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 2020, the total amount of free and restricted cash and cash equivalents of PLN 2 522 million was held in bank accounts and in short-term deposits.
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 2020 |
As at 31 December 2019 |
|---|---|---|
| from AAA to AA- according to S&P and Fitch, and from Aaa to Aa3 according to Moody’s | 10% | 16% |
| from A+ to A- according to S&P and Fitch, and from A1 to A3 according to Moody’s | 51% | 81% |
| from BBB+ to BBB- according to S&P and Fitch, and from Baa1 to Baa3 according to Moody’s | 39% | 3% |
* Weighed by amount of cash deposited in current accounts and deposits.
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 2020 the maximum single entity share of the amount exposed to credit risk arising from cash and bank deposits amounted to 25%, or PLN 642 million (as at 31 December 2019: 19%, or PLN 189 million).
| As at 31 December 2020 |
As at 31 December 2019 |
|
|---|---|---|
| Counterparty 1 | 642 | 189 |
| Counterparty 2 | 519 | 183 |
| Counterparty 3 | 338 | 178 |
| Counterparty 4 | 244 | 82 |
| Counterparty 5 | 155 | 82 |
| Other | 624 | 300 |
| Total | 2 522 | 1 014 |
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.