KB prezent. angl - Komerční banka

106 ➔107
Unconsolidated Financial Statements
under CAS
28. Contingencies and off balance sheet commitments
Legal disputes
The Bank conducted a review of legal proceedings outstanding against it as of 31 December 2003. Pursuant to the review of
significant litigation matters in terms of the risk of losses and litigated amounts, the Bank has recorded a provision of CZK 435 million
(2002: CZK 458 million, 2001: CZK 75 million) for these legal disputes. The Bank has also recorded an accrual of CZK 92 million (2002:
CZK 64 million, 2001: CZK 24 million) for costs associated with a potential payment of interest on one of the pursued claims.
As of 31 December 2003, the Bank assessed legal actions filed against other entities. The Bank has been notified that certain parties
against which it is taking legal action may file counterclaims against it. The Bank will contest any such claims and, taking into
consideration the opinion of its internal and external legal counsel, believes that any asserted claims made will not materially affect
its financial position. No provision has been made in respect of these matters.
Commitments arising from the issuance of guarantees
Commitments from guarantees represent irrevocable assurances that the Bank will make payments in the event that a customer
cannot meet its obligations to third parties. These assurances carry the same credit risk as loans and therefore the Bank makes
provisions against these instruments on the same basis as is applicable to loans.
Capital commitments
As of 31 December 2003, the Bank had capital commitments of CZK 84 million (2002: CZK 202 million, 2001: CZK 88 million) in respect
of current capital investment projects. Management is confident that future net revenues and funding will be sufficient to cover this
commitment.
Commitments arising from the issuance of letters of credit
Documentary letters of credit, which are written irrevocable undertakings by the Bank on behalf of a customer (mandatory)
authorising a third party (beneficiary) to draw drafts on the Bank up to a stipulated amount under specific terms and conditions, are
collateralised by the underlying shipments of goods to which they relate. The Bank records provisions against these instruments on
the same basis as is applicable to loans.
Commitments to extend credit, undrawn loan commitments, unutilised overdrafts and approved overdraft loans
Principal off balance sheet exposures include unutilised overdrafts and approved overdraft loans, undrawn loan commitments, issued
commitments to extend credit and unutilised facilities. The primary purpose of commitments to extend credit is to ensure that funds
are available to a customer as required. Commitments to extend credit represent unused portions of authorisations to extend credit
in the form of loans, guarantees or stand-by letters of credit. Commitments to extend credit issued by the Bank represent issued loan
commitments or guarantees, undrawn portions of and approved overdrafts loans. Commitments to extend credit or guarantees
issued by the Bank which are contingent upon customers maintaining specific credit standards (including the condition that
a customer’s solvency does not deteriorate) are revocable commitments. Irrevocable commitments represent undrawn portions of
authorised loans and approved overdraft facilities because they result from contractual terms and conditions in the credit
agreements.