points c-f, h and i of paragraph 70 (6) item 5 of this Regulation included in the

corporate governance statement complies with the relevant regulations and information

included in the financial statements.

Information on non-financial information

In accordance with the requirements of the Act on Statutory Auditors we confirm that the Bank

included in its Report on the Activities information on preparing a separate report on non-

financial information referred to in Article 49b (9) of the Accounting Act and that the Bank

prepared such separate report.

We have not performed any assurance work concerning the separate report on non-financial

information and we do not express any assurance about it.

Mazars Audyt Sp. z o.o. 10

Report on Other Legal and Regulatory Requirements

Information on Observing Applicable Prudential Regulations

The Bank’s Management Board is responsible for ensuring the compliance of the Bank’s

operations with prudential regulations, in which for the correct determination of capital ratios.

Our responsibility is to communicate in the auditor’s report whether the Bank complies with

applicable prudential regulations, defined in separate provisions, and in particular whether the

Bank correctly determined the capital ratios presented in note 56.

The purpose of the audit of the financial statements was not to express an opinion on the

Bank’s compliance with applicable prudential regulations and therefore we do not express

such an opinion.

Based on our audit of the financial statements we would like to inform you that we have not

identified any breaches of applicable prudential regulations by the Bank in the period from 1

January 2020 to 31 December 2020, defined by separate provisions, in particular with respect

to the correctness of the determination of capital ratios as at 31 December 2020, which could

have a significant impact on the financial statements.

Declaration on non-audit services

According to our best knowledge and belief we declare that non-audit services that we have

provided to the Bank and its subsidiaries comply with laws and regulations applicable in

Poland and that we have not provided any non-audit services that are prohibited pursuant to

Article 5 (1) of the EU Regulation and Article 136 of the Act on Statutory Auditors. Non-audit

services that we have provided to the Bank and its subsidiaries in the audited period were

mentioned in note 11.3 of the Bank’s Management Report.

Appointment of an Audit Firm

We have been appointed to audit the Bank’s financial statements pursuant to the resolution of

the Bank’s Supervisory Board of 12 December 2019. We have been auditing the Bank’s

financial statements for the first time.

The key statutory auditor responsible for the audit that was the base of this independent

statutory auditor’s report is Małgorzata Pek-Kocik.

Acting on behalf of Mazars Audyt Sp. z o.o. with its registered office in Warsaw, ul. Piękna 18,

entered on the list of audit firms under no. 186, on behalf of which the key statutory auditor

audited the financial statements.

Mazars Audyt Sp. z o.o. 11

Małgorzata Pek-Kocik

Key Statutory Auditor

No 13070

Partner

Warsaw, 26 February 2021