Annual Report 2014

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Annual Report 2014
Annual Report 2014
2014
Basic consolidated financial indicators
in accordance with International Financial Reporting Standards (IFRS)
Statement of Financial Position Indicators
CZK mil.
Total assets
Loans and receivables to credit institutions
Loans and receivables to customers
Securities
Deposits from banks
Deposits from customers
Shareholders’ capital attributable to owners of the parent
2014
2013
2012
2011
2010
902,589
38,533
500,039
256,565
54,570
671,565
107,809
968,723
75,348
489,194
267,788
73,036
713,977
100,660
920,403
65,320
470,859
296,719
44,344
688,624
93,190
892,598
77,433
465,576
254,790
52,862
658,016
79,810
881,629
175,101
440,852
180,352
52,459
661,513
70,780
Income Statement Indicators
CZK mil.
Net interest income
Net fee and commission income
Operating income
Operating expenses
Operating profit
Net result attributable to owners of the parent
2014
2013
2012
2011
2010
26,673
11,306
41,139
(18,234)
22,905
15,071
27,252
11,294
41,609
(18,743)
22,866
15,588
29,657
11,768
43,575
(18,259)
25,316
16,612
31,244
12,381
44,073
(18,424)
25,649
13,638
30,250
12,167
45,421
(18,677)
26,744
12,052
Basic Ratios
ROE
ROA
Operating costs/operating income
Non-interest income/operating income
Net interest margin on interest-bearing assets
Client receivables/client payables
Standalone capital adequacy
2014
2013
2012
2011
2010
14.5%
1.7%
44.3%
35.2%
3.5%
73.5%
17.7%
16.2%
1.6%
45.0%
34.5%
3.6%
67.3%
17.7%
19.3%
1.8%
41.9%
31.9%
3.7%
69.4%
16.0%
18.2%
1.5%
41.8%
29.1%
3.9%
73.5%
13.1%
18.2%
1.3%
41.1%
33.4%
3.8%
69.5%
13.9%
Key Operating Indicators
Number:
- staff (average headcount)
- Česká spořitelna branches
- clients
private accounts
active cards
of which: credit cards
active SERVICE 24 and BUSINESS 24 users
ATMs and payment machines
2014
2013
2012
2011
2010
10,471
644
5,034,590
2,534,094
3,144,314
289,722
1,759,644
1,561
10,651
653
5,258,892
2,379,625
3,233,725
319,271
1,591,355
1,530
10,760
658
5,297,398
2,294,577
3,178,184
347,834
1,475,517
1,466
10,556
654
5,202,572
2,264,722
3,174,161
392,205
1,409,933
1,413
10,744
667
5,265,097
2,101,646
3,229,866
441,989
1,318,537
1,312
Rating
Rating agency
Fitch
Moody's
Standard & Poor's
Long-term rating
Short-term rating
Outlook
A
A2
A–
F1
Prime(1)
A(2)
negative
negative
negative
Content | Profile of Česká spořitelna | The Year 2014 in Review
Content
Key Figures
Profile of Česká spořitelna
The Year 2014 in Review
Foreword by the Chairman of the Board of Directors
Česká spořitelna Board of Directors
Česká spořitelna Supervisory Board and Audit Committee
Macroeconomic Development in the Czech Republic in 2014
Report of the Board of Directors on the Company’s Business Activities
and Statement of Financial Position for 2014
Strategic Plans for the Future
Risk Management
Additional Disclosures Related to Česká spořitelna Group’s Exposures
to Assets that are Subject to Forbearance Measures
Additional Disclosures Related to Česká spořitelna’s Exposures
to Assets that are Subject to Forbearance Measures
Other Information for Shareholders
Česká spořitelna – Corporate Social Responsibility
Česká spořitelna, a. s. Declaration of Compliance of its Governance
with the Code Based on OECD Principles
Organizational Structure
Supervisory Board Report Report of the Audit Committee
2
4
5
9
11
13
17
Financial section 1
Independent Auditor’s Report
Consolidated Financial Statements
77
78
79
18
43
45
53
56
59
63
68
74
75
76
Financial Section 2 Independent Auditor’s Report
Separate Financial Statements
156
157
158
Report on Relations between Related Parties
Česká spořitelna Financial Group Independent Auditor’s Report
Conclusions of the Ordinary General Meeting 233
246
254
255
3
Content | Profile of Česká spořitelna | The Year 2014 in Review
Profile of Česká spořitelna
The Modern Bank with the Longest Tradition
We are a modern bank with a focus on retail clients, small- and
medium-sized enterprises, municipalities and cities and we play
an important role in financing large corporations and providing
financial market services. With more than 5 million clients, we are
the Czech Republic’s largest bank. We boast the longest tradition
among the banks on the Czech market; in 2015 we mark the 190th
anniversary of the Company’s founding. In Fincentrum’s Bank
of the Year competition we received the Most Trustworthy Bank
of the Year award for the eleventh year running. The prestigious
magazine The Banker selected Česká spořitelna as the Bank of
the Year 2014, which is the eighth title won by the Company. We
provide our clients with the broadest range of banking services in
the Czech Republic through a network of 644 branches and 1,561
ATMs and payment terminals.
Quality Comes First
We are a pillar of the Czech banking system and, since 2000,
we have been able to rely on the strong backing of Central
Europe‘s Erste Bank financial group. Our aim is to offer clients
precisely those services they need. We are among those banks
that set the trends in modern banking services and in technology innovations. We have launched new private banking under
the BLUE brand for more affluent clients, designed to help meet
their financial needs at every stage of life.
Investing in the Future
The Bank was founded in 1825 to help people stand on their
own two feet. Today we still proudly subscribe to this mission. We educate to achieve competitiveness: each year we
earmark about CZK 10 million to support education. In addition, since 2012 we have worked to improve teaching of science
and engineering disciplines through the Nadace Depositum
Bonum foundation, which has 21 regional centres. Thanks to
the Nadace České spořitelny foundation we stand by those who
have been abandoned by society – since 2002 we have provided
in excess of CZK 210 million to help the needy. We break down
the barriers that stand in the way of not just our services: we
more than doubled the number of ATMs adapted for the use by
blind customers in 2014.
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Profile of Česká spořitelna | The Year 2014 in Review | Foreword by the Chairman of the Board of Directors
The Year 2014 in Review
January
Česká spořitelna was first in the Czech Republic to launch the
sale of mortgages through Facebook with a preferred interest rate.
This successful sales event was repeated in June. A great deal of
client interest was generated in both cases. This special event was
conceived for clients who prefer banking online. A professional
judging panel awarded Česká spořitelna first place in the category
Best Use of Digital Media at the FLEMA Media Awards for this
special campaign.
A consortium of banks, coordinated in tandem by Česká spořitelna
and ČSOB, provided Pražský plynárenský Holding (controlled by
the City of Prague) with bank financing of CZK 4.1 billion to purchase just under 50% of the shares of Pražská plynárenská from
E.ON Group.
Česká spořitelna was named Friendliest Bank – Handicap Friendly
for 2013. The title was awarded based on evaluations of individuals
with physical disabilities under the auspices of the National Council
for Persons with Disabilities. In 2013, Česká spořitelna won in all
four quarterly evaluations. Česká spořitelna has been a longstanding
friend to persons with disabilities.
February
For the second year running, Česká spořitelna placed first in banking and insurance in the Top Employers 2013/2014 survey. The
survey, conducted by the Czech Student Union, is open to Czech
high school and university students.
Česká spořitelna provides financing to the British Petainer
Group, helping it become a leader on the market for plastic beverage containers by providing a multipurpose revolving loan of
EUR 15.4 million to fund company growth.
March
Paying online is safer with Česká spořitelna cards and their 3D
Secure service: for purchases at participating vendors, payments
go through after SMS authorization is given, just like with the
SERVIS 24 internet banking service. All internet vendors in the
Czech Republic and 50% of those abroad accept 3D Secure.
Česká spořitelna was the first bank on the Czech market to enable
its clients to pay bills and invoices using QR codes in payment
machines (QR Platba – QR Payment). Clients don’t have to copy
all the payment information from the invoice, they simply load the
QR code into the payment machine and the invoice is automatically
converted into a payment order, which just needs to be looked over
and confirmed.
Česká spořitelna opened new offices for Erste Premier and Erste
Private Banking clients in Prague and Liberec. The Prague branch is
located in a luxury villa in Dejvice and offers a full suite of private
banking services. The Liberec private banking centre is located in
the historical Česká spořitelna building in the city centre.
Česká spořitelna – penzijní společnost is voted the best pension
company in the Czech Republic by a professional judging panel
from the international magazine World Finance.
Česká spořitelna and the VIA Foundation launched the comprehensive Accelerator programme for managers of social enterprises and
non-profits as part of the ČS Social Enterprise Academy.
April
Grantika Česká spořitelny changed its business name and brand
to Erste Grantika Advisory, making the company more a part of
the family of strong international corporate banking brands of the
Česká spořitelna – Erste Corporate Banking Group. Erste Grantika
Advisory is a renowned advisory company and the first advisor that
can see to everything a client needs to continue doing business successfully, providing all necessary financial and strategic advisory
services in one place.
Česká spořitelna participated in arranging an export buyer credit
of EUR 66 million to enable Azomures, a Romanian producer of
chemical fertilisers, to undertake one of the largest investments in
the last 30 years. Azomures is using the financing to modernise
its urea production plant, a project being carried out by the Czech
company Chemoprojekt.
Česká spořitelna launched the new mobile application Investiční
centrum [Investment Centre] with which clients gain free-of-charge
access to information from the world of investment. This app offers
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Profile of Česká spořitelna | The Year 2014 in Review | Foreword by the Chairman of the Board of Directors
the very latest market information, such as movements in share
prices, interest rates, exchange rates and indexes as well as information about products on offer by Česká spořitelna and the latest
analyses and prognoses published by Erste Group.
Česká spořitelna launched a new barrier free service for hearing
impaired clients at 26 branches – the eScribe application enables
simultaneous online transcription of communication with the client.
The Ordinary General Meeting of Česká spořitelna approved a
proposal for the distribution of profit. A total of CZK 9.120 million
was allocated for a dividend payment of CZK 60 per share.
May
Česká spořitelna was the main issue manager for Pivovary
Lobkowicz Group shares, which were first listed on the Prague
Stock Exchange on the 28th of May. This was the largest and most
interesting share issue the Prague Stock Exchange had seen since
2010.
The Depositum Bonum Foundation (NDB) organized the three-day
Elixir conference at schools in Hradec Králové where more than
160 physics teachers from throughout the Czech Republic gathered with representatives from the Ministry of Schools and other
educators. Participants agreed that physics should be interpreted
through real-life examples and interesting experiments engaging
all the students’ senses should be used in class. Indeed, the NDB
supports this form of instruction and to date has helped established
18 regional centres in the CR where teachers can come to draw new
ideas and borrow all sorts of physics teaching aids at no charge.
Česká spořitelna opened a new administrative centre in the Vinice
Building in Pardubice. By relocating administrative centres to
regions, the Bank is creating work opportunities nationwide.
Some 250 people are currently employed in Pardubice, and Česká
spořitelna plans to increase the headcount to 400 by the 2015 year
end. The Vinice Administrative Building was named Building of the
Year in 2010: it is 100% barrier free and Česká spořitelna actively
encourages candidates with physical disabilities to apply for job
openings.
advise start-up entrepreneurs nationwide. The Inostart project is
carried out in cooperation with the Ministry of Industry and Trade
and the Czech-Moravian Guarantee and Development Bank.
Erste Grantika Advisory administered the Czech Republic’s first
ever online auction of corporate notes. The basic goal of the auction is to achieve a lower margin and thus assure cheaper access
to money for the note issuer. The Prague Transportation Authority
sold a six-month note for CZK 550 million in the auction.
Česká spořitelna introduced the new YOU INVEST mutual funds
offered through Investiční společnosti ČS and designed for Erste
Premier and Erste Private Banking high-net-worth clients who don’t
want to spend too much time managing their capital, but still insist
on a high degree of transparency and flexibility. The client chooses
an investment strategy and the professional portfolio managers of
Erste Group take care of the rest.
For example, a mortgage for rental property may be used to finance
the purchase of an apartment building or single-family house with
non-residential premises, which are then leased. The mortgage
as investment is a new trend on the mortgage market and Česká
spořitelna always adapts its product portfolio to embrace new
trends.
According to the international magazine World Finance, Investiční
společnost Česká spořitelny was the best investment company in
the CR in 2014.
Loans to firms and entrepreneurs, i.e. the product called Investment
Loan, again ranked number one in the Business Loans category of
the Zlatá koruna survey.
July
Česká spořitelna introduced another convenient way to make an
appointment at a branch. With the mobile application Lístkomat
Česká spořitelny, clients and non-clients alike can set up an
appointment date and time or “take a number” and go directly
to a branch. Appointments can be made via mobile phone at
234 branches.
The number of clients using the SERVIS 24 Start service grew to
more than 50 thousand. SERVIS 24 Start is primarily designed for
clients who only use products of Česká spořitelna subsidiaries and
don’t have a primary account. It’s a simpler version of S24 and
offers clients access to accounts at subsidiaries via the services
S24 IB, S24 TB, S24 MB, S24 GSM.
The Bank’s SERVIS 24 Mobilní banka product did well in the
survey Mobile Application of the Year, placing third in the Client
Service category. Users also expressed their appreciation for the
application. The general public was invited to participate in the
survey designed to find the most popular, as well as most inspired
and innovative, applications for mobile phones and tablets.
June
The company Achterm, a heat and electricity producer and
heat distributor in Chomutov, obtained a ten-year club loan of
CZK 550 million to refinance all its loans, finance heating plant
expansion, overhaul primary heat distribution systems and finance
operations. Česká spořitelna acted as agent and collateral agent for
the transaction.
With the aim of helping small and medium-sized enterprise startups secure credit for innovative projects, Erste Corporate Banking
offers the corporate banking services of Česká spořitelna as part
of the Inostart Swiss-Czech cooperation programme to fund and
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Profile of Česká spořitelna | The Year 2014 in Review | Foreword by the Chairman of the Board of Directors
August
Erste Group Bank and Česká spořitelna collaborated on the largest
corporate bond placement of the last ten years, the NET4GAS
bond issue. NET4GAS, the Czech natural gas transmission system
operator, issued euro and crown bonds in three tranches at a total
of EUR 710 million.
Česká spořitelna introduced BUSINESS 24 Mobilní banka and
became the first bank on the market to introduce a special mobile
application that allows corporate clients to manage their accounts.
The application is available at no charge in Czech and English versions and can be used on multiple devices; it is optimised for smart
phones and tablets using the Android and iOS operating systems.
Česká spořitelna opened an experimental branch in the Lochotín
district of Plzeň. This new type of branch is designed to improve
the client service model, expand self-service options for routine
banking operations and improve the quality of provided advisory.
For both the Balanced and Dynamic participation funds, ČS penzijní
společnost achieved 3rd pillar asset value in excess of CZK 50 million. Thus, with time to spare it met the statutory requirements for
every pension company to amass no less than CZK 50 million in
each of its funds within 2 years of acquiring authorisation to operate
participation funds.
Česká spořitelna supported the company Point Park Properties (P3),
an owner, developer and manager of logistics real estate throughout Europe, in what was the largest transaction ever on the Czech
industrial real estate market: the acquisition of 58 warehouses and
11 logistics parks. Česká spořitelna was one of three financing
banks. Financing totalled EUR 360 million.
The Investiční společnosti ČS Top Stocks open-ended mutual fund
celebrated eight years of existence in which time the fund has nearly
doubled in value. In the last year alone, the value of just one ISČS
Top Stocks unit grew by almost 25% and CZK 1.1 billion was
added to the fund. The fund now has CZK 3.7 billion in net assets.
September
The number of active Private Accounts and Private Giro Accounts
grew to over 2.5 million.
Česká spořitelna expanded its video banker service to include more
towns. The client sees the video banker on the computer and can
arrange non-recurring payments, set up, change or terminate standing orders (for incoming or outgoing payments), change contact
information and carry out other simple operations. The service is
mainly designed for clients who don’t often use internet banking.
ATMs or payment machines.
Česká spořitelna contributed a total of CZK 1,079,561 to Domov
Palata (a home for the blind), which it acquired via an unusual
campaign called “Your Card Also Helps”. For every payment with
a Česká spořitelna card, the Bank contributed to reading aids and
other devices for Domov Palata residents. Česká spořitelna has
supported Domov Palata since it was established, i.e. for more
than 120 years.
October
Česka spořitelna started offering private banking under the brand
name BLUE at 138 regular branches and two special branches in
Prague and Brno. BLUE is aimed at middle-income clients who
expect a wide array of services from the Bank and a range of private
banking services of the highest standard. Česká spořitelna hopes to
establish a lifelong relationship with its clients and designed BLUE
to effectively address their needs at every stage of life, from the
start of their productive years through retirement.
Pegas Nonwovens, the largest manufacturer of nonwoven fabrics
in the Europe, Middle East and Africa (EMEA) region, undertook
an inaugural bond issue totalling CZK 2.5 billion. This successful
transaction was oversubscribed by a factor of 2.35. Česká spořitelna
acted as the sole issue arranger and the exclusive counterparty to
hedge interest and foreign exchange risk connected with the issue.
Česká spořitelna came up with a unique loan offering – it’s the first
time a loan will actually valorise the money lent. For every instalment paid on time, the Bank will gift the client 5% of the amount
of the standard monthly instalment, which will, moreover, earn 5%
interest on a special savings account. As soon as the client repays
the loan in full, he receives the entire amount to use as he wishes.
The iBOD [iPOINT] loyalty programme, a multi-partner bonus
programme used by 950 thousand clients (of which more than
800 thousand are Česká spořitelna clients) turned one year old.
Participating clients collect ipoints for using financial services or
making purchases at dozens of retail partners throughout the Czech
Republic. In 2014, clients obtained ipoints at a value in excess of
CZK 350 million.
New versions of the online banking services SERVIS 24 and
BUSINESS 24 offered clients complete debit card management.
In the SERVIS 24 application, new functions were added such
as blocking, unblocking or issuing replacements cards, ordering
cards with a custom design or an improved transaction history. For
BUSINESS 24, the complete management of debit cards is a brand
new feature. Entrepreneurs and corporate clients can thus, among
other things, change card limits, use the 3D Secure service, take
out insurance and request card blocking or unblocking.
November
Česká spořitelna won the prestigious award Bank of the Year given
out by the magazine The Banker of the Financial Times media
group. Bank of the Year for the Czech Republic was chosen by
a professional judging panel comprising CEOs and executive
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Profile of Česká spořitelna | The Year 2014 in Review | Foreword by the Chairman of the Board of Directors
managers of British firms together with the monthly publication’s
editors. Česká spořitelna received this honour for the eighth time.
In the Fincentrum Bank of the Year 2014 competition, Česká
spořitelna was named Barrier-free Bank based on an evaluation by
the organisation Konta Bariéry in collaboration with handicapped
individuals. For the eleventh time, Česká spořitelna was chosen by
the public as Most Trustworthy Bank of the Year. Česká spořitelna
also won in the category Mortgage of the Year 2014 and placed
second in the Bank of the Year category.
The professional judging panel of the Best Innovator 2014 competition praised Česká spořitelna’s approach to innovation and named
it “Biggest Surprise of the Competition”, emphasising the fact that
change is usually fairly complicated in the banking sector and it had
never seen an approach to innovation like Česká spořitelna’s. The
Best Innovator 2014 competition is organised by the international
consultancy A. T. Kearney and looks for the best in innovation management among companies. Its aim is systematically to evaluate
the innovation process from the birth of a thought to its successful
application in practice.
Česká spořitelna was named the best financial services provider
for 2014 in a competition held by Construction and Investment
Journal. This very prestigious award in the field of real estate has
been given out in the Czech Republic since 2001.
wallet]. BLESK peněženka is a rechargeable prepaid debit card for
use anywhere, which clients can purchase at newsstands. It may be
used to pay for online purchases or in shops with payment terminals.
December
Česká spořitelna co-arranged long-term club financing of
CZK 7.2 billion for Škoda Transportation Group, a leading
European vehicle manufacturer. This is one of the largest transactions to be executed on the local market in 2014.
By the year end, Česká spořitelna received nearly 200 applications to finance energy savings in residential buildings for a total
amount of CZK 850 million, of which loans of CZK 600 million
have already been extended. Projects that achieve a 30% savings
in energy are supported via Česká spořitelna with funds from the
European Union in the form of a grant of 10% of the provided loan.
This is the only programme of its kind in the Czech Republic and
it is only available through Česká spořitelna.
BLUE and Erste Premier clients can now make multi-currency
payments with a single card. Česká spořitelna offers the option
of tying a debit card to a foreign currency account. Thanks to this
multi-currency functionality, clients are not charged exchange fees
on foreign-currency transactions, but the paid or withdrawn amount
comes straight from the account in the given currency.
In collaboration with the Czech News Center, the subsidiary
MOPET CZ launched the service BLESK peněženka [LIGHTNING
8
The Year 2014 in Review | Foreword by the Chairman of the Board of Directors | Česká spořitelna Board of Directors
Foreword by the Chairman of the Board of
Directors
Pavel Kysilka
Chairman of the Board
of Directors
allowing to charge Pilsen Regional Transit cards at our ATMs. In
collaboration with the Prague Transit Company we have launched
the pilot operation of a new generation of contactless ticketing
machines. We have also significantly enhanced the security of
online card payments by running the 3D Secure service which confirms each Internet transaction with an SMS code. In addition, ČS
clients may easily make an appointment for a specific time at any
branch using the “Lístkomat” mobile application. In appreciation
of a highly innovative project for the sale of mortgage loans via
Facebook, Česká spořitelna received the FLEMA Media Awards
prize for the best use of digital media.
Česká spořitelna was the first bank on the market to offer a special
mobile application BUSINESS 24 Mobile Bank for corporate
clients. A broad range of services and products available through
SERVIS 24 and BUSINESS 24 internet banking is one of the
Company’s strengths, which is reflected in the growing number
of users.
Dear Ladies and Gentlemen, Shareholders and
Colleagues,
From the macroeconomic perspective, 2014 saw moderate economic recovery and increased confidence of household consumers,
which benefited Česká spořitelna as one of the key banks of the
Czech economy. New technologies and increasingly sophisticated
customers using the advantages of the highly competitive banking
environment in the Czech Republic, represented the crucial trends
in the banking industry over the past year.
The client demands necessitate the ongoing implementation of
technological innovations by the Company. Since March 2014,
Česká spořitelna as the only bank on the Czech market has enabled
its clients to pay bills and invoices at ATMs using QR codes.
We have received the Czech Innovation award for a functionality
Technological innovations have been introduced at branches as
well. In August, we opened an experimental branch in Pilsen Lochotín, designed to improve the client service model, expand
self-service facilities for standard banking operations, and enhance
the quality of the advisory services provided. In September, Česká
spořitelna expanded the Video Banker service to other cities with
the aim to facilitate the execution of simple banking transactions
by clients. A very important step was the launch of personal banking under the BLUE brand, targeting more affluent clients. It is
designed to help meet customers’ financial needs at every stage of
their life, from the start of working career to retirement.
Česká spořitelna strives to be a socially responsible organization
and, in line with these endeavours, has engaged in a number of
charitable and philanthropic projects. In 2014, we distributed
through the Nadace České spořitelny foundation more than
CZK 17 million to 57 projects with the aim to provide assistance
to people in need who live on the fringes of society. Ongoing
modifications of Česká spořitelna branches should facilitate visits
of clients with disabilities, and ATMs have been adapted to serve
9
The Year 2014 in Review | Foreword by the Chairman of the Board of Directors | Česká spořitelna Board of Directors
blind customers. These projects confirm that social engagement
is not just about giving money, but about volunteerism and the
direct engagement of our employees who have been increasingly active. The success of the proper focus of our activities is
reflected in the Bank without Barriers 2014 award received in the
Fincentrum national competition. We cannot omit the activities
of the other Česká spořitelna foundation, Nadace Depositum
Bonums, dedicated to improving the quality of teaching in Czech
schools, while the foundation’s project Elixir for Schools aims
to enhance the attractiveness of technical subjects. Within the
framework of the project, 21 regional centres have been established in the Czech Republic where teachers can share their ideas
and rent special teaching aids free of charge.
The list of awards received by Česká spořitelna in 2014 is long
and we value all of them equally. I cannot not mention the eighth
title Bank of the Year 2014 awarded to the Company by the professional magazine The Banker, the Most Trustworthy Bank 2014
title awarded by the professional portal Fincentrum (which we
won for the eleventh year in a row), and the TOP Employer title
in the banking and insurance category awarded by the Czech
Students Union.
Česká spořitelna has achieved its success thanks to the excellent
work of its employees, to whom a great debt of gratitude is
owed. It is also the result of a long-term model of responsible
lending and effective cost management. This long-standing system assures stability and will provide for our continued growth
in the future and allow us to celebrate the 190th anniversary of
the founding of Česká spořitelna’s direct predecessor that we
will mark in 2015.
Pavel Kysilka
Česká spořitelna Board of Directors Chairman
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Foreword by the Chairman of the Board of Directors | Česká spořitelna Board of Directors | Česká spořitelna Supervisory Board and Audit Committee
Česká spořitelna Board of Directors
as of 2014
Pavel Kysilka
Date of birth: 5 September 1958
Chairman of the Board of Director
Reference address: Olbrachtova 62, Prague 4, Czech Republic
Mr. Kysilka is a graduate of the Faculty of Economics of the
University of Economics in Prague. He additionally completed
postgraduate research in 1986. From 1986 to 1990, he worked
at the Institute of Economics of the Czechoslovak Academy
of Sciences. From 1990 to 1991, Mr. Kysilka served as chief
economic advisor to the minister for economic policy. In the
1990s, he held various positions culminating in the post of executive governor of the Czech National Bank, where he also oversaw the splitting of the Czechoslovak currency in 1993. From
1994 to 1997, he served as an expert advisor to the International
Monetary Fund and participated in the launch of national currencies in several eastern European countries. In the 1990s,
he served as president of the Czech Economic Society. Before
joining Česká spořitelna, Mr. Kysilka worked for Erste Bank
Sparkassen (CR) in Prague as the executive director responsible
for IT, administration, human resources and services. In 2000,
he joined Česká spořitelna as its chief economist and a member
of the Senior Management Team
On 5 October 2004, the Česká spořitelna Supervisory Board
appointed Mr. Kysilka as a member of the Board of Directors and on
1 January 2011 he became the chairman of the Board of Directors.
Membership in bodies of other companies: the managing board
of the University of Economics in Prague, the managing board
of the Smetanova Litomyšl music festival, the managing board
of the Nadace Leoše Janáčka foundation in Brno, the managing
board of the Česká spořitelna Foundation, the managing board of
the Depositum Bonum Foundation, the supervisory board of the
Dobrý anděl Foundation.
Wolfgang Schopf
Date of birth: 12 August 1961
Vice-chairman of the Board of Directors
Reference address: Olbrachtova 62, Prague 4, Czech Republic
After completing high school and graduating from a business academy, Mr. Schopf embarked on his career in 1980 at Girocentrale und
Bank der österrechische Sparkassen AG, where he was responsible
for accounting and reporting. He joined Erste Bank in 1997 as
head of accounting. In 2004, Mr. Schopf became director of the
Controlling Division at Erste Group Bank, and later he managed
the performance management program. He held these positions
until leaving Erste Group Bank in July 2013.
Mr. Schopf has been the vice-chairman of the ČS Board of Directors
since August 2013. He is responsible for financial management.
Membership in bodies of other companies: Depositum Bonum
Foundation.
Daniel Heler
Date of birth: 12 December 1960
Member of the Board of Directors
Reference address: Evropská 2690/17, Prague 6, Czech Republic
Mr. Heler is a graduate of the Prague University of Economics,
Faculty of International Trade. He held internships with J.P.
Morgan, Goldman Sachs, S. Montague, UBS, N.M. Rothschild,
Shearson and Bayerische Hypobank. He also completed a number
of courses on global banking, banking profitability, retail banking
strategy, and treasury and risk management. He has worked in the
banking sector since 1983. He first held various positions in the
Department of Foreign Exchange and Money Markets and then,
in 1990, he became director of the Financial Markets Division of
Československá obchodní banka Praha. In 1992, he was appointed
treasurer and member of the Board of Directors of Crédit Lyonnais
Bank Praha. In 1998, he was appointed as a member of the Board
of Directors of Erste Bank Sparkassen (CR) responsible for financial markets. In 1999, he became vice-chairman of the Board of
Directors of Erste Bank Sparkassen (CR).
Since 1 July 2000 Mr. Heler has been a member of the Board of
Directors of Česká spořitelna responsible for asset management
and retail investment products, corporate finance and investment
banking, treasury sales and trading, capital markets, balance sheet
11
Foreword by the Chairman of the Board of Directors | Česká spořitelna Board of Directors | Česká spořitelna Supervisory Board and Audit Committee
management, financial institutions and correspondent banks. Since
1 January 2011, he has also been responsible for corporate clients,
real estate business, municipal financing and trade financing.
Membership in bodies of other companies: Burza cenných
papírů Praha, a. s., Erste Corporate Finance, a. s., Investiční
společnost České spořitelny, a. s., Česká spořitelna Foundation,
brokerjet ČS.
Karel Mourek
Date of birth: 20 September 1967
Member of the Board of Directors
Reference address: Olbrachtova 62, Prague 4, Czech Republic
Mr. Mourek is a graduate of the Czech Technical University in
Prague and later obtained his MBA from Thunderbird University
in the US. He began his career in 1992 at Creditanstalt, and later
joined the Corporate Client Division of Bank Austria Creditanstalt
Czech Republic. From 2001 to 2011, he worked at Česká spořitelna,
where he managed the Commercial Center. From 2011 to July
2013, Mr. Mourek worked at Erste Group Immorent as the Board
of Directors member responsible for risk management.
Mr. Mourek has been a member of the ČS Board of Directors since
1 August 2013. He is responsible for risk management.
Membership in bodies of other companies: s Autoleasing, a. s., Erste
Reinsurance S.A.
Jiří Škorvaga
Date of birth: 26 April 1963
Member of the Board of Directors
Reference address: Olbrachtova 62, Prague 4, Czech Republic
Mr. Škorvaga graduated from the Institute of Chemical Technology
in Prague and did postgraduate studies at the Czechoslovak
Academy of Sciences. He joined Česká spořitelna in 1998 when
he assumed the post of head of the ČS Card Center. In 1999, he
was appointed head of retail banking. In 2000, he became responsible for retail banking business management and joined the Senior
Management Team.
From November 2006, Mr. Škorvaga was a member of the Board
of Directors responsible for retail banking. Mr. Škorvaga’s tenure
as the Board of Directors member ended in November 2014.
12
Česká spořitelna Board of Directors | Česká spořitelna Supervisory Board and Audit Committee | Macroeconomic Development in the Czech Republic in 2014
Česká spořitelna Supervisory Board and
Audit Committee
as of 2014
John James Stack
Date of birth: 4 August 1946
Chairman of the Supervisory Board
Reference address: Olbrachtova 62, Prague 4, Czech Republic
Mr. Stack, a US citizen, studied mathematics and economics at
Iona College (BA, 1968) and specialized in finance and management at the Harvard Graduate School of Business Administration
(MBA, 1970). From 1970 to 1976, he worked in the New York city
administration. From 1977 to 1999, he worked for Chemical Bank,
which later merged with Chase Manhattan Bank, where he held
a number of key posts, including executive vice-president. From
2000 to 2007, Mr. Stack was chairman of the Board of Directors and
CEO of Česká spořitelna. From 2005 to 2007, he was a member of
the Czech Banking Association. At present, Mr. Stack is a member
of the Supervisory Board of Erste Group Bank and serves on the
boards of a number of US companies.
On 22 April 2013, Mr. Stack was elected a member of the
Supervisory Board. He has been Supervisory Board chairman since
September 2013.
Membership in bodies of other companies: Erste Group Bank AG,
Ally Bank, Ally Financial Inc., Mutual of America Capital
Management Corp., Depositum Bonum Foundation.
Andreas Treichl
Date of birth: 16 June 1952
Vice-chairman of the Supervisory Board
Reference address: Am Graben 21, Vienna, Austria
From 1971 to 1975, Mr. Treichl studied economic sciences at
Vienna University. After completing a training program in New
York, he began his career at Chase Manhattan Bank in 1977 He was
later seconded to Brussels (1979–1981) and Athens (1981–1983).
In 1983, he first worked for Die Erste. In 1986, he became CEO at
Chase Manhattan Bank in Vienna, which purchased Credit Lyonnais
in 1993. In 1994, he was appointed to the administrative board of
Die Erste. In July 1997, he was appointed CEO. In August 1997, the
shareholders approved a merger with GiroCredit, in which Die Erste
had acquired a majority interest in March 1997. Under his management, Erste, which until that time had been strictly a local savings
bank, became a leading financial services provider in Central and
Eastern Europe with a focus on retail and SME clients. In addition
to serving as Board of Directors chairman and CEO of Erste Group
Bank, Mr. Treichl’s other responsibilities include strategy, group
communications, human resources, audit and investor relations.
Mr. Treichl has been a Supervisory Board vice-chairman since
September 2013.
Membership in bodies of other companies: Erste Group Bank AG,
Erste Bank der oesterreichischen Sparkassen AG, Donau
Versicherungs-AG VIG, Sparkassen Versicherung AG VIG,
MAK – Oesterreischisches Museum fuer Angewandte Kunst,
Österreichischer Sparkassenverband, Felima Privatstiftung,
Ferdima Privatstiftung and Haftungsverbund GmbH.
Peter Bosek
Date of birth: 5 June 1968
Member of the Supervisory Board
Reference address: Am Graben 21, Vienna, Austria
Mr. Bosek graduated from Vienna University Law School and
began his career in Vienna. He joined Erste Bank der oesterreichischen Sparkassen AG in 1996, starting in its Legal Department
before moving on to the Real Estate and Retail departments. Since
2007, Mr. Bosek has been the Board of Directors member responsible for Retail banking, Corporate clients, the Public sector, Real
Estate, Marketing and Product Management.
Mr. Bosek has been a member of the Supervisory Board since
April 2013.
Membership in bodies of other companies: Erste Bank der
Oesterreichischen Sparkassen AG, AVS Beteiligungsgesmbh,
Bausparkasse der Oesterreichischen Sparkassen AG, Donau
Versicherungs AG VIG, EBV – Leasing Geselschaft mbH & Co
KG, Paylife Bank GmbH, Erste Asset Management, Erste Group
Immorent AG, Oesterreichische Kontrollbank AG, Sparkasse
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Česká spořitelna Board of Directors | Česká spořitelna Supervisory Board and Audit Committee | Macroeconomic Development in the Czech Republic in 2014
Versicherung AG VIG, S Wohnaubank AG, Salzburger Sparkasse
Bank AG, Tiroler Sparkasse Bank AG Innsbruck, Oesterreichische
Sparkassenverband, Finanzpartner GmbH, ERP – Fond, Wien 3420
Aspern Development AG and AWS Gruenderfonds Beteiligungs
GmbH & Co KG.
Eliška Bramborová
Date of birth: 4 December 1953
Member of the Supervisory Board
Reference address: Olbrachtova 62, Prague 4, Czech Republic
serving as an advisor to the Czech Ministry of Agriculture during
agricultural privatization. Since 1993, he has worked in agriculture management and participated in Phare, Sapard and Leader +
titles projects designed to support agricultural system cooperation
throughout the EU. He belongs to lobbying groups in Austria and
the EU whose aim is to support sustainable development in land
use and agriculture.
Mr. Hardegg has been a member of the ČS Supervisory Board
since May 2002.
Mrs. Bramborová is a graduate of the Charles University Law
School. She began her career at ČKD, and has been an attorney
with Česká spořitelna since 1992. She is currently the head of the
Corporate Banking Legal Support Department. Mrs. Bramborová
also represents ČS on the Legal Committee of the Czech Banking
Association and is a member of the Internal Committee of the Česká
spořitelna, a. s. Ladies’ Investment Club.
Membership in bodies of other companies: Die Erste österreichische Spar-Casse Privatstiftung and Nadace Depositum Bonum.
Mrs. Bramborová was elected to the ČS Supervisory Board by the
Bank’s employees in October 2008.
Mr. Jirásek is a graduate of the Czech Technical University in
Prague and completed postgraduate studies at the University of
Economics in Prague. He began his career in 1974 at ČKD Kutná
Hora, where he worked in several interesting positions in distribution and sales before becoming foundry manager. In 1994, he joined
Česká spořitelna, where he held management positions until 2000.
After ČS joined Erste Group Bank, he moved into a non-managerial
position as a sales trainer. In 2007–2014, he was chairman of the
Bank’s Trade Union Committee and since June 2014 he has been
vice-chairman of the Group-wide Trade Union Committee.
Stefan Dörfler
Date of birth: 24 February 1971
Member of the Supervisory Board
Reference address: Boersegasse 14, Vienna, Austria
Mr. Dörfler graduated from the Vienna University of Technology
in 1995, where he majored in technical mathematics. After completing his studies, he joined GiroCredit Bank AG Sparkassen in
Vienna. He has been with Erste Bank since 1997, the year that
Erste Oesterreichischen Sparkassen and GiroCredit merged. In
1999 and 2000, he headed up the Interest Rate and Currency
Derivatives Department, and from 2000 to 2004 he was director
of bond trading and sales. From 2004 to 2009, he was a manager
in the Erste Bank Capital Markets Division, and has been the head
of this department since 2009.
Mr. Dörfler was elected to the ČS Supervisory Board by the General
Meeting in April 2012.
Membership in bodies of other companies: Erste Securities
Polska S.A., Erste Asset Management, RINGTURM
Kapitalanlagegesellschaft m.b.H., VBV-Pensionskasse AG,
Zertifikate Forum Austria and Die Erste österreichische Spar-Casse
Privatstiftung
Maximilian Hardegg
Date of birth: 26 February 1966
Member of the Supervisory Board
Reference address: Am Graben 21, Vienna, Austria
Mr. Hardegg is a graduate of the Faculty of Agricultural Sciences
in Weinhenstephan, Germany. From 1991 to 1993, he worked at
AWT Trade and Finance Corp., a part of Creditanstalt Group, while
Zdeněk Jirásek
Date of birth: 31 July 1950
Member of the Supervisory Board
Reference address: Masarykova 645, Kutná Hora, Czech Republic
Mr. Jirásek was elected to the ČS Supervisory Board by the Bank’s
employees in October 2008.
Membership in bodies of other companies: KH Tebis, s. r. o.
Herbert Juranek
Date of birth: 13 November 1966
Member of the Supervisory Board
Reference address: Am Graben 21, Vienna, Austria
Mr. Juranek is a graduate of the Commercial College in Austria –
Bruck/Leitha. He began his career working in securities at
Girozentrale der österreichischen Sparkassen. At GiroCredit Bank,
A.G., his focus was on derivatives clearing and technical support.
From 1996 to 1998, he worked for Reuters Ges.m.b.H. overseeing
all sales and risk management activities of Reuters in Austria. Since
1999, he has held various positions at Erste Group Bank, first in
securities operations and then as CEO of the companies ecetra
Central European e-Finance and ecetra Internet Services AG, where
he was responsible for broker services and internet banking for
Erste Group Bank. In March 2003, he became executive director
responsible for Erste Group Bank’s Organization and IT and, in
July 2007, he was promoted to Chief Operating Officer and became
a member of the Erste Group Bank Board of Directors responsible for group-wide organization, IT, asset management, operations
14
Česká spořitelna Board of Directors | Česká spořitelna Supervisory Board and Audit Committee | Macroeconomic Development in the Czech Republic in 2014
and processing. Since 2008, his group-wide responsibilities have
included the Card Center and centralized procurement.
Mr. Juranek was a member of the ČS Supervisory Board from April
2005. He stepped down from the position of the Supervisory Board
member as at 11 December 2014.
Aleš Veverka
Date of birth: 26 January 1973
Member of the Supervisory Board
Reference address: Národních hrdinů 3127/7, Břeclav, Czech
Republic
Mr. Veverka graduated high school in Břeclav before doing
a Business Academy qualification course in economics. After
completing his studies and his basic military service, he joined
the Břeclav branch of Česká spořitelna in 1983 as an advisor to
MSE clients. He has continued to devote his time to MSE clientele.
In June 2014 he was elected chairman of the Group-wide Trade
Union Committee.
Mr. Veverka was elected to the ČS Supervisory Board by the Bank’s
employees in November 2011.
The members of administrative, management and supervisory bodies represent that they are unaware of any potential conflicts of
interest between their statutory duties and their personal interests
or other obligations.
Audit Committee
John James Stack
Date of birth: 4 August 1946
Chairman
Reference address: Olbrachtova 62, Prague 4, Czech Republic
Mr. Stack, a US citizen, studied mathematics and economics at
Iona College (BA, 1968) and specialized in finance and management at the Harvard Graduate School of Business Administration
(MBA, 1970). From 1970 to 1976, he worked in the New York
city administration. From 1977 to 1999, he worked for Chemical
Bank, which later merged with Chase Manhattan Bank, where he
held a number of key posts, including executive vice-president.
From 2000 to 2007, Mr. Stack was chairman of the Board of
Directors and CEO of Česká spořitelna. From 2005 to 2007, he
was a member of the Czech Banking Association. At present,
Mr. Stack is a member of the Supervisory Board of Erste Group
Bank and serves on the boards of a number of US companies.
Mr. Stack has been a member of the ČS Supervisory Board
since April 2013.
Since 23 April 2014, Mr. Stack has been a member of the Audit
Committee. On 23 June 2014 Mr. Stack became chairman of the
Audit Committee.
Maximilian Hardegg
Date of birth: 26 February 1966
Vice-chairman
Home address: 2062 Seefeld-Kadolz, Austria
Mr. Hardegg is a graduate of the Faculty of Agricultural Sciences
in Weinhenstephan, Germany. From 1991 to 1993, he worked at
AWT Trade and Finance Corp., a part of Creditanstalt Group, while
serving as an advisor to the Czech Ministry of Agriculture during
agricultural privatization. Since 1993, he has worked in agriculture management and participated in Phare, Sapard and Leader +
titles projects designed to support agricultural system cooperation
throughout the EU. He belongs to lobbying groups in Austria and
the EU whose aim is to support sustainable development in land
use and agriculture. In May 2002, he became a member of the ČS
Supervisory Board.
