7.5.2.1 Credit risk related to cash, cash equivalents and bank deposits
in PLN millions, unless otherwise stated
The Group allocates periodically free cash in accordance with the requirements to maintain financial liquidity and limit risk and in order to protect capital and maximise interest income.
As at 31 December 2021, the total amount of free and restricted cash and cash equivalents of PLN 1 904 million was held in bank accounts and in short-term deposits (in total as at 31 December 2020: PLN 2 522 million).
All entities with which deposit transactions are entered into by the Group operate in the financial sector. Analysis of exposure to this type of risk indicated that these are solely banks with the highest, medium-high and medium ratings, and which have an appropriate level of equity and a strong, stable market position. The credit risk in this regard is monitored through the on-going review of the financial standing and by maintaining an appropriately low concentration levels in individual financial institutions.
The following table presents the level of concentration of cash and deposits, with the assessed creditworthiness of the financial institutions*.
| Rating level |
As at 31 December 2021 |
As at 31 December 2020 |
|
|---|---|---|---|
| Highest | from AAA to AA- according to S&P and Fitch, and from Aaa to Aa3 according to Moody’s | 22% | 10% |
| Medium-high | from A+ to A- according to S&P and Fitch, and from A1 to A3 according to Moody’s | 53% | 51% |
| Medium | from BBB+ to BBB- according to S&P and Fitch, and from Baa1 to Baa3 according to Moody’s | 25% | 39% |
Risk level of the financial institution arising from depositing cash on bank accounts or deposits, and taking into consideration the risk of these instruments, is almost the same, and therefore they are presented jointly.
As at 31 December 2021 the maximum single entity share of the amount exposed to credit risk arising from cash and bank deposits amounted to 41%, or PLN 778 million (as at 31 December 2020: 25%, or PLN 642 million).
|
As at 31 December 2021 |
As at 31 December 2020 |
|
|---|---|---|
| Counterparty 1 | 778 | 642 |
| Counterparty 2 | 322 | 519 |
| Counterparty 3 | 259 | 338 |
| Counterparty 4 | 156 | 244 |
| Counterparty 5 | 121 | 155 |
| Other | 268 | 624 |
| Total | 1 904 | 2 522 |
Impairment losses on cash and cash equivalents were determined individually for each balance of a given financial institution. External bank ratings were used to measure credit risk. The analysis determined that these assets have a low credit risk at the reporting date. The Group used a simplification permitted by the standard and the impairment loss was determined on the basis of 12-month credit losses. The calculation of impairment determined that the amount of impairment loss is insignificant. These assets are classified to Degree 1 of the impairment model.