Fundamentos científicos de la Psicología Social Comunitaria.

The financial risk in the Bank is includes: 1) liquidity risk; 2) interest rate risk (in the banking and trading book); 3) currency risk (in the banking and trading book).

Risk management in the Bank is based on the risk appetite level determined by the Supervisory Board of the Bank based on a set of internal limits that underlie the early warning system focused on identification, measurement, monitoring, control and reporting of risk.

The banking book transactions constitute the core business of the Bank, i.e. arise from its commercial operations. including obtaining funding sources and efficient liquidity management. The trading book is to ensure that the Bank’s clients are served with top quality standards.

The financial risk level and profile is regularly monitored and reported to: Supervisory Board of the Bank. Supervisory Board of DM BOŚ S.A., Management Board of the Bank, Management Board of DM BOŚ S.A., ALCO and Liquidity and Market Risk Committee.

2.1.

Liquidity risk

Liquidity risk is defined as the Bank’s losing its ability to pay liabilities within contractual deadlines, to obtain funds to cover unpredicted withdrawal of deposits and the ability to generate a positive cash flow balance.

In order to measure current and short-term liquidity, the Bank has introduced the following measures and tools: 1) liquid assets; 2) liquidity reserve; 3) M1 and M2 regulatory measures; 4) short-term liquidity gap for key currencies (PLN. EUR. CHF). For the purpose of measuring medium- and long-term liquidity, the following ratios are determined and monitored: 1) liquidity gap (contractual and actual), including both balance sheet and non-balance sheet items; 2) non-current ratio. 3) the ratio of loans funding real property to the most stable funding sources; 4) most stable funding sources; 5) deposit base concentration; 6) deposit base stability; 7) monthly loan early repayment ratio. 8) M3 and M4 supervisory liquidity measures; 9) projected liquidity reserve and M1 ratio - supervisory value for the six-month horizon. For most of the above measures, warning limits and values are determined within the set of internal liquidity risk limits with a hierarchical structure (i.e. determined by the Supervisory Board, Management Board and ALCO). Achieving the relevant liquidity risk profile is supported with inclusion of liquidity costs under the transfer pricing system adopted by the Bank.

In order to enhance the liquidity risk monitoring in 2013, the Bank has implemented an IT system that has contributed to modification of the measures used and extension of analyses and improving their detail level (in particular. with regard to contractual liquidity gap and actual liquidity gap).

For compliance with external requirements, BOŚ S.A. determines the liquidity ratios in accordance with supervisory short- and long-term liquidity measures. In 2013, as in the previous year, the supervisory standards were complied with.

2.2.

Interest rate risk

The interest rate risk is defined as a potential negative effect of changes in interest rates on projected financial result, economic value of equity and the current value of debt securities held. The process of managing the risk is performed separately for the banking book and for the trading book.

2.2.1. Interest rate risk in the banking book

The key objective of interest rate risk management in the banking book is to stabilize and optimize the interest income and interest margin of the Bank and to limit the negative effects of market interest rate changes on the economic value of equity. For this purpose, the Bank uses two tools: the investment portfolio included in the banking book and derivative transactions performed under hedge accounting. The investment portfolio has two roles: 1) to stabilize the result and interest margin and 2) to provide supplementary assets in the process of liquidity management.

In order to maintain an acceptable interest rate risk level in the banking book, the Bank uses hedge accounting for: 1) cash flows; 2) fair value. The cash flow hedge accounting is to hedge variability of cash flows for the EUR-denominated floating rate mortgage loan portfolio originated until the hedging relation commencement date (in the normal and “watched” loan classes a portfolio of clearly determined transactions has been separated and hedged with IRS transactions); the portfolio value assumed for the hedging purposes is the same as the nominal value of hedging transactions; changes in the measurement of IRS hedging transactions do not increase fluctuation of the financial result. The purpose of fair value hedge accounting is to hedge the fair value of fixed-interest State Treasury bonds constituting a part of the portfolio held for sale; IRS hedging transactions limit capital fluctuations resulting from interest rate changes.

In the first half of 2013, the Bank completed implementation of an IT system supporting interest rate management in the banking book, which resulted in modification and extension of measures and analyses. At present, the Bank has determined / performed: 1) repricing gap; 2) sensitivity gap

presenting decomposition or interest rate sensitive items into standard zero-coupon instruments with maturities corresponding to each gap date; 3) book value analysis simulation; 4) net present value simulation; 5) price shocks under basis risk analysis; 6) yield curve risk analysis; 7) client option risk analysis and 8) stress-testing.

As at 31 December 2013, economic capital value sensitivity to interest rate change by -200 b.p. was PLN 200.30 million and by + 200 b.p. was PLN -153.80 million. As at 31 December 2013, assuming simultaneous shift in interest rates by 100 b.p., the interest income could increase by PLN 9.44 million (in the case of interest rate drop) or by PLN -5.08 million, respectively (in the case of interest rate increase). The sensitivity calculation was based on the assumption that after the change, interest rates cannot be

lower than zero. As at 31 December 2013, the Bank was exposed to client option risk, basis risk and yield curve risk.Stress testing results indicate that the level of interest risk in the banking book has been safe. The following internal limit and warning values determined according to each month’s closing balance have been adopted by the Bank: 1) sensitivity of interest income to negative interest rate change by +/- ±100 b.p.; 2) sensitivity of economic value of equity to interest rate changes by +/- ±200 b.p. As at 31 December 2013 the limits were kept.