Mr. Hardegg has been a member of the Audit Committee since
7 October 2009.
Stefan Dörfler
Date of birth: 24 February 1971
Vice-chairman
Reference address: Boersegasse 14, Vienna, Austria
Mr. Dörfler graduated from the Vienna University of Technology
in 1995, where he majored in technical mathematics. After completing his studies, he joined GiroCredit Bank AG Sparkassen in
Vienna. He has been with Erste Bank since 1997, the year that
Erste Oesterreichischen Sparkassen and GiroCredit merged. In
1999 and 2000, he headed up the Interest Rate and Currency
Derivatives Department, and from 2000 to 2004 he was director
of bond trading and sales. From 2004 to 2009, he was a manager
in the Erste Bank Capital Markets Division, and has been head of
this department since 2009.
Mr. Dörfler was a member of the Česká spořitelna Supervisory
Board from April 2012. He stepped down from the position of the
Audit Committee member as at 23 April 2014.
Mario Catasta
Date of birth: 6 September 1954
Member
Home address: Sankt Veit-Gasse 11, Austria
Mr. Catasta completed his studies at the University of Economics
in Vienna in 1980. After his dissertation was accepted in 1982,
he joined an audit firm affiliated with the Austrian National Bank
as an independent auditor. He has been with Erste Group Bank
since 1987, first as an internal auditor and, since 1983, as head
of Compliance. In 1994, he became head of the Internal Audit
Department. Following the merger between Erste österreichischen
Sparkassen and GiroCredit, he became head of the Corporate Client
Department. He has been Erste Group Bank’s director of internal
audit since 2003.
15
Česká spořitelna Board of Directors | Česká spořitelna Supervisory Board and Audit Committee | Macroeconomic Development in the Czech Republic in 2014
Mr. Catasta has been a member of the Audit Committee since
7 October 2009.
Zlata Gröningerová
Date of birth: 4 July 1957
Member
Home address: Počernická 3226/2f, Prague 10, Czech Republic
Mrs. Gröningerová completed her studies at the University of
Economics in Prague, where she became an academic assistant at the Faculty of Finance and Credits after graduating in
1982. From 1991 to 1993, she was deputy CEO of the company SUEZ INVESTIČNÍ, a. s., where she specialized in advisory and consulting in enterprise search and acquisition. From
1995 to 2004, Mrs. Gröningerová held several senior positions
(director of equity investment financing, senior director of
credit transactions and business specialists) and was a member
of the Board of Directors and Banking Counsel of the Czech
Consolidation Agency. From 2005 to 2007, she was CEO and
Board of Directors chair of Technometra Radotín, a. s. From
2007 to 2009, she provided economic and organizational advisory services. She then joined the Czech Ministry of Finance
as a section director. Since early 2011, she has worked in the
International Division of ČEZ, a. s. Her professional residencies
and courses include a managerial development program and
residencies in corporate finance and financial management at
universities in Paris and Lyon.
Mrs. Gröningerová has been a member of the Audit Committee
since 7 October 2009.
16
Česká spořitelna Supervisory Board and Audit Committee | Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014
Macroeconomic Development in the Czech
Republic in 2014
In 2014, the Czech economy reaffirmed its previous recovery
recorded at the end of 2013 and continued to grow at a steady
pace, which was also manifest in real wage growth and falling
unemployment. Low inflation during 2014 stemmed primarily from the developments in the eurozone and decreasing oil
prices.
The Czech economy grew by 2% due to domestic demand and
exports. Household consumption was driven by climbing real
wages and falling unemployment. As a result, consumer confidence increased. From the perspective of households, the risk
of job loss began to decline significantly, so consumers began to
spend more. The situation improved considerably for companies as
well. The volume of new orders, industrial production and business
confidence grew, accelerating investment activity of businesses.
Exports substantially contributed to economic growth throughout
the year, driven by the developments in Germany and partly also
by the weaker Czech crown. However, due to the dynamics of
imports supported by strong domestic demand for consumption
and investments with high import intensity, the aggregate growth
contribution of exports and imports, i.e. net exports, was negative,
with the exception of Q1.
The price growth in the Czech economy was very slow in 2014. The
average inflation rate of 0.4% was the lowest since 2003. The main
factors of the moderate price increase comprised energy prices and
the trend in the eurozone, which produced inflationary pressures
on the Czech economy. In H2, a marginal rise in food prices and
falling oil prices that gradually impacted fuel prices contributed
to the foregoing factors. Conversely, adjusted inflation excluding
fuels, which best reflects demand-pull inflation in the economy,
was in the black for the first time since 2009, and thus partially
offset the aforementioned factors. The adjusted inflation was also
affected, in addition to increased domestic demand, by the exchange
rate regime of the Czech National Bank (“CNB”), which due to
the weakening of the Czech crown against the euro increased the
prices of imported goods.
The labour market saw an upturn in 2014. The unemployment rate
declined and nominal wages grew. Due to the low inflation, real
wages of households also increased, which sparked the acceleration
of the growth rate of personal consumption.
With regard to the low inflation rate of the Czech economy, CNB
retained its key interest rate at technical zero in the course of 2014,
while it upheld its exchange rate commitment of CZK 27/EUR, set
during the November 2013 intervention. The weaker Czech crown
gradually affected the prices and thus helped the Czech economy
avoid deflation in 2014.
In 2014, revenue from Czech government bonds fell to an all-time
low, in particular due to the gradual easing of monetary conditions
by the European Central Bank. The domestic factors contributing
to lower yields of Czech government bonds included substantial
excess liquidity in the Czech banking sector and, in respect of the
commitment to stabilize the absolute amount of the central government’s indebtedness, the low emission activity of the Ministry
of Finance.
17
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
Report of the Board of Directors on the
Company’s Business Activities and
Statement of Financial Position
for 2014
Consolidated Results of Operations*
Despite the difficult environment of permanently low interest rates
and a highly competitive environment, Česká spořitelna enjoyed
one of its best results in its long history. The year 2014 was
exceptional not only by the size of the net profit but also
by a number of small and major successes in various areas
of banking business.
The key autumn event for Česká spořitelna and its clients was
the start-up of the personal banking service under the brand
BLUE. New unique retail projects and tools, such as Loan 5+5,
Dobrá rada (Good Advice) or Videobanker were launched during
the year. The aim of the laboratory branch, which launched
its activities in Plzeň Lochotín, is the live testing of a new
service model, expanding self-service devices for routine banking
operations and improving the quality of provided advisory services.
In January 2014, Česká spořitelna was the first bank in the
Czech Republic to present sale of mortgages via Facebook
and repeated this successful sale in June 2014. Despite low interest
rates, Česká spořitelna is able to successfully offer to clients a large
scale of investment instruments headed by mutual funds, and bring
about a remarkable yield.
Česká spořitelna develops an IT environment that allows running new exceptional applications for clients, such as the
mobile application for corporate and business clients “BUSINESS
24” and Lístkomat, thanks to which the clients may arrange for
meetings at branches or withdraw directly a virtual ticket. Česká
spořitelna is also preparing intensively for paperless operations.
Česká spořitelna is successful in major commercial transactions and trades, such as bond issues of the Czech corporations Net4Gas or Pegas Nonwowens, whereas Net4Gas was
the largest Czech crown emission of corporate bonds for
the last decade. The Bank has been successfully developing the
programme TOP INNOVATIONS, which is focused on financing
of innovative projects and developing activities of companies and
makes use of advantageous programmes offered by the European
Investment Bank or the European Investment Fund. In cooperation with the parent Erste Group Bank, Česká spořitelna successfully implemented the initial public offering (IPO) of shares of
the Lobkowicz Group Breweries. This was a key transaction in
the Czech capital market, upholding the role of Česká spořitelna
as the leading stock issue manager in the Czech Republic. Česká
spořitelna participated in the arrangement of the long-term club
funding for Škoda Transportation, a leading European manufacturer
of means of transport.
Česká spořitelna applies a disciplined approach to its operating
expenses, which decreased for the sixth consecutive year. Česká
spořitelna won for the eighth year running the prestigious
award “Bank of the Year”, granted by The Banker magazine from the Financial Times media group. The expert jury of
the competition Best Innovator 2014 organised by A.T. Kearney
appreciated Česká spořitelna’s approach to innovations and
declared it the “Major Surprise of the Competition”. Last but not
least, Česká spořitelna feels its social responsibility to the society,
which is reflected in the educational activities of the Foundation
Depositum Bonum, the Floccus Award of the Foundation of Česká
spořitelna or the winning of the award “Bank without Barriers”.
Income Statement
As of 31 December 2014, Česká spořitelna reported consolidated net profit after minority interests of CZK 15.1 billion
under International Financial Reporting Standards. The net result
decreased by 3% compared to net profit of CZK 15.6 billion in
2013. Although the net profit dropped, this was one of the most
profitable years in the history of Česká spořitelna. The operating
result, which demonstrates the bank’s power to generate
profit, kept its stable level of CZK 22.9 billion.
Due to the growth of equity and the decreased profit, the return on
equity (“ROE”) indicator dropped to 14.5%. The return on assets
* Transformovaný fond penzijního připojištění se státním příspěvkem Česká spořitelna – penzijní společnost, a. s. (“ČSPS Transformed Fund“), including additional pension insurance
funds with state contribution in Pillar III, was deconsolidated from the consolidated unit of Česká spořitelna as of 31 March 2014. The ČSPS Transformed Fund continues to be managed
by the ČS Financial Group via Česká spořitelna – penzijní společnost, a. s.
18
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
Net profit and operating result (CZK billion)
Cost/Income ( %)
125
30
26.7
25.3
25.6
22.9
24
18
16.6
13.6
12.1
22.9
100
75
15.6
15.1
12
50
6
25
0
2010
Net profit
2011
2012
2013
2014
0
44.3
41.1
41.8
41.9
42.0
2010
2011
2012
2013
2014
Operating result
(“ROA”) indicator grew to 1.7% due to a reduction of the balance sheet amount. In 2013, these values were 16.2% and 1.6%,
respectively. Profit before taxes and minority interests (gross profit)
decreased by 4% year-on-year to CZK 18.7 billion.
Lower net interest income, the favourable impact of an ongoing
reduction in operating expenses, an increase of trading result and
a reduction of other operating result, all impacted the Bank’s consolidated results.
Total operating income comprising net interest income, net fee
and commission income, net trading result, dividend income and
rental income dropped slightly, i.e. 1% to CZK 41.1 billion. The
share of non-interest income in total operating income increased
to 35%. Operating expenses continued to decrease, by
3% in 2014 to CZK 18.2 billion. Operating expenses for 2014
and for the comparable period newly contain also a statutory
contribution to the Deposits Insurance Fund in the amount of
CZK 0.9 billion. Thanks to the decrease of the expenses,
income from loans and receivables to customers thus fell 5%
to CZK 24.9 billion.
Interest income from held-to-maturity debt securities, which was
the second most important item, has also decreased. This was due
to the maturity of bonds with higher interest yield in the course of
the years 2013 and 2014. On the other hand, Česká spořitelna
managed to reduce interest expense on its own bonds, which
was due to a decrease of their volume, and on deposits.
Composition of operating income (CZK billion)
35
31.2
30.4
29.7
27.9
28
27.5
21
14
the cost/income ratio improved from 45.0% to 44.3%.
12.2
12.4
11.8
11.3
11.3
7
Net interest income traditionally represents for the major part
of operating result. The interest rates in the Czech market and
throughout Europe have been long kept at the historically lowest level. Since November 2012 the Czech National Bank base
rate has remained at a historic low of 0.05% (technically zero);
therefore, even the growth of client loans did not outweight further decrease of interest margins. The net interest
2.9
0
2010
2011
2012
Net interest income*
Net trading result
2.7
2.2
0.5
2013
2.3
2014
Net fee and commission income
* Net interest income includes dividend income and rental income
margin on interest-bearing assets dropped from 3.61% to 3.53%.
Given these circumstances, net interest income dropped by 2%
to CZK 26.7 billion.
Net fee and commission income, another substantive component
of operating result, witnessed a stable development and totalled
CZK 11.3 billion in 2014, which is the same result as in the comparable period. Net fee and commission income from securi-
Credit transactions generate more than 80% of interest income.
ties transactions and management of client assets reported
positive development due particularly to increased client interest
The portfolio of loans and receivables to customers
increased year-on-year by 2%, with mortgage loans the fastest
growing component. Although Česká spořitelna successfully
improved the interest margins of retail mortgages and kept stable
margins for corporate segment, the achieved interest margins
reflect the highly competitive banking environment. Interest
in investment or pension funds. Sales of insurance products were
also successful.
The year-on-year drop of net income from payment transfers and
lending business is affected by falling prices of financial services
due to continuously growing use of internet banking and discounted
19
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
programmes and products by clients. Despite the year-on-year
growth in the volume and number of card transactions (for instance,
the volume of card transactions executed by Česká spořitelna’s
cards increased in 2014 by further 9%), income from card transactions did not increase adequately, mainly due to growing fees paid
to card associations. Net fee and commission income from payment transfers is the primary source of total net fee income,
representing more than one half of the total.
Česká spořitelna once again reported an outstanding net trading
result. Net trading and fair value result grew year-on-year by
5% to CZK 2.3 billion. Income from trading in securities, particularly from their sales and result from assets at fair value is behind
this good result. In contrast, profit from derivatives and foreign
exchange transactions decreased.
Rental income, including primarily rental income from investment properties and dividend income from shares held by Česká
spořitelna, have kept their stable level and have contributed together
CZK 0.8 billion to total operating result.
circulation costs, or costs of production of chip cards. The factors
behind cost reduction include namely new procurement
procedures for suppliers and setup of banking processes,
which increase effectiveness of the Bank’s activities. In con-
trast, IT expenses increased due to the implementation of projects
evoked by requirements of regulatory authorities. Another increase
was reported by the statutory contribution to the Deposits Insurance
Fund. At 31% of total other administrative expenses, data processing (IT) expenses continued to be the single largest item. This is
followed by expenses for office space at 19%, statutory contribution
to the Deposits Insurance Fund at 13%, advertising and marketing
costs at 12% and transactions costs at 11%.
Depreciation and amortisation of tangible/intangible fixed assets
reports a long-term decrease, falling slightly 1% to CZK 2.3 billion
in comparison with 2013 due to lower tangible asset depreciation
for real estate and hardware.
Structure of operating expenses (CZK billion)
Personnel expenses
8.6
Composition of operating result (CZK billion)
47 %
Net fee and commission income
11.3
27 %
Net trading result
2.3
6 %
2%
65 %
Rental income and dividend income
0.8
Depreciation and amortization
2.3
13 %
5 %
35 %
Statutory deposits insurance contribution
0.9
Other administrative expenses
6.4
Net interest income
26.7
Rigorous and consistent cost management was reflected in
further decrease of operating expenses by 3% to CZK 18.2 bil-
lion. Expressed in absolute terms, this represents savings of almost
CZK 0.5 billion. Hence, Česká spořitelna has been continuously
reducing its operating expenses for six consecutive years. General
administrative expenses (operating expenses) comprising personnel expenses, other administrative expenses, depreciation and
amortisation and newly also the deposit insurance contribution,
which is also reported in the comparable period.
Personnel expenses of Česká spořitelna dropped year-on-year by
4% to CZK 8.6 billion, due primarily to a decrease of headcount in
2013. Personnel expenses represent almost one half of all general
administrative expenses.
Net gains/losses from financial assets and liabilities not measured
at fair value through profit or loss reached CZK 0.1 billion and fell
year-on-year by almost one third, primarily due to lower realized
gains on held-to-maturity financial assets.
Net impairment loss on financial assets not measured at fair value
through profit or loss (i.e. net charge for provisions for balance sheet
credit risks) reached CZK 3.7 billion, which corresponds to a slight
year-on-year increase by 2 %. Thanks to the foregoing, the
provisioning coverage of non-performing loans improved
to the high level of 80%.
The decrease of the balance of other operating result is caused by
a number of factors, such as gains and losses from the revaluation and sale of fixed assets, creation and release of other provisions, impairment of tangible assets, risk insurance, revenue from
non-banking services, etc.
The total volume of other administrative expenses was successfully
reduced by 2% to CZK 7.3 billion, particularly due to a reduc-
Statement of Financial Position
tion of expenditure on office space and business transactions, which comprise, for instance, material consumption, cash
The consolidated balance sheet total of CZK 902.6 billion at
31 December 2014 represents a year-to-year decrease by 7%. This
20
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
significant decrease was caused by the deconsolidation of the ČSPS
Transformed Fund in the volume of CZK 50.7 billion. Absent the
effect of the deconsolidation, the balance sheet total would have
been reduced by 2%.
In a year-to-year comparison, assets also changed in structure and
the volume of loans and receivable to customers and the portfolio of available-for-sale financial assets saw an increase, while
the volume of loans and receivables to credit institutions, including
deposits with the Czech National Bank (CNB), and held-for-trading
financial assets fell. Absent the effect of the ČSPS Transformed
Fund, deposits from customers and the volume of total equity
increased slightly on the liabilities’ side of the statement of financial
position. The volume of deposits from banks and of the Bank’s debt
securities issued fell.
881.6
892.6
100
80
65.7
73.5
69.3
66.8
67.3
2011
2012
2013
60
40
20
0
2010
2014
in the household mortgage loan portfolio. In absolute
Total assets (CZK billion)
1 000
Proportion of net client loans to client deposits ( %)
terms, the portfolio grew by CZK 12.1 billion.
920.4
968.7
902.6
800
600
400
Despite growing demand for consumer financing, it has not
yet prevailed over the repayment volume; therefore, the total
volume of consumer lending provided by the Bank, including overdraft and credit card loans, reported a 5% drop to
CZK 66.2 billion. Low mortgage rates have negatively impacted
the client’s interest in construction savings loans, the total volume of which contracted year-on-year by 5% to CZK 35.3 billion (net value).
200
Net loans and receivables to customers (CZK billion)
0
2010
2011
2012
2013
2014
600
Assets
Loans and receivables to customers are the most important part
of active business and generate the largest portion of operating
result. The total volume of net loans and receivables to
customers increased by 2% to CZK 500.0 billion in 2014
owing mostly to an increase in mortgage loans.
Given the growth in client loans and decrease in deposits due to
the deconsolidation of the ČSPS Transformed Fund, the proportion of net client loans to client deposits increased from 67.3%
to 73.5%. Absent the effect of the ČSPS Transformed Fund,
this share would have represented 72.3% in 2013. Net loans
and receivables to customers account for 55% of all lending
transactions.
The volume of net loans and receivables to households and
unit owners associations (SVJ) totalled CZK 285.7 billion,
representing year-on-year growth of 4% or CZK 11.2 billion.
Mortgage loan business has continued its successful growth
record. Considerably low interest rates, a favourable real
estate market and, above all, Česká spořitelna’s active loan
policy yielded growth of more than 8% (to CZK 167.2 billion)
500
440.9
465.6
489.2
500.0
2013
2014
470.9
400
300
200
100
0
2010
2011
2012
Net consolidated loans and receivables to corporate clients
reported a stable development in comparison with 2013. Their
total volume amounted to CZK 194.0 billion, which indicates
a slight decrease of nearly 1%. The most favourable development was reported by corporate mortgage loans, and both leasing
companies of Česká spořitelna, sAutoleasing and Erste leasing,
were also successful.
Loans and advances to the public sector and municipal clients
reported a relatively significant growth, with their total net value
increasing year-on-year by 5% to CZK 20.4 billion.
21
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
The quality of the loan portfolio again reported year-on-year
improvement in 2014. The share of non-performing loans on the
total loan portfolio fell year-on-year from 4.6% to 4.4%. The risk
profile of the loan portfolio has been improved, among others, by the continuously growing share of mortgage loans
to households. The coverage of risky loans by credit provisions
increased to 80%, representing a year-on-year growth of two percentage points in comparison with 2013. The total loan portfolio
coverage, including collateral, is close to 119%.
Loans and receivables to credit institutions fell year-on-year to
almost one half and amounted to CZK 38.5 billion. Absent the effect
of deconsolidation of the ČSPS Transformed Fund, they would have
been reduced by one third.
The aggregate balance of the portfolio of financial assets at fair
value, available-for-sale securities and held-to-maturity securities
decreased 4% year-on-year to CZK 256.6 billion. Absent the effect
of deconsolidation of the ČSPS Transformed Fund, it would have
grown 8%. This was due primarily to an increase in the volume of
available-for-sale securities.
Bonds comprise as much as 99% of the securities portfolio. Česká
spořitelna prefers to purchase bonds issued by government
institutions, which account for a total of 91% of all bonds. The
proportion of bonds issued by financial institutions is 8%. Securities
and investment certificates make up only 1%, or CZK 1.6 billion, of
the portfolio. In the interest of maintaining stable net interest
income, bonds in the held-to-maturity portfolio account for
more than 59% of the securities portfolio.
The volume of investment property has been reduced intentionally and fell 12% year-on-year to CZK 7.3 billion. The objective
of investment property is to generate rental income. Česká
spořitelna also invests in investment property funds (within the
Financial Group) open to institutional investors and focused on
the Czech and Slovak markets.
The aggregate balance of property, equipment and other assets and
intangible assets decreased 3% year-on-year to CZK 17.0 billion, of
which land and buildings comprise 69%. Intangible assets increased
8% to CZK 3.6 billion due, in particular, to licenses and software
acquisitions. Amount of tangible assets fell 5% to CZK 13.4 billion.
The aggregate proportion of tangible and intangible assets to total
assets is 2%.
Liabilities
Deposits from customers (primary) have traditionally been
the key source of funding for Česká spořitelna’s lending:
these currently comprise 75% of all liabilities, meaning that Česká
spořitelna is considerably independent on interbank funding.
Client deposits, including those measured at fair value, totalled
CZK 680.4 billion. Deposits from customers fell 6% year-on-year
due to the deconsolidation of the ČSPS Transformed Fund with the
client savings amounting at the end of 2013 to CZK 49.8 billion.
Absent this effect, the client deposits volume would have increased
0.5%. The high volume of deposits from customers also contributes
to the strong liquid position of Česká spořitelna.
Long-term customer deposit growth testifies to the trust shown
in Česká spořitelna. Absent the effect of deconsolidation of
the ČSPS Transformed Fund, deposits from households
and unit owners associations grew 4% to CZK 515.4 billion.
Deposits on Giro Accounts and Personal Accounts (“Osobní
účet“ and „Osobní konto“) have increased. Savings products,
such as ČS Savings, are also popular. In contrast, construction
savings deposits decreased.
Corporate client deposits (excluding unit owners associations)
increased 6% in 2014 to CZK 114.9 billion, solely on current
accounts. In contrast, public sector deposits fell significantly 29%
to CZK 50.2 billion due to the high volume of loans accepted
in repo transactions in 2013, which decreased year-on-year by
CZK 11.3 billion.
Foreign currency deposits grew to 6% of total client deposit volume; the euro is the currency of choice, followed by the US dollar.
Deposits from customers (CZK billion)
800
670.3
672.3
704.5
726.6
2012
2013
680.4
600
Structure of assets (CZK billion)
Net loans and receivables to customers
500.0
55%
Financial assets
256.6
29 %
400
200
Loans and advances to credit instituti10 %
2 %
4 %
ons and the CNB 93.0
Property and equipment and intangible assets
17.0
Other assets
36.0
0
2010
2011
2014
The balance of deposits from banks measured at amortised costs
comprising loans, term deposits and current account balances
fell 25% year-on-year to CZK 54.6 billion for the year ended
22
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
31 December 2014. A significant reduction in interbank loans
was also attributable to a decrease in loans received in repo
transactions.
Business Activity
Retail Banking
The total volume of debt securities issued decreased 22% year-onyear to CZK 23.8 billion, including issued structured bonds at fair
value and subordinated debt. A number of mortgage bonds, senior
and subordinated debt issues gradually fell due, hence the decrease.
The total value of mortgage bonds as a stable and long-term source
of funding for mortgage transactions in the consolidated balance
sheet is CZK 19.2 billion.
large and diversified clientele is hard to be found in any market
in the Czech Republic. A key to the maintenance of such
wide client base, whose requirements regarding service quality
and efficiency will increase with the passage of time, is to offer
services via client-focused segments.
In past years, Česká spořitelna issued subordinated bonds to shore
up its capital base. Given its strong capital adequacy associated with the addition of retained earnings to equity, total
Years past have shown that the targeted segmentation of
services accounts for an essential increase in client satisfaction. An example is the Erste Premier service, focusing on
subordinated debt was reduced to CZK 0.3 billion through
gradual repayment.
Equity attributable to owners of the parent, comprising sub-
scribed capital, capital reserves, the legal and statutory reserve,
revaluation gains or losses (especially on the cash flow hedges
and portfolio of available-for-sale securities), exchange rate
differences and retained earnings, totalled CZK 107.8 billion.
In a year-to-year comparison, equity reported further increase
of 7% due, in particular, to an increase in retained earnings.
The equity attributable to owners of the parent represents 12%
of all sources.
Standalone capital adequacy ratio reported to the CNB in
compliance with applicable rules reached 17.7%. The Bank
did not use the possibility offered in Article 26/2 of the CRR
directive, and did not include interim profit and credit risk
adjustments in the original Tier 1 capital in its report to the
CNB for 2014. The Bank meets the capital adequacy in accordance with all CNB’s requirements. In 2013, the standalone
capital adequacy ratio of the Bank was also 17.7%. The total
capital used in the calculation of capital adequacy amounted
to CZK 75.5 billion and the risk exposure to CZK 426.0 billion, compared with CZK 75.7 billion and CZK 426.7 billion,
respectively, for 2013.
Structure of liabilities (CZK billion)
Deposits from customers
680.4
75 %
Deposits from banks
54.6
6%
3 %
4 %
Debt securities issued
23.8
Other liabilities
36.0
12 %
Equity attributable to owners of the parent
107.8
Retail banking services offered by Česká spořitelna and its
subsidiaries are used by 5 million clients. An entity with such
clients who seek the highest service quality, or the new service
“Blue”, launched in autumn 2014, targeting clients with their own
vision which they wish to realise. The retail banking objective for
future years is to maintain and to enhance the leading position in
the client base, particularly by improving the quality of segmented
service, a focus on profiling services to small and medium-sized
enterprises and adjusting the product offer to the broadest private
clientele.
Beside the large client base, retail banking in Česká spořitelna
may be also proud of its large scale of products covering all possible needs of its clients in the field of financial services. Anyone
perceives as natural the offer of current accounts and savings
products on the deposits side, or, on the loans side, the offer of
housing services, where the CS Mortgage won the award of the
best mortgage in 2014, as well as different consumer financing variants, including consumer loans, credit cards, overdraft
and American mortgages. Česká spořitelna has a large and
developed portfolio of investment services, beginning with
numerous types of mutual funds, through real estate investments
and pension savings up to individualised portfolio management.
Last but not least, Česká spořitelna also offers insurance products.
Each product is updated regularly as a part of improvement of
services and client approach.
In addition to banking services, the Financial Group of Česká
spořitelna has begun to offer to its clients further products allowing
them to reduce their living costs and helping increase their wealth.
The first example of this kind is the sale of cheaper energies
by the subsidiary Erste Energy Services.
In accordance with its new strategy, Česká spořitelna focuses on
the development of digital banking, serving clients by means of
distribution channels best suited for them, offering custom-made
products and services at the places where they actually need
them. The ultimate aim is to provide to clients continuously increasing and better quality, to motivate employees
towards improvement of customer satisfaction and to improve
the perceived quality of services provided by the Bank to
its clients.
23
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
Products and Services by Segment
Česká spořitelna presented in autumn an innovation in the
form of a new private banking service offered under the brand
BLUE, which is designated for people for whom the quality
of their life is a priority and who have their own vision which
they wish to realise.
BLUE brings about a new standard to the private banking services. It is entirely unique with regard to its complexity
and ability to resolve effectively all financial needs of the client.
Using BLUE, the clients will obtain high quality and flexible banking service, with regular replacement of products
and services in accordance with their current needs, where
they will receive professional advice concerning the solution of
their financial situation and obtain interesting information from
the world of finance.
The basis of the BLUE service is the private banker, who
takes regular care of the client and his finances, prepares a Personal
Financial Plan, representing a strategy for the client to achieve his
financial objectives. The Bank’s flagship product is the Private
Account ČS, which offers everything a client could need for daily
cash management. Together with the new brand, clients may use
special “BLUE” debit and credit cards.
BLUE also rewards clients for their activity. Every client using
selected products of Česká spořitelna can receive the entire BLUE
service for free.
Another novelty brought by BLUE is the Busy banking service,
offered to clients who have their own banker at the branch
but do not want to visit them personally with every minor
problem. The banker informs them by telephone, e.g. about the
approaching expiration of a guaranteed deposit and agrees with
them on further steps; thereafter, the banker will take all such
steps and the client will only approve the relevant request in
SERVIS 24.
Clients using the BLUE service who are busy or cannot
visit the branch may use the Virtual Branch service. By the
end of 2014, the Virtual Branch had as many as 1,200 satisfied
clients in its portfolio. These clients use services of their own private banker by telephone, e-mail and internet banking, all within
extended business hours, each business day from 7 am to 10 pm.
Clients using the BLUE service expect high quality of provided
services; therefore, the Bank provides a unique Quality
Guarantee: if a client is unhappy with the quality of a service,
the fee for that service will be refunded. At 140 selected branches
of Česká spořitelna, BLUE service clients are looked after by 580
private bankers and 50 investment specialists.
A part of the updated strategy of Česká spořitelna consists of the
multichannel distribution of products; the first significant step in
this direction is the establishment of the experimental branch in
Plzeň-Lochotín, where the Bank tests a new method of services to retail clients. Such new service methods do not consist
only in a modern appearance of the branch, but particularly in
a new method of interaction with clients, aiming at a reduction of
routine transactions executed at the branch, which consequently
offers the consultants an opportunity to carry on sales discussions
with clients about more complex topics in order to increase customer satisfaction and sales effectiveness. Successfully tested
activities will be further spread among the branch network. The
result of the first phase of this project is a significant reduction
of the waiting period for cash services at the branch, as well as
growing client satisfaction.
Another output of the experimental branch is the videobanker service, which is designated primarily for clients who
do not use payment cards and internet banking. At the first glance,
the device looks as a touch screen ATM. Client verification is
made by means of the identity card and specimen signature.
The client is then connected to the videobanker, sees him on
the screen and the videobanker sees the client. Both of them
can naturally communicate discreetly by means of earphones.
The clients appreciate most the speed and the related savings of
their time; they need not stand in the queue to the counter, the
service is operated on Monday to Friday from 8 am to 6 pm. The
videobanker service is perceived by clients as very simple and
accessible and the clients also appreciated the professional and
humane approach of videobankers.
Česká spořitelna launched in October a service under the title
Za důvěru (For Loyalty), which is designated for both new and
existing clients. Subject to the fulfilment of simple conditions, the
client receives a free account. By the end of 2014, 110 thousand of these programmes were activated.
At the year-end, Česká spořitelna prepared a new type of insurance for senior clients, which will be sold at selected branches
in the first quarter of 2015. The Bank also supports IT education
of seniors and their knowledge of banking products.
The Erste Premier brand provides above-standard banking services in Česká spořitelna. This service is designated for
clients with higher income or net wealth that need a proactive
approach of the banker, who becomes the client’s advisor in all
areas of his finances. Comprehensive top-notch banking service
provided in the Bank’s own branches, based on high quality and
professional level of all provided services and with regard to
client needs also on consistent discretion of the service, is a must.
In 2014, the number of Premier Centres grew to twelve, which
improved the accessibility for a larger client group. New Premier
Centres were opened in Liberec and Prague 6. Premier Centres
are situated in a total of nine cities - Brno, Ostrava, Plzeň, Hradec
Králové, Olomouc, České Budějovice and Liberec and four of them
in Prague. By the end of 2014, the Bank served more than 20 thousand Erste Premier clients.
24
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
The essence of the Erste Premier service remains the same as in the
previous year; despite that, the Bank prepared several innovations,
such as the use of remote on-line signature via SERVIS 24. This
further simplifies the services provided to clients, because they
can discuss their requirements with their Premier Banker over the
telephone and can confirm them from any place where they have
access to their internet banking.
Another innovation is the new You Invest fund with a variant focused
on investment for children, “Me To You Invest”. Investments
constitute a substantial part of the Erste Premier service;
therefore, consulting services are further developed in this
area. Drafting of personal financial plans represented in 2014 one
of the key pillars of Erste Premier.
Supplementary services have also further developed. Clients
receive a periodical quarterly Premier Magazine, which provides
information about upcoming innovations, news from the world
of finance and lifestyle, including introduction of Erste Premier
clients. Other developments concerned The Premier Benefit Club,
which has further increased the number of business partners offering benefits to Premier clients. The club prepared regularly special
offers of social events, relaxation and offers for the whole families of Premier clients. Such offers are presented in its monthly
Newsletter.
The correct direction of the development of the Erste Premier service is checked by Česká spořitelna directly with clients through
relationship bankers, as well as by satisfaction surveys. Thanks
to this approach, the Bank obtains suggestions of further development and confirms real satisfaction of its Premier clients.
The private banking service offered under the Erste Private
Banking brand represents the top quality offer to clients of
Česká spořitelna, which provides under this brand private banking services for the richest clientele, focused on financial investment. Erste Private Banking provides comprehensive service
for important clients, first-class advisory services, an individual
approach to each client and maintains a personal relationship
Financing of Private Housing Needs
In 2014, Česká spořitelna once more achieved success at the mortgage loan market. Clients’ interest in mortgage loans has been
continuing. The interest rates, which had been low, decreased further, the real estate market continues to be favourable and Česká
spořitelna’s ever active lending policy was supported by
qualified advisors and regular special offers.
Česká spořitelna was very innovative. In January, it became the
first bank in the Czech market to introduce mortgage sales via
Facebook. This unique event met with major success particularly
among young clients and was therefore repeated in June. Thanks
to both events, people took up mortgage loans in the total value of
more than CZK 1.4 billion. This innovation was also appreciated
by the professional jury, which granted to the Bank the FLEMA
Media Awards for the best use of digital media.
In the course of the year, Česká spořitelna included in its offer
a new “Hypotéka na pronájem” (Rental Mortgage), designated for
financing the purchase of a residential building or a family home
with non-residential premises, a flat or a recreation facility under
favourable terms of the housing loan and to rent out such premises. Moreover, Česká spořitelna prepared for entrepreneurs the
“Obratová hypotéka” (Turnover Mortgage), which allows documenting income for the purpose of assessment of a loan application
on the basis of turnover shown in the tax return. Thanks to this
product, real estate investments have become much more convenient for entrepreneurs.
The ČS Mortgage also allows quick funding of the construction
of assembled homes and simplified financing of the purchase of
cooperative or municipal flats without using another property as
a collateral. In case of refinancing a mortgage loan provided by
another bank, Česká spořitelna guarantees favourable interest rate
for up to one year in advance.
with the client through private bankers, based on professionalism, trust and discretion.
Another opportunity is the Premium Mortgage, which rewards client loyalty by guaranteeing a 0.3% interest rate discount for the first
fixing period and rewarding clients for their loyalty by a financial
premium paid at the beginning of each subsequent fixing period,
which may be used by the clients for any purpose.
Despite the slight increase of the number of Erste Private Banking
clients, the value of managed assets increased significantly
both in aggregate and from individual client perspective. Erste
Private Banking continues to be focused on the offer of the management of private client portfolios by professional portfolio
managers with the knowledge of the Czech and the international
financial market.
Another permanent benefits of the ČS Mortgage include the absence
of arrangement and loan administration fees, the possibility to postpone repayment or to change the instalments, the appraisal made
on-line at the branch, the possibility to quickly draw money, to
use money during construction without presenting the invoices
and the possibility to obtain funds up to 100% of the value of the
pledged property.
Erste Private Banking clients also participate in further development of the services by means of feedback given through their
bankers and by satisfaction surveys. It is encouraging that Erste
Private Banking clients are those who express their confidence
and thanks.
As a part of its autumn Mortgage Days, Česká spořitelna
offered to its clients as the sole bank operating in the Czech
market the fixing of the current favourable interest rate for
up to 10 years. The 10-year guarantee of the low interest rate
ensures long-term stability of instalments regardless of potential
25
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
growth of inflation. At the end of the year, Česká spořitelna prepared
a new Advent calendar, where the clients could obtain every day
a selected benefit in relation to their mortgage, whether a guaranteed interest rate, free real estate appraisal or other complementary
services.
In 2014, Česká spořitelna provided more than 22 thousand housing mortgage loans in the total volume of CZK 35.5 billion.
Česká spořitelna also won the appreciation of experts,
who assessed its mortgage as the best in the highly competitive market and granted it the Fincentrum award “ 2014
Mortgage”.
The total portfolio of mortgages to private individuals – households increased 8% year-on-year to CZK 167.2 billion, a significant
year-to-year increase of more than CZK 12 billion. The number of
mortgage loans exceeded 140 thousand and the average maturity
is 23 years; residual maturity is 19 years. The key indicator of
the average loan-to-property value of the entire portfolio
reached 65.9%.
At mid-year, the bank offered to clients who use the
SERVIS 24 Mobilní banka (Mobile Bank) application a possibility to
arrange for the loan and overdraft by means of mobile phone.
Thanks to this innovation, the clients may execute a Loan Agreement
by a few clicks and may have the money available immediately on
their current account. Another innovation presented by the Bank was
the on-line web application by means of which the client can file
a loan application conveniently and comfortably from his own home.
unsecured loans. It is the first loan that will increase the value of
money. The Bank will reward the client for each duly paid
instalment by an amount equal to 5% of the regular monthly
instalment, which will also bear interest at a high 5% rate
on a special savings account. Once the client has repaid the
entire loan, he will receive the whole amount and may use it for
any purpose. This attractive offer proved to be very interesting
for the clients. The 14% year-to-year increase of new sales in
the fourth quarter exceeded even the market growth dynamic.
200
167.2
155.1
139.2
127.6
120
Throughout the year 2014, Česká spořitelna presented a number
of innovative offers with the aim of attracting client interest and
offering to clients something extra. In spring, it was the guarantee
of reduction of monthly instalments or payment of CZK 1,000 to
clients who signed up for Loans Consolidation, which represents
consolidation of more loans to a single loan with a lower monthly
instalment. If Česká spořitelna failed to offer to the client a lower
instalment upon such consolidation, it compensated the client’s time
spent at the branch by a lump-sum remuneration of CZK 1,000.
In autumn, Česká spořitelna presented a unique offer of
Mortgage loans portfolio (CZK billion)
150
presented as the first bank in the Czech market a loan which earns
money to clients.
117.5
90
60
45.1
41.7
39.5
30
0
2010
2011
2012
37.6
2013
36.4
2014
Portfolio of mortgages to private individuals - households
Portfolio of Stavební spořitelna ČS loans
Stavební spořitelna České spořitelny is another important provider
of home financing loans. Given the upswing in mortgage loans
in recent years, there has been less of a demand for construction
savings loans as a partial replacement for mortgage loans. The
total portfolio of bridging loans and constructing savings loans fell
by 3% to CZK 36.4 billion. Bridging loans represent 69% of the
portfolio. The total number of loans at the end of 2014 exceeded
151 thousand.
Financing the Needs or Private Individuals
Although the volume of provided consumer loans has been
growing for the second consecutive year and reached
CZK 21.6 billion in 2014, it has not yet reached the pre-cri-
sis values. Česká spořitelna focused in 2014 primarily on further expansion of sales via alternative distribution channels and
An important part of support of credit cards sales was the tying
of credit cards to the programme Za důvěru (For Loyalty). Within
the scope of this programme, the client may obtain from Česká
spořitelna together with the credit card maintenance of the account
free of charge. Another important step was the launching
of the sale of credit stickers in November, supported by
Total volume of consumer loan portfolio
(CZK billion)
100
82.6
80
77.5
72.5
69.7
66.2
2013
2014
60
40
20
0
2010
2011
2012
26
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
a rewards campaign. Total number of newly sold cards increased
30% year-on-year. The credit sticker is a contactless credit
card in the form of a sticker for the fastest payment method,
which is always at hand. For instance, it can change a mobile phone
to a contactless payment instrument.
The total volume of consumer loans including credit cards and
overdraft facilities fell 5% year-on-year to CZK 66.2 billion. This
indicates that, despite an increase in the volume of new consumer
loans, such increment is not yet enough to cover the payment of
earlier loans.
Private Account
The Česká spořitelna Private Account or, in case of the
BLUE service, the Česká spořitelna Personal Account is
the cornerstone of the product and service portfolio for the
Bank’s private clientele. The fully variable and flexible Private
Account ČS satisfies demand for an individualised account that
can successfully adapt to a client’s changing needs.
The Private Account Premier is used by clients who are served within
the Erste Premier network. The Private Account Premier offers exclusive services. Discretion, top-flight advisory, the premium services
of a Premier Banker and a comfortable environment are assured.
At the 2014 year end, nearly 2.5 million clients were using
a Česká spořitelna Private Account or Personal Account,
a substantial year-to-year increase of more than 154 thousand. The volume of cash deposits increased year-on-year by 24%
to a total of CZK 204.2 billion.
Private Accounts (in thousands)
3 000
2 534
2 500
2 000
2 102
2 265
2 295
2011
2012
2 380
1 500
The ČS Private Account represents the concept of a single
account for a lifetime. This account is designed for all clients:
children, teenagers, students, families and seniors. Naturally,
the basic package includes services such as a payment card and
online or mobile account access. Complementary services are
prepared based on the individual needs of clients. As regards
Private Accounts, the Bank has focused on rewarding
current clients within the above-mentioned programme Za
důvěru, on offers to new clients, simplification of product port-
folio of accounts and naturally on new account functionalities,
such as the multicurrency debit card and a number of other
improvements.
Thanks to the programme Za důvěru, the current and new clients may obtain maintenance of the Private Account free of
charge under simple conditions and for an unlimited period of
time. The programme is very popular and over 110 thousand
clients acquired this benefit by the end of 2014. Thanks to its
sponsoring of the key sports event in 2014, the Olympic Games
in Sochi, Česká spořitelna prepared an attractive offer for new
clients, which were based on success of Czech sportsmen at the
Games. Since these Olympic Games were the most successful
winter Olympic Games for the Czech Republic, the marketing
campaign was also one of the most successful campaigns, which
resulted in the opening of more than 32 thousand new Private
Accounts.
BLUE clients used the ČS Personal Account, which is a modern
account offering to clients for a single price all services required
for active management of their daily finances, together with
all Private Banking Benefits. Discounted complementary services, such as withdrawals abroad, foreign payments, a savings
account, etc., may be purchased to the ČS Personal Account.
1 000
500
0
2010
2013
2014
Investment Products
Česká spořitelna’s long-term strategy is to target the needs of clients and present investment solutions that go as far as possible
toward meeting their demands and expectations. Product innovation
emphasises comprehensibility and quality.
