KB prezent. angl - Komerční banka

35. Commitments and contingent liabilities
Legal disputes
The Group 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 Group has recorded a provision of CZK 490 million
(2002: CZK 511 million) for these legal disputes. The Group has also recorded an accrual of CZK 92 million (2002: CZK 64 million) for
costs associated with a potential payment of interest on one of the pursued claims.
As of 31 December 2003, the Group assessed legal actions filed against other entities. The Group has been notified that certain
parties against which it is taking legal action may file counterclaims against it. The Group 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 Group 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 Group makes
provisions against these instruments on the same basis as is applicable to loans.
Capital commitments
As of 31 December 2003, the Group had capital commitments of CZK 84 million (2002: CZK 202 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 Group on behalf of a customer (mandatory)
authorising a third party (beneficiary) to draw drafts on the Group up to a stipulated amount under specific terms and conditions, are
collateralised by the underlying shipments of goods to which they relate. The group 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 Group represent issued
loan commitments or guarantees, undrawn portions of and approved overdrafts loans. Commitments to extend credit or guarantees
issued by the Group 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.