Once a month, the Bank carries out stress testing with regard to the interest rate risk level in the banking book if the extreme changes of risk factors occur. Mostly, it checks the effects of extremely unfavorable changes of:

1) interest rate on: a) interest income; b) economic capital value; c) the banking book portfolios including hedging securities, debt securities, IRS and FX swaps;

2) foreign exchange on interest income and economic capital value;

3) interest rates and foreign exchange jointly on interest income and economic capital value.

The analysis indicated that with extremely unfavorable market conditions and increased Bank’s positions in instruments sensitive to interest rate risk, the banking book values remain on the safe level.

The results of stress testing performed on a monthly basis are presented in reports prepared for the Management Board of the Bank and ALCO and in quarterly reports prepared for the Supervisory Board.

When estimating the internal capital of the Bank, interest rate risk included in the banking book is included. As at 31 December 2013, the interest rate risk in the banking book was material and internal capital of PLN 54.58 million was recognized.

2.2.2. Interest rate risk in the trading book

The purpose of the interest rate risk management in the trading book is to achieve financial performance assumed in the financial plan for this area, accompanied with acceptable exposure to this risk and minimizing its negative effects on instruments sensitive to interest rate changes held in the trading book. The interest rate risk in the trading book occurs mainly in the Bank. According to the strategy, the trading book transactions supplement the banking book ones. The Bank monitors the trading book risk in accordance with the following principles: 1) the trading activity is significant. but supplementary to other operating areas; 2) only liquid instruments allowing risk closing if the adopted limits have been extended are purchased to the trading book; 3) risk generated in the trading book is regularly monitored and its level controlled and reduced with the use of limits; 4) if the standing of financial markets is highly uncertain. the Management Board may decide to materially limit trading for a defined time period.

The interest rate risk in the trading book is monitored using: 1) Value at Risk model for the confidence level of 99% based on daily variability of interest rates for 250 working days preceding the analysis date; 2) BVP (i.e. sensitivity of interest rate risk-generating securities and derivatives to interest rate change by 1 b.p.); 3) the system of limits and 4) stress testing.

As at 31 December 2013, interest rate VaR for the trading portfolio was PLN 1,359 thousand. i.e. 41.9% of the current value of the portfolio, while BPV for the trading portfolio (with interest rate increase by 1 b.p.) was PLN 15 thousand.

In order to verify the interest rate VaR. the Bank performs a monthly back-testing in the form of comparing maximum losses arising from the model to actual gains and losses and theoretical

Calculating and monitoring of the use of each limit takes place as at each working day and for BPV also during the day and regularly reported to the management staff.

Once a month, the Bank carries out stress testing with regard to the interest rate risk level in the trading book if the extreme changes of risk factors occur. The effects of extremely unfavorable changes in the level of market interest rates on the Bank’s performance are tested. as well as effects of changes in interest rates within 250 working days and correlation between their fluctuation on the VaR level with both historical and parameter-based method.

The analysis indicated that with extremely unfavorable market conditions and increased Bank’s positions in instruments sensitive to interest rate risk, the trading book values remain on the safe level.

The results of stress testing performed on a monthly basis are presented in reports prepared for the Management Board of the Bank and ALCO and in quarterly reports prepared for the Supervisory Board.

2.3.

Currency risk

Currency risk is defined as potential unfavorable effects of changes in foreign exchange rates on the Bank’s performance.

This risk is generated in banking and trading books. The Bank’s objective regarding currency risk management in the banking book includes avoiding of holding open individual items within the structural FX position. Currency exposure arising from banking book transactions are regularly transferred to the Treasury Department on the same date or – at the latest - on the following working day.

As at 31 December 2013, the ten-day VaR for the Bank was PLN 159 thousand. In order to verify the interest rate VaR. the Bank performs a monthly back-testing in the form of comparing maximum losses arising from the model to actual gains and losses and theoretical performance fluctuations arising from repricing of items. Back-testing results are presented in a monthly cycle in reports prepared by the Management Board and ALCO and in a quarterly cycle in reports prepared for the Supervisory Board. The system of currency risk limits in the trading book includes:

1) limit for ten-day VaR arising from a single-day VaR rescaling to ten days;

2) limits for the total position and individual items for key currencies. binding both during and at the end of a working day;

3) Limits of a daily and accrued monthly loss on foreign exchange transactions; 4) In DM BOŚ S.A., limits of the total currency position.

The control of use of the above limits takes place on each working day, and the limits for the total position and for individual items for the key currencies of the Bank are additionally controlled during the day. Information regarding the use of each limit is regularly provided to the Bank's management. The analyses indicated that in the audited period, the risk remained on a medium level.

Once a month, the Bank carries out stress testing with regard to the currency risk level if the extreme changes of risk factors occur. The effects of extremely unfavorable changes in the level of foreign exchange/PLN. EUR/USD and EUR/CHF rates on the currency position result are tested, as well as effects of changes in interest rates within 250 working days and correlation between their fluctuation on the VaR level with both historical and parameter-based method.

The analysis indicated that with extremely unfavorable market conditions and increased Bank’s positions. the currency risk values in the Bank remain on the safe level.

The results of stress testing performed on a monthly basis are presented in reports prepared for the Management Board of the Bank and ALCO and in quarterly reports prepared for the Supervisory Board.