The permanent environment characterised by low interest rates on
classical banking products continued to be favourable in 2014 for
investment of Česká spořitelna. The possibility of obtaining better
yield than the yield available in case of saving deposits attracted client attention, which was reflected positively in an increase of sales
of investment products. Investors were most interested in more
conservative investments products, preferring lower market
risks over the maximum achievable yield. This trend is documented
by the volume of sold bonds, which exceeded CZK 11.5 billion,
with government savings bonds accounting for CZK 0.7 billion.
Low interest rates are also reflected in the creation of structured
products, primarily Premium Deposits and structured deposits,
deriving their premium yields from the developments in the stock,
commodity or currency market with the minimum 100% return on
the nominal value. Despite those complicated circumstances, the
volume of new sales of Premium Deposits exceeded CZK 2.8 billion. The total Premium Deposits balance at the 2014 year end was
CZK 8.9 billion, a 30% decrease year-on-year.
27
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
Stock markets also performed well and created interesting investment opportunities for more dynamic investors, drawing their
attention to direct equity investment. Clients not wishing to submit buy or sell orders electronically can do so on the Prague Stock
Exchange or a foreign stock exchange (including limit orders) at
Česká spořitelna branch offices or by phone. The total turnover
of shares transacted in this manner exceeded CZK 1.2 billion in 2014.
Investment certificates offered by Česká spořitelna did also
very well. Clients were particularly interested in Bonus Certificates
and the Turbo long and Turbo short. The total volume of certificates traded by clients in 2014 was CZK 0.7 billion. The sale of
physical gold was also attractive for clients, who purchased via
Česká spořitelna in 2014 gold ingots for investment purposes
worth close to CZK 90 million.
The year 2014 was favourable again for open-end mutual
funds offered by Česká spořitelna. The continuing favourable
sentiment of past years, which is based on low interest rates,
supported growing sales of funds, particularly of mixed portfolios. The inflow of finances to the funds relied again on
the important component of regular investments. The total
share of regularly sent funds accounted for 23% of the total
sales of retail mutual funds. Nearly one of every two investors
invested regularly in 2014 and the number of such investors is
still rising. The average value of a regular investment amounted
to CZK 2,733.
In summary, the year 2014 can be considered as very positive
in the financial markets; risky assets, as well as interest-rate
investment instruments did well. Positive macroeconomic and
corporate data, particularly from the US, encouraged willingness of investors to invest in more risky assets. An attractive
21.8% increase in value was generated by the Top Stocks
fund, which is focused on global developed markets. In con-
trast, the year 2014 does not come as favourable for Central and
Eastern Europe; particularly the Russian market performance
was adversely affected by sanctions and in the last quarter also
Volume of assets managed by funds of Investiční
společnost ČS (CZK billion):
Bond markets, including the domestic bond market, witnessed
a positive development; the prices of high-quality bonds were
growing with decreasing interest rates. This pleased mainly the
holders of Sporobond certificates, whose funds increased by 6.4%.
Mixed mutual funds of Investiční společnost ČS also performed well; all their risky profiles increased investor funds by
a percentage ranging from 2.9 in case of the Conservative Mix
to 7.7% in the most risky mixed fund Stock Mix. It is also worth
pointing to the major interest of investors in the investments
in the Conservative Mix, whose assets increased last year by
CZK 7.9 billion.
The total volume of assets managed by the funds of
Investiční společnost České spořitelny increased in
2014 by 24% , in absolute numbers by CZK 13.1 billion to
CZK 68.1 billion.
Together with its subsidiary REICO investiční společnost ČS,
Česká spořitelna offers retail clients the possibility of investing
in commercial real estate through the ČS real estate investment
fund, an open-ended mutual fund. The ČS real estate investment
fund is the largest real estate fund for retail clients in the
Czech Republic with capital of CZK 3.8 billion. The portfolio
of ČS real estate investment fund was expanded in March 2014 by
a new acquisition of the Qubix building in Prague-Pankrác. It is
a high quality commercial real estate property mainly comprising
office space. The total number of buildings in the fund grew to
nine commercial properties. Thanks to this acquisition, over 80%
of the value of the real estate portfolio of the funds consists of the
properties of the highest investment degree. The value of the funds
invested in the ČS real estate fund increased in 2014 by 3.6% and
in the last five years by 3.4% p.a. The generated yield confirmed
the stable long-term performance of the funds. This is also evident
from its performance curve, which has been showing for almost
6 years a positive growth. Over 19 thousand clients invested in
the fund in 2014. Values of the buildings in the fund portfolio were stable in 2014 with a significant potential for their
long-term stability.
Savings Products
100
80
68.1
60
by weakening of the rouble related to a sharp fall of oil prices.
Hence, Sporotrend, which is focused on this region, fell by 9.91%.
59.1
51.3
50.3
55.0
Supplementary pension insurance in the third pillar is the most
popular and steadily growing form of long-term savings, which
is provided in the Group of Česká spořitelna by ČS-penzijní
společnost. Although the supplementary pension insurance in
the Transformed Fund was closed to new clients, the volume
of client deposits in the Transformed Fund again reported
high growth, of 11% year-on-year to CZK 55.8 billion.
40
20
0
2010
2011
2012
2013
2014
The volume of finance in complementary pension insurance (DPS)
in the third pillar, which is designated for new clients, continued
to grow in 2014 in all managed funds. The volume of funds in
28
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
the mandatory Conservative Participation Fund, which is
the largest fund in the DPS market, increased three-fold in
2014, i.e. to CZK 1.3 billion. ČS-penzijní společnost was the first
pension insurance company which met in its Balanced Participation
Fund and Dynamic Participation Fund (even in advance) the mandatory obligation to collect in each fund within 2 years after obtaining
the licence to operate the fund at least CZK 50 million. The increase
in value of client funds invested in DPS is among the highest in the
markets and will reach in 2014 in case of the Transformed Fund
one percentage point over the annual inflation rate.
In November 2013, Česká spořitelna offered clients a new savings
account, Savings ČS, making it easier to get a better return on
deposited funds. This new savings account is designed for
both regular and irregular savings. Deposited funds are always
accessible and withdrawals bear no fees. Savings ČS witnessed
Hence, Česká spořitelna - penzijní společnost has become
the leader in the DPS market. More than 50 thousand clients
While the number of passbook accounts is consistently dropping,
it still represents an impressive figure of 1.4 million passbook
accounts. The volume of funds deposited on them was stabilised
at CZK 59.2 billion, which represents a mere 1% decrease.
decided in 2014 to invest in pension security with ČS-penzijní
společnost, and the number of DPS clients grew to 67 thousand. As
regards the number of clients, the DPS market share of ČS-penzijní
společnost exceeds 30%.
In November 2014 the Czech Government decided to cancel pension savings in the second pillar. In connection with the cancellation
of the second pillar, Česká spořitelna - penzijní společnost decided
not to expose its clients to short-term investment risks and the
deposits in all pension funds are not and will not be invested in
accordance with long-term financial strategies and will continue
to be deposited in the money market.
a significant increase in 2014, the number of these accounts
exceeded 200 thousand and the total savings amounted to
CZK 25.6 billion. Another favourite product is the Savings Account
Premier, which reached the volume of CZK 13.0 billion, an 85%
year-on-year increase.
Current and term deposits in foreign currencies total CZK 9.8 billion and have remained stable over the years; the euro and US dollar
are the preferred currencies .
Savings of individuals (CZK billion)
Private and Giro accounts
247.8
48 %
Total assets managed by ČS – penzijní společnost as
of 31 December 2014 amounted to CZK 57.7 billion, which represents a 14% year-on-year increase.
22 %
2%
9 %
Volume of assets managed by ČS – penzijní
společnost (CZK billion):
Construction savings deposits
82.4
Savings deposits including passbook
accounts
112.4
Term deposits
12.9
16 %
1 %
2 %
Current accounts
47.8
Premium deposits
8.9
Other deposits
3.2
80
Small Enterprises and Entrepreneurs
60
57.7
50.7
38.1
40
an effort to support the perception of Česká spořitelna as a bank for
this market segment. The Bank wants to work side-by-side with these
clients and offer valuable advice on how to save money, better support
enterprise growth and take more effective advantage of the banking
services on offer.
42.5
32.4
20
0
2010
2011
2012
2013
Active building the Bank-client relationship in the small enterprise and entrepreneur segment has long been a priority in
2014
Construction savings deposits with Stavební spořitelna ČS
continue to constitute the most significant savings product by volume. At the 2014 year end, Stavební spořitelna ČS
administered more than 790 thousand construction savings
accounts for its clients with a target amount in excess of
CZK 193 billion and a sum saved of CZK 82.4 billion, a 13%
drop year-on-year.
In 2014, Česká spořitelna expanded the offer of current accounts for
firms and entrepreneurs by the Klasik Account, which also includes
overdraft, and the Maxi Account, where the basic price covers the
processing of all e-transactions. Other accounts which have rapidly
won client attention were the savings account for entrepreneurs and
the multicurrency account with a card.
Another new item in the offer is the fast and simple unsecured loan
up to CZK 500 thousand which does not require a proof of the
purpose for which the money is to be used. The loan is approved
29
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
within minutes and the client receives money immediately on
its account. Like other clients, entrepreneurs may also use Loan
Consolidation, thanks to which their monthly instalments of loans
obtained from other banks will be lower. The consolidation will
also make repayment of and accounting for such loans easier.
Entrepreneurs and small firms in selected key branches in
each district can make use of Advisors for Entrepreneurs,
who are specialised in the service of small entrepreneurs. Also
available are Commercial Bankers (Acquirers, Specialists and
Agro Specialists), who can provide services to representatives of
small and medium-sized enterprises, including start-up businesses,
at regularly organised educational events, fairs or workshops.
These advisors are able on a regional basis to cover the
needs of more than 70% of clients in the entrepreneurial
sector.
The support package for start-up entrepreneurs included
in 2014 not only the possibility of free use of the Entrepreneur
Account Klasik for two years and of simplifying significantly
the demanding administrative procedure of incorporation of
the company thanks to the partnership projectzalozfirmu.cz,
but also a possibility of repeated free business plan consultations
or of using of the project prepared by the lean-canvas method with
trained Commercial Bankers. As part of its support of start-up
businesses, Česká spořitelna became a partner in the competition
Rozjezdy roku (Start-ups of the Year), the main objective of which
is to support start-up entrepreneurs to not only realise profit on
their projects, but also, among other things, to give something
back to the community, offer a service that is lacking or contribute
to employment.
The investment loan defended its first place in the Business
Loans category of the Zlatá koruna survey, which means
that Česká spořitelna offers the best loan product for firms and
entrepreneurs. Despite the strong competition of new banks, Česká
spořitelna continues to hold a 30% market share in the segment of
entrepreneurs and small firms.
The cornerstone transaction banking product for the small entrepreneur and small enterprise client segment is the successful
Commercial Account ČS. The number of these accounts is fast
approaching the one hundred thousand mark. The total balance
increased 17% year-on-year to CZK 26.8 billion. The Commercial
Account is not used by entrepreneurs alone; one third of account
holders are legal entities or non-profit organisations.
The total loan portfolio for entrepreneurs and commercial clients
with turnover of up to CZK 30 million was CZK 58.6 billion at
31 December 2014, a 4% increase year-on-year.
Card Programme
The total number of issued active payment cards of Česká spořitelna
exceeded 3.1 million at the year-end 2014, with credit cards
Number of active cards (in thousands)
3 500
3,230
3,234
3,178
3,174
3,144
2 800
2 100
1 400
The Bank has also expanded its package to cover independent professional clients. The offer of current accounts with
better prices and of loans requiring a reduced number of documents and offered for reduced prices was supplemented by a loan
designated for starting-up physicians lacking business history, who
take over a medical practice, furnish their consulting rooms, etc.
Portfolio of loans and receivables to entrepreneurs
and small enterprises (CZK billion, gross value for
the bank)
700
0
442
2010
392
2011
Number of active cards
348
2012
319
290
2013
2014
of which: number of credit cards
ČS card transactions executed with vendors
(issuing)
150
140.0
100
121.8
120
109.3
80
95.9
90
60
59.8
59.6
55.7
56.5
58.6
98.1
105.0
114.7 116.1
90.5
82.4
60
40
30
20
0
0
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Volume of payment transactions with ČS cards in CZK billion
Number of payment transactions with ČS cards in millions
30
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
accounting for 0.3 million. The total volume of payments made
by Česká spořitelna’s cards increased 9% year-on-year to
CZK 114.7 billion. Clients executed on average 77 transactions per
card, 52 of which with vendors. Average annual per-card spending
at vendors exceeded CZK 36 thousand.
The popularity of card payments for internet purchases has been
growing every year. The total volume of purchases made by Česká
spořitelna’s cards for the whole year 2014 amounted to CZK 7.3 billion. This was one of the reasons why Česká spořitelna introduced the 3D Secure service (Verified by Visa, MasterCard
SecureCode), which make online purchases much more secure due
to the cardholder verification. The verifying method used by the
Bank is a non-recurrent password, which is sent to the client during
on-line payment by means of a text message.
Česká spořitelna was a partner of the Czech Olympic team for winter Olympic Games in Sochi. In this respect, the Bank prepared
interesting offers for clients, such as a fan account with a specially
designed debit card Visa Classic. The Visa Europe association
awarded Česká spořitelna for this project the title Best Card
Issuer in the second year of the Visa Awards competition. The Bank
also offered to Erste Premier clients a new debit card MC World Elite
with an elegant black colour design with a decent matted surface
and a silver logo.
A new credit card insurance type has been offered since the beginning of 2014. This innovative insurance of drawn amounts
with a higher coverage for clients replaced the former insurance of repayment ability. Up to the entire outstanding amount
may be reimbursed to the client. Almost 19 thousand clients have
signed up for this new product in the first year of its existence.
The Bank expanded payment card services for commercial and corporate clients in the internet banking service BUSINESS 24. Clients
may apply now online for a change of the limit, may block a lost
or stolen card, arrange for card insurance, etc.
A non-traditional campaign “Your Card Will Also Help” was
organised in August and September in cooperation with the home
for visually impaired Palata. Thanks to payments made by Česká
spořitelna’s payment cards, the Bank donated to the Palata Home
with the help of its clients more than CZK 1million.
At the year-end 2014, almost 950 thousand clients were registered in the multi-partner bonus programme iBOD, more
than 800 thousand of them were clients of Česká spořitelna. In the
iBOD programme, clients collect points for the use of financial
services or purchases from tens of business partners throughout the
Czech Republic. Through this bonus programme, the clients
acquired in 2014 i-points worth more than CZK 350 million.
In 2014, 192 million transactions totalling CZK 145 billion were
carried out at Česká spořitelna payment terminals. This represents
17% growth year-on-year and a 7% increase in transaction volume.
The average transaction amount is decreasing due to the increasingly frequent use of payment cards for smaller purchases and an
increasing number of contactless transactions.
The number of contactless transactions in the payment terminals network of České spořitelny has tripled in comparison with 2013. The bank cooperates with major business partners
in the area of acceptance of contactless payment cards, for example
with Penny Market and BILLA, Datart, IKEA, Sportisimo, C&A
Moda, PetCenter, Alpine Pro and Česká lékárna.
Česká spořitelna has long been the market leader in ATM
network size in the Czech Republic. At the end of 2014, the
Bank operated a total of 1,561 ATMs and payment machines. Česká
spořitelna operates more than 600 ATMs that can accommodate the visually impaired, and these ATMs are continually
increasing in number. Reading of money orders and invoices by
means of bar codes has been also developing and this service is
currently offered at 1,050 ATMs. All ATMs are equipped with the
ČS card network transactions (acquiring)
210
192.4
180
Volume of ČS ATM network withdrawals
163.2
150
145.0
143.8
350
135.3
120
103.1
90
87.4
88.6
307.5
306.7
210
140
30
70
0
2010
310.8
280
109.9
60
0
311.0
303.6
124.9
2011
2012
2013
ČS network payment transaction volume in CZK billion
Number of ČS card transactions in millions
2014
89.6
2010
91.8
2011
93.2
2012
92.9
2013
91.2
2014
Volume of ČS ATM network withdrawals in CZK billion
Number of ČS ATM network withdrawals in millions
31
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
chip card reading technology and meet at the same time the
maximum security requirements for the elimination of risks
of illegal copying (skimming) of payment cards.
Česká spořitelna also expanded its network of deposit ATMs that, in
addition to standard services, enable clients to make cash deposits
to accounts with Česká spořitelna and other banks in the Czech
Republic. There are currently 63 of these machines in operation.
In 2014, clients made over 147 million transactions at ATMs of
Česká spořitelna, with cash withdrawals accounting for 91 million
of those transactions with the total amount of CZK 306.3 billion,
which means that clients withdrew every hour an average amount of
CZK 35 million. The average withdrawal amounted to CZK 3,364.
Česká spořitelna cooperates in its network with major retail chains,
such as Tesco, Kaufland, Ahold, Globus and REWE (Billa, Penny
Market).
Erste Corporate Banking
The Erste Corporate Banking brand is a service that ties together
corporate and investment banking, financial markets and asset management for Česká spořitelna clients.
The level of corporate banking at Česká spořitelna enables
the Bank to best meet the needs and expectations of its
commercial clients in all phases of their life cycle through cus-
tomised solutions. Česká spořitelna’s corporate banking is highly
successful; its advisory and other services report the highest degree
of client satisfaction by all national and international comparisons.
The commercial business is in many respects the fastest growing
activity at Česká spořitelna.
The Bank’s sound business model has been acknowledged by the
host of awards received over the years. Still, the most prestigious
award for Česká spořitelna and Erste Corporate Banking is client
feedback. The ever-improving evaluations of client satisfaction and experience and the high degree of loyalty clients have
confirmed that the Bank is dynamically moving forward on
the right track. Clients are well aware that Česká spořitelna is
there for them in good times and worse as a long-term partner
offering the right solutions and always endeavouring proactively
to help handle the risks and stumbling blocks their businesses face.
Real Estate Financing
Česká spořitelna has been traditionally one of the most
active banks in real estate financing, real estate investments
and mortgage transactions. After many years of decline, the
real estate market continues in its recovery, which started in 2013.
The aggregated non-consolidated balance of Česká
spořitelna mortgages significantly exceed the two hundred billion limit, totalling CZK 228.2 billion at the 2014 year
end for year-to-year growth of 7%. Mortgage loans grew in all
segments; of this amount, loans to entrepreneurs, corporates and
municipalities accounted for CZK 61.0 billion. The quality of the
portfolio remains very high.
Mortgage loan portfolio (in CZK billion. gross value
for the bank)
240
228.2
213.8
200
Česká spořitelna’s corporate banking is a market leader
in public, non-profit and municipal sector financing, real
estate financing, energy and renewable energy project
financing and the use of discounted funding in collaboration
with the European Investment Bank (EIB), Kreditanstalt für
120
80
The Bank confirmed its position as a leading arranger of syndicated
and club loans, participating in the majority of such transactions
on the market. Česká spořitelna was first to market with electricity
price hedging products as well as other energy, metals and commodities hedging products. The Bank can also be proud of the
reliability of its payment system.
0
export projects and plans of Czech enterprises in foreign
markets on virtually every continent. The Bank also actively sup-
ports SMEs acting as indispensable sub-vendors for Czech exporters. Naturally, the Bank offers a number of other banking products
necessary to successfully implement export plans.
193.8
160
Wiederaufbau (KfW), the European Investment Fund and national
agencies such as the Czech-Moravian Guarantee and Development
Bank and EGAP.
Česká spořitelna holds a leading position among banks and financial institutions as an active supporter of established and emerging
Czech exporters. Also in 2014, the Bank financed a number of
186.0
176.4
40
167.2
117.5
35.8
23.1
2010
127.6
34.2
24.2
2011
139.2
155.1
33.9
30.9
23.7
2012
24.8
2013
35.0
26.0
2014
Total mortgage loans
of which: mortgage loans to individuals - households
of which: mortgage loans to entrepreneurs and small enterprises
of which: mortgage loans to medium and large enterprises
Real estate financing within Erste Corporate Banking fully utilises
the know-how of the group-wide Erste Group Immorent team, especially in relation to clients active in Central and Eastern Europe.
Residential construction projects and capital loans for office
and retail properties with a solid track record continue to
be the financing priority.
The Bank maintained its stakes in real estate investment companies for the institutional investors CEE Property Development
32
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
Portfolio 2 a.s. and Czech and Slovak Property Fund B.V. Both
companies are focused mainly on the Czech and the Slovak market.
The investment cycle was adapted in 2014 to reflect the existing situation in the real estate market. The seat of CEE Property
Development Portfolio 2 a.s. was relocated and the internal relations of the company were changed within the scope of ongoing
restructuring and at the same time several commercial and office
projects of both companies in Prague and Bratislava were successfully sold. The Bank also invests in the closed-end real estate fund
Emerging Europe Properties LP (formerly Discovery Group Fund
3C LP), which is currently in the second half of its investment cycle.
Medium-Size Enterprises
A nationwide sales network comprising sixteen sales
points associated in a network of thirteen Regional
Corporate Centres is available to SMEs with annual turnover
of CZK 60 million to CZK 2billion. These regional centres, which
are located in every regional seat, provide enterprises with the
comprehensive top-quality services of the entire Česká spořitelna
Financial Group under the Erste Corporate Banking brand.
Regional Corporate Centres serve commercial clients from the entire
spectrum of industry. In addition, regional specialists in public and
non-profit sector and real estate financing are available to this client
segment. The business model is based on the specialisation
of relationship managers and financial analysts in individual
industries for a better understanding of the circumstances
of specific client businesses, a smoother process for meeting
their needs and, no less importantly, greater efficiency. This effort
has been very well received by clients, significantly strengthening
Česká spořitelna’s position in corporate banking.
In spring 2014, part of the SMEs portfolio was transferred under
administration of the Corporate Clientele division, with the aim of
enhancing further development of those enterprises, particularly by
strengthening the advisory and investment banking services, know
how in capital markets and other.
In 2014, Erste Corporate Banking continued the successful TOP
INNOVATION programme of previous years and implemented in
this programme 230 projects with the volume of CZK 9.4 billion (a
year-on-year increase of 20%). The programme offers funding of
innovative projects and development activities of enterprises
and makes use of favourable programmes offered by the
European Investment Bank or by the European Investment Fund.
Česká spořitelna is the first Czech bank to provide funding as part of the European Investment Bank and European
Commission Risk Sharing Instrument programme and contin-
ues to maintain its leading position in the Czech market in the area of
cooperation with such institutions. The aggregate volume of global
EIB loans used by Česká spořitelna amounted to EUR 1.15 billion.
In cooperation with EIB, the Bank launched in the market
a new Green Energy programme, focused on financing of
energy saving investments. Projects generating at least 20%
of energy savings are supported through Česká spořitelna by
grants provided from funds of the European Union in an amount
equal to 10% of the provided loan. By the end of 2014, Česká
spořitelna granted such subsidised loans in the total amount of
EUR 30 million.
In the interest of supporting enterprise start-up, innovation and
growth, Erste Corporate Banking expanded in 2014 its INOSTART
programme, established in cooperation with the Ministry of
Trade and Industry, to cover the whole territory of the Czech
Republic. The programme is designed to finance operating and
investment needs of start-up companies and combines preferential funding and provision of advisory services relating
to enterprise start-up, creation of a business plan, legal
matters, etc. The funding provided by Česká spořitelna in the
INOSTART programme amounted in 2014 to CZK 87 million.
Česká spořitelna further expanded the family of its popular TOP
programmes, including the continuation of the very successful TOP EXPORT programme focused on sub-vendors of exporters of large investment projects. The TOP ENERGY programme
offers advisory services and funding to energy and heat
generation projects.
Česká spořitelna was the first bank in the Czech market
to expand the internet banking BUSINESS 24 by adding
a mobile application for commercial and corporate clients.
The mobile application allows convenient and safe management
of the company’s accounts on the mobile phone and tablets and
provides a possibility to upload and control of domestic payments,
to execute of foreign exchange transactions, to have continuous
information about account balances and (if required) to find a way
to the nearest branch or ATM operated by Česká spořitelna.
Corporate Clientele
Erste Corporate Banking serves a corporate clientele of both
domestic corporations and large multinational corporations.
Erste Corporate Banking provides corporate clients with a broad
range of top-quality corporate banking products, including specialised investment banking products and services. For clients
with operations both in and outside the Czech Republic,
Česká spořitelna together with the Erste Group is ready to
serve and accompany corporate clients to the countries
in which they operate. Like the SME model, the domestic
corporate segment business model was changed with the aim
of better understanding the dynamics of individual industries.
After the downturn caused by the financial crisis, the signs of
recovery that were already clear in previous two years continued
through 2014. The majority of enterprises saw turnover return
to, and in some cases surpass, pre-crisis levels. Česká spořitelna
is very well prepared to respond to this development and assist
enterprises with financing or advisory services for their growth
and development plans.
33
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
The year 2014 was rich in acquisition activity and Česká
sending e-invoices and e-documents to end consumers in
spořitelna was highly active in supporting its clients with
financing while providing domestic and foreign acquisition
advisory services.
the electronic banking applications (e-invoicing standard no. 29),
enabling invoice issuers to send to the SERVIS 24 Internet banking application, beside e-invoices, also non-payment documents
and offering them a possibility to activate the service. In case
Česká spořitelna responded to the uptick in demand of large
enterprises for investment and operational financing. For exam-
of payment documents, the billing process is linked to the
payment process based on an automatically generated onetime payment order. Since the SERVIS 24 Internet banking
ple, the Bank won the Unipetrol Group’s tender for provision of cash
management services and was selected as one of the principal banks
to provide banking services to the petrochemical and refinery group
PKN Orlen / Unipetrol in the Czech Republic. The provided services
include a three-year multipurpose revolving credit line of CZK 4billion, an intra-day credit line of CZK 1billion, and a comprehensive
cash pooling solution for payment system in Czech crowns.
In 2014, a number of large enterprises took advantage of the favourable
capital markets situation and issued corporate bonds. Česká spořitelna
assisted again with the issues of the majority of Czech corporate
bonds, such as the bonds issued by Net4Gas or Pegas Nonwowens.
Net4Gas, the operator of the Czech natural gas transmission sys-
tem, issued three tranches of bonds in euro and Czech crowns in
the total volume of EUR 710 million. Česká spořitelna acted as the
lead co-manager, documentation and marketing bank for the issue
of 6.5-year bonds of this company with the volume of CZK 7billion,
which is the largest Czech crown issue of corporate bonds
in the last decade. The Bank also acted as a passive co-manager
of the euro part of the bond issue and also became the agent and
creditor in the club financing in the total volume of EUR 400 million.
Pegas Nonwovens, the leading manufacturer of nonwoven textile
in the EMEA region, made an initial issue of bonds in the total volume of CZK 2.5 billion, maturing in November 2018. The actual
subscription volume of this successful transaction was 2.35 times
higher than planned; the strong demand consisted mostly of institutional investors, followed by Erste Private Banking clients and retail
investors. Česká spořitelna acted as the sole arranger of the
issue and the exclusive counterparty in hedging of the interest rate and foreign exchange risk related to the bond issue.
service was launched, clients have received over 500 thousand
documents. Customers can receive e-invoices, e-documents and
insurance premium or subscription payment orders from ČEZ,
E.ON, RWE, Kooperativa, Pojišťovna České spořitelny, SmVak
Ostrava, MAFRA (Mladá fronta DNES and Lidové noviny subscriptions), ČEVAK, Right Power Energy, and Czech Radio (payment of the radio broadcast fee).
Česká spořitelna continues to be the sole bank which offers
this solution on the basis of a consolidated principle and
exchange of e-invoices between businesses . Electronic
invoicing provides to companies the benefit of secure electronic
sending of invoices and significant savings of time and costs. The
@FAKTURA 24 service has already processed over 1 million
transactions.
As a part of improvement of services provided to the corporate clientele, Česká spořitelna decided to manage more systematically client experience with Erste Corporate Banking.
Therefore, it created a team from among the existing employees in several corporate banking departments, which consistently monitors client experience and satisfaction with Erste
Corporate Banking services and proposes improvement measures, participates in their introduction and in the improvement
of effectiveness of internal processes and services provided to
corporate clients.
Loans provided to corporate clients (in CZK billion.
gross value for the bank. excluding mortgage
loans)
90
As a part of its comprehensive services to corporate clients, Česká
spořitelna also provided debt advisory services and consultations
regarding the acquisition and maintenance of company rating.
ČEPS a.s., the state-owned operation of the Czech power transmission system, defended successfully for the third consecutive
year its A2 credit rating by Moody’s. By means of its Prague-based
Debt & Rating Advisory department, Erste Group provided exclusive advisory services to ČEPS in acquiring the best possible rating
in 2012 and has been working systematically with ČEPS in the
maintenance of such rating.
Česká spořitelna, a leading innovator in Cash Management,
is continuing to develop unique solutions. A prime example is
@ FAKTURA 24. Česká spořitelna was the first bank on
the Czech market to implement the banking standard for
79.4
79.4
75.5
75
68.7
60
58.2
62.4
70.9
69.0
68.2
51.3
45
30
15
0
13.8
12.5
2010
2011
13.1
2012
12.2
2013
13.1
2014
Portfolio of loans to SME
Portfolio of loans to large enterprises Portfolio of loans to large enterprises
Portfolio of loans to large municipal clients 34
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
Aside from the slight increase in operational financing, there was
resurgence in investment, corporate acquisitions and export financing in the large multinational corporate segment, and this was also
reflected in loan activity.
organisations but also by providing for their financial needs. For more
information – refer to the CSR part
Service for the Public and Non-profit Sector
focused in 2014 particularly on advisory services concerning the management of assets in relation to church restitutions.
istration agencies and semi-budgetary organisations established by
them is beneficial for both parties. Its cooperation with clients
is based on long-term communication and extensive knowledge of
client needs. The offer of standard products and services of Česká
spořitelna is appropriately complemented with services offered by
its subsidiaries, such as advisory services in the field of infrastructure and subsidies or assistance in the administration of public contracts. The offer of products and services always respects current
needs of clients.
Česká spořitelna offers public sector clients standard banking
services as well as an ever more popular and always evolving offering
Česká spořitelna confirmed again in 2014 that the longterm partnership with public administration and self-admin-
Česká spořitelna participated in syndicated financing for Pražská
plynárenská (Prague Gas Distribution Authority) in the amount of
CZK 4.1 billion. By means of a note issue programme, the Bank
provided to the statutory city of Liberec funds in the amount of
CZK 0.7 billion. Other examples of the extensive range of provided services include the hedging of oil prices and interest
rate hedging of the note programme for Dopravní podnik
hlavního města Prahy (Prague Transportation Authority),
brokering of sales of electricity to the City of Sušice and Hospital of
Sušice and setting an external rating for the City of Písek.
Česká spořitelna also provides financing for housing co-operatives
and apartment owner associations. The product offering focuses on
comprehensively meeting the needs of clients, in particular to finance
renovations, privatization purchases and new home construction.
Although government subsidies for apartment blocks were minimal
in 2014, loans provided by Česká spořitelna increased 14% year-onyear to CZK 19.4 billion.
More than 100 new projects amounting to CZK 350 million were
financed in 2014 in cooperation with the German development bank KfW Bankengruppen as a part of the programme
of Financing Energy Savings in Apartment Blocks. The financed
projects are supported by a European Union grant in the amount
equal to 10% of the loan provided. This programme is unique in the
Czech Republic and is only offered by Česká spořitelna. By the end
of 2014, Česká spořitelna received almost 200 financing requests
totalling CZK 850 million, of which loans provided amounted to
CZK 600 million.
Česká spořitelna offers to its clients from the public sector and
non-profit organisations individual solutions of their financial
needs by means of a network of specialist banking advisors.
The Bank also cooperates with its long-term partners from the nonprofit sector through the Česká spořitelna Foundation. Česká spořitelna
also focuses on the development of social enterprise, not only by means
of special educational programmes for social enterprises and non-profit
Česká spořitelna is also a strategic partner of churches and
religious societies. A significant part of services to those clients
of comprehensive advisory services in cooperation with its
subsidiary Erste GRANTIKA Advisory. This primarily comprises
advisory services in subsidies, financial matters and managerial issues.
Česká spořitelna also continues to cooperate successfully
with the European Investment Bank in the public and nonprofit sector. The current activity is represented by a global loan and
involvement of Česká spořitelna in the subsequent grant programme
launched by the European Commission under the title Municipal
Infrastructure Facility.
Sale of Financial Market Products to Corporate
Clients
Česká spořitelna provides financial advisory services in the Czech
Republic to large international and local corporations and to SMEs.
As regards financial markets, Česká spořitelna possesses
high-quality analytical and commercial background allowing
providing not only reliable execution of transactions but also
the analysis and advice in structuring and timing of hedging transactions. Česká spořitelna’s long-term strategy, focused
on offering a wide range of well-priced customized products, has
proven itself by generating a slight increase in transaction volume
and assuring customer satisfaction with the services provided despite
a tough economy.
The interest of commercial clients focused in 2014 primarily
on the exchange rate of Czech crown. The intervention regime,
its length and method of its termination affected strategic decisions
concerning the management of foreign exchange risk of exporting and
importing companies. The intervention exchange rate, as a new parameter of hedging strategies, was manifested by an increasing demand
for non-linear solutions. After several years of slump, currency options
have begun to occupy once again a prominent place.
The significant decline of the prices of oil and oil derivatives in the
second half of 2014 further increased client interest in hedging of commodity prices. In addition to the established hedging of prices
of motor fuels, electrical energy and gas, Česká spořitelna
also performed well in the sale of hedging of industrial metals
prices and agricultural commodities.
Debt Securities and Equity Instruments Trading
In 2014, Česká spořitelna was one of the leading stock and bond
traders in the Czech Republic and continues to strengthen its leading
35
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
position for institutional clients. Long-term confidence is a principal advantage of Česká spořitelna and the reason why it
continues to confirm its leading position in stock trading
among banking entities. As the lead manager, Česká spořitelna
launched in the market two new issues: Stock Spirits Group and
Lobkowicz Group Breweries. Both issues further expanded investment opportunities. It is also important to mention that the issue of
the Lobkowicz Group Breweries generated funds in the amount of
CZK 368 million, which enabled the company to proceed with its
further expansion plans. Hence, Česká spořitelna fulfilled one the
key capital market functions.
The Czech bond market was characterised by a decline in interest
rates throughout the entire yield curve. The repo rate of shorter-term
notes reached 0.05% and the longer part of the curve up to the
fifteen-year bonds was aligned below 1%. Due to a decrease of
interest rates, institutional investors generated once again sound
profits and thanks to high capital gain on their bond portfolios,
clients acquired very good return.
Financial Institutions
In 2014, Česká spořitelna continued its successful sales
of products and services to current customers and, thanks
to its acquisition of several high-profile clients, confirmed
its position as a leading provider of value-added services to
financial institutions. The Bank further deepened its cooperation
with insurance companies and pension funds and developed its
collaboration with investment companies and their funds. Services
provided to these clients emphasised new payment methods in the
area of cash management, enabling the Bank to focus on additional specialised services, like depositary or custody services and
brokerage of dividend and coupon payments. The Bank achieved
a further year-to-year increase in the number of clients from among
non-banking financial institutions.
In the area of correspondence banking, Česká spořitelna continued
to be an important provider of payment solutions in the domestic and
in foreign currencies. In collaboration with the other Erste Group
members and based on the joint platform, Česká spořitelna
is becoming increasingly involved in central European payment solutions for prominent banking institutions as well as for
local banks. When it comes to custody services in Czech crowns,
Česká spořitelna was successful in several difficult tenders organized by banking clients. This meant that the number of accounts
kept for banks, and the volume of transactions performed via these
accounts, continued to grow in 2014.
Asset Management for Institutional Clients
Česká spořitelna manages over CZK 110 billion in assets for institutional clients. Assets in custody increased in volume by nearly
13% year-on-year. Česká spořitelna’s clients include mainly financial institutions, i.e. pension funds, life-and non-life insurers, health
insurance companies, foundations, churches, municipalities, corporate clients, housing cooperatives and trade unions. According
to the Capital Market Association, Česká spořitelna is the market
leader in asset administration for third parties with the market share
exceeding 60%
Once again, yield curves decreased significantly in 2014 both in
the Czech Republic and in the world. The level of base interest
rates fell to a technical zero. In this environment of unprecedentedly low interest rates, asset management yielded clients average
returns of 2.07%, which is equal to the weighted performance of
adopted benchmarks.
Depositary
Česká spořitelna remained in 2014 one of the market leaders in the
provision of depositary services in the Czech Republic. As opposed
to 2013, the number of supervised funds declined slightly from 102 to
94, mostly due to the newly adopted tax legislation, which resulted in
the exit of some market subjects in the segment of qualified investor
funds. Despite the reduced number of funds the total assets
managed by the depositary increased by CZK 25.5 billion to
CZK 203.1 billion, a 14% increase year-on-year.
Custody
Česká spořitelna provides security custodial services not only as
a depositary bank or as part of client portfolio management, but also
as a separate service. Clients are primarily financial institutions,
corporate clients, municipalities holding equity participations and
other entities investing in securities. Overall, a significant yearon-year growth was reported in asset volume, thanks to several
new acquisitions, growing investments of the existing clients and
strengthening foreign markets.
Settlement Agent and Securities Administration
Česká spořitelna is the most important provider of services related
to settlement of dividend and coupon payments. In 2014, the
Bank brokered 846 thousand settlements at a total volume
of CZK 88 billion, including buybacks of mutual fund units.
Česká spořitelna brokered, among others, payment of the dividend
for ČEZ, a. s., O2 Czech Republic, a. s. and Philip Morris. Česká
spořitelna has also maintained a significant position for several years
now as a provider of coupon settlement and calculation agent services for bond issues. It not only maintained, but slightly improved,
this position in 2014, acquiring issues of several prominent companies, such as Cetelem ČR, a. s., Pegas Nonwovens SA and České
dráhy, a. s., for its portfolio as a settlement and calculation agent.
EU Office of Česká spořitelna
The activities of the EU Office of Česká spořitelna concentrated
in 2014 mainly on the 10th anniversary of the entry of the Czech
Republic into the European Union. On this occasion, the EU Office
of ČS organised in cooperation with the Office of the Government
of the Czech Republic and the Union of Industry and Transport
a conference “Entrepreneurial Forum: 10 Years of the Czech
Republic in the EU”, designated for corporate clients of Česká
spořitelna. The conference was held in the Liechtenstein Palace in
Kampa, with the participation of more than 140 guests and under the
patronage of the Prime Minister Bohuslav Sobotka. In addition to
36
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
the Prime Minister, the leading speaker was Herman van Rompuy,
chairman of the European Council.
Another major success was witnessed by four regional conferences
held in Prague, Brno, Ostrava and Hradec Králové, which were
organised by EU Office jointly with Erste Grantika Advisory. The
key topic was the new EU subsidy period of 2014–2020. The same
topic is reflected in the report “Cohesion Policy 2014–2020 – the
Most Part of Money to CEE”, issued by the EU Office upon the
start-up of the new EU programming period. The report won major
interest of the media. Its issue was accompanied by two press conferences in Vienna and Warsaw and was provided wide media coverage almost in the entire region of Central and Eastern Europe.
The key ordinary activities included further expansion of the advisory programme Guide to Doing Business Abroad, which currently
covers 18 European countries. The reader base of the main report –
EU Information Monthly – has also increased; by the end of 2014,
it was read by more than 20 thousand people.
Distribution Channels
Branch Network
With its 644 branches, Česká spořitelna is one of the Czech
Republic’s largest banking networks, offering good regional
coverage and easy accessibility for all its clients. The branch network continues to be the basic executive component of the Bank’s
multi-channel sales model
The branch network provides a broad and comprehensive portfolio
of Česká spořitelna Financial Group services and products to private clients, SMEs and individual entrepreneurs. Private banking
services are provided under the new BLUE brand. Above-standard
services designated for wealthier clients are provided to Ester
Premium clients. The Bank’s specialised advisory services respond
to the needs of municipalities and offer solutions for the corporate
and private financial needs of independent professional clients.
As part of its effort to optimise regional coverage by the
branch network, Česká spořitelna closely monitors branch
operation and analyses usage patterns. Based on these analyses, the Bank makes changes to the network to ensure
that branches are available to clients where and when they
really need them and that the Bank achieves maximum operating
efficiency. In 2014, four new branches were opened, two in the Erste
Premier format in Liberec and Prague 6 and two branches located
in shopping centres in Olomouc and Mladá Boleslav. Ten branches
were relocated to more attractive locations or places better suited to
today’s lifestyle of the Bank’s clients. Eleven branches were closed
down due to economic reasons and their clients were transferred
with all their accounts and other products to the closest points of
sale or to a branch of their choice.
Česká spořitelna now operates 37 branches in commercial centres
and shopping malls. Weekend hours have been introduced
at thirty branches, mainly in large shopping malls . In
addition, 101 branches are equipped with a self-service zone,
which is accessible to clients outside the opening hours of the
branch and which enables the clients to execute basic cash and
cashless transactions. The operation of the mobile branch in
southern Bohemia was adjusted to provide banking services to
four municipalities.
Eighteen branches throughout the Czech Republic were modernised or extensively renovated. Mobile box branches were
used as a more effective temporary alternative for mid-sized
bricks-and-mortar branches undergoing renovation. In 2014,
these were used during renovations in locations including Úpice,
Plzeň Lochotín or Náchod. Most branch modernisation and
renovation entails creating barrier-free access. To date,
374 branches have been so adapted.
Discretion is assured at branches not only through interior
design and layout elements (e.g. screens, carpeting, separated
waiting and consulting areas), but also by the distance of the
waiting and advisory part of the hall or through background
music piped into waiting areas. Branch clients and advisors
have all praised the system’s installation, the music choice and
the volume control options.
In 2014, the Bank continued to work with the Czech Red Cross on
the unique “Friendly Places” concept in which branch employees
are trained in a professional approach to handicapped clients and
seniors and receive first aid training. Branch certification is a part
of this programme. Branches that are fully barrier-free and
have provided training to all staff who serve handicapped
clients can receive a Friendly Places certificate. Further 26
branches received this certificates in 2014.V
Česká spořitelna has been testing since August 2014 a new
branch design and client service method in the experimental
branch in Plzeň Lochotín. The new form and layout of client
premises should be proactively enhanced by improved processes
with the aim of improving client satisfaction while increasing
at the same time the effectiveness of operating expenses of the
branch.
Numbers of non-cash direct banking transactions
(CZK million)
BUSINESS 24
12.1
12 %
18%
3 %
67 %
MultiCash
17.5
ATMs and payment machines
3.2
SERVIS 24
66.8
37
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
Direct Banking
Direct banking is the most common way in which clients contact Česká spořitelna. More than 93% of financial transactions are
conducted through direct banking channels. In 2014, more than
100 million financial transactions totalling CZK 2.8 billion
were carried out in this manner, representing a year-on-year
increase of 6%.
The number of clients of SERVIS 24 increased by 11% in 2014 to
1.76 million. Internet banking is used actively by almost 95% of
users; more than one half of them have activated telephone banking.
9% of users access their account via the Mobile Bank and 4% via
GSM Banking.
SERVIS 24 Internet banking has undergone another significant
development. Users may now execute comprehensive management
of cards beginning with the card application, through activation,
election of design, a possibility of blocking or de-blocking up to the
PIN display. Hence, the clients need not visit their branch to resolve
card issues. From the comfort of their home clients may also arrange
for a loan, overdraft or a credit card via the new service called Busy
banking or complete a purchase in internet banking. Payment orders
may be newly uploaded until 11 pm of the current day and the
daily limit of transferred money may be reset up to CZK 1million.
If the client lacks sufficient funds for the transaction, he
will automatically obtain an offer of overdraft that can be
drawn immediately. The loan menu also offers a new possibility
use the Mobile Bank on more than one device. New functionalities,
such as obtaining or increasing credit products, are available. Only
during the second half of 2014, clients obtained or increased via the
Mobile Bank over one thousand overdraft loans, loans and credit
cards. The Mobile Bank may also be proud of its new application, particularly Lístkomat, by means of which the clients
may arrange for meetings at branches or obtain virtual number
tickets from the q-matic system. This is another reason why the
Mobile Bank won in 2014 the third place in the client services
category of the competition Mobile Application of the Year.
One of the direct banking channels that has shown dynamic longterm growth is payment orders via ATMs and payment machines.
In 2014, the number of these transactions exceeded 3 million in
number and CZK 15 billion in volume. More than 120 thousand
clients use this service every month. Moreover, the Bank is able to
sell travel insurance via its ATMs, and the client has an opportunity
to take up the insurance in two minutes without a visit to the branch.
The number of active users of the direct banking services
SERVIS 24 and BUSINESS 24 increased in 2014 to 1.76 million, which represents a nearly 11% year-on-year increase.
Number of active clients of SERVIS 24 and
BUSINESS 24 (thousands)
1 800
1,760
of increasing the loan within a couple of minutes.
1,591
1 500
Internet banking also offers its services to firms, cities and municipalities or to other legal entities. By the end of 2014, the Bank
carried on its records over 20 thousand BUSINESS 24 clients, a year-on-year increase of 14%. More than 3 thousand
clients use the MultiCash services. Česká spořitelna launched in
August the Mobile Bank for corporate clients. Like in SERVIS 24,
the clients of BUSINESS 24 are offered a possibility of comprehensive management of their cards. In addition, they may newly
order or execute forex transactions in the foreign exchange market,
guarantees or documentary transactions. There are also new available functionalities, such as keeping of the calendar of duties (e.g.
tax obligations) or electronic pledging of receivables.
BUSINESS 24 Databanking, which offers to entrepreneurs
and firms the possibility to send payment orders directly
from their accounting systems, exceeded in 2014 the limit of
100 thousand financial transactions, transferring CZK 6billion,
which indicates a year-on-year one fifth increase.
The Mobile Bank has been offered by Česká spořitelna to its clients
in the third consecutive year and is currently used by more than
150 thousand clients, who transferred in 2014 more than CZK 7billion by means of nearly two million transactions. Viewed from this
perspective, the Mobile Bank is the most dynamic payment channel
in the Bank. The Mobile Bank is currently available also for smart
phones using the Windows Phone operating system; the user may
1,319
1, 410
1,476
1 200
900
600
300
0
2010
2011
2012
2013
2014
Note: clients using more channels are counted only once
PLATBA 24 underwent a significant development in 2014. This
system provides to users of SERVIS 24 a simple payment
method of purchases in e-shops and of invoices in the client
portal environment. Since its launching, 4 million orders in the
volume of nearly CZK 4billion have been executed by means of
this service.
A significant benefit of direct banking is product and service sales.
Nearly 300 thousand products were sold through this channel
in 2014, 90% of them without the need for visiting the branch.
The sales that performed well were mostly the sales of overdraft
loans and credit cards; however, the best results were reported
in respect of provision of loans to individuals. The Bank began
38
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
selling loans through external call centres, and users of SERVIS 24
Internetbanking have also a new opportunity to increase by themselves their loans, or to complete in this application the purchase
of credit products requested by telephone.
The overall growth in the use of direct banking will continue in
the years to come. In 2014, direct banking recorded 174 million
client visits and contacts, accounting for 91% of all client contacts
or visits to the Bank. SERVIS 24 Internetbanking reported the most
visits (114 million) followed by the Česká spořitelna website (with
34 million visits) and the Mobile Bank (14 million logins).
Non-commercial Activities
People
Česká spořitelna’s employees are its most important resource in
determining a healthy direction and ensuring success of the Bank
in a highly competitive environment. Česká spořitelna believes
that its qualified, high-quality, satisfied and professional
employees always motivated to perform to the best of their
abilities, are its competitive advantage. The Bank thus offers
employees fair employment conditions, a friendly workplace and
educational opportunities.
The Česká spořitelna employee training and development strategy
focuses on greater utilisation of potential through development programmes and projects. Staff development is based on an Internal
Training Catalogue comprising a targeted selection of educational
and training activities reflecting the needs of the Bank’s employees
and managers. The comprehensive offering comprises class tutions,
e-learning, self-study materials and progress measurement tools.
Training is open to every Bank employee and specifically
supports the principle of a self-learning organisation.
Česká spořitelna has been working with its talented employees. In 2014, it set up a concept of identification and development
of potential successors to the positions of commercial team leaders,
area retail banking managers and working team leaders in the operating areas of the headquarters. Furthermore, the talent programmes
Operating Academy and Commercial Banking Academy were run.
As regards central programmes, the talent programme Expert and
the annual Graduate Programme have been running since January
2014.
One of the key development programmes and projects is the
Diversitas programme designed to support work/life balance
and equal opportunities for all male and female employees of Česká
spořitelna. In its projects, the Bank creates favourable conditions
for return of parents from maternity or parental leave, offers help
to the handicapped and otherwise disadvantaged employees, and promotes the work/life balance, equal number of men
and women in managerial positions and opens at the same time an
inter-generation dialogue within the Bank.
Thanks to the Project Stork, parents on maternity or parental leave
have an opportunity to attend up to eight annual meetings with Česká
spořitelna, where they learn the Bank news and meet the top managers. They also discuss legal issues, are provided personal counselling
and participate in various workshops.
Within the scope of the Project Gender – Equal Opportunities, Česká
spořitelna launched a development programme Satori for talented
women in the Bank. The Programme includes mainly mentoring,
training, workshops and development activities. At the same times,
a group of successful women in managerial positions directed by the
board of directors, the LL (Ladies Leaders) Group, which has been
formed, has issued a biographical electronic library. The Satori and
LL programmes are linked to improve cooperation on strategic tasks
of the Bank, particularly in connection with the new MIDI strategy.
The project Transition – Without Barriers resolves problems of employees with disabilities, who are provided within
the scope of this programme with special working aids, such as
keyboards or chairs. Česká spořitelna organised internships for
people with disabilities across all its departments. The Bank also
participated in the programme Job Fair without Barriers
and cooperated with the Ministry of Labour and Social Affairs
in the creation of a manual for work with employees with
disabilities. The Wise Owl project held three meetings with the
50+ year category of employees, which discussed specific needs
of employees belonging to this age group. Česká spořitelna also
Average staff headcount
12 500
10,744
10 000
As a part of the use of modern development tools, Česká spořitelna
has prepared a set of interesting instruments: the mini application
“Amosův tahák” (Amos’s Help List), which assists employees in
the planning of their development in accordance with the new Erste
Group competencies, and the e-library Safari books, used mainly by
IT specialists to study technical literature. Sociomapping is a tool
for which the Banks holds a license and which uses certified facilitators to help the teams in Česká spořitelna develop, use effective
communication means and cooperate. The number of employees
coached in Coaching Cafés increased by 15% and the portfolio of
development tools used by internal coaches has expanded.
10,163
10,760
10 556
9 485
10,651
9,640
10,471
9,550
9,405
7 500
5 000
2 500
0
2010
2011
2012
2013
2014
Staff headcount of the ČS* Financial Group
Staff headcount of Česká spořitelna*
* The average restated staff headcount including employees of other Erste Group companies
(the expatriates)
39
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
established a Third Age University. The project Flexible Calendar
deals with the expansion of flexible working hours across the Bank.
In 2014, Česká spořitelna prepared 23 recruitment events for potential employees. The Bank also participates in job fairs focusing on
the presentation of job opportunities, organises Days with Česká
spořitelna and has prepared a number of lectures and workshops
at universities in various Czech cities.
Average staff headcount decreased year-on-year by 180
to 10,471, of which 74% are women. 10% of employees work
part-time and the bank has also successfully integrated 150
mothers after their return from maternity leave. Average length
of employment rose to 10.6 years and average employee age
increased to 39.5 years. Employees older than 50 years of age
represent 16% of the population of Česká spořitelna.
Service Quality
A key service quality goal of Česká spořitelna is the continuous improvement and enhancement of the quality of
services provided to clients. The level of services provided
by the Bank to its clients is monitored throughout the year by
the short-term measurement of client experience, focusing primarily on the Net Promoter Score (NPS). The aim of this quantitative research is to obtain information about the experience
of retail clients of Česká spořitelna at a branch immediately
after their visit.
Moreover, long-term customer experience is measured every
half year and the outcomes help determine the objectives of
individual Bank departments. Client loyalty is measured
via the NPS method, which monitors the willingness of
A team of ombudsmen is available to Česká spořitelna
clients through various communication channels. Clients can
call 956 717 718 or e-mail [email protected], come in for
a personal consultation, send letters or contact the Office of the
Ombudsman through Facebook ČS. Team members resolve client
issues in Czech, English and German. Ombudsmen handle the
most complicated cases that might impact the activity of
multiple bank departments and which are often associated with
reputational risk. They can also convene expert groups of employees from various Bank departments to individually assess client
compensation claims. In 2014, the team of ombudsmen resolved
in cooperation with other Bank departments complaints of clients
relating to phishing attacks on their account. Česká spořitelna communicates with clients who are victims of such attacks and ensures
individual assessment of each such case.
In 2014, the average submission resolution period by the ombudsman team reached 10.4 days and client satisfaction with complaint
resolution increased by three percentage points to 76%. In 2014,
the ombudsman team staff resolved 100 cases in collaboration with
the Czech National Bank and 59 cases with the Financial Arbitrator
of the Czech Republic.
In 2014 the main areas of client complaints or requests for an
ombudsman opinion were banking products and services fees,
unapproved loans and loan restructuring and debt collection, withdrawal and securing of mortgage loans. Further complaints related
to the non-functioning or comprehensibility of products or services.
Another important factor of the quality of services provided to clients is the quality of internal services provided
within the Bank. The level of quality of internal services provided
clients to recommend the products and services of Česká
spořitelna to their friends. An analysis of the reasons for
mutually by the Bank’s departments is measured by custom-made
questionnaires. In 2014, the Bank focused on the evaluation of its
headquarters with regard to the provision of support to commercial
departments, The results of this measurement constitute the basis
for the assessment of the quality of delivery against the internal
client’s expectations; the output is the SLI (Service Level Index).
These measurements are supplemented by the mystery shopping, which allows obtaining a comprehensive and independent
view of client experience. Naturally, the Bank resolves the basic
causes of client complaints, searches for the most frequent problematic product and service areas, which are negatively perceived by clients and seeks solutions of the identified problems.
Project Management
recommendation / non-recommendation enables the Bank to
alter products and services to better suit clients. As the NPS
method is used in other sectors, too, the results can be compared
to those of other local and international companies.
A complaint is a manifestation of client dissatisfaction with
a service, product or conduct, which is communicated to the
Bank. It is in the Bank’s interest to record every one of these
complaints, even those that are resolved immediately. A key
element in the complaints resolution process is the Client Care
Centre in Prostějov, which is responsible for overall complaint
resolution. The team also strives continuously to ensure the
most convenient and highly professional way of compliant
resolution for the clients.
Česká spořitelna successfully realises its strategic goals
through projects. The benefits are reflected in greater client sat-
isfaction, higher revenue, greater operational efficiency and risk
mitigation.
The majority of projects deal with the development and implementation of new technologies and products for clients. Česká
spořitelna endeavours to offer regularly to its clients innovative services that are both new and reliable, e.g. in the
areas of internet and mobile banking, sale of mortgages, or the
new service model at the branch. Annually, dozens of projects are
carried out at Česká spořitelna.
Česká spořitelna also works with Erste Group Bank on group projects whose general aim is to fully utilise the commercial potential
40
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
of central European markets in all segments, take advantage of
economies of scale and cost synergies, concentrate ancillary services within the Group, and achieve comparability of performance
measurement and risk management.
The project portfolio is closely tied to the Bank’s business
strategy. First steps towards the implementation of the new MIDI
17 strategy have been taken, such as the launching of the pilot operation of six video terminals, the Blue service clients need not sign
agreements at the branch but may execute them electronically (via
the Busy banking).
The Bank opened in August 2014 an experimental branch in
Plzeň Lochotín with the aim of live testing of the new service
model for retail banking clients. The new service method should
meet the three basic objectives: to improve customer satisfaction,
to work most effectively and to increase sales.
The project Dobrá rada (Good Advice) represents a major benefit
for clients. This concept provides to advisors the relevant sales tips
and service requirements of each specific client, which facilitates
communication and consulting at the personal meeting. This is
the first step to the effective use of client data and creation of the
relevant offer for the individual client needs.
Another important project providing benefits to retail clients is the card with the multicurrency function, which can be
provided to clients together with the ČS Personal Account, Private
Account Premier, ČS Commercial Account and ČS Business
Account, and which will enable the clients to withdraw by means
of a single card funds from the CZK account and from all foreign
exchange accounts included in this service.
An application for sale of mortgage loans has been launched in
the branch network. This application increases the effectiveness
of the sales process by the introduction of a high level of automation in the assessment of application, generation of documents
and uploading mortgages in the product systems of the Bank. The
mortgage processing procedure also uses the application model
Jednotná fronta (Single Front), which allows effective management of allocation of tasks to members of the approval and documentation team. Thanks to this new application, Česká spořitelna
may optimise the mortgage selling process, reduce error frequency
and respond more effectively to changes in the mortgage market.
A brand new website has been launched to cover the needs
of Erste Corporate Banking, which will facilitate fast and
easy orientation in the offered products and market segments. The application BUSINESS 24 Mobile Bank, which has
been launched to the market for corporate clients, is available at
GooglePlay and AppStore. Thanks to this new application, the
client may easily, quickly and conveniently send money from the
telephone or tablet or may find out whether a payment has arrived.
Corporate clients using the BUSINESS 24 internet banking
were offered by Česká spořitelna a number of innovations
in 2014: a significant expansion of functionalities relating to bank
guarantees and documentary transactions, including secured transfer of documents or interactive communication between the client
and the Bank, active payment card operations, uploading orders,
an overview of open transactions or display of confirmations of
transactions executed in the foreign exchange market.
Reporting of open derivative transactions to the Register of Trading
Data was launched in February 2014 and was expanded in August by
information required for hedging and valuation of transactions. At
the same time, the Bank carried out an analysis of requirements relating to clearing of transactions through the central counterparty based
on technical standards issued in 2014 by ESMA (European Securities
and Markets Authority). The Bank also set up a new COREP and
FINREP reporting in accordance with the EBA (European Banking
Authority) methods.
A major legislative change in 2014 was the implementation
of the new Civil Code and the Business Corporations Act in
the internal processes and client contractual documents.
Expressed in figures, it meant analysing more than 2 thousand sections of the law, which resulted in the adjustment of 340 contractual templates, 140 internal regulations and training of 5 thousand
employees in changes of the affected processes. These changes
had a considerable impact on the Bank’s IT systems. An
example can be the complete change of the method of communication with cadastral authorities, which is currently carried on solely through data boxes, or the required automated
processing of execution petitions in respect of passbook accounts,
whose number has increased significantly due to the change of
the law. The implementation of the new Civil Code also led to the
November launch of the pilot operation for processing of legislative duties of the Bank, specifically the processing of executions in
accordance with the new rules.
A significant shift in the automatic enforcement in retail banking was
brought by the introduction of set-offs, enabling the Bank to set off
in real time the balances on the client’s accounts with his due loan
or card payables. The virtualisation of specialised departments and
headquarter sections took place in 2014. All users at the headquarters
have access to the virtual environment, which is used particularly
for testing and access to certain specific applications.
The pilot operation of the new application eSpis (eFile), with
the aim of shifting Česká spořitelna towards paperless bank,
was launched at seven branches and the foundations of the new
central storage facility were laid down in Hradec Králové. The eSpis
application will provide an overview of all client documentation and
the new storage facility will have the capacity of up to 100 kilometres
of documentation, which will allow future centralisation of all paper
client documentation in a single place and simplify and reduce the
costs of internal processes.
Another important step was the relocation of selected processing
procedures from Prague to Pardubice. A total of 250 employees
41
Macroeconomic Development in the Czech Republic in 2014 | Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 |
Strategic Plans for the Future
of Česká spořitelna have moved into a modern barrier-free
office in the Vinice building.
Economic and Strategic Analyses
The Economic and Strategic Analysis Team’s responsibilities are
divided into three areas. The first is strategic planning and banking sector analysis. These analyses and associated documentation
become an integral part of the drafting and review of the Česká
spořitelna Financial Group plan. The area of equities analyses covers twelve companies in Central and Eastern Europe, primarily in
the media and utilities sectors. The third area comprises macroeconomic analyses resulting in prognoses of foreign exchange and
interest rate developments. The equities and macro groups also
offer investment strategy advice to clients in addition to analyses
and prognoses. Analyses are published online at www.investicnicentrum.cz. The set of regular analytical reports issued with daily
to quarterly frequency in Czech and English now comprises 20 different products. Analysts and strategists are available to a selected
group of Česká spořitelna Financial Group clients for consultation.
Security Policy
Česká spořitelna attaches a great deal of importance to its security policy. The Bank operates an independent security department charged with overseeing the investigation of operational
risks and maintaining IT and physical security focusing on potential violations of bank secrecy and their prevention and Business
Continuity Management (“BCM”). The Bank’s work here is
chiefly concerned with preventing all adverse events or
inappropriate conduct jeopardising the security of clients
and employees or the assets of Česká spořitelna Financial
Group companies.
The aim of the Česká spořitelna security policy is to mitigate operational and security risks. Any criminal activity of Bank clients or
employees constitutes a priority reference point when evaluating
and administering warnings in software applications, assessing
methodological procedures and assessment of new Bank development projects.
The significant rise in cyber-attacks with banking-specific Trojan
horses and phishing continued in 2014 as well. The Bank paid much
attention to information campaigns targeting clients and internal
users with the aim of continuous improvement of security awareness. Under the auspices of the Bank Association, Česká
spořitelna participated in the preparation and introduction
of the system of rapid information exchange between banks
and blocking of fraudulent payments and developed at the
same time online security monitoring of internet banking transactions. Under the auspices of the Banking Association, the Bank
also focused on the preparation and definition of the implementing
decrees to the Cyber Security Act.
The development of external violent crimes continued to be positive
in 2014. The number of robbery attacks reached its record low
and was the lowest in the last 20 years. The bounty obtained by
robbers in 2014 also reached its record low. Unfortunately, the number
of attacks on ATMs increased in 2014; however, the robbers came
away empty-handed. Three attacks were carried out by means of an
explosive gas. Such attacks are particularly dangerous because they
represent, by their nature, a public threat. It can be said in general
that the results of Česká spořitelna in the field of physical security are
exceptionally good compared to the rest of the Czech banking sector.
The Bank also handles client complaints concerning violations of
bank secrecy and uses transaction monitoring in the prevention of
unauthorised employee access to information. The personal security courses “Management Psychology and Personal Security” and
“Practical Security” are also prevention oriented. Naturally, the Bank
also monitors workplace health and safety and fire safety in compliance with its statutory obligations.
Activity in the area of business continuity management was one
of the priorities of ensuring secure and smooth operation of Česká
spořitelna. The business continuity management system is
aimed at the maintenance of tolerable level of critical process
and activities in case of unscheduled and unforeseen serious emergencies. Česká spořitelna strives to make the key BCM
principles a part of its corporate culture and social responsibility, The
Bank analyses and assesses serious threats to the operational and
business continuity, which it takes into account in the checking and
testing of planned measures. At the same time, the Bank responds to
legislative and regulatory requirements, with a particular emphasis
on the protection of critical infrastructure elements and emergency
plans of supply of outsourced services.
Internal Audit
Internal Audit of Česká spořitelna is an independent and objective
assurance and consulting activity designed to add value and improve
Bank processes. Internal Audit helps the Bank achieve its goals by
affording a systematic approach to evaluating and improving the
effectiveness of the risk management system, management and control processes and Bank management and administration. Internal
Audit is responsible for assurance and advisory services and identification of areas for process improvements and methods for the
achievement of company goals. Internal Audit monitors processes
and activities in every department of the Bank and participates in
the evaluation of the level of functionality and effectiveness of the
management and control systems. Internal Audit verifies that measures arising out of audits and reviews performed are carried out and
irregularities corrected. In 2014, Internal Audit provided the Bank’s
management, Board of Directors, Supervisory Board and Audit
Committee with reports, information and assurances concerning the
risks faced by the Bank.
42
Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 | Strategic Plans for the Future | Risk Management
Strategic Plans for the Future
Strategic Objectives
The strategic ambition of Česká spořitelna is to be its clients’
number one bank for everything, to earn and maintain their
loyalty and to achieve above-average financial results by the
measure of the Czech banking market. Česká spořitelna wants
not only to maintain, but also to strengthen, its position as a
retail banking market leader, outpace the competition among
its corporate clientele and become the bank of preference in
all target sectors. Over the long term, Česká spořitelna wants
also to become a leading bank for the small and medium-sized
enterprise (SME) market and a key bank for large and international corporations.
Outline of Business Policy and Projected
Economic and Financial Position in 2015 and
Outlook for Later Years
In 2015, the Bank’s business departments will have the following
priorities:
Retail Banking
The objective in retail banking is to maintain or further strengthen
the Bank’s leading position with its customer base, primarily by
improving service quality in individual client segments, concentrating on services to SMEs and adapting the product portfolio to
the broadest range of private clients.
To assure these strategic ambitions, in 2014 Česká spořitelna
updated its MIDI strategy, whose name comprises the first letters of four key areas:
–– Multi-channel banking
–– Intelligent use of client data
–– Digital transformation of banking transactions
–– Integration of financial and non-financial services with
the aim of obtaining tangible added value
In 2015, the Bank will continue to systematically offer clients an
opportunity to move their deposits into investment products (Mise
investice – Mission Investment), and modernise consumer and
SME loans. In addition to its proprietary financial products, Česká
spořitelna offers products from the Erste Group portfolio to help
clients reduce their living expenses and grow their wealth. Chief
amongst these is the sale of cheaper energy by the subsidiary Erste
Energy Services.
Macroeconomic forecast
Česká spořitelna strives to achieve another of its goals – increasing
client satisfaction – by offering quality services tailored to individual client segments, expanding and enhancing the product portfolio
and improving the physical and online customer experience by modernising branches or offering intuitive and user-friendly digital tools.
Just as in previous years, key macroeconomic aggregates will
be impacted in 2015 by the effects of Czech National Bank
exchange rate interventions and implementation of the programme priorities set by the new Czech Government, which
projects a departure from austere fiscal restrictions and a move
toward higher public budget expenditure to foster economic
growth.
Česká spořitelna has based its 2015 budget on the following
macroeconomic projections:
–– return to Czech economic growth measured by 2% GDP
growth year on year,
–– slight inflation growth year on year,
–– gradual decline in the rate of unemployment to below
8%,
–– stagnation or a slight drop in interest rates compared to
the prior year average,
–– weakening of the Czech crown against main currencies
based on CNB interventions and currency market
developments.
In 2015, Česká spořitelna will focus on:
–– the ability to maintain and grow its share on the loan market
amid ever increasing competition,
–– an individualised and comprehensive portfolio of products
to fully satisfy the needs of every client based on ongoing
analyses of their profiles,
–– the sale of other services to clients helping them save on
family expenditure and increase their wealth.
Corporate Banking
In 2015, Česká spořitelna will continue to work to fulfil its strategic
ambition of becoming a banking leader in the SME segment while
sustaining its long-time position as a leader in the public and nonprofit sector. Česká spořitelna wants to be one of the key banks in
segment of corporate clients. The corporate banking strategy is to
43
Report of the Board of Directors on the Company’s Business Activities and Statement of Financial Position for 2014 | Strategic Plans for the Future | Risk Management
continue developing this service by offering comprehensive client
service and targeted solutions based on detailed knowledge of the
needs of individual client sub-segments and industries.
Client perception is a key measure of success. In order for Česká
spořitelna to be perceived by its clients as a key bank that can help
them in all important areas, the Bank is working on individualised
solutions across the portfolio of products and services from transactional banking through financial advisory and financial markets
to specialised products.
For these reasons, the primary objective in 2015 is to further
increase client satisfaction and the ability to attract companies not
only with quality services, but also with a broad product range.
Česká spořitelna is always expanding its portfolio of unique solutions to finance energy savings, support innovation and start-ups,
finance waste management enterprises or support individual entities in the use of European Union subsidies. Česká spořitelna will
expand its offering of the well known TOP programmes to include
TOP Pharma and TOP Aerospace while also increasing the number
of products and services available to clients online through channels
such as BUSINESS 24 and erstecorporatebanking.cz.
Česká spořitelna’s public and non-profit sector goal is to strengthen
its cooperation with strategic clients. The Bank will play an active
role in the financing of projects supported by operational programmes announced for the new 2014 – 2020 European Union
planning period. In advisory and customized products, the Bank’s
focus will be on services with greater added value and on closer
commercial ties with the bank’s subsidiaries.
Financial Markets
The goal of Česká spořitelna in financial market sales and trading
will be to further strengthen its leading position in all key financial
market areas and products. In 2015, Česká spořitelna will focus
its attention on developing products and services for commercial
clients and financial institutions while bolstering its position as a
leading regional financing partner through the placement of bonds
and equity instruments. The Bank will also continue to expand its
offering of investment certificates for all investor types. In just a
year and a half, Česká spořitelna Group has established a dominant market position, which allows it to continue expanding and
diversifying its product range.
In Asset Management for Česká spořitelna’s institutional clients,
the primary concerns will continue to be offering the utmost in
service transparency, dialoguing with the client, formulating sound
strategies, emphasizing asset class diversification, delivering first
class reporting and providing ongoing education in financial advisory. The Bank wants to continue delivering clients added value
expressed in the assets under management performing better than
would any passive investment.
In addition to traditional hedge products such as currency and interest risk hedging, Česká spořitelna is placing a strong focus on its
offering of hedge instruments for commodity risk. Together with
its subsidiary Erste Energy Services, the Bank will endeavour to
provide fair electricity market pricing and offer the option of using
derivative instruments to eliminate electricity market risks.
in 2015, Česká spořitelna will continue to introduce new investment solutions that react flexibly to market development in the sale
of investment products to retail clients. Key activities have long
included regular investment in open-end mutual funds in which
the Bank sees an optimal opportunity for clients to realise effective returns on even small amounts. Thus, the long-term goal is to
increase the volume of managed investment products and grow
market share in mutual funds and structured products.
Projected Economic and Financial Position
Česká spořitelna is projecting profit for 2015 in roughly the same
amount as in 2014. Given the expectation of only marginal economic recovery, persistently low interest rates and the announced
tightening of banking regulations concerning banking transactions,
this goal can be seen as highly ambitious.
Persistent minimal interest rates and the limited options for effective
investment of primary financial sources are expressed in stagnation
or a slight drop in net interest income. The Bank also projects
stagnation or a slight drop in net trading result, whose development was affected in 2014 by certain extraordinarily favourable
circumstances. Increased regulation of banking fees coupled with
pressure from consumers and consumer organisations to further
limit or reduce fees are reflected in a drop in net fee and commission income.
The cost/income ratio is projected to be roughly 45% and limited
options for further increasing operating income will lead to greater
pressure on the rigorous management of operating costs. Taking
into account the projected dividend amount, stabilised profit will be
expressed in a drop in return on equity (ROE), whose target value
should be around 14%. Given Česká spořitelna’s good capital base,
once again in 2015 we can expect the capital adequacy indicator to
greatly exceed the minimum set by the banking regulator.
In 2015, Česká spořitelna expects significant growth in client
loans compared to client deposits expressed in an increase in the
ratio of client loans to client deposits, which should exceed 80%.
Client loans and deposits will remain decisive items on the Česká
spořitelna balance sheet.
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Strategic Plans for the Future | Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
Risk Management
Risk management processes are a key element of the Bank’s internal
management and control system. The nature of its business and
other activities means Česká spořitelna is inevitably exposed to a
variety of credit, market, operating and liquidity risks. The Bank’s
attention to risk management is commensurate with its size and the
complexity and volume of its products, business activities and other
operations. The Česká spořitelna Board of Directors has approved a
risk management strategy incorporating risk management principles
covering risk identification, monitoring and measurement processes
and the setting of limits and restrictions. By adopting these principles, the Bank has kept its risk exposure at an acceptable level,
enabling it to maintain effective management processes.
The following departments play a role in managing risk at Česká
spořitelna:
–– Risk Management Strategy Department: primarily
responsible for credit risk, market and operating risk and
liquidity risk, which includes consolidated risk management
for the entire Česká spořitelna Financial Group;
–– Corporate Banking Credit Risk Management and Retail
Banking Credit Risk Management Departments: primarily
responsible for credit risk strategies for corporate and retail
banking, respectively; and
–– Financial Group Balance Sheet Management Department:
manages net banking book (investment portfolio) interest
risk and liquidity risk pursuant to Assets and Liabilities
Management Committee decisions.
The activities of these risk management departments are complemented by the work of the:
–– Security Department: responsible for risk management in
respect of physical and IT security;
–– Legal Services Department: responsible for providing legal
support;
–– Compliance, Financial Crime and Fraud Prevention
Department: responsible for managing compliance risk and
anti-money laundering measures; and
–– Card Centre Department: responsible for payment card
transaction risk management.
The Board of Directors shares risk management approval authority
with the following committees:
–– Assets and Liabilities Management Committee (“ALCO”);
–– Česká spořitelna Board of Directors Credit Committee;
–– Financial Markets and Risk Management Committee
(“FMRMC”);
–– Compliance, Operating Risk and Security Committee
(“CORB”) – a body of the Bank’s Board of Directors that
makes decisions concerning the management of operating
risk, compliance risk and security; and
–– Operating Liquidity Management Committee (“OLC”).
Credit Risk
Česká spořitelna is exposed to credit risk; that is, the risk that a
counterparty will be unable to pay amounts in full when due. In
managing credit risk, Česká spořitelna applies a standardised methodology adopted on a Group-wide basis that sets out the applicable
procedures, roles and authorities.
The lending policy includes:
–– Prudent lending process guidelines, including rules to
prevent money laundering and fraud;
–– General client segment acceptability guidelines based
on principal activities, geographical location, maximum
maturity period, the product and the purpose of the loan;
–– Basic framework for the rating system and the
determination and review of debtor ratings;
–– Basic principles of the system of limits and the structure of
approval levels;
–– Loan collateral management rules;
–– Structure of basic product categories; and
–– Methodology for provisioning and risk-weighted asset
calculations.
Collection of key risk management information
In managing credit risk, the Bank draws not only on its own portfolio information, but also on the portfolio information of other
members of the Česká spořitelna Financial Group. The Bank additionally uses information obtained from external sources such as
the Czech Banking Credit Bureau and Central Credit Register,
or ratings provided by reputable ratings agencies. The extensive
database available for credit risk management purposes serves to
model credit risk and supports the collection and measurement of
receivables as well as the calculation of losses.
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Strategic Plans for the Future | Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
Internal Rating Tools
Rating is considered to be a key risk management tool. The Bank
uses a client’s rating to measure the counterparty risk profile.
The client rating reflects the probability of debtor default in the
subsequent 12 month period. The debtor evaluation and internal
rating determination are part of every loan approval or of significant changes in lending terms and conditions. Debtor evaluation
reflects the client’s financial position and non-financial characteristics. For corporate debtors, this primarily involves an analysis
of strengths and weaknesses such as management quality and
competitiveness. For retail debtors, the analysis chiefly entails
demographic and behavioural indicators. As a part of risk management, the Bank categorises its clients as “non-performing”
and “performing”. The Bank uses an eight grade rating scale for
“performing” clients - private individuals (i.e. non-entrepreneurs)
and a thirteen grade rating scale for other clients. For all “non-performing” clients, the Bank uses a single rating grade – “R” – which
is further broken down based on the reason for the default.
All information essential for the above mentioned assessments is
gathered and stored centrally. The Bank performs regular internal rating reviews (no less than once a year). The internal rating
methodology is validated based on historical data using statistical
models. In accordance with regulatory requirements, the Bank
ensures independent entity oversight of the internal rating methodology validation process.
Exposure Limits
Exposure limits are defined as the maximum exposure acceptable
for the Bank in respect of an individual client or group of economically related persons. The system is set up to protect the Bank’s
income and capital from concentration risk.
Structure of Approval Authorities
The structure of approval authorities is based on the principle of
the materiality of the impact of potential loss from a provided
loan on the Bank’s financial performance and the risk profile of
the respective loan transaction. The Supervisory Board Credit
Committee and Board of Directors Credit Committee have the
highest approval authorities. Lesser approval authorities are scaled
according to Credit Risk Management Department staff seniority.
Determination of Risk Parameters
Česká spořitelna uses its own internal models to determine risk
parameters such as probability of default (“PD”), loss given default
(“LGD”) and credit conversion factors (“CCF”, i.e. coefficients
used to transfer off-balance sheet items to the balance sheet). All
models comply with the Basel II requirements. Monitoring and
predicting historical risk parameters forms the basis for quantitative portfolio management. Česká spořitelna currently uses risk
parameters to monitor credit risk, manage the non-performing
loan portfolio and assess risks. The active use of risk parameters
in managing the credit risk of the Bank makes it possible to obtain
detailed information about the possible sensitivity of basic portfolio segments to both internal and external changes.
Impairment allowances for credit risk
Česká spořitelna uses a provisioning methodology that complies with International Financial Reporting Standards (‘IFRS’).
Portfolio provisions are determined for portfolios of receivables
in which no individual impairment has been identified. The level
of portfolio provisions is established using models based on the
Bank’s historic experience. The PD and LGD risk parameters
are a significant component of these models. Receivables where
impairment has been identified are provided for individually. The
discounted cash flow method is used to measure impairment of
non-retail receivables and retail receivables with a value exceeding
CZK 5 million. The degree of impairment of other retail receivables is determined statistically on the basis of experience with
the recovery of a similar type of receivable. Impairment allowances against all receivables are re-assessed on a monthly basis.
Allowances are back-tested annually with a focus on the adequacy
of created allowances by a comparison with actual credit portfolio
losses. Back-testing covers all major credit portfolios (at least
95%).
Concentration Risk and Risk-weighted Assets
Česká spořitelna manages loan portfolio concentration risk
through a system of large exposure limits. Large exposure limits
are established as the maximum exposure that the Bank may accept
in respect of an individual client or economically-related group of
clients with a given rating and underlying collateral. The system
is set up to avoid excessive risk concentration in a portfolio to a
small number of clients and is based on the maximum level of
economic capital that may be allocated to one group of clients.
Česká spořitelna complied with the conditions for the use of the
Internal Ratings-Based (“IRB”) approach when calculating the
credit risk capital requirement, and since July 2007 risk-weighted
assets and the capital requirement have been based on internal
ratings and the Bank’s own estimates of the PD, LGD and CCF
parameters. Risk-weighted assets are calculated monthly. The
standard calculation is regularly supplemented by stress testing,
which includes modelling of the (chiefly macroeconomic) impacts
of sudden changes in the market.
Risk Appetite Statement
The maximum tolerated exposure to capital level and the Bank’s
operating result towards various types of risks is defined in the
Risk appetite statement approved by the Bank’s Board of Directors.
Improving the Early Recovery Process
The Bank continued to develop and upgrade the process of early
recovery and detection of problematic clients. In corporate banking, this area is handled by a department responsible for monitoring performance of the non-financial terms of loan contracts
with corporate clients with the aim of improving the monitoring
of the Bank’s loan portfolio and reducing its credit risk exposure. In retail banking, the Bank continued the effective use of
the call centre for early recovery of delinquent receivables. Call
centre services are also utilised by other entities within the Česká
spořitelna Financial Group.
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Market Risks
Market risks assumed by Česká spořitelna relate principally to
financial market transactions that are traded in both the trading
and banking books, and interest rate risk associated with banking
book assets and liabilities. Trading book transactions on the capital, money and derivatives markets can be broken down into the
following areas:
–– Client quotations and transactions and the execution of
client orders;
–– Interbank and derivative market quotations (market
making);
–– Active trading on the interbank market; and
–– Distribution of financial market products to retail clients.
Erste Group Bank uses a “holding” business model for financial
markets trading called “Group Capital Markets”. Risks from executed client transactions are transferred through back-to-back transactions to portfolios of Erste Group Bank. Quotations on the bond,
derivative and foreign currency markets and interbank transactions
are transferred to the holding company as well. Annually, Erste
Group Bank redistributes the proportionate share in the Group result
arising from trading in accordance with the approved model. Česká
spořitelna retained transactions and quotations on the money and
equity markets. In 2014, Česká spořitelna also undertook active
trading with electricity derivatives.
Banking book transactions on the capital, money and derivatives
markets are categorized by area:
–– Bank investments in securities as part of its investment
strategy;
–– Execution of certain interbank and client deposits and
credits;
–– Issuance of own bonds;
–– Management of interest income, hedging of banking
book interest risk and closing of the gap between foreign
currency assets and liabilities
The Strategic Risk Management Department monitors and measures trading and banking book market risk. This department
is entirely independent of the Financial Markets Department
(for trading book) and of the Asset and Liability Management
Department (for banking book) to avoid conflicts of interest
and to ensure that reports submitted on the Bank’s risks are
sound and unbiased.
The Strategic Risk Management Department ensures that an independent evaluation of all financial market transactions for both the
Group and client portfolios administered by the Group is conducted.
The department is also responsible for managing operational risks
associated with financial markets trading and managing market
risks. It carefully focuses on control activities and reconciliations
to ensure that complete and accurate records of instruments in the
Bank’s portfolios exist.
Limits for market risks are determined separately for the trading
book and the banking book. All trading book limits (specifically,
VaR limits for intra-day holding and sensitivity limits) are proposed
in collaboration with the Strategic Risk Management Department
and competent business departments and approved by the Financial
Markets and Risk Management Committee. All banking book
risk limits (specifically, VaR limits for intra-month holdings) are
proposed in collaboration with the Strategic Risk Management
Department and the Group Balance Sheet Management Department
and approved by the Assets and Liabilities Management Committee.
The set of market limits must comply with the maximum risk exposure (measured using the VaR method) as approved by the Bank’s
Board of Directors and must also be confirmed by the parent company, Erste Group Bank.
While the VaR for the trading book may be determined using standard verifiable methods, the banking book of the Bank and certain
subsidiaries includes assets and liabilities that cannot be represented
using standard techniques. Hence, the VaR for these banking portfolios is calculated based on special procedures that endeavour to
reflect as faithfully as possible the actual behaviour of the assets
and liabilities in these portfolios.
The Bank uses what is known as the PVBP gap, a matrix of interest rate sensitivity factors of individual currencies for individual
portfolios of interest rate products, in order to measure the interest
rate risk exposure of financial markets transactions. These factors
measure portfolio market sensitivity with a parallel shift of the
yield curve of the respective currency within the predefined period
to maturity. The system of PVBP limits is set for each interest rate
product trading portfolio by currency. The limits are compared
to the value that represents the greater of the sum of the positive
PVBP values or the sum of the negative PVBP values in absolute
terms for each period to maturity. This results in managing not only
the risk of a parallel shift in the yield curve, but also any possible
yield curve rotation. A limit for the simple sum of PVBP values is
set for major currencies such as the CZK, EUR and USD. Česká
spořitelna additionally monitors other special limits for interest
rate option contracts, e.g. the gamma and vega limits for interest
rates and their volatility.
In addition to interest rate risk, the Bank also monitors credit spread
risk. This type of risk pertains to bonds, where changes in bond
prices can occur at constant interest rates as a result of a reduction
or increase in credit spread. CR01 limits are introduced for credit
spreads; these are similar to PVBP limits and are calculated as a
simple sum of the impact of a change in credit spread by 1bps
across all reference time periods.
The sensitivity of foreign currency derivatives to foreign exchange
rate movements is measured in the form of delta equivalents and is
reflected in the Bank’s foreign currency position. Česká spořitelna
monitors special limits for foreign currency option contracts, e.g.
limits for delta equivalent sensitivity to the exchange rate change
in the form of the gamma equivalent and limits for option contract
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Strategic Plans for the Future | Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
value sensitivity to exchange rate volatility in the form of the vega
equivalent. The Bank also monitors the sensitivity of the value to
the period to maturity (theta) and interest rate sensitivity (rho),
which is measured together with other interest rate instruments in
the form of PVBP.
evaluating the quality of the security issuer, country of origin and
performance of the respective economic sector. If these indicators
significantly worsen, each investment is individually re-evaluated
from the perspective of its future development, potential sale or
continued holding.
Trading book equity risk is monitored using the delta sensitivities of
portfolio market values to equity price movements both by equity
issue and in the aggregate for each market and for the portfolio
as a whole.
Information on the Bank’s exposure to market risks and on compliance with the established limits is reported on a daily basis to
the Bank’s responsible managers and on a monthly basis to the
members of the Board of Directors via the Assets and Liabilities
Management Committee and Financial Markets and Risk
Management Committee.
Trading book commodity risk is monitored using the delta sensitivities of portfolio market values to commodity price movements
for individual commodities.
The Strategic Risk Management Department uses other sophisticated procedures to assess the value and risks of structured products
including credit investment instruments whose explicit valuation
is not feasible. The Monte Carlo method is most frequently used
to simulate the probability distribution for the price and future
development of complex transactions, including price sensitivities
to changes in market factors.
The VaR method is used to measure aggregated trading and banking
book market risk of the Bank. VaR values are calculated with a
confidence level of 99% for the holding period of one trading day.
The calculation is performed using the KVaR+ system and simulations based on historical data over the most recent 520 trading
days. Under conditions of normal loss distribution, VaR is also
determined for a holding period of one month or one year and for
higher probability levels (99.9%, 99.98%).
VaR limits are determined for individual trading desks or portfolios.
The VaR method is augmented with back testing (both hypothetical
and real), which is designed to verify model correctness. To date,
back testing results have shown that the VaR calculation model
has been set correctly.
Based on Czech National Bank approval, the market VaR method is
also used to calculate the capital requirement in respect of foreign
currency risk, general interest rate risk, general and specific equity
risk and risk associated with trading book option transactions. This
method is also used to calculate Economic Capital for trading book
and banking book market risks. VaR calculations are also used
when assessing risks associated with the asset portfolios of funds
of Investiční společnost ČS, Penzijní fond ČS and Erste Energy
Services and when assessing market risks in the banking book of
Stavební spořitelna ČS using special models to represent the Bank’s
statement of financial position.
As a complement to the VaR method, Česká spořitelna performs
stress testing, which is described in more detail in a separate section.
Banking book investments in bonds are monitored by the Strategic
Risk Management Department using a system of indicators
Interest Rate Risk
Česká spořitelna uses the following methods to manage banking
book interest rate risk:
–– Net interest income simulation;
–– Simulation of net interest income sensitivity to market
interest rate changes (parallel/non-parallel discrete shift in
market yield curves);
–– Value at Risk calculation;
–– Simulation of changes in the theoretical market value of
the banking book when a market yield curve shifts by
±100/±200 basis points (including key rate duration); and
–– Gap analyses.
The Bank’s current interest rate risk exposure is assessed monthly
by the Assets and Liabilities Management Committee within the
context of overall development of financial markets, the Czech
banking sector and the structural changes in the Bank’s statement
of financial position.
The key parameter monitored in respect of Česká spořitelna’s interest rate sensitivity is the relative change in the Bank’s expected net
interest income should market interest rates show an immediate parallel increase/decrease of +100/–100 basis points over a 36-month
horizon given the assumption of a stable statement of financial
position structure (i.e. product structure of assets and liabilities).
Liquidity Risk
Liquidity risk is defined as the risk that the Bank will not be able to
meet its financial commitments as they fall due or finance its assets.
Liquidity is monitored and managed based on expected cash flows
and the subsequent adjustment of the liability structure.
The Survival Period Analysis (“SPA”) is a key tool in liquidity
management. This indicator measures how long an entity may survive under various predefined crisis scenarios from a liquidity risk
perspective. These scenarios include the ordinary course of business
(“OCB”), moderate identity crisis (“MIC”), serious identity crisis
(“SIC”), moderate market crisis (“MMC”), serious market crisis
(“SMC”) and combined serious identity and market crisis (“CIM”).
The actual survival period is assessed monthly. Regulatory bodies
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Strategic Plans for the Future | Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
recommend that the survival period be one month; in 2014, Česká
spořitelna’s survival period exceeded half a year with a stipulated
internal limit of 2 months.
Česká spořitelna monitors and assesses two regulatory ratios to
measure liquidity risk introduced by Regulation of the European
Parliament and of the Council No. 575/2013 (“CRD IV”) every
month: the Liquidity Coverage Ratio (“LCR”) and the Net Stable
Funding Ratio (“NSFR”).
The LCR measures a bank’s resistance to a sudden stress event on
its liquidity position, specifically whether the bank is able to survive
for at least 30 days in the event of a liquidity crisis. The indicator
is defined as the ratio of highly liquid assets to total projected net
cash outflows over a 30 day period under stress conditions. The
minimum ratio should always be higher than 100%. The plan is for
60% of this limit to be reached as of 2015, followed by an annual
10% increase to 100%.
The NSFR supports liquidity resistance in a long-term horizon
in order to ensure that non-current receivables are financed with
non-current funds. The standard requires a minimum amount of
funding that is expected to be stable over a one year time horizon.
The NSFR is defined as the amount of longer-term, stable sources
of funding employed by an institution (capital and a portion of longterm funds stable over a one year horizon under stress conditions)
and the volume of required stable funding (assets convertible into
cash in a period exceeding one year). NSFR should always be
higher than 100%.
Owing to its comfortable liquidity position (high volume of liquid
assets combined with retail market financing), Česká spořitelna
will meet the liquidity ratio with a significant reserve for the foreseeable future.
Česká spořitelna uses a cushion of highly liquid assets (an intraday liquidity buffer) for operational liquidity management. The
limit for the minimum volume of highly liquid assets is regularly
assessed based on transactions on Česká spořitelna accounts at the
CNB. The task of the cushion is to guarantee sufficient liquidity
to ensure one-day coverage of outstanding interbank transactions
in a crisis situation.
Česká spořitelna uses a system of early warning indicators for
the timely detection of forthcoming crises. These indicators afford
timely detection of individual and combined market and idiosyncratic liquidity crises. Where a crisis is detected, the Bank proceeds
in compliance with its liquidity crisis emergency plan that was
revised in 2014 pursuant to Regulation No. 163/2014 Coll.
Operational Risks
Česká spořitelna defines operational risks in accordance with CNB
Regulation No. 163/2014 on the activity of banks, credit unions
and investment firms as the risk of loss arising from the inadequacy
or failure of internal processes, human error, system failure or the
risk of loss resulting from external events, including legal risk.
The Bank’s management is regularly informed of operational risk
developments and levels.
Česká spořitelna uses a Book of Risks developed by the Risk
Management and Internal Audit departments as a tool to standardise
the identification of risks for the needs of the entire ČS Financial
Group and to standardise risk categorisation with the aim of achieving consistency in risk monitoring and assessment.
The CNB approved the use of advanced measurement approaches
(AMA) for the management of operational risk and calculation
of the capital requirement for operational risk effective from
1 July 2009. This concept was approved at the level of Erste Group
Bank and applies for all group entities using advanced measurement
approaches for operational risk. The Bank is currently working on
the further development of these principles in the area of operational
risk management with an emphasis on further strengthening the
internal control system.
In 2011, the Bank successfully modified and approved a model for
calculating regulatory minimum capital requirements that newly
reflects the impact of insurance. The CNB also approved the use
of the AMA by Stavební spořitelna ČS.
The Bank has been using the EMUS software application since
2002 to collect data on operational risk. Data are collected for the
purpose of quantifying operational risks and calculating the capital
requirement, but also for qualitative management, i.e. to prevent
the further incidence of operational risks and simplify processes for
recording events in which the Bank has suffered damage, including
insurance claims. The collection and evaluation of data on inappropriate conduct of the Bank’s clients and the risk of human failure
(inappropriate employee conduct) in the credit and non-credit areas
is key from the perspective of loss prevention.
Česká spořitelna does not only rely on data obtained from actual
operational risk incidents to assess and manage operational risks.
Expert opinions of management regarding risks in the areas for
which they are responsible constitute another valuable resource.
These risk assessments and expert risk scenario evaluations are
gathered on a regular basis and the data are aggregated into a risk
map and rendered in a standardised form for Erste Group Bank.
Risk scenario estimates are applied to calculations of the capital
requirement for operational risk pursuant to Basel II principles.
An important tool for mitigating losses arising from operational
risks is the insurance programme that Česká spořitelna has used
since 2002. The programme involves not only insurance of property damage, but also of risks arising from banking activities and
liability risks. Česká spořitelna has been a part of the Erste Group
Bank joint insurance programme since 1 March 2004, which has
greatly expanded the Bank’s insurance coverage, in particular for
damage that may have a material impact on Česká spořitelna’s
profit or loss. To manage business continuity, Česká spořitelna has
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Strategic Plans for the Future | Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
introduced a methodology and procedures based on internationally
recognised standards and Best Practice. The Bank systematically
analyses key processes and threats with respect to the risk of process failure, including an evaluation of the efficiency of adopted
measures and testing of existing emergency plans. Česká spořitelna
also participates in the activities of the Financial Markets Critical
Infrastructure Committee (“KIFT”) that involves key banks and is
overseen by the CNB.
Careful attention is given to fraud prevention as a specific category
of operational risk. The Bank focuses on the prevention of external
client or third party fraud as well as the risk of internal fraud. All
cases (zero tolerance for fraud) are subject to detailed investigation
followed by individual measures and system changes in the Bank’s
IT and business processes.
The Bank has a system in place to manage risks associated with
outsourcing. A group policy that complies with regulatory requirements (in particular, CNB Regulation No. 163/2014 and other official notifications) has been implemented. Risk analysis is regularly
performed and updated for material activities; a general outsourcing activity assessment is reported to the CORB (Compliance,
Operational Risk and Security) Committee on an annual basis.
Stress Testing
Česká spořitelna greatly expanded its stress testing of risk factors
in 2009 based on its experience with the crisis of 2008-2009 and
regulatory requirements.
Market risk associated with the trading book and the part of the
banking book revalued at market prices is subject to monthly stress
testing. Scenarios are primarily based on historical events and stress
scenario results are compared to the capital requirement for market
risk.
The Bank’s Board of Directors is sent a quarterly summary of all
risk exposures – a Comprehensive Stress Testing Report. The report
quantifies the impacts of a negative scenario for individual risks:
Great Depression scenario: projecting a 3-year economic depression
in Western Europe and the USA similar to the economic crisis of
the 1930s.
The report includes a summary of stress tests for market risk (separately for marked-to-market positions and for impacts of tests of the
Bank’s net interest income), the risk of widened credit spreads, credit
risk, operating risk, business risk, concentration risk and liquidity risk. The aggregate impact of the Comprehensive Stress Test
is reflected in the Bank’s resultant capital adequacy in compliance
with Pillar 1 and Pillar 2.
Of equal importance are the impacts of identified reverse scenario
risks, i.e. scenarios selected for their threat to the Bank’s viability,
specifically involving, for example, extraordinarily strong revenue
curve shifts, an economic collapse leading to a marked increase in
the likelihood of insolvency, extreme operational risk events or a run
on the bank associated with the worsening possibility of obtaining
market liquidity.
Other stress scenarios form a part of the Recovery Plan prepared in
2014 and approved by the Bank’s Board of Directors.
Capital Management
As regards the internal capital adequacy assessment process
(“ICAAP”), Česká spořitelna uses the Erste Group Bank methodology, which is updated on an ongoing basis to reflect current trends,
recognised standards and regulatory requirements. The approach
taken by Česká spořitelna is based on a group with minor differences
required by local regulatory requirements or other local specifics.
All significant risks are quantified and covered by internal capital
within ICAAP. Economic capital is calculated for a one year period
with a confidence level of 99.9%. Market, operational and liquidity
risks are quantified using the complex advanced approach based on
VaR methodology. Credit risk is calculated using the risk-weighted
assets method with the IRB approach. Česká spořitelna has also
developed models for other risks (business, strategic, reputation
and concentration risk).
Total Group risk constitutes the sum of individual risks, i.e. the
diversification effect is not applied out of preference for a more
conservative approach. Total risk is then compared with capital
sources derived from regulatory capital (in particular, the result for
the current year is added to capital sources).
Česká spořitelna performs stress testing, which provides additional information for an internal assessment of the Bank’s capital
adequacy.
The resulting economic capital is allocated to the Bank’s business
lines in order to calculate their risk-adjusted performance.
The Česká spořitelna ICAAP results are submitted quarterly to the
Board of Directors, which then decides on any steps to be taken in
respect of ICAAP and, generally, of risk and capital management.
The Bank has implemented new procedures comprising an
Emergency Response Plan and Recovery Plan in consideration of
new regulatory requirements to be prepared for unexpected adverse
market developments and, where the situation so requires, to adopt
sufficient timely measures.
Erste Group Bank, Česká spořitelna included, attaches sufficient
importance to ICAAP with the aim of gradually improving the system for managing the Group’s risk profile and capital adequacy while
taking future development into account. The Bank is systematically
continuing to refine its inclusion of new regulatory requirements
when modelling the development of capital needs and sources.
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Strategic Plans for the Future | Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
The Bank manages its capital with the aim of maintaining a capital level
that allows it to support business activities, comply with all applicable
regulatory requirements and ensure a stable return for shareholders.
Capital Adequacy
In 2014, the standalone capital adequacy of Česká spořitelna greatly
exceeded 13.50%, as required by the CNB when reflecting capital
reserves in Pillar 1. Based on the CNB calculation, Česká spořitelna
was assessed as a systemically important bank and will thus have to
hold extra capital in an amount of 3% above the basic requirement
of 8%, further increased by the applicable flat rate of 2.5% for a
capital reserve.
Several events occurred in 2014 that significantly impacted both
capital and capital adequacy. In QI 2014, the Bank began reporting
capital adequacy in accordance with new regulatory standards. At
31 March 2014, retained earnings brought forward (minus a paid
dividend of CZK 9.1 billion) were included in capital adequacy,
resulting in increased capital. At the 2014 year end, standalone
capital adequacy pursuant to the CNB methodology was 17.73%.
Capital adequacy*
2014
2013
2012
2011
2010
17.73%
17.73%
16.03%
13.09%
13.92%
*Data per CNB methodology
Information on Capital and Ratio
Indicators Pursuant to Annex No. 14 of
Regulation No. 163/2014 Coll.
Capital for the Bank’s capital adequacy calculation on a standalone
basis, as reported to the regulator pursuant to the valid regulations. Česká spořitelna did not avail itself of the option provided
in Article 26/2 of the CRR Directive and included neither interim
profit nor credit risk allowances in Tier 1 Capital in its reporting
to the regulator for 2014.
Data on capital and capital requirements
a) pursuant to Article 437(1)(a) of EU Regulation No. 575/2013
In CZK thousand
Standalone
data
31. 12. 2014
Capital
Tier 1 (T1) capital
Common Equity Tier 1 (CET1) capital
Common Equity Tier 1 capital instruments
Paid up CET1 instruments
Share premium
Retained earnings brought forward
Accumulated other comprehensive income (OCI)
Other reserve funds
CET1 capital adjustments for prudential filters
Reserve fund for cash flow hedges
Gains or losses on liabilities valued at fair value resulting from changes in own credit standing
Fair value of gains or losses on liabilities resulting from changes in own credit standing related to
derivatives obligations
(–) Value adjustments per requirements for prudential valuation
(–) Other intangible assets – gross value
(–) Lack of coverage of expected losses due to credit risk adjustments per IRB
Other temporary adjustments of CET1 capital
Other instruments of CET1 capital and other deductions from CET1 capital
Tier 2 (T2) capital
Instruments and subordinated loans usable as T2 capital
Paid up T2 instruments and subordinated loans
Excess coverage of expected loss amounts per IRB
Other temporary adjustments of T2 capital
75,506,467
75,289,387
75,289,387
15,201,688
15,200,000
1,688
68,064,838
764,171
3,040,462
(523,198)
(9,233)
(32,424)
(302,770)
(178,771)
(3,288,712)
(2,565,605)
(754,939)
(4,649,319)
217,080
261,499
261,499
60,181
(104,599)
51
Strategic Plans for the Future | Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
b) pursuant to Article 438(c) through (f) of EU Regulation No. 575/2013
In CZK thousand
Standalone
data
31.12.2014
Exposures to public sector entities
Exposures to institutions
For institutions calculating the risk-weighted
Exposures to corporates
exposure amounts in accordance with Chapter
Retail exposure
2 of Part Three, Title II, 8% of the risk-weighted
exposure amounts for each of the exposure classes Exposures in the form of units or shares of collective
specified in Article 112 of Regulation (EU) 2013/575 investment undertakings
Equity exposures
Other items
Own funds requirements calculated in accordance
for position risk
with points (b) and (c) of Article 92(3) of Regulation
for commodity risk
(EU) 2013/575
Own funds requirements calculated in accordance
Own funds requirements calculated in accordance with Title
with Regulation (EU) 575/2013 Part Three, Title III,
III, Chapter 4 of Regulation (EU) 2013/575
Chapters 2, 3 and 4 and disclosed separately.
415
2,298,101
15,417,617
9,048,257
4,039
1,235,858
1,574,031
523,430
688
3,975,521
Capital indicators
In CZK thousand
Standalone
data
31.12.2014
Tier 1 common capital ratio
Tier 1 capital ratio
Total capital ratio
17.67
17.67
17.73
Ratio indicators
In CZK thousand
Standalone
data
31.12.2014
Return on average assets (ROAA)
Return on average equity Tier 1 (ROAE)
Assets per employee
Administrative expenses per employee
After tax profit or loss per employee
1,86
25.46
87,007
1,523
1,524
52
Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures |
Additional Disclosures Related to Česká spořitelna’s Exposures to Assets that are Subject to Forbearance Measures
Additional Disclosures Related to Česká
spořitelna Group’s Exposures to Assets
that are Subject to Forbearance Measures
Forborne exposures
The Group implemented the new forbearance methodology according to the EBA regulation in 2014. Forborne exposures are exposures where the debtor is considered unable to comply with the
contract due to its financial difficulties and the Group decided to
grant a concession to a debtor. Forbearance measure can be either
modification of terms and conditions or refinancing of the contract.
Modification of terms includes payment schedule changes (deferrals or reductions of regular payments, extended maturities, etc.),
interest rate reductions or penalty interest waivers.
Forborne exposure initially receives default rating “R”; such exposure is classified as non-performing defaulted forborne exposure.
After minimum 12 months and when the pre-defined conditions are
fulfilled the exposure can be reclassified into performing forborne
exposure. The performing forborne exposure has to be closely monitored during the probation period which takes minimum 2 years.
When the exposure within the probation period defaults the exposure is downgraded into the non-performing forborne exposures.
If after 2 years’ probation period the stated conditions are met the
exposure ceases to be classified as forborne.
Quantitative information on the level of
forbearance activity
In addition to the quantitative information in respect of
Forbearance presented in the table f) Exposures with forbearance measures as at 31 December 2014 within Note 38 Risk
management in the ‘Credit risk’ subsection The Group decided
to provide users with the following additional quantitative data
in respect of Forbone exposures.
1. Analysis of Exposures with forbearance measures as required by IFRS 7 including
level of impairment and collateral
CZK million
As of 31 December 2014
Households
Non-financial corporation
Total
As of 31 December 2013
Central governments
Households
Non-financial corporation
Total
Outstanding
Neither
past due no
impaired
Past due
but not
impaired
Impaired
Total
forborne
1,140
1,264
113
12
2,655
1,084
3,908
2,361
Provisions
Collateral
1,073
728
1,679
458
2,404
125
3,739
6,269
1,801
2,137
11
694
1,184
–
277
24
27
2,779
3,494
38
3,749
4,702
9
1,377
1,434
21
1,379
3,054
1,889
301
6,300
8,489
2,820
4,454
2. Dissaggregation of the forborn financial assets by type of forbearance measure
All forbearance measures are reported as a modification of the previous terms and conditions.
53
Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures |
Additional Disclosures Related to Česká spořitelna’s Exposures to Assets that are Subject to Forbearance Measures
3. When original forborn assets have been derecognised during the reporting
period, carrying amount of the newly recognised assets arising from the fobearance
measures has to be quantified and disclosed.
At the moment The Group does not report such data.
4. The carrying amount of forborn assets in comparison with other assets remaining
the portfolio
CZK million
As of 31 December 2014
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total
As of 31 December 2013
General governments
Credit institutions
Other financial corporations
Non-financial corporation
Households
Total
Total portfolio
Forborne
portfolio
Share on total
portfolio
20,413
38,533
17,067
176,887
285,672
–
–
–
2,361
3,908
–
–
–
1.3%
1.4%
538,572
6,269
1.2%
19,400
75,348
23,827
182,137
263,830
38
–
–
4,702
3,749
0.2%
–
–
2.6%
1.4%
564,542
8,489
1.5%
5. Level of the collective and specific impairment allowance held against forborne
assets
CZK million
As of 31 December 2014
Households
Non-financial corporation
Total
As of 31 December 2013
Central governments
Households
Non-financial corporation
Total
Specific
allowances
Collective
allowances
Total
1,003
667
70
61
1,073
728
1,670
131
1,801
–
1,318
1,340
9
59
94
9
1,377
1,434
2,658
162
2,820
54
Risk Management | Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures |
Additional Disclosures Related to Česká spořitelna’s Exposures to Assets that are Subject to Forbearance Measures
6. Reconciliation from the opening balance to the closing balance of forborn assets
CZK million
As of 31 December 2014
Opening balance (1 January 2014)
Inflow (+)
Outflow (-)
Changes in outstanding (+/-)
Closing balance (31 December 2014)
As of 31 December 2013
Opening balance (1 January 2013)
Inflow (+)
Outflow (-)
Changes in outstanding (+/-)
Closing balance (31 December 2013)
Central
governments
Non- Households
financial
corporation
Total
38
0
(38)
0
4,702
612
(3,205)
252
3,749
2,425
(2,224)
(42)
8,489
3,037
(5,467)
210
20
42
(8)
(16)
5,174
2,258
(1,996)
(734)
3,901
2,513
(1,288)
(1,377)
9,095
4,813
(3,292)
(2,127)
Loss
Direct
write- offs
77
217
0
0
0
38
2,361
4,702
3,908
3,749
6,269
8,489
7. Loss from the forborn exposures
CZK million
As of 31 December 2014
Non-financial corporations
Households
Total
As of 31 December 2013
Central governments
Non-financial corporations
Households
Total
294
0
7
336
401
0
0
0
744
0
55
Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
| Additional Disclosures Related to Česká spořitelna’s Exposures to Assets that are Subject to Forbearance Measures | Other Information for Shareholders
Additional Disclosures Related to Česká
spořitelna’s Exposures to Assets that are
Subject to Forbearance Measures
Forborne exposures
The Bank implemented the new forbearance methodology according to the EBA regulation in 2014. Forborne exposures are exposures where the debtor is considered unable to comply with the
contract due to its financial difficulties and the Bank decided to
grant a concession to a debtor. Forbearance measure can be either
modification of terms and conditions or refinancing of the contract.
Modification of terms includes payment schedule changes (deferrals or reductions of regular payments, extended maturities, etc.),
interest rate reductions or penalty interest waivers.
Forborne exposure initially receives default rating ‘R’; such exposure is classified as non-performing defaulted forborne exposure.
After minimum 12 months and when the pre-defined conditions are
fulfilled the exposure can be reclassified into performing forborne
exposure. The performing forborne exposure has to be closely monitored during the probation period which takes minimum 2 years.
When the exposure within the probation period defaults the exposure is downgraded into the non-performing forborne exposures.
If after 2 years’ probation period the stated conditions are met the
exposure ceases to be classified as forborne.
Quantitative information on the level of
forbearance activity
In addition to the quantitative information in respect of Forbearance
presented in the table f) Exposures with forbearance measures as at
31 December 2014 within Note 38 Risk management in the ‘Credit
risk’ subsection The Bank decided to provide users with the following additional quantitative data in respect of Forbone exposures.
1. Analysis of Exposures with forbearance measures as required by IFRS 7 including
level of impairment and collateral
CZK million
As of 31 December 2014
Households
Non-financial corporation
Total
As of 31 December 2013
Central governments
Households
Non-financial corporation
Total
Outstanding
Neither
past due no
impaired
Past due
but not
impaired
Impaired
Total
forborne
1,116
1,263
109
12
2,460
1,043
3,685
2,318
Provisions
Collateral
1,002
726
1,609
458
2,379
121
3,503
6,003
1,728
2,067
11
649
1,184
0
262
24
27
2,502
3,494
38
3,413
4,702
9
1,253
1,434
21
1,275
3,054
1,844
286
6,023
8,153
2,696
4,350
2. Dissaggregation of the forborn financial assets by type of forbearance measure
All forbearance measures are reported as a modification of the previous terms and conditions.
56
Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
| Additional Disclosures Related to Česká spořitelna’s Exposures to Assets that are Subject to Forbearance Measures | Other Information for Shareholders
3. When original forborn assets have been derecognised during the reporting
period, carrying amount of the newly recognised assets arising from the fobearance
measures has to be quantified and disclosed.
The bank does not report such data.
4. The carrying amount of forborn assets in comparison with other assets remaining
the portfolio
CZK million
As of 31 December 2014
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total
As of 31 December 2013
General governments
Credit institutions
Other financial corporations
Non-financial corporation
Households
Total
Total portfolio
Forborne
portfolio
Share on total
portfolio
20,413
37,233
30,309
167,685
247,118
0 0 0 2,318
3,685
0.0%
0.0%
0.0%
1.4%
1.5%
502,758
6,003
1.2%
19,386
49,384
27,936
181,783
227,103
38
0
0
4,702
3,413
0.2%
0.0%
0.0%
2.6%
1.5%
505,592
8,153
1.6%
5. Level of the collective and specific impairment allowance held against forborne
assets
CZK million
As of 31 December 2014
Households
Non-financial corporation
Total
As of 31 December 2013
Central governments
Households
Non-financial corporation
Total
Specific
allowances
Collective
allowances
Total
936
665
66
61
1,002
726
1,601
127
1,728
0
1,199
1,340
9
55
94
9
1,254
2,539
158
1,434
2,697
57
Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures
| Additional Disclosures Related to Česká spořitelna’s Exposures to Assets that are Subject to Forbearance Measures | Other Information for Shareholders
6. Reconciliation from the opening balance to the closing balance of forborn assets
CZK million
As of 31 December 2014
Opening balance (1 January 2014)
Inflow (+)
Outflow (-)
Changes in outstanding (+/-)
Closing balance (31 December 2014)
As of 31 December 2013
Opening balance (1 January 2013)
Inflow (+)
Outflow (-)
Changes in outstanding (+/-)
Closing balance (31 December 2013)
Central
governments
Non- Households
financial
corporation
Total
38
0
(38)
0
4,702
569
(3,205)
252
3,413
2,320
(2,005)
(43)
8,153
2,889
(5,248)
209
20
42
(8)
(16)
5,174
2,258
(1,996)
(734)
3,532
2,186
(1,165)
(1,140)
8,726
4,486
(3,169)
(1,890)
Loss
Direct
write-offs
77
199
0
0
0
38
2 317
4,702
3 685
3,413
6 002
8,153
7. Loss from the forborn exposures
CZK million
As of 31 December 2014
Non-financial corporations
Households
Total
As of 31 December 2013
Central governments
Non-financial corporations
Households
Total
276
0
7
336
349
0
0
0
692
0
58
Additional Disclosures Related to Česká spořitelna Group’s Exposures to Assets that are Subject to Forbearance Measures | Other Information for Shareholders | Other Information for Shareholders
Other Information for Shareholders
pursuant in particular to § 118 of Act No. 256/2004 Coll. on doing business on
the capital market, par. 4, letters b) through k) and par. 5 letters a) through k)
Česká spořitelna, a. s., with its registered office at Prague 4,
Olbrachtova 1929/62, 140 00, Company ID 45244782, is the legal
successor of the Czech State Savings Bank and was registered as a
joint stock company in the Czech Republic on 30 December 1991
in the Commercial Register maintained by the Municipal Court in
Prague, Section B, Entry No. 1171.
§ 118, par. 4, letter d) and par. 5, letters a)
through e)
The structure of the consolidated and individual equity of Česká
spořitelna is presented in the consolidated or standalone annual
financial statements on page 77 or page 156 of the Annual
Report, respectively.
Česká spořitelna, a. s. shares
–– Class: Ordinary and preference shares
–– Type: 140,788,787 ordinary bearer shares, i.e. 92.62% of
basic capital 11,211,213 preference shares, i.e. 7.38% of
basic capital
–– Form: Book entry
–– Number of shares: 152,000,000
–– Total issue volume: CZK 15,200,000,000
–– Nominal value per share: CZK 100
–– Share marketability: Shares are not traded on any public
market
Česká spořitelna shareholder structure at
31 December 2014 – Share in basic capital
The transferability of preference shares is restricted to towns and
municipalities of the Czech Republic; transfers of preference shares
to other entities are subject to Česká spořitelna Board of Directors
approval. A preferential right to receive dividends is attached to
preference shares. Holders of preference shares are entitled to preference dividends every year that the General Meeting adopts a
decision to distribute profit, even if other shareholders will not be
paid dividends in the given year based on the General Meeting’s
decision. A right to vote at General Meetings is not attached to the
Company’s preference shares. Holders of preference shares have all
other rights attached to ordinary shares. Additional information on
shareholders’ rights is presented in Item B. Company Relationships
with Shareholders in the Česká spořitelna, a. s. Declaration on the
Compliance of its Governance with the Code based on OECD
Principles (see page 68 of the Annual Report).
§ 118, par. 5, letters g)
and h)
The election and dismissal of Board of Directors members lies
within the remit of the Supervisory Board. Board of Directors
members are elected and dismissed by acclamation (a show of
hands) at Supervisory Board meetings; in this case, any agreement
to take a vote in writing or via remote means of communication
outside of the Supervisory Board meeting is unacceptable. The
Supervisory Board has a quorum if an absolute majority of its
members is present. The Supervisory Board decides by resolution;
adopting a resolution requires a majority vote of the Supervisory
Česká spořitelna shareholder structure at
31 December 2014 – Share in voting rights
Towns and municipalities of the
Czech Republic
0.59
0.44
Other legal persons and individuals
98.97
EGB Ceps Holding GmbH,
Graben 21. Vienna, Austria*
Towns and municipalities of the
Czech Republic
0.48
99.52
EGB Ceps Holding GmbH,
Graben 21. Vienna, Austria*
*EGB Ceps Holding GmbH is a wholly-owned subsidiary of EGB Ceps Beteiligungen GmbH, itself a wholly-owned subsidiary of Erste Group Bank AG.
59
Additional Disclosures Related to Česká spořitelna’s Exposures to Assets that are Subject to Forbearance Measures | Other Information for Shareholders | Česká spořitelna – Corporate Social Responsibility
Board’s members. In the event of a tie, the chair shall cast the
deciding vote. The General Meeting decides on any changes to the
Company’s Statutes in compliance with the relevant provisions of
the Commercial Code.
The Board of Directors is a statutory body that manages the activities of Česká spořitelna and acts on its behalf. The standard powers
and responsibilities are set out in Article 13 of the Česká spořitelna
Statutes. Members of the Board of Directors have no special powers
in the meaning of par. 5 letter h).
§ 118, par. 5, letter i)
Česká spořitelna has executed ISDA Master Agreements, which
include the condition that if the ownership of either party changes,
the other party shall have the right to terminate the agreement.
The foregoing applies to agreements entered into with these
counterparties: BNP Paribas, Paris; CALYON, Paris; ING Bank,
Amsterdam; JP Morgan Chase Bank, New York; Morgan Stanley
& Co. (International); Royal Bank of Canada, Toronto; and UBS,
London.
Information arising from § 118 of Act No. 256/2004 Coll. on
doing business on the capital market, par. 4 letters b), c), e) and
j), is included in the Česká spořitelna, a. s. Declaration on the
Compliance of its Governance with the Code based on OECD
Principles (see page 68 of the Annual Report).
Česká spořitelna has entered into no contracts, agreements or programmes in the meaning of § 118 of Act No. 256/2004 Coll. on
doing business on the capital market, par. 5 letters f), j), and k).
Controlling entity
Erste Group Bank AG is the controlling entity of Česká
spořitelna, a. s. via EGB Ceps Holding GmbH and EGB Ceps
Beteiligungen GmbH. Measures designed to prevent the controlling
entity from misusing its control arise from the Commercial Code
and primarily include
–– a ban on the misuse of a voting majority in a company,
–– a ban on the abuse of a controlling entity’s influence by
forcing the adoption of a measure or execution of a contract
that could cause damage to the property of a controlled
entity, unless such damage is compensated by the end of
the accounting period in which the damage was incurred,
at the latest, or a contract is signed stipulating a reasonable
period and method for the compensation to be paid by the
controlling entity,
–– the obligation of the Company to prepare a Related Parties
Report (see page 233 of the Annual Report),
–– the obligation of the controlling entity to pay damages to
the controlled entity, and
–– guarantees provided by members of the statutory body of
the controlling entity and controlled entity.
Česká spořitelna is a universal bank and is not dependent on other
Česká spořitelna Financial Group or Erste Group Bank entities.
Information on the acquisition of
treasury shares and Erste Group bank
shares
In 2014, Česká spořitelna neither traded nor held any treasury
shares. It acted as a market maker in respect of the shares of its controlling entity, Erste Group Bank, on the Prague Stock Exchange.
Česká spořitelna purchased 3.541 thousand under standard market
conditions at an aggregate purchase price of CZK 2.212 million
and sold 3.541 thousand shares at an aggregate selling price of
CZK 2.168 million. In 2014, the minimum price for the purchase
and sale of one share was CZK 452.00 and CZK 451.70, respectively, and the maximum price for the purchase and sale of one
share was CZK 813.10 and CZK 814.50, respectively. Neither at
the beginning nor the end of 2014 did Česká spořitelna hold any
shares. The average nominal value of one share of Erste Group
Bank was EUR 2 at the 2014 year end.
Information on the Guarantee Fund
contribution
As a securities trader, Česká spořitelna contributes to the Guarantee
Fund, which safeguards the guarantee system from which compensation is paid to clients of securities traders unable to meet their
client obligations. The calculation base for the Česká spořitelna
Guarantee Fund contribution for 2014 was CZK 672 million. The
contribution itself amounted to CZK 13 million.
Information on research and
development activities
Česká spořitelna is a leading financial services provider in the
Czech Republic. Its extensive portfolio of services and efforts to
maintain their high quality are commensurate with the emphasis
Česká spořitelna places on security when it comes to service reliability and the protection of clients’ personal information, the secure
use of internet banking, payment card security and the reliability
and proper functioning of information systems. Česká spořitelna
conducts in-house research and development, in particular of proprietary software, i.e. architecture design, development of ancillary
tools (frameworks) and their implementation and integration. The
Bank also develops mathematical, statistical and other empirical
models designed to model risks, i.e. creating risk management
systems, the prevention and automated detection of fraud, and
research and development of empirical models designed to model
retail market conditions. Česká spořitelna incurred research and
development costs of CZK 150 million in 2014.
Supplementary information on debt
securities
Debt securities ISIN CZ0002000623, CZ0002000755,
CZ0002001068, CZ0002001134, CZ0002001191, CZ0002001282,
CZ0002001407, CZ0002001415, CZ0002001423 and
CZ0003701054 have been traded on the regulated market of the
60
Additional Disclosures Related to Česká spořitelna’s Exposures to Assets that are Subject to Forbearance Measures | Other Information for Shareholders | Česká spořitelna – Corporate Social Responsibility
Prague Stock Exchange since the time of their issuance. No other
securities are traded on any regulated market. Issued debt securities are summarized in the standalone financial statements. The
debt securities have not been assigned any rating. Credit ratings
are assigned to Česká spořitelna by the renowned credit rating
agencies Fitch, Moody’s and Standard & Poor’s. All three credit
rating agencies were registered in compliance with Commission
Regulation (EC) No. 1060/2009 on credit rating agencies, amended
by Commission Regulation (EC) No. 462/2013 (The Regulation
on Credit Rating Agencies). The market share of each of the above
credit rating agencies calculated in compliance with Commission
Regulation (EC) No. 1060/2009 exceeds 10% of the European
Union market.
Fees invoiced by the audit company
Ernst & Young Audit in 2014
§ 118, par. 4, letter k)
CZK million
Audit
services
Other
services
Total
23
3
26
14
2
16
37
5
42
Česká spořitelna
Other consolidated
companies
Total
Principles of executive manager
and Supervisory Board member
remuneration
§ 118, par. 4, letters f) g), h), i)
Executive managers
At Česká spořitelna, executive management comprises the chairman of the Board of Directors and the members of the Board of
Directors, who form a collective statutory body. The Board of
Directors is by law the statutory body managing the operations of
the Company and acting on its behalf. Some members of the Česká
spořitelna Board of Directors are key employees of the company
ÖCI – Unternehmensbeteiligungs-gesellschaft.m.b.H., a subsidiary
of Erste Group Bank A.G.
Members of the Česká spořitelna Board of Directors exercise their
powers with due diligence and professional care and act in good
faith and in the best interests of the Company and its shareholders.
They are skilled in managing large corporations and have international experience and the ability to work in a team. Their position
calls for the ongoing development of their industry knowledge and
corporate governance skills, a proactive approach to the discharging
of their duties, the ability to participate in developing corporate
strategy and, no less importantly, loyalty to the Company. Members
of the Board of Directors adhere to high ethical standards and are
responsible for ensuring that the Company complies with enacted
laws. They are personally liable for damages arising from a breach
of legal obligations and, in their capacity as Board of Directors
members, are responsible to the Company’s shareholders.
Board of Directors members are remunerated based on a Contract
for Performance of the Duties of a Board of Directors Member concluded in accordance with the valid provisions of Act No. 90/2012
Coll. on business companies and cooperatives (the “Business
Corporations Act”). Contract for Performance of the Duties of
a Board of Directors Member was approved by the Company’s
General Meeting. The Supervisory Board approves the amount of
Board of Directors members’ remuneration.
The compensation policy for Board of Directors members is set and
approved by the Česká spořitelna Supervisory Board. The indicators
based on which variable components of executive manager income
were paid are net profit of Česká spořitelna, the EVA of Česká
spořitelna and the non-performing loan (NPL) index. Performance
criteria are set for each calendar year and are approved and subsequently assessed by the Supervisory Board. Board of Directors
members may receive an annual bonus of up to 100% of their
annual base salary. Based on their management and professional
expertise, experience and contribution to the Company, Board of
Directors members are entitled to:
–– monetary income arising from the position of Board of
Directors chairman and Board of Directors member in an
aggregate amount of CZK 15.6 million,
–– bonuses arising from the position Board of Directors
chairman and Board of Directors member in an aggregate
amount of CZK 7.2 million,
–– deferred bonuses in compliance with the European
Union’s CRD III Guidelines on Remuneration Policies
and Practices in an aggregate amount of CZK 5.7 million,
–– income in-kind arising from the positions of Board of
Directors chairman and Board of Directors member in an
aggregate amount of CZK 2.1 million,
–– monetary income arising from the position of
statutory body member in an aggregate amount of
CZK 30.9 million.
All the foregoing income is paid by Česká spořitelna; Board of
Directors members receive no income from companies controlled
by Česká spořitelna.
In 2014, the members of the Board of Directors held no shares of
Erste Group Bank under the ESOP programme.
Neither Board of Directors members nor persons close to them own
shares or call options to purchase shares of Česká spořitelna. Česká
spořitelna shares have not been publicly tradable since August 2002.
Detailed professional biographies of the executive directors of
Česká spořitelna attesting to their qualifications, professional
abilities and practical experience and describing their work are
published on pages 11 and 12 of the Annual Report.
The Supervisory Board has established a Compensation Committee
comprising Supervisory Board members serving no executive function in the Company. The powers of the Compensation Committee
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Additional Disclosures Related to Česká spořitelna’s Exposures to Assets that are Subject to Forbearance Measures | Other Information for Shareholders | Česká spořitelna – Corporate Social Responsibility
cover the formulation of proposals for Supervisory Board decisions pertaining to compensation within the Company, including
compensation having an impact on risks and risk management.
When preparing these decisions, the Compensation Committee
considers the long-term interests of shareholders, investors and
other capital partners. The duties of the Compensation Committee
include submitting proposals to the Supervisory Board for Board
of Directors member remuneration, overseeing the remuneration of
departmental directors carrying out internal controls and supervising the basic principles of compensation and their application. The
Compensation Committee members are: M. Hardegg, S. Dörfler,
J. Stack.
Supervisory Board
The Supervisory Board is the Company’s controlling body, which
oversees the exercising of the Board of Directors’ powers in performing the Company’s business activities. The Supervisory Board
checks, in particular, whether the Board of Directors is performing
its duties in compliance with the legislation and the Company statutes and whether the Board of Directors members are acting with
due professional care in the interests of the Company. Supervisory
Board members perform their duties with due professional care and
are required to possess professional skills, maintain allegiance to
the Company and maintain the confidentiality of all confidential
information and matters.
Supervisory Board members are liable for damages arising from
a breach of legal obligations and, in their capacity as members
of the Company’s Supervisory Board, are responsible to the
Company’s shareholders. Supervisory Board members are remunerated in accordance with the relevant provisions of the Business
Corporations Act. The General Meeting approves the amount of
Supervisory Board members’ remuneration. Neither Supervisory
Board members nor persons close to them own shares or call
options to purchase shares of Česká spořitelna. Česká spořitelna
shares have not been publicly tradable since August 2002.
Members of the Supervisory Board were entitled to remuneration,
including income in-kind, of CZK 4.8 million for their work on the
Česká spořitelna Supervisory Board in 2014; no in-kind compensation was provided to Supervisory Board members. Česká spořitelna
employees who are Supervisory Board members obtained monetary
income in an aggregate amount of CZK 1.3 million, bonuses in an
aggregate amount of CZK 0.5 million and income in-kind in an
aggregate amount of CZK 0.05 million. All the foregoing income is
paid out by Česká spořitelna; Supervisory Board members receive
no income from companies controlled by Česká spořitelna.
Affidavit
The undersigned represent that, to the best of their knowledge, the
annual report and consolidated annual report provide a true and
fair view of the financial position, business activities and profit of
Česká spořitelna and its consolidation group for the accounting
period ending 31 December 2014 and of the outlook for the future
development of its financial position, business activities and profit.
Prague, 3 March 2015
Pavel Kysilka
Chairman of the Board
of Directors
Wolfgang Schopf
Vice-chairman of the Board
of Directors
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Other Information for Shareholders | Česká spořitelna – Corporate Social Responsibility | Česká spořitelna, a. s. Declaration of Compliance of its Governance with the Code Based on OECD Principles
Česká spořitelna – Corporate Social
Responsibility
Corporate Social Responsibility (“CSR”), an integral part of our
business, is reflected in everything we do. As a company whose
origins date back to 1825, we acknowledge and proudly proclaim
our corporate social responsibility.
CSR projects supported by Česká spořitelna and the activities of its
two foundations, Nadace České spořitelny and Nadace Depositum
Bonum, are based on the three pillars of the Bank’s CSR strategy
“Investing for the Future”:
through specialised advisors. For a list of advisors, go to www.
poradci-pro-neziskovky.cz.
Česká spořitelna and Nadace ČS contributed CZK 76 million to
charities and charitable projects in 2014.
I. We stand with those whom society
ignores
I. We stand with those whom society ignores
II. We educate for competitiveness
III. We are barrier free
in 2002, we launched the foundation Nadace České spořitelny,
a key tool in our corporate philanthropy efforts. Nadace ČS works
in social development, an area often overlooked by other donors.
Indeed, our motto is “We stand with those whom society ignores”.
In 2014, we created an interactive map of key CSR projects available online at www.mapa-csr.cz.
Nadace ČS has long offered effective help in addressing
certain important social issues, such as the problems faced by
Česká spořitelna for Society
Our corporate and CSR strategies enable us to meet our social
obligations in a systematic manner while remaining mindful of
the interests of all key groups – clients, employees, shareholders
and society.
We take an open approach to our clients and honour the rules
of fairness. In addition to the standard use of feedback tools,
clients enjoy the services of an independent Česká spořitelna
Ombudsman.
Clients can acquire valuable information about debt obligations
through the Debt Advisory Centre, which we were instrumental in establishing. The Ostrava and Ústí nad Labem branches of
this bureau exist as a complement to the headquarters in Prague,
and there are another 7 travelling mobile branches located in
Česká Lípa, Hradec Králové, Litvínov-Janov, Plzen, Šumperk
and Prostějov. The Centre has helped more than 70 thousand
people.
We also take a socially responsible approach to business solutions –
a special team of staff is dedicated to serving investor clients, helping them prepare and implement their business plans. Moreover,
we offer support to start-up entrepreneurs through advisory and
tailored products. We offer a special advisory and financial
service to non-profit organisations and social enterprises
seniors, preventing and fighting drug addiction and helping persons
with mental disabilities (Nadace ČS has also been a long-time supporter of community and environmental development). In its efforts
to better help those on society’s margins, Nadace ČS announced the
first annual Cena Floccus [Floccus Prize] in autumn 2014, an
award to recognise courage shown by organisations and individuals.
The public was invited to participate in the autumn nominations,
then the professional jury met, the public voted and the winners
were announced and notified in January 2015.
Nadace ČS works together with non-profit sector partners to execute
its long-term projects in support of active seniors, persons with mental disabilities and the prevention and treatment of addiction. These
partners include: Palata – domov pro zrakově postižené [Home
for the Blind], Charita ČR, Život 90, the Livia and Václav Klaus
Endowment Fund, SANANIM, Drop In, Podané ruce [Helping
Hands] and Diakonie ČCE [Diaconia of the Evangelical Church
of Czech Brethren].
Nadace České spořitelny also directs support toward regions in
which getting financing to where it is needed can be especially
difficult. Smaller organisations are helped through projects carried
out by Česká spořitelna regional branches and thanks, too, to the
Bank’s Grant Programme and the volunteerism of ČS employees.
In 2014, Nadace ČS donated more than CZK 17 million to its partners in support of a total of 57 projects. Under the Grant Programme,
a total of CZK 2 million was distributed among 35 projects.
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II. We educate for competitiveness
education is the way to a better life. Our mission has always been
– and will always be – to help young people who have set out on
the path of higher education. We execute most activities in this area
through our Nadace Depositum Bonum, cooperation with universities and the financial education programme Today’s Financial World.
Nadace Depositum Bonum
In 2012, we established the foundation Nadace Depositum
Bonum (Latin: good deposit) to support Czech society in the
areas of science, research and education. Nadace DB supports
Czech international competitiveness by investing in education. The
Foundation’s assets consist of funds in dormant anonymous passbook accounts that have been barred by statute and whose further
existence has been prohibited by the EU and Czech Parliament.
Česká spořitelna has decided to use unclaimed funds totalling
CZK 1.45 billion to give back to Czech society by establishing
this foundation.
Nadace Depositum Bonum supports scientific and technical fields
of endeavour that yield long-term practical benefits for society and
bolster global competitiveness. As its first programme, the foundation launched the Elixir for Schools project focused on interactive
physics instruction, allowing gifted and motivated teachers and students to deepen and expand their abilities, knowledge and experience
in this field. In 2014, another 6 regional centres were established
throughout the Czech Republic. In all, Nadace DB has 21 centres
fostering the sharing of good practices and the professional development of physics teachers. In May 2014, Nadace DB organised the
first Elixir Conference for schools, in which 160 teachers took part;
Nadace DB issued the annual report for this project in autumn 2014.
In the course of 2014, Nadace DB began to lend support to the H-mat
society, which promotes the instruction of mathematics based on
the approach of Professor Milan Hejný, who was awarded the
prestigious Eduína prize in 2014.
As of the 2014/2015 school year, Nadace Depositum Bonum
replaced Česká spořitelna as the general partner of the Eurorebus
knowledge competition.
October 2014 saw the second annual conference The Czech School
of the 21st Century organised by Nadace Depositum Bonum and
Erste Corporate Banking in collaboration with the Czech Union
of Industry and Transport. Specific steps and forms of cooperation
were discussed by 120 representatives of educational institutions
and companies.
Financial Education
Since 2011, we have been developing the comprehensive instructional programme in financial literacy, Today’s Financial World
(TFW) for elementary and high school students in cooperation
with the firms Terra-Klub and KFP. We expanded the programme
for high schools in 2014, among other ways by completing and
publishing learning materials. The TFW programme FS includes
the School Atlas – Today’s Financial World textbook and CD, a
methodology guide for instructors, accredited workshops for teachers and extensive online support for pupils, parents and teachers at
www.dnesni-financni-svet.cz.
Since 2012, another component of this comprehensive instructional
programme has been the fun interactive board game Financial
Freedom, which elementary school kids can play with our trained
staff. Some 157 schools have introduced Financial Freedom into
their lesson plans. In 2014, we were also a partner of the first annual
Czech Financial Freedom Championship for elementary and high
schools and we organised a championship for our partner universities (see below).
More than 300 schools have made use of tools offered by the Today’s
Financial World programme (seminars, workshops, the School Atlas,
the Financial Freedom game). We held 23 teacher workshops in 2014
to introduce ways in which financial topics could be incorporated
into lessons and the Today’s Financial World programme could be
applied.
Partnering with Universities
We are a general partner of the University of Economics and
Hradec Králové University; we also work with Prague’s Charles
University, Mendel University in Brno, Palacký University in
Olomouc, Pardubice University, the Mining University – Technical
University of Ostrava and others. We provide these institutions not
only with financial support, but also professional cooperation in the
form of traineeship, manager shadowing and overseeing student
thesis work. We also support professional conferences and activities
of many new and established student associations, helping to foster
and maintain a vibrant student life at these universities.
In 2014, we offered students at our partner schools stipends for a
study programme on doing business online. The top experts working
at iCollege are also leading innovators in the fields of business,
technology, enterprise management and creative thinking. They pass
their know-how on to the students and help them apply it to their
business plans.
We are also partners in quite a few competitions supporting worthy
student business plans. Since its inception, we have been a supporter
of the Social Impact Award competition in which students and
young people can implement their ideas regarding how to do business while also doing good. Students also have a chance to succeed in
other competitions – in the Podnikavá hlava [Head for Business]
competition organised by Palacký University Olomouc or Pardubice
University’s Byznys trefy [Business Clubs]. Entrepreneurs just
starting out can also submit their projects for the Start-ups of the
Year contest.
In late 2014, we entered into a collaboration with the Prague
University of Economics’ emerging xPORT Business Accelerator.
As its first corporate partner, we brought two projects to the
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Other Information for Shareholders | Česká spořitelna – Corporate Social Responsibility | Česká spořitelna, a. s. Declaration of Compliance of its Governance with the Code Based on OECD Principles
Accelerator: groups of selected students will work on them throughout 2015 under the professional guidance of one expert from ČS
and another from the academic sphere.
A further component of our university partnerships in 2014 was the
organisation of the school round of the Championship in Financial
Freedom for university students. Students learned in an amusing way
how to look after their finances; in May 2015, contest participants
will enter the final round for a valuable prize.
In 2014, we also implemented a cycle of interactive social media
internships called Future Minds.
Other Projects
We are also continuing the DreamCatcher project (www.dreamcatcher.cz) designed for youths aged 13 to 26. It offers them a unique
opportunity to fulfil their dreams by showing them that the way to
do so is through effort and endeavour, while teaching them how to
present themselves and their projects and underlining the importance
of teamwork, accountability and, no less importantly, public service.
In the five years of the DreamCatcher project, some 160 dreams have
been fulfilled at a total of more than eight million Czech crowns.
The Bezpečný internet [Secure Internet] project (www.
bezpecnyinternet.cz) is a joint undertaking of Česká spořitelna,
Microsoft and Seznam.cz with the support of the Czech Police.
This web portal provides useful information about safe internet practices, e.g. risks associated with internet use and ways
to avoid and effectively protect against internet scams, viruses
and phishing.
Česká spořitelna also offers e-learning in the form of comics that
teach safe internet use published on the company website (www.
csas.cz/bezpecnost).
We help foster culture through a host of sponsorships and organiser
roles. In 2014, for example, we continued to display works of art
from the Česká spořitelna fund, not only in the Česká spořitelna
Gallery, but also in a free exhibition held at Prague’s Rytířská Palace.
This exhibition cycle carries on the longstanding tradition of art
patronage begun by our legal predecessors in the 19th century.
III. We are barrier free
Together with the Czech Red Cross, we have launched the Friendly
Places project (www.pratelskamista.cz) to educate our employees in
how best to serve customers with various disabilities. We increased
the number of our certified locations to 42 in 2014.
Together with the organisation Barrier Account, we organise banking courses for the handicapped. We offer courses for the visually impaired in the use of ATMs with audio output as well as ČS
traineeship in collaboration with the Union of Organisations for the
Visually Impaired and Blind (SONS).
In 2014, we more than doubled the number of ATMs adapted for
the visually impaired to 610.
For our hearing impaired customers, we have introduced induction
loops into 26 of our branches and the simultaneous transcription
service eScribe at another 26.
In 2014, we were named Bank Without Barriers 2014 in the
Fincentrum Bank of the Year competition. The organisation Barrier
Account, in collaboration with people with disabilities, named us
the friendliest bank for clients with disabilities.
Supporting Social Enterprise
We actively support social enterprise, an undertaking that links our
business strategy and our strategy for corporate social responsibility.
We do so through a series of educational activities in the Financing
Social Enterprise programme and by placing great value on inspirational and innovative ideas.
In 2014, we worked with the VIA Foundation to put on a series of
educational seminars for social enterprises and non-profit organisations called the Česká spořitelna Social Enterprise Academy
(the last seminar was held in January 2015). The aim of these seminars was to advise social enterprises and organisations how effectively to do business in a socially responsible way. Seminar content
was offered by our own ČS experts. Another part of the Academy is
the Accelerator assistance programme offering selected non-profits
a year of help to evaluate their business activities and to think about
and plan for the future to ensure their social enterprise operates as
efficiently as possible. The Accelerator will run until May 2015.
We’re a bank for everyone! We break down barriers in our services
and in our approach to nonstandard requirements and situations.
We are also general partner of a competition to support young people with innovative ideas – the Social Impact Award – in which
university students are given an opportunity to turn their ideas into
reality and start their own socially responsible business.
Bank Without Barriers
Česká spořitelna for Employees
Our objective is to be a bank for everyone, and that’s why we do our
best to accommodate persons with disabilities by working with professionals and experts in this area. We are mapping the wheelchair
accessibility of branches and ATMs in collaboration with the Prague
Wheelchair Association (POV) and are also working to eliminate
any barriers that remain. The maps are available to the public online
at www.presbariery.cz.
We appreciate the loyalty of our employees and look forward to
long working relationships with them; on average, employees stay
with us for 10.6. We offer our employees a wide range of social benefits including lifelong learning, support for parental leave and
a childcare contribution for kids up to 5. Every new father receives
five days off when his newborn comes home from the hospital.
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Other Information for Shareholders | Česká spořitelna – Corporate Social Responsibility | Česká spořitelna, a. s. Declaration of Compliance of its Governance with the Code Based on OECD Principles
More than 77% of parents return to work with us after maternity
or parental leave. In 2014, we also prepared and implemented a
flex-time methodology.
In 2013, we launched the optional employee benefit programme
Cafeteria, taking into account the individual needs of every employee
assistance for non-profit organisations they work with in their free
time. Last year, we donated a total of CZK 1 million to 22 projects
all across the country – winning projects were chosen by the public
in an online vote. Under the ČS Grant Programme for Employees,
we donated a total of CZK 1 million to 13 projects.
and based on the principle of freedom to choose from the widest possible range of benefits.
In addition to charitable activities, our employees are also given
opportunities to help reduce the Bank’s environmental footprint.
Our comprehensive Diversitas programme addresses issues such
as the under-representation of women in management, compensation gaps, personal development and career growth, conditions for
returning from maternity or parental leave, achieving an effective
work/life balance, intergenerational dialogue, age management and
combating discrimination. In the area of gender equality, we partner
with the British Chamber of Commerce on the Equilibrium mentoring programme for women in management and business.
Česká spořitelna Cares about the
Environment
We also support employment of persons with disabilities. Members
of this population comprised 1% of our staff in 2014.
Bearing in mind the importance of employee feedback, we introduced
the open communication system to ensure employees are in touch
with senior management and kept well informed.
As business ethics play a fundamental role at Česká spořitelna, the
Bank created the position of Ethics Manager to oversee this area
throughout ČS Financial Group. The ethics manager assumes an
advisory role in matters pertaining to the employee Code of Ethics
and oversees adherence to the Code. The position deals with the ways
in which we set and apply our work procedures and methods and how
we interact with our customers, shareholders, colleagues and vendors.
We endeavour to assist ČS Financial Group employees address all
manner of professional and personal issues in the workplace. To this
end, they can turn to an Internal Ombudsman who strives to remain
unbiased and carefully review the facts behind complaints. All information in a complaint is treated as sensitive and strictly confidential.
The employee who has made the complaint will choose whether to
agree to the disclosure of personal information from the complaint
or to maintain anonymity.
Projects that directly engage employees in implementing
the CSR strategy are of key importance. Through the Charity
Day project, our employees can take two working days to volunteer.
In 2014, 1,250 employees took advantage of this opportunity and
volunteered a total of 2,099 days with 144 non-profit organisations
throughout the Czech Republic.
For employees in management positions, we have the Managers
for a Good Cause programme enabling them to spend a week
sharing their professional knowledge with a non-profit organisation.
The Grant Programme , another project of Nadace Česká
spořitelna, offers ČS employees the opportunity to secure financial
Česká spořitelna endeavours in a variety of ways to reduce its
energy consumption (electricity, heat, natural gas and water)
and reduce its environmental footprint. For example, under the
Energy Consumption Reduction Programme branches are regularly
informed of their energy consumption (water, heat, natural gas and
electricity) (in 2015, the programme is being expanded to include
the ČS headquarters). ČS also measures, monitors and reports its
carbon footprint on a year-to-year basis in the areas of mobility,
paper consumption and energy use. ČS supports an initiative for
employees to come to work by bike. To this end, we have created
several specially designated parking areas for bicycles. We advocate
waste separation at all headquarters buildings and at most branch
offices (where this is technically possible, i.e. sorted waste removal
can be arranged). Additionally, we have placed collection boxes in
the headquarters buildings and some 25-30 branches to facilitate the
sorting of small electronics. ČS then ensures the removal and environmentally-friendly processing of electrical waste. Since 2013,
the Bank has been using recycled paper exclusively. In November
2014, we launched the pilot project Paperless Bank designed to shift
client documentation and the associated administrative work from
branches to a newly built central registry in Hradec Králové. New
processes will be supported by the eSpis [eFile] application, which
will help us track the flow of documents from inception through
shredding and allow access to documentation from anywhere within
the ČS workplace.
The Bank also offers its clients specialised products designed to
reduce energy demands.
What’s in Store
In 2015, we will continue with existing projects while launching
new initiatives. We will devote considerable energy to developing
projects in regions and to achieving greater employee engagement
in socially responsible activities. We will vigorously develop the
voluntary program Managers for a Good Cause, which enables
the Bank’s managers to devote one work week to a non-profit
organisation.
In 2015, Nadace České spořitelny will continue to support those
on whom society turns its back. In January 2015, the winners of the
Floccus Prize were announced and we will see the second annual
round of nominations in autumn. Our employees and clients will
once again have the opportunity not only to nominate organisations
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Other Information for Shareholders | Česká spořitelna – Corporate Social Responsibility | Česká spořitelna, a. s. Declaration of Compliance of its Governance with the Code Based on OECD Principles
for the second annual Floccus Prize, but also for this year’s round
of the Nadace ČS Grant Programme. Employees may also voluntarily help out with the foundation’s projects, e.g. as instructors
in the Seniors Communicate project.
Nadace Depositum Bonum has set as one of its tasks in the
coming years to connect business and schools. The Czech School
of the 21st Century conference, which was held in autumn 2014,
showed that both groups highly appreciate such mutual cooperation
and that platforms for these gatherings have been missing. Nadace
DB therefore enlisted not only Česká spořitelna in its work, but also
the Union of Transport and Industry, which announced that 2015
will be the Year of Industry. Nadace DB also intends to develop
existing projects, for instance by working to get them accredited.
In our work to support social enterprise, we will collaborate on
the 4th annual Social Impact Award. We will offer organisations
special financial services within the Česká spořitelna portfolio of
products as well as the opportunity to participate in the Bank’s
educational programmes.
Several changes are in store for Today’s Financial World in 2015.
Financial Freedom will gradually be expanded to all regions thanks,
in particular, to greater staff involvement and cooperation with
students. We will also complete a new amusing and educational
online game (application) that can be played by students of all ages,
their parents and the general public.
In our Bank without Barriers initiative, we will continue to
enhance our approach to persons with disabilities and focus on
supporting their employment; we would like to increase their staff
presence to more than the current 1%. In the first half of the year,
we will finish mapping barrier-free branches and ATMs throughout
the Czech Republic in cooperation with the Prague Wheelchair
Association. We will continue, among other endeavours, to carry
out the Friendly Cities project together with the Czech Red Cross
through which we educate branch employees on how to communicate with and treat persons with all manner of disabilities. We
will also complete a web portal for Bank services for these same
clients.
In our efforts to support education of the young, we will continue
not only to develop our existing cooperation with universities in
2015, but will also be a permanent partner of the TEDxPrague
initiative and the xPort VŠE business accelerator at the Prague
University of Economics. We will also broaden the portfolio of
partner schools to include Palacký University Olomouc, and we
are planning a host of activities at universities across the country,
including lectures, workshops, competitions and special Days
with Česká spořitelna where students not only get the latest
information from the field, but can also develop their project
management capabilities or soft skills. We will also continue
to partner up with competitions such as Head for Business
at Palacký University Olomouc, Business Clubs at Pardubice
University and more.
In the area of support for equal opportunities, we will continue to
develop current projects under the Diversitas programme while
focussing on support for parents on maternity and parental leave
and for women, e.g. in the form of mentoring programmes.
Efforts to mitigate the Bank’s environmental footprint in 2015 will
include a programme to monitor energy consumption at branch
offices and headquarters buildings. Through the Energy League,
we provide employees with information about energy consumption
in all ČS buildings; we classify buildings in the Bank’s portfolio by
square metres or building type (e.g. branches in shopping centres)
and we update the energy consumption rankings monthly. We are
also at work on environmental e-learning for ČS employees
and are implementing a virtualisation project that should lead to
lower electricity consumption by replacing computer terminals.
Key activities will include the further development of a paperless
bank.
To learn all about our CSR activities, go to www.csas.cz/onas and
for a summary of our projects go to www.mapa-csr.cz.
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Česká spořitelna – Corporate Social Responsibility | Česká spořitelna, a. s. Declaration of Compliance of its Governance with the Code Based on OECD Principles | Organizational Structure
Česká spořitelna, a. s. Declaration
of Compliance of its Governance with the Code based on OECD Principles
In compliance with the statements made by Česká spořitelna, a. s.
(the “Company”) in its previous annual reports, the members of
the Company’s Board of Directors make every effort to improve
the Company’s standards of corporate governance and ensure,
to the extent set out hereunder, compliance with the Corporate
Governance Code based on the OECD principles of 2004 (the
“Code”). The Company systematically supports, develops and
enhances its governance practices. No major changes adversely
affecting the Company’s corporate governance standards were
made in 2014. Česká spořitelna complies with all key provisions,
principles and recommendations of the Code, which may be
viewed on either the Česká spořitelna website: http://www.csas.
cz/kodex, or the Czech Finance Ministry website (http://www.mfcr.
cz/cs/archiv/agenda-byvaleho-fnm/sprava-majetku/kodex-spravy-a-rizeni-spolecnosti-corpor/kodex-spravy-a-rizeni-spolecnosti-zaloze-14620). The principles of Česká spořitelna’s governance
standards are set out below.
In conjunction with the document ”Guidelines on the assessment
of the suitability of members of the management body and key
function holders” issued by the European Banking Authority (EBA)
and the Czech National Bank, Česká spořitelna drafted guidelines
and procedures for the assessment of the suitability of members of
the management body and key function holders in Česká spořitelna.
A. Organisation of the Company
The Board of Directors is a five member body. The Board of
Directors is the Company’s statutory body. It manages the Company
and acts on its behalf while assuming responsibility for its longterm strategic direction and operational management. The scope
of its powers is defined in the Company’s statutes and internal
rules as well as by Czech legal regulations. The Board of Directors
exercises its powers with due care and diligence; in discharging its
activities, it is accountable to the extent set out in the Czech legal
regulations. All Board of Directors members are internationally
experienced professionals and team players skilled in managing
large corporations. The Board of Directors members adhere to the
legal rules and ethical standards.
Pursuant to the Company’s Statutes, the Board of Directors must
obtain the Supervisory Board’s opinion or approval before performing a number of acts and, in certain cases determined by Supervisory
Board decision, the Board of Directors must solicit the prior opinion
of a committee established by the Supervisory Board. The Board
of Directors regularly presents reports on Company activities to
the Supervisory Board and its committees. In compliance with the
Banking Act, the Board of Directors is responsible for establishing, maintaining and evaluating an efficient and effective internal
management and control system for the Company.
Board of Directors Decision-making Procedures
The work of the Board of Directors is directed by an activity plan,
which the Board of Directors drafts in advance for every calendar
quarter. The Board of Directors meets as needed, but no less than
twice a month. Regular weekly sessions have, however, become
common practice. In 2014, the Board of Directors held 46 meetings.
Board of Directors meetings are conducted in English or Czech, as
required by the attending members. Board of Directors meetings
are chaired by the chairman and, in the chairman’s absence, by
the vice-chairman. Should both the chairman and vice-chairman
be absent, an authorised Board of Directors member shall chair
the meeting. All Board of Directors members and the Company
secretary take part in meetings.
The Board of Directors only achieves a quorum if more than half
of all its members are present at a meeting. The Board of Directors
adopts decisions in the form of a resolution requiring a majority
of votes of attending members. In the event of a tie, the chairman
shall cast the deciding vote. If all the Board of Directors members
are in agreement, the Board of Directors may pass a resolution by
a written vote or a vote taken via remote means of communication (e.g. all Board of Directors members per rollam or individual
members in writing, via video- or teleconferencing); in such cases,
voting members are deemed present. Material submitted in per
rollam form is approved, if a majority of the votes of all members
of the Board of Directors is in agreement. Voting on matters under
discussion is conducted openly at Board of Directors meetings by
acclamation, i.e. a show of hands.
All Board of Directors members have the requisite character traits
and professional experience to execute the role of a Board of
Directors member. Members of the Board of Directors are elected
and recalled by the Supervisory Board. In compliance with the
Banking Act, nominees for Board of Directors membership are
discussed in advance with the Czech National Bank, which assesses
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the professional qualifications, credibility and experience of the
nominees. The term of office of a member of the Board of Directors
is four years, and members may be re-elected.
Detailed professional biographies of the Board of Directors members attesting to their qualifications, professional abilities and practical experience are published on page 11 of the Annual Report.
The Supervisory Board of the Company has nine members.
John James Stack and Maximillian Hardegg serve as independent
members of the Supervisory Board pursuant to the requirements
of the Code. The Supervisory Board also includes representatives
of the Company’s employees, namely Eliška Bramborová, Zdeněk
Jirásek and Aleš Veverka. All Supervisory Board members are
professionals, who guarantee the high quality of the Supervisory
Board’s function, and possess the requisite personal and professional qualifications to serve as Supervisory Board members. The
Board members are elected by the General Meeting. The term of
office of a Supervisory Board member is four years; re-election for
another term is allowed. A full list of Supervisory Board members,
including their professional biographies, is published on page 17
of the Annual Report.
The Supervisory Board oversees the execution of the Board of
Directors’ powers and the performance of the Company’s business activities. In addition to its statutory duties and authorisations, the Supervisory Board, in accordance with the Company’s
statute, has the right to opine in advance on certain acts impacting
the Company’s assets (including, inter alia, capital expenditures
for building, plans (projects) to acquire tangible and intangible
assets for the Company in excess of a designated limit, the transfer
of title to Company assets, the Company’s equity investments,
etc.). The Supervisory Board also furnishes an advance opinion
on the strategic plan for Company activities and development,
planning tools and regular financial information. Additionally, the
Supervisory Board furnishes its advance opinion on proposals for
the appointment and recall of a person for the position of risk
management, compliance and internal audit and on the selection of
an external auditor. The Supervisory Board set up Compensation,
Appointments and Risk Committees to facilitate its work. In 2014,
the Supervisory Board convened a total of four times.
Supervisory Board Decision-Making Procedures
The work of the Supervisory Board is directed by an activity
plan, which the Supervisory Board drafts annually in advance.
Supervisory Board meetings are held on an ad hoc basis, usually
in compliance with the activity plan, but no fewer than four times
a year. Supervisory Board meetings are conducted in Czech or
English, as required by the attending members. Supervisory Board
meetings are chaired by the chairman, vice-chairman or an authorised member of the Supervisory Board and, in their absence, the
most senior member of the Supervisory Board in attendance.
The Supervisory Board only achieves a quorum if more than half
of all its members are present at a meeting. The Supervisory Board
adopts decisions in the form of a resolution requiring a majority
of votes of the members. In the event of a tie, the chairman shall
cast the deciding vote. If all the Supervisory Board members are in
agreement, the Supervisory Board may pass a resolution by a written vote or a vote taken via remote means of communication (e.g.
all Board of Directors members per rollam or individual members in
writing, via video- or teleconferencing); in such cases, voting members are deemed present. Voting on matters under discussion is conducted openly at Supervisory Board meetings, i.e. by acclamation (a
show of hands). The election and recall of a member of the Board of
Directors is also conducted in an open vote at a Supervisory Board
meeting; in this case, no written voting submissions or voting via
remote means of communication are permitted.
The Audit Committee is a company body that shall perform the
tasks assigned to an audit committee by law or the Company’s
statutes. The Audit Committee is chiefly responsible for monitoring procedures used to prepare the standalone and consolidated
financial statements, monitoring the effectiveness of the Company’s
internal controls, internal audit function and any risk management
systems in place, monitoring the process of performing the statutory audit of the standalone and consolidated financial statements,
assessing the independence of the statutory auditor and audit company and, most importantly, providing ancillary services to the
audited entity and recommending an auditor. A full list of Audit
Committee members, including their professional biographies, is
published on page 15 of the Annual Report.
Audit Committee Decision-making Procedures
The work of the Audit Committee is governed by its Rules of
Procedure and activity plan. The Audit Committee met four times
in 2014. Meetings of the Audit Committee are chaired by its chairman, vice-chairman or an authorised member. At Audit Committee
meetings, votes on matters under discussion are taken openly, i.e. by
acclamation (a show of hands). The Audit Committee only achieves
a quorum if more than half of its members are present. It adopts
decisions in the form of a resolution requiring a majority of votes of
the Audit Committee members. In the event of a tie, the chairman
shall cast the deciding vote. Where all Audit Committee members
are in agreement, the Audit Committee may vote based on a written
vote or a vote undertaken via remote means of communication,
in which case those voting are deemed present at such meeting.
The Company sees to it that the members of the Board of Directors
and Supervisory Board are kept up to date at all times; the
Company has in place a well administered and highly developed
system supporting the execution of corporate governance. Newly
elected members of the bodies are given immediate access to all
information regarding the Company’s principles and rules of corporate governance.
The Company’s highest bodies, i.e. the Board of Directors,
Supervisory Board and Audit Committee, have adopted binding
Rules of Procedure for the bodies. These deal in great detail with
administrative and procedural matters related to the activity of
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a given body. The Rules of Procedure of all three bodies regulate
the technical process of convening and voting at meetings, the
preparation of meeting minutes, the activities of the body outside
of meetings and procedures to address the potential bias of a body
member. Both Supervisory Board members and Board of Directors
members take part in Supervisory Board meetings. All Board of
Directors members take part in Board of Directors meetings, as do
the authors of materials to be presented to the Board of Directors.
Representatives of the external auditor, members of the Board of
Directors and Supervisory Board and, on occasion, other guests, are
invited to attend meetings of the Audit Committee. Members of the
Board of Directors, Supervisory Board and Audit Committee may
solicit a legal opinion on individual materials under discussion from
the Company’s Legal Services Department or may seek the services
of independent advisors. The Office of the Company Secretary
organises long-term training in corporate governance and legislation for the members of administrative bodies so as to develop and
enhance their knowledge and skills on an ongoing basis.
has also issued bearer preference shares. The transferability of these
shares is restricted to Czech towns and municipalities; transfers to
other entities are subject to approval by the Company’s Board of
Directors. A preference right to receive dividends is attached to
the preference shares. Decisions regarding transfers of preference
shares are made by the Board of Directors and are always based
on detailed information about the assignee.
The position of Company Secretary has long existed within the
Company. The Secretary of the Company’s bodies manages administrative and organisational matters for the Board of Directors and
Supervisory Board, including the organisation of General Meetings.
The Secretary familiarises new members of administrative bodies
with the activities of those bodies and with the Company’s corporate
governance process.
In compliance with the applicable law, the Company convenes
General Meetings by means of a letter sent to all shareholders.
The invitation to a General Meeting always includes basic information for shareholders about the conditions of participation in the
General Meeting, the exercising of shareholders’ rights and basic
financial indicators. General Meeting announcements are published
on the Company’s website as a matter of course. Shareholders may
familiarise themselves in advance (within the statutory period) with
the materials that are to be subject to General Meeting discussion.
The Company always organises its General Meetings at venues that
are accessible to all shareholders. For several years now, General
Meetings have been held at the Company’s registered office.
The Company Secretary ensures mutual co-operation among the
Company’s bodies. The Secretary is appointed by the Company’s
Board of Directors and reports directly to the chairman of the Board
of Directors. The Secretary is responsible for due and timely distribution of invitations and materials for meetings of the Company’s
Board of Directors and Supervisory Board. The Company has
instituted binding regulations for the submission of materials to
be discussed at meetings of the Supervisory Board and Board of
Directors, which stipulate the basic rules for the preparation and
submission of materials, comment procedures prior to the submission of materials and conditions for the archiving of materials. The Secretary takes the minutes of all meetings of the Board
of Directors and Supervisory Board. The Company maintains an
electronic database of all minutes from meetings of its bodies;
these are available to authorised persons on the Company’s internal
archiving system. The Company Secretary is, inter alia, a member
of the Czech Institute of Corporate Secretaries (“ČITOS”) and of its
steering committee. ČITOS’s mission is to promote and support the
professional development of secretaries of administrative bodies.
The Company complies with all duties to inform its shareholders
and other entities to the extent imposed by law and keeps shareholders updated throughout the year via the media and the Company’s
website. The Company posts information on its current financial
results, shareholder structure, planned events and more on a web
page designed specifically for shareholders and investors (www.csas.
cz/vztahy k investorům). Press releases covering important information about the Company are issued on a regular basis. All material
information the Company publishes on its website is available in
Czech and English.
B. Company Relationships with
Shareholders
The powers of the General Meeting extend to decisions on matters
that the law or Company statutes assign to the powers of a General
Meeting. The General Meeting is held no less than once a year and
no more than four months after the end of the accounting period.
General Meeting voting is performed by ballot; details are stipulated
by the Rules of Procedure of the General Meeting approved by the
General Meeting. General Meeting votes are first taken on proposals
presented by the individual who convened the General Meeting; if
the General Meeting has been convened by request, then the proposals presented by the individual who requested that the General
Meeting be convened are voted on first. If this proposal is passed, no
votes shall be taken on further counter-proposals in the given matter.
If the proposal is not passed, the proposals presented by attending
shareholders are voted on in consecutive order according to the number of shareholder votes. The General Meeting adopts decisions in
the form of a resolution requiring a majority of votes of attending
shareholders, where the law does not stipulate a different majority.
The Company diligently ensures compliance with all the legal
rights of shareholders and with the principle of equitable treatment of all shareholders. The Company’s shares are held in book
entry form. A list of all shareholders is maintained by the Central
Securities Depository. In addition to ordinary shares, the Company
Shareholders receive all supporting documents for a General
Meeting at the time of their registration for the respective General
Meeting. These materials always include the Rules of Procedure
of the General Meeting, which the General Meeting approves. If
Supervisory Board members are to be elected, shareholders are
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provided with detailed biographical data of all nominees attesting to their professional and personal qualifications to hold such
office. The bodies of the General Meeting are set up by the Board
of Directors in a manner that ensures all the bodies are able to
perform their functions with due and professional care. In most
cases, a notary is present at the Company’s General Meeting. In
compliance with the Rules of Procedure, shareholders may exercise
their shareholder rights in person or by proxy, i.e. vote on proposed
items on the agenda, solicit and receive explanations on such items
and put forward proposals and counter-proposals.
The members of the Board of Directors, Supervisory Board and
Audit Committee take part in General Meetings (there must be at
least as many members as are required for a quorum) as do members
of the Supervisory Board committees who answer shareholders’
questions. The Company provides sufficient time for shareholders
to raise their questions on agenda items prior to a vote being taken.
All shareholder questions and answers are recorded in the General
Meeting minutes. Each item on the General Meeting agenda is
subject to a separate vote taken after debate on the given item is
closed. All shareholders registered in the attendance list and present
at the General Meeting when the vote is being taken are entitled to
vote, with the exception of those shareholders who hold preference
shares. The right to vote at General Meetings is not attached to the
Company’s preference shares. In addition, shares whose holders’
voting rights for General Meetings were suspended by a decision
of the Czech National Bank are not considered voting shares; the
shareholder is informed of such a suspension at the time of his/her
registration in the attendance list and the Company indicates this
fact (including the reasons for the suspension) in the attendance list.
C. Information Disclosure and
Transparency
The Company rigorously endeavours to prevent the misuse of
insider information that might allow persons who have special
relationships with the Company to enjoy unauthorised gains in
dealing with the Company’s securities. Board of Directors members and parties close to them are obliged to promptly notify the
Czech National Bank of transactions with securities issued by the
Company or with investment instruments derived from such securities, which they perform on their own account. Erste Group Bank’s
rules for securities trading are applied to ensure identical terms and
conditions for all members of the Board of Directors of Erste Group
Bank companies – members of the Company’s Board of Directors
are obliged to inform the Company’s Compliance Department of
dealings with Erste Group Bank’s shares or derivatives and to comply with an imposed trading moratorium during a stipulated period.
The Company has established a Compliance Department whose
principal activities include ensuring compliance of the Company’s
internal regulations with valid legal and regulatory requirements
and their observance and ensuring compliance of the employees’
conduct with the legal regulations, internal regulations, Code of
Ethics and other adopted standards and rules governing employee
conduct. Compliance is involved in all aspects of Company activities and administration and forms a part of its corporate culture.
The Compliance Department evaluates insider information included
in the Watch List and Restricted List of investment instruments as
well as any dealings with investment instruments recorded in these
lists. The Compliance Department informs the Company’s Board
of Directors and Supervisory Board of its activities on a regular
basis and keeps a regularly updated list of persons with access
to insider information.
The Company diligently fulfils and complies with all Czech legal
regulations, principles of the Corporate Governance Code based on
OECD principles and EU Commission recommendations regarding
corporate governance and, on an ongoing basis, provides shareholders and investors with all material information on its
business activities, the Company’s financial and operating results,
ownership structure and other significant events. All information
is prepared and disclosed in compliance with the top standards
of accounting and the disclosure of financial and non-financial
information. Moreover, the Company discloses a great deal more
information than the statutory requirements so that shareholders
and investors may make informed decisions concerning ownership
of the Company’s securities and voting at General Meetings. The
Company uses various distribution channels to publish such information, e.g. the media or the Company website, where information
is published in both Czech and English to enable equal participation
of foreign investors and shareholders in decisions regarding the
Company’s business and development.
The Company regularly publishes annual and semi-annual reports.
The annual report principally includes the audited financial statements and provides a picture of the Company’s financial position,
business activities and operating results. The report also provides
information on the Board of Directors and Supervisory Board
member remuneration policy in compliance with the legal regulations. The Company has no option scheme for remuneration either
for the members of the Board of Directors or the Supervisory Board.
D. Committees of the Company’s
Administrative Bodies
The Company has established committees under the Board of
Directors and Supervisory Board to support the Company’s activities and to ensure the internal management and accountability
of these bodies. The individual committees’ Rules of Procedure
define the scope of their powers and include a precise description
of applicable rules, tasks and decision making procedures.
Committees of the Supervisory Board
Risk Committee
The Risk Committee has an advisory function in respect of the overall current and future approach to risks, strategy in the risk area and
the accepted risk level, as well as the drawing up of credit policy and
credit portfolio. The Committee also oversees the implementation
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of risk management strategies. In specific credit-related cases the
Committee has an approval function. The members of the Risk
Committee are: P. Bosek, S. Dörfler, A. Treichl.
Compensation Committee
The Compensation Committee provides support to the Supervisory
Board when formulating the basic principles of compensation. Its
duties include submitting to the Supervisory Board proposals for
Board of Directors member remuneration, overseeing the remuneration of departmental directors carrying out internal controls and supervising the basic principles of compensation and their application. The
Compensation Committee members are: M. Hardegg, S. Dörfler and
J. Stack.
and related purchased services. In addition, the Committee assesses
the expediency and effectiveness of advisory services.
Česká spořitelna Financial Group Marketing and
Sponsorship Committee
The Česká spořitelna Financial Group Marketing and Sponsorship
Committee is an advisory body of the Board of Directors, which
discusses proposed marketing and sponsorship strategies and strategic communication concepts and campaigns. The Committee
deals with the brand and support of sales channels including branch
merchandising.
Retail Committee
Appointments Committee
The Retail Committee is a body that:
a) assesses and approves the launch, innovation or discontinuation
of retail banking products and services,
b) manages and implements Česká spořitelna’s pricing policy and
strategies in the retail banking segment and assesses and approves
retail prices of products and services.
Committees of the Board of Directors
Compliance, Operational Risk and Security
Committee
The Appointments Committee primarily assesses the suitability of
nominated and appointed members of the management body and
evaluates the activities of the members of the management body and
the management body as a whole. The members of the Appointments
Committee are: J. Stack, A. Treichl.
Board of Directors Committees are advisory bodies of the Board of
Directors established by resolution of the Board of Directors. The
purpose of the committees is to create and present technical recommendations to the Board of Directors; committees consist of Board of
Directors members and selected Company employees. All the committees are accountable to the Board of Directors and submit a report
on their activities at least once a year.
Credit Committee
The Credit Committee is the body that assesses and approves credit
transactions and products, as well as assessing and approving the business policy principles, the credit risk measurement and management
system and the level of Česká spořitelna’s credit portfolio structure for
the purpose of achieving the designated level of financial objectives.
Assets and Liabilities Management Committee
The Assets and Liabilities Management Committee is the highest body
that assesses and approves the process of planning, managing and
controlling financial transactions and the structure of Česká spořitelna’s assets and liabilities and off-balance sheet items with the aim
of achieving an optimal combination of the Bank’s profitability and
assigned financial risks. The Committee determines Česká spořitelna’s
strategy in this area and assigns tasks to Česká spořitelna’s organisational units to fulfil the strategy.
Financial Markets Risk Management Committee
The Financial Markets Risk Management Committee is the body
that deals with decisions on operational issues of risk management
processes related to financial markets.
Investment Committee
The Investment Committee is the body that assesses the expediency
and effectiveness of capital expenditure, including ATM, projects
The Compliance, Operational Risk and Security Committee is
a body of the Board of Directors whose role is to decide on issues
regarding the management of operational risk, compliance risk and
security in relation to compliance in the Bank.
Capital Investments Committee
The Capital Investments Committee is a body of the Board of
Directors that assesses and makes decisions on capital investments
of the Company in real estate funds / venture capital companies.
Financial Market Products and Wholesale
Banking Committee
The Financial Market products and Wholesale Banking Committee
is a body that:
a) assesses and approves innovations and the launch or discontinuation of products and services in the area of assets and liabilities
management (ALM), financial markets and wholesale banking,
b) manages and implements Česká spořitelna’s pricing policy and
strategies in the financial markets and corporate banking segment.
Business Intelligence Committee
The Business Intelligence Committee is a body that oversees the
fulfilment of BI strategy.
Statistical Models Committee
The Statistical Models Committee is the highest body that approves
any changes to the internal approaches to calculating capital
requirements for credit, market and operational risk and methods
of determining economic capital for all risk types. The Committee
approves changes in the IRB approach (changes in the rating system, including the ratings policy, changes in methods for estimating
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risk parameters and changes to all relevant risk parameters) or
changes in ICAAP (the Internal Capital Adequacy Assessment
Process).
E. Company Policy with Respect to
Stakeholders
Information on this topic is available in the section Corporate
Responsibility of Česká spořitelna (see page 63).
F. Principles of Internal Control and
Rules for Accepting Risk in the Financial
Reporting Process
The Company processes its financial accounts via SAP, which
complies with exacting requirements for the security and quality
of account preparation. System inputs are entered both manually
and automatically from other transaction systems.
The entity complies with all statutory and legislative requirements. Procedures pertaining to accounting documents and their
circulation have been put in place as required by the Accounting
Act and in a manner that serves the needs of the controlling and
management accounting functions. The entity established separate
internal regulations for accounting documents and their circulation and these are subject to regular review, particularly internal
regulation on accounting document circulation, which requires
the “four-eyes” control principle and eliminates the possibility of
unauthorised accounting transactions by defining persons authorised to approve and perform accounting entries, i.e. who may be
involved in the accounting process. Any correction of accounting
entries is subject to the same controls. Manual and automatic controls of the completeness and correctness of SAP system inputs
are performed in respect of automatic accounting between SAP
and the transaction accounting systems. Accounting documents
are archived both in the system and manually and the archiving
process has been set up to comply with statutory requirements
(the Accounting Act and Archiving and Records Service Act).
The entity fulfils asset valuation requirements pursuant to Part IV
of the Accounting Act (in accordance with the general principle of
prudence) and International Financial Reporting Standards. The
entity has instituted several separate internal regulations for this
area that comply with these statutory requirements and principally
address the setting of asset input prices, i.e. their valuation under
Accounting Act requirements, changes in their valuation, in particular provisioning, asset amortisation, depreciation, impairment,
disposal, stock taking and related tax requirements.
The area of management accounting is not separately addressed
by statutory or legislative regulations, with the exception of the
definition of basic features required, inter alia, for clarity. The
entity established management accounting based on historical
developments while respecting current requirements for bookkeeping and for cost controlling within the entity. Management
accounting is primarily kept in the form of sub-ledger accounts
whose contents are subject to regular review. Bookkeeping operations on sub-ledger accounts are controlled for accuracy on an
ongoing basis.
The entity primarily recognises impairment allowances and provisions pursuant to the basic principles stipulated by the statutory
accounting and tax regulations. The accounting procedures are
additionally regulated by internal rules that, in addition to the
foregoing, reflect the needs of key departments in relation to the
accounting system in this area (audit, reporting, controlling, etc.).
The methodology and accounting for the creation and release of
impairment allowances in the Company is concentrated in a single location and carried out by a small group of staff, which is
advantageous, inter alia, from the perspective of logic, operational
and reconciliation controls. The controls are performed on an
ongoing basis both before and after accounting operations. Given
the impact on financial results, the general creation of impairment
allowances is not monitored by individual accounting item, but
in a broader context.
Aggregated financial statements are submitted to the Company’s
statutory body on a monthly basis. The Company’s Supervisory
Board has the aggregated financial statements on hand at every
one of its meetings. The Audit Committee monitors the process
of compiling the consolidated and standalone financial statements
while also evaluating the effectiveness of internal controls. The
Audit Committee additionally monitors the process of the statutory audit of the consolidated and standalone financial statements,
which are subject to a standard external audit once a year; the
preliminary work is done first and this is followed by the audit
work on both the consolidated and standalone financial statements
and the annual report.
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Organizational Structure
effective to December 31, 2014
Chief Executive Officer
(CEO)
1st Deputy CEO
Deputy CEO
Deputy CEO
Pavel Kysilka
Wolfgang Schopf
Daniel Heler
Karel Mourek
Company Office
Accounting, Controlling and BI
Investment Banking
Legal Services
Communication and CSR
Property Management
Financial Markets – Wholesale and
Trading
Strategic Risk Management
Internal Audit
Group Balance Sheet Management
Financial Markets – Retail Distribution
Credit Risk Management - Corporate Banking
Human Resources
Process Management
Funding Group
Security
Marketing
Corporate Clients (Regional Corporate Centres)
Credit Risk Management Retail
Banking
Economic and Strategic Analysis
Real Estate Business
Resctructuring and Workout
Client Experience and Service
Quality Management
Municipalities
Compliance, Financial Crime Prevention and Anti-Fraud Management
Digital Service Unit
Large Corporates
Payments
Corporate Banking Product Management
Administration of Accounts and
Client Documentation
Support
Corporate Cash Management and
Sales Support
Wholesale Back Office
Administration of Accounts and Debt
Collection
IT and Projects
Operations Management
Client Centre
Distribution (Regions, Branch
Network)
Remote Delivery
Card Centre
Retail Product and Processes
Management
External Sales Force and Cooperation
Retail Segment Management
Financial Planning and Analysis
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Supervisory Board Report
In the year 2014 the Supervisory Board supervised the discharge of the Managing Board’s powers and the operation of the
Česká spořitelna, a. s. business in accordance with the Articles of
Association and legal provisions.
The Supervisory Board, among others, approved the Financial
Statements and distribution of Profit for the year 2014, and it
discussed regularly the Financial Reports of the FGČS, macroeconomic development in the Czech Republic, the development
of the Loan Portfolio, Capital participation strategy, Real Estate
investment strategy, and asset management. Further, Supervisory
Board discussed the centralization of FGČS activities, optimization of the branch network, principles of remuneration as well as
approving the 2015 Budget.
The Supervisory Board continuously monitored the execution of
the powers / authorities of the Managing Board, carrying out the
Bank’s business activity and implementing its strategy.
The Managing Board provided the Supervisory Board with the
documentation and information necessary for the discharge of its
functions in accordance with the Articles of Association and legal
provisions. The Supervisory Board states that the Managing Board
in the year 2014 duly fulfilled its tasks arising mainly from the law,
the Articles of Association and decisions of the Supervisory Board
and the General Meeting.
In 2014 the Supervisory Board held four regular meetings; besides
these meetings, the Supervisory Board also made use of the “per
rollam” voting.
During the year, the Supervisory Board members discussed the
results of activities of the individual committees - Credit Committee,
Remuneration Committee and Nomination Committee. In June
2014, the Supervisory Board in accordance with the regulatory
requirements established Risk Committee, with the cancellation
of Credit Committee. The Risk Committee took over the role of
Credit Committee and also other responsibilities resulting from new
legislative requirements. The Supervisory Board was also informed
about activities of Audit Committee, which is an independent body
of the company.
During 2014 changes in the Supervisory Board´s membership took
place. The General Meeting in April elected Supervisory Board
Member Mr. Andreas Treichl. Consequently Mr. Treichl was
elected as Vice-Chairman of the Supervisory Board in June 2014.
In December 2014 Mr. Herbert Juranek resigned his membership
on the Supervisory Board.
In accordance with legal provisions, the Supervisory Board
reviewed the Non-consolidated and Consolidated Financial
Statements as of 31. 12. 2014 and came to the conclusion that the
books and accounting records were kept in a transparent manner
in accordance with accounting regulations and that the accounts
and Non-consolidated and Consolidated Financial Statements correctly reflect the financial situation of Česká spořitelna, a. s. and
the consolidated unit as of 31. 12. 2014. The audit of the yearend
financial statement was performed by Ernst & Young Audit, s. r. o.,
who confirmed that according to their opinion the financial statements presented fairly, in all material respects, the financial position
of the Group as at 31 December 2014, and its financial performance and its cash flows for the year then ended in accordance
with International Financial Reporting Standards as adopted by
the European Union. The Supervisory Board with agreement took
account of the auditor’s statement.
The Supervisory Board also reviewed the Report on Relations
between the Related Parties and in accordance with the provision 83
para 1 of the Business Corporations Act states that it took account
of this Report without comments.
Based on these facts, the Supervisory Board hereby recommends
to the General Meeting to approve the Non-consolidated and
Consolidated Financial Statements of Česká spořitelna, a. s. as of
31. 12. 2014 and the proposed distribution of profit of the Company
submitted by the Board of Directors.
75
Supervisory Board Report | Report of the Audit Committee | Financial section 1
Report of the Audit Committee
In 2014, the Česká spořitelna, a. s. Audit Committee operated as
an independent company body.
In compliance with Act No. 93/2009 Coll. on auditors and the
Česká spořitelna, a. s.statutes, the Audit Committee monitored
the proceedures used to compile the standalone and consolidated
financial statements, observed the effectiveness of the Bank’s internal control, the risk management systems and the Internal Audit
unit; monitored the process of the statutory audit of the standalone and consolidated financial statements, assessed the auditor´s
independence and recommended that the company Ernst & Young
Audit, s. r. o. perform the audit of the annual financial statements
for 2014.
In compliance with the Czech National Bank requirements, the
Audit Committee performed an evaluation of the functionality and
effectiveness of the management and control system in the Bank.
At its regularly held meetings in 2014, the Committee discussed
planned Internal Audit activities and strategies, reports on Internal
Audit plans and activities and information on the fulfilment of
measures resulting from audits and controls adopted by the Bank´s
management. The Audit Committee also focused its attention on
risk management, activities of the compliance function and the
protocol on Czech National Bank oversight, including the implementation of adopted measures.
Jack Stack
Chairman of the Supervisory Board
Chairman of the Audit Committee
76
Report of the Audit Committee | Consolidated Financial Statements | Independent Auditor’s Report
Consolidated Financial Statements
For the Year Ended 31 December 2014
Prepared in Accordance with International Financial Reporting
Standards as Adopted by the European Union
Auditors’ Report to the Shareholders of Česká spořitelna, a. s.
Consolidated Income Statement and Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Shareholders’ Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
72
73
74
75
76
77
77
Independent Auditor’s Report
To the Shareholders of Česká spořitelna, a. s.:
We have audited the accompanying consolidated financial statements of Česká spořitelna, a. s., and its subsidiaries (“the Group”), which
comprise the consolidated statement of financial position as at 31 December 2014, and the consolidated income statement, consolidated
statement of comprehensive income, consolidated statement of changes in total equity and consolidated cash flow statement for the year then
ended, and a summary of significant accounting policies and other explanatory information. For details of the Group, see part A and Note
45 to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International
Financial Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in
accordance with the Act on Auditors and International Standards on Auditing as amended by implementation guidance of the Chamber
of Auditors of the Czech Republic. Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditor’s judgment, including an assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at
31 December 2014, and its financial performance and its cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union.
Ernst & Young Audit, s.r.o.
License No. 401
Roman Hauptfleisch, Auditor
License No. 2009
3 March 2015
Prague, Czech Republic
A member firm of Ernst & Young Global Limited,
Ernst & Young Audit, s. r. o. with its registred office at Na Florenci 2116/15, 110 00 Prague 1 – Nové Město,
has been incorporated in the Commercial Register administered by the Municipal Court in Prague,
Section C, entry No. 88504, under Identification No. 26704153.
78
Independent Auditor’s Report | Consolidated Income Statement and Statement of Comprehensive Income | Consolidated Statement of Financial Position
Consolidated Income Statement and
Statement of Comprehensive Income
For the year ended 31 December 2014
Income Statement
CZK mil.
Net interest income
Net fee and commission income
Dividend income
Net trading and fair value result
Rental income from investment properties & other operating leases
Personnel expenses
Other administrative expenses
Depreciation and amortisation
Gains/losses from financial assets and liabilities not measured at fair value through
profit or loss, net
Net impairment loss on financial assets not measured at fair value through profit or
loss
Other operating result
Pre-tax result from continuing operations
Taxes on income
Post-tax result from continuing operations
Notes
2014
2013
reclassified
1
2
3
4
5
6
6
6
26,673
11,306
50
2,287
823
(8,632)
(7,331)
(2,271)
27,252
11,294
52
2,183
828
(9,013)
(7,446)
(2,284)
7
146
213
8
(3,728)
(3,638)
9
10
Net result for the period
Net result attributable to non-controlling interests
(603)
19,481
15,070
15,577
15,071
15,588
(3,650)
15,070
(1)
Net result attributable to owners of the parent
40
18,720
(3,904)
15,577
(11)
Statement of Comprehensive Income
CZK mil.
Notes
2014
2013
15,070
15,577
10
1,331
(472)
10
149
(230)
64
271
Net result for the period
Items that may be reclassified to profit or loss
Available for sale reserve
Gain/(loss) during the period
Cash flow hedge reserve
Gain/(loss) during the period
Currency translation
Gain/(loss) during the period
Deferred taxes relating to items that may be reclassified
Gain/(loss) during the period
Total
Total other comprehensive income
Total comprehensive income
Total comprehensive income attributable to non-controlling interests
Total comprehensive income attributable to owners of the parent
10, 25
(315)
81
1,229
16,299
16,299
(350)
15,227
15,227
16,300
15,238
(1)
(11)
The accompanying notes are an integral part of these financial statements.
79
Consolidated Income Statement and Statement of Comprehensive Income | Consolidated Statement of Financial Position | Consolidated Statement of Changes in Total Equity
Consolidated Statement of Financial
Position
As of 31 December 2014
CZK million
Assets
Cash and cash balances
Financial assets - held for trading
Derivatives
Other trading assets
Financial assets – designated at fair value through profit or loss
Financial assets - available for sale
Financial assets - held to maturity
Loans and receivables to credit institutions
Loans and receivables to customers
Derivatives - hedge accounting
Property and equipment
Investment properties
Intangible assets
Current tax assets
Deferred tax assets
Other assets
Notes
2014
2013
reclassified
1 January
2013
12
54,489
23,231
18,740
4,491
1,272
99,289
151,513
38,533
500,039
878
13,431
7,342
3,593
543
159
8,277
77,581
47,718
21,168
26,550
4,223
82,295
154,720
75,348
489,194
945
14,166
8,330
3,333
102
126
10,642
22,501
66,499
25,618
40,881
7,205
66,666
181,967
65,320
470,859
1,163
14,594
9,561
3,208
127
119
10,614
13
14,18
15,18
16,18
17,18
19
20
21
23
23
24
25
25
26
Total assets
Liabilities and equity
Financial liabilities - held for trading
Derivatives
Other trading liabilities
Financial liabilities – designated at fair value through profit or loss
Deposits from customers
Debt securities issued
Financial liabilities measured at amortised cost
Deposits from banks
Deposits from customers
Debt securities issued
Other financial liabilities
Derivatives - hedge accounting
Provisions
Current tax liabilities
Deferred tax liabilities
Other liabilities
13
27
28
29
21
30
25
25
31
Total equity
32
Equity attributable to non-controlling interests
Equity attributable to owners of the parent
Total liabilities and equity
902,589
968,723
920,403
23,431
20,654
2,777
9,664
8,874
790
751,959
54,570
671,565
23,043
2,781
169
2,418
45
474
6,646
24,024
24,024
–
14,434
12,616
1,818
815,659
73,036
713,977
28,646
–
422
2,594
414
100
10,100
26,189
26,186
3
17,903
15,908
1,995
769,386
44,344
688,624
36,418
–
172
2,251
127
365
10,698
316
100,660
122
93,190
107,783
100,976
902,589
968,723
(26)
107,809
93,312
920,403
The accompanying notes are an integral part of these financial statements.
These consolidated financial statements were prepared by the Group and authorized for issue by the Board of Directors on 3 March 2015
and are subject to approval at the General Meeting of shareholders.
Pavel Kysilka
Chairman of the Board of Directors
Wolfgang Schopf
Vice-chairman of the Board of Directors
80
Consolidated Statement of Financial Position | Consolidated Statement of Changes in Total Equity | Consolidated Cash Flow Statement
Consolidated Statement of Changes in Total Equity
For the year ended 31 December 2014
CZK mil.
As of 1 January 2013
Dividends paid
Changes in scope of consolidation
Total comprehensive income
Net result for the period
Other comprehensive income
Subscribed capital
Capital reserves
Retained earnings
Legal and statutory
reserve
Cash flow hedge
reserve
Available for sale
reserve
Currency
translation
Equity attributable
to owners of the
parent
15,200
11
73,129
3,803
91
1,443
(487)
93,190
–
–
–
–
–
–
–
–
–
–
(7,600)
(189)
15,588
15,588
–
9
–
–
–
–
–
(186)
–
(186)
(95)
1,008
(204)
100,660
(95)
1,008
(204)
100,660
26
2,052
(140)
107,809
As of 31 December 2013
15,200
11
80,928
3,812
As of 1 January 2014
15,200
11
80,928
3,812
Dividends paid
Changes in scope of consolidation
Total comprehensive income
Net result for the period
Other comprehensive income
As of 31 December 2014
–
–
–
–
–
15,200
–
–
–
–
–
11
(9,120)
(52)
15,071
15,071
–
86,827
21
–
–
–
3,833
–
–
121
–
121
–
–
(435)
–
(435)
–
–
1,044
–
1,044
–
–
283
–
283
–
–
64
–
64
(7,600)
(180)
15,250
15,588
(338)
(9,120)
(31)
16,300
15,071
1,229
Equity attributable
to non-controlling
interests
Total equity
122
93,312
(7,680)
105
15,239
15,577
(338)
100,976
(80)
285
(11)
(11)
–
316
316
(22)
(319)
(1)
(1)
–
(26)
100,976
(9,142)
(350)
16,299
15,070
1,229
107,783
The accompanying notes are an integral part of these financial statements.
81
Consolidated Statement of Changes in Total Equity | Consolidated Cash Flow Statement | Notes to the Consolidated Financial Statements
Consolidated Cash Flow Statement
For the year ended 31 December 2014
CZK million
Notes
Pre-tax result from continuing operations
Non-cash adjustments for items in net profit/loss for the year
epreciation, amortisation, impairment and reversal of impairment, revaluation of
D
assets
Allocation to and release of provisions (including credit risk provisions)
Gains/(losses) from the sale of assets
Change in fair values of derivatives
Accrued interest, amortisation of discount and premium
Other adjustments
2014
2013
Reclassified
18,720
19,481
6, 23, 24
2,359
2,714
8, 9, 30
4,249
71
(1,153)
(114)
396
3,660
231
2,516
(1,361)
(371)
(9,304)
37,024
(16,425)
15,549
2,935
(16,407)
2,301
(31,647)
(42,193)
(4,760)
(319)
(4,460)
(746)
(7,708)
(9,783)
(21,930)
19,358
3,132
(4,735)
(1,624)
31,625
26,518
(3,462)
274
(3,746)
(1,538)
Changes in assets and liabilities from operating activities after
adjustment for non-cash components
Deposits with the CNB
Loans and receivables to credit institutions
Loans and receivables to customers
Financial assets - held for trading
Financial assets – designated at fair value through profit or loss
Financial assets - available for sale
Other assets from operating activities
Deposits from banks
Deposits from customers
Financial liabilities - held for trading
Increase in non-controlling interests
Payments for taxes on income
Other liabilities from operating activities
Cash flow from operating activities
(43,924)
Proceeds of disposal
53,251
Financial assets - held to maturity and associated companies
Property and equipment, intangible assets and investment properties
Equity investments
Acquisition of
Financial assets - held to maturity and associated companies
Property and equipment, intangible assets and investment properties
Disposal of subsidiaries
12,005
258
–
60,957
1,295
90
(17,837)
(2,042)
87
(39,146)
(2,099)
182
Dividends paid to equity holders of the parent
Dividends paid to non-controlling interests
Other financing activities (mainly changes of subordinated liabilities)
Proceeds from bonds issued
Repurchase of bonds in issue
(9,120)
(22)
755
2,817
(6,200)
(7,600)
(80)
(169)
2,866
(10,140)
Cash flow from investing activities
(7,529)
Cash flow from financing activities
Cash and cash equivalents at beginning of period
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash and cash equivalents at end of period
Cash flows related to taxes, interest and dividends
Payments for taxes on income (included in cash flow from operating activities)
Interest received
Dividends received
Interest paid
Dividends paid to equity holders of the parent
The accompanying notes are an integral part of these financial statements.
12
21,279
(11,770)
95,991
(15,123)
36,584
32,768
95,991
(43,924)
(7,529)
(11,770)
(4,460)
31,874
50
(4,589)
(9,120)
53,251
21,279
(15,123)
(3,746)
32,978
52
(5,665)
(7,600)
82
Consolidated Cash Flow Statement | Notes to the Consolidated Financial Statements | Income Statement
Notes to the Consolidated Financial
Statements
For the year ended 31 December 2014
A. General Information
Česká spořitelna, a. s. (‘the Bank’), having its registered office
address at Olbrachtova 1929/62, Prague 4, 140 00, Corporate
ID 45244782, is the legal successor of the Czech State Savings
Bank and was founded as a joint stock company in the Czech
Republic on 30 December 1991. The Bank is a universal bank
offering retail, corporate and investment banking services within
the Czech Republic.
The Bank’s majority shareholder is EGB Ceps Holding GmbH,
which is a 100% subsidiary of EGB Ceps Beteiligungen GmbH,
a wholly-owned subsidiary of Erste Group Bank AG (‘Erste Group
Bank’) which is the ultimate parent. The Bank together with subsidiaries and associated companies forms the Group.
The Group is subject to the regulatory requirements of the Czech
National Bank (‘CNB’) , the banking Act and EU guidelines/
directives. These regulations include those pertaining to minimum
capital adequacy requirements, categorization of exposures and
off-balance sheet commitments, credit risk connected with clients
of the Group, liquidity, interest rate risk, foreign currency positions
and operating risk.
In addition to the banking entities, other Group companies are subject to regulatory requirements, specifically in relation to retirement,
collective investment and brokerage services.
The Group offers a complete range of banking and other financial
services, such as savings and current accounts, asset management,
consumer credit and mortgage lending, investment banking, securities and derivatives trading, portfolio management, project finance,
foreign trade financing, corporate finance, capital and money market services and foreign exchange trading.
B. Significant Accounting Policies
a) Basis of Preparation
The consolidated financial statements of the Group for the 2014
financial year and the comparative information were prepared
in compliance with applicable International Financial Reporting
Standards as adopted by the European Union (‘IFRS’) on the basis
of IAS Regulation (EC) No. 1606/2002.
The consolidated financial statements have been prepared on a historical cost basis, except for financial assets available-for-sale,
derivative financial instruments and other financial assets and liabilities held for trading, and financial assets and liabilities designated at fair value through profit or loss, all of which have been
measured at fair value. The carrying values of recognised assets and
liabilities that are designated as hedged items in fair value hedges
that would otherwise be carried at amortised cost are adjusted to
record changes in the fair values attributable to the risks that are
being hedged in effective hedge relationships.
The consolidated financial statements have been prepared on
a going concern basis.
Except as otherwise indicated, all amounts are stated in millions
of Czech crowns (‘CZK’). The tables in this report may contain
rounding differences.
b) Basis of Consolidation
Subsidiaries
All subsidiaries directly or indirectly controlled by Česká
spořitelna, a. s. are consolidated in the Consolidated financial
statements on the basis of the subsidiaries’ annual accounts as of
December 2014 and for the year then ended.
Subsidiaries are consolidated from the date upon which control
is transferred to the Group. Control is achieved when the Group
is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through
its power over the investee.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated statement of comprehensive
income from the date of acquisition or up to the date of disposal.
The financial statements of the Group’s subsidiaries are prepared
for the same reporting year as that of Česká spořitelna, a. s. and
using consistent accounting policies. All intra-Group balances,
transactions, income and expenses as well as unrealised gains and
losses and dividends are eliminated.
83
Consolidated Cash Flow Statement | Notes to the Consolidated Financial Statements | Income Statement
Non-controlling interests represent those portions of total comprehensive income and net assets that are not attributable directly or
indirectly to the owners of Česká spořitelna, a. s.. Non-controlling
interests are presented separately in the consolidated statement
of comprehensive income and within equity in the consolidated
statement of financial position. Acquisitions of non-controlling
interests as well as disposals of non-controlling interests that do
not lead to a change of control are accounted for as equity transactions, whereby the difference between the consideration transferred
and the share in the carrying amount of the net assets acquired is
recognised as equity.
Additions in 2014
No material additions of new subsidiaries occurred during the year
2014.
Disposals in 2014
As of 31st March 2014 Česká spořitelna, a. s. and its subsidiary
Fund Manager, Česká spořitelna - Penzijní společnost, a. s.,(ČS
penzijní společnost) have decided to narrow the investment
mandate of the Transformovaný fond penzijního připojištění se
státním příspěvkem Česká spořitelna – penzijní společnost, a. s.
(Transformed pension fund) in order to align the purpose and
design of the Transformed pension fund with the investment
goals of the policy holders, limit the scope of the ČS penzijní
společnost’s decision making authority and restrict its exposure
to variability of returns from remuneration and other interests (ie,
the guarantee) that it holds in the Transformed pension fund. As
a result of the above described changes ČS penzijní společnost
no longer meets the definition of a principal under IFRS 10 and
is considered to be an agent of the pension fund members instead.
Consequently it is not required to consolidate Transformed fund
into the consolidated financial statements of the Group for the
year ended 2014.
The impact of deconsolidation is the following:
–– Change in the Net result for the period in amount of
CZK 76 million
–– Change in the Net fee and commission income in amount of
CZK 95 million
–– Change in the Taxes on income in amount of
CZK 18 million
–– The release of AFS provision to the income statement in
amount of CZK 344 million.
In May 2014 entity Atrium Center s.r.o, company established for
the purpose of investment into real estate, was sold.
In October 2014 entity Polygon, company established for the purpose of investment into real estate, was sold.
Additions in 2013
In the year 2013 a new company was established, VĚRNOSTNÍ
PROGRAM IBOD, a. s., with 100% of the share capital held by
the Group.
Disposals in 2013
In the year 2013 were sold following companies established for the
purpose of investment into real estate: Jégeho Residential s. r. o.,
CPDP Jungmannova s. r. o., BELBAKA a.s, TAVARESA a.s.,
SATPO Jeseniova, s. r. o., SATPO Královská vyhlídka, s. r. o.,
SATPO Sacre Coeur II, s. r. o., SATPO Na Malvazinkách, a. s.,
SATPO Sacre Coeur s. r. o. and SATPO Švédská s. r. o. Subsequently,
after the disposal of all SATPO projects the entity CSPF Residential
B.V. has been liquidated.
c) Accounting and Measurement
Methods
Changes in the Structure of the Statement of
Financial Position and the Income Statement
In 2014 the Group changed the structure of its statement of financial position and the income statement, in order to provide reliable
and more relevant information about its financial position and
performance. Consequently, the structure of numerous explanatory notes was adapted and the related figures were reclassified.
The new structure has also been introduced in order to generate
synergies in addressing the new IFRS-based Financial Reporting
regulatory requirements (“FINREP”). FINREP was introduced
in 2014 by the European Banking Authority (“EBA”) and it represents a mandatory regulatory reporting framework applicable to
EU based banking institutions. Due to harmonization, the comparability between published reports of the regulators and theGroup
has been significantly improved.
Application of changed structure has no impact to already published results or Financial statements of the Group in the past.
Comparative information in Financial statements of the Group
for year ended 31 December 2014 has been changed based on
new structure.
Summary of major changes in the structure in the income
statement:
–– Dividend income and Rental income from investment
properties and other operating leases are disclosed each on
separate line in the income statement
–– Contribution to Deposit insurance fund is now part of
Other administrative expenses (in the past part of Other
operating result).
–– Separate line for “Net impairment loss on financial assets
and liabilities not measured at fair value through profit or
loss” includes net impairment loss for all financial assets
and liabilities classified as not measured at fair value
through profit or loss
–– Consolidation of net trading and fair value result into one
line „ Net trading and fair value result“
–– Split of general administrative expenses into three
separate lines „Personnel expenses“, „ Other
administrative expenses“ and „Depreciation and
amortisation“.
84
Consolidated Cash Flow Statement | Notes to the Consolidated Financial Statements | Income Statement
Summary of major changes in the structure in statement of financial
position:
–– Loans and receivables to credit institutions and Loans
and receivables to customers are reported at the carrying
amount net of allowances due to impairment
–– Reallocation of hedging derivatives into separate line
Derivatives - hedge accounting
–– Reallocation of subordinated liabilities into separate
lines based on the categories of respective financial
liablities.
–– Reallocation of movable other property into Other assets.
–– Reclassification of Other financial liabilities as of
1 January 2014 to Financial liabilities measured at
amortised costs in amout of CZK 2,057 million.
–– Reclassification of Other financial assets incl.
Allowances for other financial assets as of
1st January 2014 in amount of CZK 1,770 million
from Other assets to Loans and receivables to credit
institutions, Loans and receivables to customers and
Allowances for loans and receivables to customers.
–– Reclassification of Other financial assets as of
1st January 2014 in amount of CZK 1,006 million from
Other assets to Loans and receivables to customers.
–– Reclassification of Other demand deposits as of
1st January 2014 in amount of CZK 15,457 million from
Loans and receivables to credit institutions into Cash
and cash balances and Other financial assets in amount
of CZK 764 million from Other assets to Loans and
receivables to credit institutions.
The following tables show the relationships between the old and
new statement of financial position and income statement line items
85
Notes to the Consolidated Financial Statements | Income Statement | Statement of Financial Position
Income Statement
CZK million
Switch of
dividend
income
Switch of
Switch of
rental and investment
leasing
property
income depreciation
Split of Consolidation of Reallocation Reallocation
general
net trading and
of other
of deposit
administ­ fair value result
operating
insurance
rative
result contribution
expenses
Switch of
Commitments
and guarantees
given
Switch of
Switch of
Switch of
realised AfS impairment off balance
or HtM gains/
on
sheet
losses
financial provisions
assets
(HTM, AFS)
2013 Old structure
Net interest and similar
income
Impairment allowance for
(3,332)
credit risk
Net fee and commission
11,294
income
27,909
New structure
(52)
(828)
223
(90)
profit/loss for the
15,577 Net
period
Attributable to non(11)
controlling interests
to owners
15,588 Attributable
of the parent
11,294
52
17,593
934
(13)
2,682
1 Net trading and fair value result
(223)
(9,013)
(6,519)
(2,061)
Net result from equity method
investments
Rental income from investment
properties & other operating leases
Personnel expenses
Other administrative expenses
Depreciation and amortisation
Gains/losses from financial assets and
(1) liabilities not measured at fair value
through profit or loss, net
(927)
201
13
(80)
259
2,183
–
828
(9,013)
(7,446)
(2,284)
213
(121)
(216)
Post-tax profit from
discontinuing operations
Net fee and commission income
Dividend income
Other operating result:
Result from financial assets
- available for sale
Other operating result:
(179) Result from financial assets
- held to maturity
Other operating result:
121
Other
15,577 Post-tax profit
27,252
(2,682)
828
(3,904) Income tax
2013
Net interest income
3,422
52
2,682 Net trading result
General administrative
(17,593)
expenses
Other operating result:
(921)
Other
Other operating result:
Result from financial
(500)
instruments – at fair value
through profit or loss
19,481 Pre-tax profit/loss
Rounding
–
–
–
–
–
(934)
927
90
–
–
–
(3,422)
(43)
–
–
–
Net impairment loss on financial assets
not measured at fair value through
profit or loss
Other operating result
Pre-tax result from continuing
operations
(3,638)
40
19,481
Taxes on income
Post-tax result from continuing
operations
Post-tax result from discontinued
operations
(3,904)
Net result for the period
15,577
Net result attributable to non-controlling
interests
15,577
(11)
Net result attributable to owners of 15,588
the parent
86
Income Statement | Statement of Financial Position | Separate Financial Statements
Statement of Financial Position
Assets
CZK million
Reallocation
of movable
other
property
Switch to net
Product
book value
split into
of loans and measurement
receivables
categories
2013 Old structure
77,581
75,348
507,483
(18,289)
New structure
Cash and balances with
central banks
Loans and advances to
financial institutions
Loans and advances to
customers
Impairment allowance for
loans and advances to
customers
Cash and cash
balances
(507,483)
18,289
Financial assets - held
for trading
(945)
75,348
489,194
14,166 Property and equipment
Investment properties
Property under construction
Intangible assets
Income tax receivable
Deferred tax assets
Other assets
968,723 Total assets
77,581
(75,348)
Positive fair value of
22,113 derivative financial
instruments
26,550 Trading assets
Financial assetsdesignated4,223 at fair value through profit
or loss
Financial assets - available
82,295
for sale
Financial assets - held to
154,720
maturity
8,330
467
3,333
102
126
10,175
2013
Derivatives
Other trading assets
Financial assets - at
fair value through profit
or loss
Financial assets available for sale
Financial assets - held
to maturity
Loans and receivables
to credit institutions
Loans and receivables
to customers
Derivatives - hedge
945
accounting
Property and
equipment
Investment properties
21,168
26,550
4,223
82,295
154,720
75,348
489,194
945
14,166
8,330
(467)
467
Intangible assets
Current tax assets
Deferred tax assets
Other assets
Total assets
3,333
102
126
10,642
968,723
87
Income Statement | Statement of Financial Position | Separate Financial Statements
Statement of Financial Position
Liabilities and Equity
CZK million
Reallocation
of
subordinated
liabilities
Reallocation
derivatives
2013 Old structure
New structure
24,024
73,036
Product
split into
measurement
categories
Amounts owed to financial
institutions
Financial liabilities held for trading
Derivatives
Financial liabilities - at
fair value through profit
or loss
Deposits from
12,616
customers
1,818 Debt securities issued
Financial liabilities
measured at
amortised cost
Deposits from banks
Deposits from
customers
Debt securities issued
Other financial
liabilities
Derivatives - hedge
accounting
713,977 Amounts owed to customers
26,550 Bonds in issue
2,096
422
Negative fair value
24,446 of derivative financial
instruments
Financial liabilities
14,434 designated at fair value
through profit or loss
2,594 Provisions
414 Income tax liabilities
100 Deferred tax liabilities
10,100 Other liabilities
2,096 Subordinated debt
Total equity
316
Attributable to noncontrolling interests
to owners of
100,660 Attributable
the parent
liabilities and
968,723 Total
equity
2013
24,024
12,616
1,818
73,036
713,977
28,646
–
422
(24,446)
(14,434)
Provisions
Current tax liabilities
Deferred tax liabilities
Other liabilities
2,594
414
100
10,100
(2,096)
Total equity
Equity attributable
to non-controlling
interests
Equity attributable
to owners of the
parent
Total liabilities and
equity
316
100,660
968,723
88
Income Statement | Statement of Financial Position | Separate Financial Statements
Foreign Currency Translation
The Group uses the following categories of financial instruments:
–– financial assets or financial liabilities at fair value through
profit or loss
–– available-for-sale financial assets
–– held-to-maturity investments
– – loans and receivables
– – financial liabilities measured at amortised cost
For foreign currency translation, spot exchange rates quoted
by the Czech National Bank are used. For Group entities with
the euro as functional currency, these are the European Central
Bank (‘ECB’) reference rates.
IAS 39 categories of financial instruments are not necessarily
the line items presented on the statement of financial position.
Relationships between the statement of financial position line
items and categories of financial instruments are described in
the table at point (xii).
The consolidated financial statements are presented in Czech
crowns. The functional currency is the currency of the primary
business environment in which an entity operates. Each entity in the
Group determines its own functional currency and items included
in the financial statements of each entity are measured using
that functional currency.
(i) Transactions and Balances in Foreign
Currency
Transactions in foreign currencies are initially recorded at the
functional currency exchange rate effective as of the date of
the transaction. Subsequently, monetary assets and liabilities
denominated in foreign currencies are translated at the functional currency exchange rate as of the balance sheet date. All
resulting exchange differences that arise are recognised in the
income statement under the line item ‘Net trading and fair
value result’. Non-monetary items that are measured in terms
of historical cost in a foreign currency are translated using the
exchange rates as of the dates of the initial transactions. Non–
monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair
value was determined.
(ii) Translation of the Statements of Group
Companies
Assets and liabilities of foreign operations (foreign subsidiaries
and branches) are translated into Group’s presentation currency,
the Czech crown, at the rate of exchange as of the balance sheet
date (closing rate). Their statements of comprehensive income
are translated at average exchange rates calculated on the basis
of daily rates. Goodwill, intangible assets recognised on acquisition of foreign subsidiaries (i.e. customer relationships and
brand) and fair value adjustments to the carrying amounts of
assets and liabilities on the acquisition are treated as assets and
liabilities of the foreign subsidiaries and are translated at the
closing rate. Exchange differences arising on translation are
recognised in other comprehensive income. On disposal of a foreign subsidiary, the cumulative amount of translation differences
recognised in other comprehensive income is recognised in the
income statement under the line item ‘Other operating result’.
Financial Instruments – Recognition and
Measurement
A financial instrument is any contract giving rise to a financial
asset of one party and a financial liability or equity instrument
of another party. In accordance with IAS 39, all financial assets
and liabilities – which also include derivative financial instruments – have to be recognised on the statement of financial position and measured in accordance with their assigned categories.
(i) Initial Recognition
Financial instruments are initially recognised when The Group
becomes a party to the contractual provisions of the instrument.
Regular way (spot) purchases and sales of financial assets
stated at fair value are recognised at trade date and at settlement
date for financial assets not stated at fair value. Regular way
trades are purchases or sales of financial assets that require
delivery of assets within the time frame generally established
by regulation or convention in the market place. The classification of financial instruments at initial recognition depends on
their characteristics as well as the purpose and management’s
intention for which the financial instruments were acquired.
(ii) Initial Measurement of Financial
Instruments
Financial instruments are measured initially at their fair value
including transaction costs. In the case of financial instruments
at fair value through profit or loss, however, transaction costs
are not included but are recognised directly in profit or loss.
Subsequent measurement is described in the chapters below.
(iii) Cash And Cash Balances
The Group considers cash and deposits with the CNB, treasury bills and treasury bonds with a residual maturity of three
months or less and nostro and loro accounts with financial
institutions to be cash equivalents.
Balances with central banks include only claims (deposits) against central banks which are repayable on demand.
Repayable on demand means that it may be withdrawn at any
time or with a term of notice of only one business day or 24
hours. Mandatory minimum reserves are also shown under
this position.
(iv) Derivative Financial Instruments
Derivatives used by The Group include mainly interest rate
swaps, futures, forward rate agreements, interest rate options,
currency swaps and currency options as well as credit default
swaps. Derivatives are measured at fair value. Derivatives are
carried as assets when their fair value is positive and as liabilities when their fair value is negative.
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Income Statement | Statement of Financial Position | Separate Financial Statements
For presentation purposes derivatives are split into
–– derivatives – held for trading; and
–– derivatives – hedge accounting
Derivatives – held for trading are those which are not designated as hedging instruments. They are presented in the line
item ‘Derivatives’ under the heading ‘Financial assets / financial
liabilities – held for trading’. All kinds of non-hedging derivatives without regard to their internal classification, i.e. both
derivatives held in the trading book and banking book are presented in this line item.
Changes in fair value (clean price) of derivatives – held for
trading are recognised in the income statement in the line item
‘Net trading and fair value result’.
Interest income/expense related to derivatives – held for trading
is recognised in the income statement under the line item ‘Net
interest income’ if held in the banking book or under the line
item ‘Net trading and fair value result’ if held in the trading book.
Derivatives – hedge accounting are those which are designated
as hedging instruments in hedges fulfilling the conditions of
IAS 39. In the balance sheet, they are presented in the line item
‘Derivatives - hedge accounting’ on asset or liability side.
Changes in fair value (clean price) of derivatives in fair value
hedges are recognised in the income statement in the line item
‘Net trading and fair value result’.
Effective part of changes in fair value (dirty price) of derivatives
in cash flow hedges is reported in other comprehensive income
in the line item ‘Cash flow hedge reserve’. Ineffective part of
changes in fair value (dirty price) of derivatives in cash flow
hedges is recognised in profit or loss under the line item ‘Net
trading and fair value result’.
Interest income/expense related to derivatives in fair value hedges
is recognised in the income statement in the line item ‘Net interest
income’. Interest income/expense from hedging derivatives in
cash flow hedges is part of the dirty price measurement which is
split into effective part and ineffective part as described above.
(v) Financial Assets and Financial Liabilities Held for Trading
Financial assets and financial liabilities – held for trading comprise
derivatives and other trading assets and liabilities. Treatment of derivatives – held for trading is discussed above in (iv).
Other trading assets and liabilities are non-derivative instruments. They
include debt securities as well as equity instruments acquired or issued
principally for the purpose of selling or repurchasing in the near term.
In the balance sheet, they are presented as ‘Other trading assets’ or
‘Other trading liabilities’ under the heading ‘Financial assets / financial
liabilities – held for trading’.
Changes in fair value (clean price for debt instruments) resulting from
other trading assets and liabilities are reported in the income statement
under the line item ‘Net trading and fair value result’. Interest income
and expenses are reported in the income statement under the line item
‘Net interest income’. Dividend income is shown under the line item
‘Dividend income’.
If securities purchased under agreement to resell or borrowed through
securities lending transactions are subsequently sold to third parties,
the obligation to return the securities is recorded as a short sale within
‘Other trading liabilities’.
(vi) Financial Assets or Financial Liabilities
Designated at Fair Value Through Profit or loss
Financial assets or financial liabilities classified in this category are
those that have been designated by management on initial recognition
(fair value option).
The Group uses the fair value option in the case of financial assets
managed on a fair value basis. In accordance with a documented
investment strategy, the performance of the portfolio is evaluated and
regularly reported to the management board. The portfolio contains
mostly items of Asset Backed Securities (predominantly Mortgage
Backed Securities), Funds, Financials and Sovereigns.
Financial assets - designated at fair value through profit or loss are
recorded on the balance sheet at fair value under the line item ‘Financial
assets - designated at fair value through profit or loss’, with changes in
fair value recognised in the income statement under the line item ‘Net
trading and fair value result’. Interest earned on debt instruments is
reported under the line item ‘Net interest income’. Dividend income
on equity instruments is shown under the line item ‘Dividend income’.
Furthermore, The Group uses the fair value option in case of some
hybrid financial liabilities. This is relevant when:
–– such classification eliminates or significantly reduces an
accounting mismatch between the financial liability otherwise
measured at amortised cost and the related derivative measured
at fair value; or
–– the entire hybrid contract is designated at fair value through
profit or loss due to the existence of an embedded derivative.
The amount of fair value change attributable to changes in own
credit risk for financial liabilities designated at fair value through
profit or loss is calculated by the method described by IFRS 7.
This amount is the difference between the present value of the
liability and the observed market price of the liability at the end
of the period. The rate used for discounting the liability is the
sum of the observed (benchmark) interest rate at the end of the
period and the instrument-specific component of the internal rate
of return determined at the start of the period.
Financial liabilities designated at fair value through profit or loss
are reported in the balance sheet under the line item ‘Financial liabilities designated at fair value through profit or loss’ further broken
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Income Statement | Statement of Financial Position | Separate Financial Statements
down into ‘Deposits from customers’ and ‘Debt securities issued’.
Changes in fair value are recognised in the income statement under
the line item ‘Net trading and fair value result’. Interest incurred is
reported under the line item ‘Net interest income’.
(vii) Financial Assets – Available for Sale
Available-for-sale financial assets include debt and equity securities
as well as other interests in entities with lower than significant
influence. Equity investments classified as available for sale are
those that are neither classified as held for trading nor designated
at fair value through profit or loss. Debt securities in this category
are those that are intended to be held for an indefinite period of
time and that may be sold in response to needs for liquidity or in
response to changes in market conditions.
Available-for-sale financial assets are measured at fair value. On
the balance sheet, available-for-sale financial assets are disclosed
under the line item ‘Financial assets – available for sale’.
Unrealised gains and losses are recognised in other comprehensive
income and reported in the ‘Available for sale reserve’ until the
financial asset is disposed of or impaired. If available-for-sale assets
are disposed of or impaired, the cumulative gain or loss previously
recognised in other comprehensive income is reclassified to profit
or loss and reported in the line item ‘Gains/losses on financial assets
and liabilities not measured at fair value through profit or loss, net’
in case of sale or in the line item ‘Net impairment loss on financial
assets’ in case of impairment.
Interest income on available-for-sale financial assets is reported under
the line item ‘Net interest income’. Dividend income is reported under
the line item ‘Dividend income’.
If the fair value of investments in non-quoted equity instruments cannot be measured reliably, they are recorded at cost less impairment.
This is the case when the range of reasonable fair value estimates as
calculated by valuation models is significant and the probabilities
of the various estimates cannot be reasonably assessed. There is no
market for such investments.
(viii) Financial Assets – Held to Maturity
Non-derivative financial assets with fixed or determinable payments
and fixed maturities are classified as held-to-maturity and reported
on the balance sheet as ‘Financial assets – held to maturity’ if The
Group has the intention and ability to hold them until maturity. After
initial recognition, held-to-maturity financial assets are measured at
amortised cost. Amortised cost is calculated by taking into account
any discount, premium and/or transaction costs that are an integral
part of the effective interest rate.
Interest earned on financial assets held to maturity is reported in the
income statement under the line item ‘Net interest income’. Losses
arising from impairment of such financial assets are presented as
‘Net impairment loss on financial assets’. Occasional realised gains
or losses from selling are recognised in the income statement under the
line item ‘Gains/losses on financial assets and liabilities not measured
at fair value through profit or loss, net’.
(ix) Loans and Receivables
The balance sheet line items ‘Loans and receivables to credit institutions’ and ‘Loans and receivables to customers’ include financial
assets meeting the definition of loans and receivables. Furthermore,
finance lease receivables that are accounted for using IAS 17 are
presented under these balance sheet line items.
Loans and receivables are non-derivative financial assets (including
debt securities) with fixed or determinable payments that are not
quoted in an active market, other than:
–– those that The Group intends to sell immediately or in the
near term and those that The Group upon initial recognition
designates as at fair value through profit or loss;
–– those that The Group, upon initial recognition, designates as
available for sale; or
–– those for which The Group may not recover substantially
all of its initial investment, other than because of credit
deterioration.
After initial recognition, loans and receivables are measured at amortised cost. Finance lease receivables are subsequently measured as
specified in the chapter ‘Leasing’. Interest income earned is included
under the line item ‘Net interest income’ in the income statement.
Impairment losses arising from loans and receivables are recognised
in the income statement under the line item ‘Net impairment loss
on financial assets’.
(x) Financial Liabilities Measured at Amortised
Cost
Financial liabilities are measured at amortised cost, unless they are
measured at fair value through profit or loss.
For presentation in the balance sheet the line item ‘Financial liabilities measured at amortised cost’ is used. The liabilities are further
broken down by ‘Deposits from banks’, ‘Deposits from customers’,
‘Debt securities issued’ and ‘Other financial liabilities’.
Interest expenses incurred are reported in the line item ‘Net interest
income’ in the income statement. Gains and losses from derecognition (mainly repurchase) of financial liabilities at amortised cost
are reported under the line item ‘Gains/losses from financial assets
and liabilities not measured at fair value through profit or loss, net’.
(xi) ‘Day 1’ Profit
Where the transaction price differs from the fair value derived from
other observable transactions for the identical instrument in active
market or derived using valuation techinique that has all significant
inputs based on observable markets data, the Bank immediately recognises the difference between the transaction price and the fair value
(a Day 1 profit) in the income statement in line item ‘Net trading and
fair value result’.
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Income Statement | Statement of Financial Position | Separate Financial Statements
(xii) Relationships Between Statement of Financial Position Items, Measurement Methods and
Categories of Financial Instruments:
Statemt of financial position
Measurement principle Financial instrument category
Fair value
At
amortised
cost
Assets
Cash and cash balances
x
Financial assets - held for trading
Derivatives
x
Other trading assets
x
Financial assets - at fair value through
profit or loss
Financial assets - available for sale
Financial assets - held to maturity
Loans and receivables to credit
institutions
Loans and receivables to customers
Derivatives - hedge accounting
Other
Nominal
value
n/a
x
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Available for sale financial assets
Held to maturity investments
x
Loans and receivables
x
Loans and receivables
n/a
x
x
x
Liabilities and equity
Financial liabilities - held for trading
Derivatives
x
Other trading liabilities
x
Financial liabilities - at fair value through
profit or loss
Financial liabilities measured at amortised
cost
Derivatives - hedge accounting
x
x
x
Furthermore, two additional classes of financial instruments which
are not presented in the table above are part of IFRS 7 disclosures.
These are financial guarantees and irrevocable credit commitments.
Embedded Derivatives
The Group, as part of its business, is confronted with debt instruments containing structured features. Structured features mean that
a derivative is embedded in the host instruments. Embedded derivatives are separated from the host debt instruments if
–– the economic characteristics of the derivatives are not
closely related to the economic characteristics and risks of
the host debt instruments;
–– the embedded derivative meets the IAS 39 definition of
derivative; and
–– the hybrid instrument is not a financial asset or liability held
for trading or designated at fair value through profit or loss.
Embedded derivatives that are separated are accounted for as standalone derivatives and presented on the statement of financial position
under the line item ‘Derivatives’ in financial assets – held for trading.
At The Group, derivatives that are not closely related and are
separated are predominantly embedded in issued host debt
Financial liabilities - at fair value through
profit or loss
Financial liabilities - at fair value through
profit or loss
Financial liabilities - at fair value through
profit or loss
Financial liabilities measured at
amortised cost
n/a
instruments recognised as liabilities. The most typical cases
are issues of bonds and deposits that contain interest caps, floors
or collars that were in the money at origination, contractual
features linking payments to non-interest variables such as FX
rates, equity and commodity prices and indices, or third-party
credit risk.
Reclassifications of Financial Assets
IAS 39 provides various possibilities to reclassify financial assets
between categories of financial instruments. It also places restrictions
on some reclassifications. The Group makes use of reclassification
alternatives only in the case of held-to-maturity financial assets. If
a significant credit deterioration in a held-to-maturity financial asset
results in a change in the intention and ability to hold the asset until
maturity, the asset is reclassified into available-for-sale financial
assets category. Such reclassifications are not included in the limit
that triggers automatic reclassification of the entire held-to-maturity
portfolio.
Derecognition of Financial Assets and Financial
Liabilities
A financial asset (or where applicable part of a financial asset or
part of a group of similar financial assets) is derecognised when:
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Income Statement | Statement of Financial Position | Separate Financial Statements
–– the contractual rights to receive cash flows from the asset
have expired; or
–– The Group has transferred its rights to receive cash flows
from the asset
–– or has assumed an obligation to pay the received cash flows
in full without material delay to a third party under a ‘passthrough’ arrangement;
–– and either:
–– it has transferred substantially all the risks and rewards
connected with the ownership of the asset, or
–– has neither transferred nor retained substantially all the risks
and rewards connected with the ownership of the asset but
has transferred control of the asset.
A financial liability is derecognised when the obligation under the
liability is discharged, cancelled or expires.
Repurchase and Reverse Repurchase
Agreements
Transactions where securities are sold under an agreement to
repurchase at a specified future date are also known as ‘repos’
or ‘sale and repurchase agreements’. Securities sold are not
derecognised from the statement of financial position, as The
Group retains substantially all the risks and rewards of ownership
because the securities are repurchased when the repo transaction ends. Furthermore, The Group is the beneficiary of all the
coupons and other income payments received on the transferred
assets over the period of the repo transactions. These payments
are remitted to The Group or are reflected in the repurchase price.
Securities Lending and Borrowing
In securities lending transactions, the lender transfers ownership
of securities to the borrower on the condition that the borrower
will retransfer, at the end of the agreed loan term, ownership of
instruments of the same type, quality and quantity and will pay
a fee determined by the duration of the lending. The transfer of the
securities to counterparties via securities lending does not result
in derecognition. Substantially all the risks and rewards of ownership are retained by The Group as a lender because the securities are received at the end of the securities lending transaction.
Furthermore, The Group is the beneficiary of all the coupons and
other income payments received on the transferred assets over the
period of the securities lendings.
Securities borrowed are not recognised on the statement of financial position unless they are then sold to third parties. In this case,
the obligation to return the securities is recorded as ‘Other trading
liability’.
Impairment of Financial Assets and Credit Risk
Losses of Contingent Liabilities
The Group assesses at each balance sheet date whether there is
any objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or group of financial assets is
deemed to be impaired if, and only if, there is objective evidence
of impairment as a result of one or more events that have occurred
after the initial recognition of the asset (an incurred ‘loss event’)
and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or the group of financial assets that
can be reliably estimated.
The corresponding cash received is recognised on the statement
of financial position with a corresponding obligation to return it
as a liability under the line item ‘Financial liabilities measured
at amortised cost’, sub-items ‘Deposits from banks’ or ‘Deposits
from customers’ reflecting the transaction’s economic substance
as a loan to The Group. The difference between the sale and
repurchase prices is treated as interest expense and recorded in
the income statement under the line item ‘Net interest income’
and is accrued over the life of the agreement. Financial assets
transferred out by The Group under repurchase agreements
remain on the Group’s statement of financial position and are
measured according to the rules applicable to the respective
statement of financial position item.
The Group uses the Basel II definition of default as a primary indicator of loss events. Default, as a loss event, occurs when
–– the obligor is more than 90 days past due on any material
credit obligation;
–– as a result of specific information or an event, the obligor
is unlikely to fulfil its credit obligations in full, without
recourse to actions such as realising security;
–– the obligor is subject to distressed restructuring, i.e.
a change in contract terms, for clients in financial
difficulties, resulting in a material loss;
–– the obligor is subject to bankruptcy or similar protection
proceedings.
Conversely, securities purchased under agreements to resell at
a specified future date are not recognised on the statement of
financial position. Such transactions are also known as ‘reverse
repos’. The consideration paid is recorded on the statement of
financial position under the respective line items ‘Loans and
receivables to credit institutions’ or ‘Loans and receivables to
customers’, reflecting the transaction’s economic substance as
a loan by The Group. The difference between the purchase and
resale prices is treated as interest income and is accrued over
the life of the agreement and recorded in the income statement
under the line item ‘Net interest income’.
For assessment at portfolio level, the Group uses the incurred but
not reported losses concept; indications of impairment are observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults. It identifies the time period
between the moment of the loss event causing future problems
and actual detection of the problems by the Group at the moment
of default. Credit risk losses resulting from contingent liabilities
are recognised if it is probable that there will be an outflow of
resources to settle a credit risk bearing contingent liability that
will result in a loss.
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Income Statement | Statement of Financial Position | Separate Financial Statements
(i) Financial Assets Carried at Amortised Cost
The Group first assesses individually for significant loans and
held-to-maturity securities whether objective evidence of impairment exists. If no objective evidence of impairment exists for an
individually assessed financial asset, The Group includes the asset
in a group of financial assets with similar credit risk characteristics
and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss
is, or continues to be, recognised are not included in a collective
assessment of impairment.
If an impairment loss has been incurred, the amount of the loss is
measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows discounted at
the original effective interest rate. The calculation of the present
value of the estimated future cash flows of a collateralised financial
asset also reflects the cash flows that may result from foreclosure
less costs for obtaining and selling the collateral.
Impairment losses on financial assets carried at amortised cost are
recognised as loss allowance. On the statement of financial position, loss allowances decrease the value of the assets. i.e. the net
carrying amount of the financial asset presented in the statement
of financial position is the difference between the gross carrying
amount and the cumulative loss allowance. This treatment holds
for all loss allowances for loans and receivables and for incurred
but not reported losses (i.e. portfolio allowances) on held-to-maturity financial assets. Reconciliation of changes in these loss allowance accounts is disclosed in the notes. However, individual loss
allowances for held to maturity financial assets are treated as direct
reduction of the asset carrying amount and therefore reconciliation
of changes is not disclosed in the notes.
In the income statement, impairment losses and their reversals are
presented in the line item ‘Net impairment loss on financial assets’.
Loans together with the associated allowance are removed from the
statement of financial position when there is no realistic prospect of
future recovery and all collaterals have been realised by The Group.
If in a subsequent year, the amount of the estimated impairment loss
increases or decreases the previously recognised impairment loss
is increased or reduced by adjusting the loss allowance.
(ii) Available-for-Sale Financial Assets
In cases of debt instruments classified as available for sale, The
Group assesses individually whether there is objective evidence
of impairment based on the same criteria as used for financial
assets carried at amortised cost. However, the amount recorded
for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less
any impairment loss on that asset previously recognised in the
income statement. On recognising impairment, any amount of
losses retained in the other comprehensive income item ‘Available
for sale reserve’ is reclassified to the income statement and shown
as impairment loss under the line item ‘Net impairment loss on
financial assets’.
If, in a subsequent period, the fair value of a debt instrument
increases, the impairment loss is reversed through the income statement under the line item ‘Net impairment loss on financial assets’.
Impairment losses and their reversals are recognised directly against
the assets on the statement of financial position.
In cases of equity investments classified as available for sale, objective evidence also includes a ‘significant’ or ‘prolonged’ decline in
the fair value of the investment below its cost. For this purpose at
The Group, ‘significant’ decline means a market price below 80%
of the acquisition cost and ‘prolonged’ decline refers to a market
price that is permanently below the acquisition cost for a period of
nine months up to the reporting date.
Where there is evidence of impairment on equity investments, the
cumulative loss measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that
investment previously recognised in the income statement, is shown
as an impairment loss in the income statement under the line item
‘Net impairment loss on financial assets’. Any amount of losses
previously recognised under the other comprehensive income item
‘Available for sale reserve’ has to be reclassified to the income
statement as part of an impairment loss under the line item ‘Net
impairment loss on financial assets’.
Impairment losses on equity investments are not reversed through
the income statement; increases in the fair value after impairment
are recognised directly in other comprehensive income. Impairment
losses and their reversals are recognised directly against the assets
on the statement of financial position.
For investment in unquoted equity instruments carried at cost
because their fair value cannot be determined reliably the amount
of the impairment loss is measured as the difference between the
carrying amount of the financial asset and the present value of
estimated future cash flows discounted at the current market rate
of return for a similar financial asset. Such impairment losses shall
not be reversed.
(iii) Contingent Liabilities
Provisions for credit losses of contingent liabilities (particularly
financial guarantees as well as credit commitments) are included
under the statement of financial position line item ‘Provisions’. The
related expense or its reversal is reported in the income statement
under the line item ‘Other operating result’.
Hedge Accounting
The Group makes use of derivative instruments to manage exposures to interest rate risk and foreign currency risk. At inception
of a hedge relationship, the Group formally documents the relationship between the hedged item and the hedging instrument,
including the nature of the risk, the objective and strategy for
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undertaking the hedge and the method that will be used to assess
the effectiveness of the hedging relationship. A hedge is expected
to be highly effective if the changes in fair value or cash flows
attributable to the hedged risk during the period for which the
hedge is designated are expected to offset the fair value changes
of the hedging instrument in a range of 80% to 125%. Hedge
effectiveness is assessed at inception and throughout the term of
each hedging relationship. Exact conditions for particular types
of hedges and for testing the hedge effectiveness by The Group
are specified internally in hedge policy.
(i) Fair Value Hedges
Fair value hedges are employed to reduce market risk. For qualifying and designated fair value hedges, the change in the fair
value (clean price) of a hedging instrument is recognised in the
income statement under the line item ‘Net trading and fair value
result’. Interest income and expenses on hedging derivatives are
reported under the line item ‘Net interest income’. The change in
the fair value of the hedged item attributable to the hedged risk is
also recognised in the income statement under the line item ‘Net
trading and fair value result’ and adjusts the carrying amount of
the hedged item.
If the hedging instrument expires, is sold, is terminated or is
exercised, or when the hedge no longer meets the criteria for
hedge accounting, the hedge relationship is terminated. In this
case, the fair value adjustment of the hedged item is amortised
to the income statement under the line item ‘Net interest income’
until maturity of the financial instrument.
(ii) Cash Flow Hedges
Cash flow hedges are used to eliminate uncertainty in the future
cash flows in order to stabilise net interest income. For designated and qualifying cash flow hedges, the effective portion of
the gain or loss on the hedging instrument is recognised in other
comprehensive income and reported under the ‘Cash flow hedge
reserve’. The ineffective portion of the gain or loss on the hedging
instrument is recognised in the income statement under the line
item ‘Net trading and fair value result’. For determination of the
effective and ineffective portions, the derivative is considered
at its dirty price, i.e. including the interest component. If the
hedged cash flow affects the income statement, the gain or loss
on the hedging instrument is reclassified from other comprehensive income in the corresponding income or expense line item
in the income statement (mainly ‘Net interest income’). As far
as accounting for hedged items in cash flow hedges is concerned
there is no change compared to the situation when no hedging
is applied.
When a hedging instrument expires, is sold, is terminated, is
exercised, or when a hedge no longer meets the criteria for hedge
accounting, the hedge relationship is terminated. In this case, the
cumulative gain or loss on the hedging instrument that has been
recognised in other comprehensive income remains separate in
‘Cash flow hedge reserve’ until the transaction occurs.
(iii) Net Investment Hedge
The Group makes use of a net investment hedge in foreign operations. The changes in fair values of hedging instruments that are
attributable to the fluctuation of foreign currency exchange rates
are recognised in the ‘Translation reserve’ within equity. Foreign
currency derivatives and foreign currency financial liabilities serve
as hedging instruments.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net
amount is reported on the statement of financial position if, and
only if, there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net basis
or to realise the asset and settle the liability simultaneously.
Determination of Fair Value
Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between knowledgable market participants at the measurement date.
Details on valuation techniques applied for fair value measurement
and on fair value hierarchy are disclosed in Note 40 Fair value of
assets and liabilities.
Leasing
A lease is an agreement whereby the lessor conveys to the lessee
the right to use an asset for an agreed period of time in return for
a payment or series of payments. A finance lease at The Group is
a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. All other lease agreements at The
Group are classified as operating leases.
The Group as a Lessor
The lessor in the case of a finance lease reports a receivable from
the lessee under the line item ‘Loans and receivables to customers’
or ‘Loans and receivables to credit institutions’. The receivable is
equal to the present value of the contractually agreed payments
taking into account any residual value. Interest income on the
receivable is reported in the income statement under the line item
‘Net interest income’.
In the case of operating leases, the leased asset is reported by the
lessor in ‘Property and equipment’ or in ‘Investment properties’
and is depreciated in accordance with the principles applicable to
the assets involved. Lease income is recognised on a straight-line
basis over the lease term in the income statement under the line
item ‘Rental income from investment properties & other operating
leases’.
Lease agreements in which The Group is the lessor almost exclusively comprise finance leases.
The Group as a Lessee
As a lessee, The Group has not entered into any leases meeting
the conditions of finance leases. Operating lease payments are
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recognised as an expense in the income statement on the line item
‘Other administrative expenses’ on a straight-line basis over the
lease term.
incorporates the specifics of the banking business and its regulatory
environment. In determining value in use, the present value of
future earnings distributable to shareholders is calculated.
Business Combinations and Goodwill
The estimation of future earnings distributable to shareholders is
based on financial plans for the CGUs as agreed by the management while taking into account the fulfilment of the respective
regulatory capital requirements. The planning period is five years.
Any forecasted earnings beyond the planning period are derived
on the basis of the last year of the planning period and a long-term
growth rate. The present value of such perpetual earnings growing
at a stable rate (referred to as terminal value) takes into consideration macroeconomic parameters and economically sustainable
cash flows for each CGU.
(i) Business Combinations
Business combinations are accounted for using the acquisition
method of accounting. Goodwill represents the future economic
benefits resulting from the business combination, arising from
assets that are not individually identified and separately recognised.
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interests and the
fair value of the previously held equity interest over the net of the
acquisition-date amounts of the identifiable assets acquired as well
as the liabilities assumed. At the acquisition date, the identifiable
assets acquired and the liabilities assumed are generally recognised
at their fair values.
If, after reassessment of all components described above, the calculation results in a negative amount, it is recognised as a bargain
purchase gain and reported in the income statement under the line
item ‘Other operating result’ in the year of acquisition.
Non-controlling interests that are present ownership interests in the
acquiree are measured at the proportionate share of the acquiree’s
identifiable net assets. Other types of non-controlling interests are
measured at fair value or, when applicable, on the basis specified in
another IFRS. Acquisition costs incurred are expensed and included
under the income statement line item ‘Other operating result’.
(ii) Goodwill and Goodwill Impairment Testing
Goodwill arising on acquisition of a business is carried at cost as
established as of the date of acquisition of the business less accumulated impairment losses, if any. Goodwill is tested for impairment
annually in November, or whenever there is an indication of possible impairment during the year, with any impairment determined
recognised in profit or loss. The impairment test is carried out
for each cash-generating unit (CGU) to which goodwill has been
allocated. A CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
Goodwill is tested for impairment by comparing the recoverable
amount of each CGU to which goodwill has been allocated with its
carrying amount. The carrying amount of a CGU is based on the
amount of net asset value allocated to the CGU taking into account
any goodwill and unamortised intangible assets recognised for the
CGU at the time of business combination.
The recoverable amount is the higher of a CGU’s fair value less
costs of disposal and its value in use. Where available, the fair
value less costs of disposal is determined based on recent transactions, market quotations or appraisals. The value in use is determined using a discounted cash flow model (DCF model), which
The cash flows are determined by subtracting the annual capital
requirement generated by a change in the amount of risk-weighted
assets from the net profit. The capital requirement was defined
through the target tier 1 ratio in light of the expected future minimum regulatory capital requirements.
The value in use is determined by discounting the cash flows at
a rate that takes into account present market rates and the specific risks of the CGU. The discount rates have been determined
based on the capital asset pricing model (CAPM). According to
the CAPM, the discount rate comprises a risk-free interest rate
together with a market risk premium that itself is multiplied by
a factor that represents the systematic market risk (beta factor).
Furthermore, a country-risk premium component is considered
in calculation of the discount rate. The values used to establish the discount rates are determined using external sources of
information.
Where the recoverable amount of a CGU is less than its carrying
amount, the difference is recognised as an impairment loss in the
income statement under the line item ‘Other operating result’.
The impairment loss is allocated first to write down the CGU’s
goodwill. Any remaining impairment loss reduces the carrying
amount of the CGU’s other assets, though not to an amount lower
than their fair value less costs of disposal. No impairment loss is
recognised if the recoverable amount of the CGU is higher than
or equal to its carrying amount. Impairment losses relating to
goodwill cannot be reversed in future periods.
Property and Equipment
Property and equipment is measured at cost less accumulated
depreciation and accumulated impairment. Borrowing costs for
qualifying assets are capitalised into the costs of property and
equipment.
Depreciation is calculated using the straight-line method to write
down the cost of property and equipment to their residual values
over their estimated useful lives. Depreciation is recognised in the
income statement on the line item ‘Depreciation and amortisation’
and impairment under the line item ‘Other operating result’.
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Intangible Assets
The estimated useful lives are as follows:
Useful life in years
Buildings
Office furniture and equipment
Passenger cars
Computer hardware
15– 50
4– 10
4– 8
4– 6
In addition to goodwill, The Group’s intangible assets include computer software and customer relationships, the brand, the distribution
network and other intangible assets. An intangible asset is recognised
only when its cost can be measured reliably and it is probable that
the expected future economic benefits that are attributable to it will
flow to the Group.
Land is not depreciated.
Property and equipment is derecognised on disposal or when no future
economic benefits are expected from its use. Any gain or loss arising
on disposal of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is recognised
in the income statement under the line item ‘Other operating result’.
Investment Properties
Investment property is property (land and buildings or part of a building or both) held for the purpose of earning rental income or for
capital appreciation. In the case of partial own use, the property is
investment property only if the owner-occupied portion is insignificant. Investments in land and buildings under construction, where the
future use is expected to be the same as for investment property, are
treated as investment property.
Investment property is measured initially at cost, including transaction costs. Subsequent to initial recognition, investment property
is measured at cost less accumulated depreciation and impairment.
Investment property is presented in the statement of financial position
in the line item ‘Investment properties’.
Rental income is recognised in the line ‘Rental income from investment properties and other operating leases’. Depreciation is presented
in the income statement in the line item ‘Depreciation and amortisation’ using the straight-line method over an estimated useful life. The
useful lives of investment properties are identical to those of buildings
reported under property and equipment. Any impairment losses, as
well as their reversals, are recognised under the income statement line
item ‘Other operating result’.
Property Held for Sale (Inventory)
The Group also invests in property that is held for sale in the ordinary
course of business or property in the process of construction or development for such sale. This property is presented as ‘Other assets’ and
is measured at the lower of cost and net realisable value in accordance
with IAS 2 Inventories.
The cost of acquiring inventory includes not only the purchase price
but also all other directly attributable expenses, such as transportation
costs, customs duties, other taxes and costs of conversion of inventories, etc. Borrowing costs are capitalised to the extent to which they
directly relate to the acquisition of real estate.
Sales of these assets are recognised as revenues under the income
statement line item ‘Other operating result’, together with costs of
sales and other costs incurred in selling the assets.
Costs of internally generated software are capitalised if The Group
can demonstrate the technical feasibility and intention of completing
the software, the ability to use it, how it will generate probable economic benefits, the availability of resources and the ability to measure
the expenditures reliably. Intangible assets acquired separately are
measured on initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation
and any accumulated impairment losses.
The cost of intangible assets acquired in a business combination is
their fair value as of the date of acquisition. In the case of The Group,
these are brands, customer relationships and distribution networks,
and they are capitalised on acquisition if they can be measured with
sufficient reliability.
Intangible assets with finite lives are amortised over their useful economic lives using the straight-line method. The amortisation period
and method are reviewed at least at each financial year-end and
adjusted if necessary. The amortisation expense on intangible assets
with finite lives is recognised in the income statement under the line
item ‘Depreciation and amortisation’.
The estimated useful lives are as follows:
Useful life
in years
Computer software
Customer relationships
Distribution network
4– 8
10– 20
5,5
Brands are not amortised as they are assumed to have an indefinite useful life. An intangible asset has an indefinite useful life, if
there are no legal, contractual, regulatory or other factors limiting
that useful life. Brands are tested for impairment annually within
the cash-generating unit to which they belong, and impairment
is recognised if appropriate. Furthermore, each period brands are
reviewed as to whether current circumstances continue to support
the conclusion as to indefinite life. In the event of impairment,
impairment losses are recognised in the income statement under
the line item ‘Other operating result’.
Impairment of Non-financial Assets (Property and
Equipment, Investment Properties, Intangible
Assets)
The Group assesses at each reporting date whether there is an
indication that a non-financial asset may be impaired. Testing for
impairment is done at individual asset level if the asset generates
cash inflows that are largely independent of those from other assets.
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The typical case is investment property. Otherwise the impairment
test is carried out at the level of the cash-generating unit (CGU) to
which the asset belongs. A CGU is the smallest identifiable group
of assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets. For specific
rules related to impairment of goodwill and impairment allocation
rules for CGUs please see the chapter ‘Business combinations and
goodwill’, part (ii) Goodwill and goodwill impairment testing.
If any indication of impairment exists, or when annual impairment
testing for an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher
of the asset’s or CGU’s fair value less costs of disposal and its
value in use. If the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount. In measuring value in
use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific
to the asset.
At each reporting date an assessment is made as to whether there is
any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such an indication exists,
the Group estimates the asset’s or CGU’s recoverable amount.
The previously recognised impairment loss is reversed only if
there has been a change in the assumptions used to determine
the asset’s recoverable amount since the last impairment loss was
recognised. The reversal is limited so that the carrying amount
of the asset does not exceed its recoverable amount or does not
exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognised for
the asset in prior years.
Impairments and their reversals are recognised in the income
statement under the line item ‘Other operating result’.
Non-current Assets and Disposal Groups Held
for Sale
Non-current assets are classified as held for sale if they can be
sold in their present condition and the sale is highly probable
within 12 months of classification as held for sale. If assets are
to be sold as part of a group that may also contain liabilities (e.g.
a subsidiary) they are referred to as disposal group held for sale.
Assets classified as held for sale and assets belonging to disposal
groups held for sale are reported under the statement of financial
position line item ‘Assets held for sale’. Liabilities belonging to
the disposal groups held for sale are presented on the statement of
financial position under the line item ‘Liabilities associated with
assets held for sale’.
Non-current assets and disposal groups that are classified as held
for sale are measured at the lower of carrying amount and fair value
less costs to sell. Should the impairment loss in a disposal group
exceed the carrying amount of the assets that are within the scope
of IFRS 5 measurement requirements, there is no specific guidance
on how to treat such a difference. The Group recognises this difference as a provision under the statement of financial position line
item ‘Provisions’.
Financial Guarantees
In the ordinary course of business, The Group provides financial
guarantees, consisting of various types of letters of credit and guarantees. According to IAS 39, a financial guarantee is a contract that
requires the guarantor to make specified payments to reimburse the
holder for a loss it incurs in case a specified debtor fails to make
a payment when due in accordance with the original or modified
terms of a debt instrument.
If The Group is in a position of being a guarantee holder, the financial guarantee is not recorded on the statement of financial position but is taken into consideration as collateral when determining
impairment of the guaranteed asset.
The Group as a guarantor recognises financial guarantees as soon
as it becomes a contracting party (i.e. when the guarantee offer is
accepted). Financial guarantees are initially measured at fair value.
Generally, the initial measurement is the premium received for
a guarantee. If no premium is received at contract inception, the fair
value of a financial guarantee is nil, as this is the price that would
be paid to transfer the liability in an orderly transaction between
market participants. Subsequent to initial recognition, the financial
guarantee contract is reviewed for the possibility that provisioning
will be required under IAS 37. Such provisions are presented in the
statement of financial position under the line ‘Provisions’.
The premium received is recognised in the income statement under
the line item ‘Net fee and commission income’ on a straight-line
basis over the life of the guarantee.
Provisions
Provisions are recognised when the Group has a present obligation
as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. On the statement of financial position, provisions are
reported under the line item ‘Provisions’. They include credit risk
loss provisions for contingent liabilities (particularly financial guarantees and loan commitments) as well as provisions for litigation
and restructuring. Expenses or income related to provisions are
reported under the line item ‘Other operating result’.
Taxes
(i) Current Tax
Current tax assets and liabilities for the current and prior years
are measured as the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used to
compute the amounts are those enacted by the balance sheet date.
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(ii) Deferred Tax
(i) Net Interest Income
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part
of the deferred tax asset to be utilised. Unrecognised deferred tax
assets are reassessed at each balance sheet date and are recognised
to the extent that it has become probable that future taxable profit
will allow the deferred tax asset to be recovered.
Interest income includes interest income on loans and receivables
to credit institutions and customers, on cash balances and on bonds
and other interest-bearing securities in all financial assets categories.
Interest expenses include interest paid on deposits from customers,
deposits from banks, debt securities issued and other financial liabilities in all financial liabilities categories.
Deferred tax is recognised for temporary differences between the
tax bases of assets and liabilities and their carrying amounts as
of the balance sheet date. Deferred tax liabilities are recognised
for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and unused tax
losses to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences and
carry forward of unused tax losses can be utilised. Deferred taxes
are not recognised on temporary differences arising from the initial
recognition of goodwill.
Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply in the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted as of the balance sheet date. For
the subsidiaries, local tax environments apply.
Deferred tax relating to items recognised in other comprehensive
income is recognised in other comprehensive income and not in
the income statement.
Deferred tax assets and deferred tax liabilities are offset if a legally
enforceable right to offset exists and the deferred taxes relate to
the same taxation authority.
Share Capital
The issued capital (registered, subscribed and paid) as at the end
of the reporting period is accounted for at an amount recorded in
the Commercial register.
Fiduciary Assets
Interest income or expense is recorded using the effective interest
rate (EIR) method. The calculation includes origination fees resulting from the lending business as well as transaction costs that are
directly attributable to the instrument and are an integral part of the
EIR (apart from financial instruments at fair value through profit or
loss), but no future credit losses. Interest income from individually
impaired loans and receivables and held-to-maturity financial assets
is calculated by applying the original effective interest rate used to
discount the estimated cash flows for the purpose of measuring the
impairment loss.
In net interest income also interest on derivative financial instruments held in the banking book is included.
(ii) Net Fee and Commission Income
The Group earns fee and commission income from a diverse range
of services that it provides to its customers.
Fees earned for the provision of services over a period of time are
accrued over that period. These fees include lending fees, guarantee fees, commission income from asset management, custody and
other management and advisory fees as well as fees from insurance brokerage, building society brokerage and foreign exchange
transactions.
Fee income earned from providing transaction services, such as
arranging the acquisition of shares or other securities or the purchase or sale of businesses, is recognised upon completion of the
underlying transaction.
(iii) Dividend Income
The Group provides trust and other fiduciary services that result
in the holding or investing of assets on behalf of its clients. Assets
held in a fiduciary capacity are not reported in the financial statements, as they are not the assets of The Group.
Dividend income is recognised when the right to receive the payment is established. This line item includes dividend from shares
and other equity-related securities in all portfolios as well as income
from other investments in companies categorised as available for
sale.
Dividends on Ordinary Shares
(iv) Net Trading and Fair Value Result
Dividends on ordinary shares are recognised as a liability and
deducted from equity when they are approved by The Group’s
shareholders.
Recognition of Income and Expenses
Revenue is recognised to the extent that the economic benefits
will flow to the entity and the revenue can be reliably measured.
The description and revenue recognition criteria of the line items
reported in the income statement are as follows:
Results arising from trading activities include all gains and losses
from changes in fair value (clean price) on financial assets and
financial liabilities classified as held for trading, including all
derivatives not designated as hedging instruments. In addition,
for derivative financial instruments held in the trading book, net
trading result also contains interest income or expense. However,
interest income or expenses on non-derivative trading assets and
liabilities and on derivatives held in the banking book are not part
of net trading result as they are reported as ‘Net interest income’.
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It also includes any ineffective portions recorded in fair value and
cash flow hedge transactions as well as foreign exchange gains
and losses.
Fair value result relates to changes in the clean price of assets and
liabilities designated at fair value through profit or loss.
(v) Rental Income from Investment
Properties & Other Operating Leases
Rental income from investment properties and other operating
leases is recognised on a straight-line basis over the lease term.
(vi) Personnel Expenses
Personnel expenses include wages and salaries, bonuses, statutory
and voluntary social security contributions, staff-related taxes and
levies.
and intangible assets. Also included here are any impairment losses
on goodwill.
In addition, other operating result encompasses the following:
expenses for other taxes; income from the release of and expenses
for allocations to provisions; impairment losses (and their reversal
if any) as well as selling gains and losses on equity investments
accounted for using the equity method; and gains or losses from
derecognition of subsidiaries.
d) Significant Accounting Judgements,
Assumptions and Estimates
Other administrative expenses include information technology
expenses, expenses for office space, office operating expenses,
advertising and marketing, expenditures for legal and other consultants as well as sundry other administrative expenses. Furthermore
the line item contains deposit insurance contributions expenses.
The consolidated financial statements contain amounts that have
been determined on the basis of judgements and by the use of
estimates and assumptions. The estimates and assumptions used
are based on historical experience and other factors, such as planning as well as expectations and forecasts of future events that
are currently deemed to be reasonable. As a consequence of the
uncertainty associated with these assumptions and estimates, actual
results could in future periods lead to adjustments in the carrying
amounts of the related assets or liabilities. The most significant uses
of judgements, assumptions and estimates are as follows:
(ix) Depreciation and Amortisation
Control
(vii) Other Administrative Expenses
This line item comprises depreciation of property and equipment,
depreciation of investment property and amortisation of intangible
assets.
(x) Gains/losses on Financial Assets and
Liabilities not Measured at Fair Value Through
Profit or Loss, Net
This line item includes selling and other derecognition gains
or losses on available-for-sale and held-to-maturity financial
assets, loans and receivables and financial liabilities measured
at amortised cost. However, if such gains/losses relate to individually impaired financial assets they are included as part of
net impairment loss.
(xi) Net Impairment Loss on Financial Assets not
Measured at Fair Value Through Profit or Loss
Net impairment losses on financial assets comprise impairment
losses and reversals of impairment on loans and receivables,
held-to-maturity and available-for-sale financial assets. Net impairment losses relate to allowances recognised both at individual and
portfolio (incurred but not reported) level. Direct write-offs are
considered as part of impairment losses. This line item also includes
recoveries on written-off loans removed from the statement of
financial position.
(xii) Other Operating Result
Other operating result reflects all other income and expenses not
directly attributable to The Group’s ordinary activities. Other operating result includes impairment losses or any reversal of impairment losses as well as results on the sale of property and equipment
IFRS 10 “Consolidated Financial Statements” (adopted by The
Group starting with 1 January 2014) defines investor’s control over
an investee in terms of the investor having all of the following: (a)
power over the investee; (b) exposure, or rights, to variable returns
from its involvement with the investee; and (c) the ability to use
its power over the investee to affect the amount of the investor’s
returns.
Hence, assessing the existence of control under this definition may
require considerable accounting judgements, assumptions and estimates, notably in non-standard situations such as: (1) power stemming both from voting rights and from contractual arrangements (or
mostly from the latter); (2) exposure stemming both from on-balance investments and from off-balance commitments or guarantees
(or mostly from the latter); or (3) variable returns stemming from
both readily identifiable income streams (e.g. dividends, interest,
fees) and from cost savings, economies of scale and/or operational
synergies (or mostly from the latter) .
Fair Value of Financial Instruments
Where the fair values of financial assets and financial liabilities
recorded on the statement of financial position cannot be derived
from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The
inputs to these models are derived from observable market data
where possible, but where observable market data is not available judgement is required to establish fair values. Disclosures
for valuation models, the fair value hierarchy and fair values of
financial instruments can be found in Note 40 Fair value of assets
and liabilities.
100
Income Statement | Statement of Financial Position | Separate Financial Statements
Impairment of Financial Assets
The Group reviews its financial assets not measured at fair value
through profit or loss at each balance sheet date to assess whether
an impairment loss should be recorded in the income statement.
In particular, it is required to determine whether there is objective
evidence of impairment as a result of a loss event occurring after
initial recognition and to estimate the amount and timing of future
cash flows when determining an impairment loss.
Disclosures concerning impairment are provided in Note 38 Risk
management in the ‘Credit risk’ subsection ’. The development of
loan loss provisions is described in Note 8 Net impairment loss on
financial assets not measured at fair value through profit or loss
Impairment of Non-Financial Assets
The Group reviews its non-financial assets at each balance sheet
date to assess whether there is an indication of impairment loss
that should be recorded in the income statement. Furthermore,
cash-generating units to which goodwill is allocated are tested
for impairment on a annual basis. Judgement and estimates are
required to determine the value in use and fair value less costs of
disposal by estimating the timing and amount of future expected
cash flows and the discount rates. Assumptions and estimates used
for impairment on non-financial assets calculations are described in
the parts ‘Business combinations and goodwill’ and ‘Impairment of
non-financial assets (property and equipment, investment property,
intangible assets)’ in the Accounting Policies.
Deferred Tax Assets
Deferred tax assets are recognised in respect of tax losses and
deductible temporary differences to the extent that it is probable
that taxable profit will be available against which the losses can be
utilised. Judgement is required to determine the amount of deferred
tax assets that can be recognised, based upon the likely timing and
level of future taxable profits, together with future tax planning
strategies. Disclosures concerning deferred taxes are in Note 25
Tax assets and liabilities.
Provisions
the lessor to the lessee. Disclosures concerning leases are in Note
34 Leases.
e) Application of Amended and New
IFRS/IAS
The accounting policies adopted are consistent with those used
in the previous financial year except for standards and interpretations that became effective for financial years beginning on or after
1 January 2014. As regards new standards and interpretations and
their amendments, only those that are relevant for the business of
The Group are listed below.
Effective Standards and Interpretations
The following standards and their amendments have been mandatory since 2014:
–– IAS 27 (revised 2011) Separate Financial Statements
–– IAS 28 (revised 2011) Investments in Associates and Joint
Ventures
–– Amendments to IAS 32 – Offsetting Financial Assets and
Liabilities
–– Amendments to IAS 36 – Recoverable Amounts
Disclosures for Non-financial Assets
–– IFRS 10 Consolidated Financial Statements
–– IFRS 11 Joint Arrangements
–– IFRS 12 Disclosure of Interests in Other Entities
–– Amendments to IFRS 10, IFRS 11 and IFRS 12 – Transition
guidance
–– Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment
entities
–– IFRIC 21 Levies
Application of other standards and amendments had no material
effect on the financial statements of The Group.
Standards and Interpretations Not Yet Effective
The standards and interpretations shown below were issued by the
IASB but are not yet effective.
Recognition of provisions requires judgement with respect to
whether The Group has a present obligation as a result of a past event
and whether it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
Furthermore, estimates are necessary with respect to the amount
and timing of future cash flows when determining the amount of
provisions. Provisions are disclosed in Note 30 Provisions and
further details on provisions for contingent credit liabilities in Note
38.2 Credit risk. Legal proceedings that do not meet the criteria
for recognition of provisions are described in Note 43 Contingent
assets and liabilities.
Thereof, the following standards and amendments have been
endorsed by the EU:
–– Amendments to IAS 19 – Defined Benefit Plans: Employee
Contributions
–– Amendments to IAS 39 – Novation of Derivatives and
Continuation of Hedge Accounting
–– Annual Improvements to IFRSs 20102012 and 20112013
Cycle
Leases
Amendments to IAS 16 and IAS 38: Clarification of Acceptable
Methods of Depreciation and Amortisation
From The Group’s perspective as a lessor, judgement is required
to distinguish whether a given lease is a finance or operating lease
based on the transfer of substantially all the risk and rewards from
Although they have been endorsed by the EU, The Group decided
not to apply them before they become effective.
Amendments to IAS 16 and IAS 38 were issued in May 2014 and
are effective for annual periods beginning on or after 1 January 2016.
101
Income Statement | Statement of Financial Position | Separate Financial Statements
The amendments prohibit the use of revenue-based depreciation
for property, plant and equipment and significantly limiting the use
of revenue-based amortisation for intangible assets.
Application of these amendments is not expected to have a significant impact on The Group’s financial statements.
Amendments to IAS 19 – Defined Benefit Plans: Employee
Contributions
Amendments to IAS 19 were issued in November 2013 and are
effective for annual periods beginning on or after 1 July 2014.
The amendments clarify that contributions from employees or third
parties that are linked to service must be attributed to periods of
service using the same attribution method as used for the gross
benefit. However, the contribution may be recognised as a reduction
in the service cost if the amount of the contributions is independent
of the number of years of service.
Application of these amendments is not expected to have a significant impact on The Group’s financial statements.
Amendments to IAS 39 – Novation of Derivatives and
Continuation of Hedge Accounting
Amendments to IAS 39 were issued in June 2013 and are effective
for annual periods beginning on or after 1 January 2014.
Under the amendments there would be no need to discontinue hedge
accounting if a hedging derivative were novated, provided certain
criteria are met.
Application of these amendments is not expected to have a significant impact on The Group’s financial statements.
IFRS 9: Financial Instruments
IFRS 9 was issued in July 2014 and is effective for annual periods
beginning on or after 1 January 2018.
IFRS addresses three main areas of accounting for financial instruments: classification and measurement, impairment and hedge
accounting.
IFRS 9 introduces two classification criteria for financial assets: 1)
an entity’s business model for managing the financial assets, and
2) the contractual cash flow characteristics of the financial assets.
As a result, a financial asset is measured at amortised cost only if
both the following conditions are met: a) the contractual terms of
the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal outstanding and b) the asset is held within a business model whose
objective is to hold assets in order to collect contractual cash flows.
Measurement a fair value through other comprehensive income
is applicable to financial assets which meet the condition a) but
the business model applied to them is focused both on holding
the assets to collect contractual cash flows and selling the assets.
All other financial assets are measured at fair value with changes
recognised in profit or loss. For investments in equity instruments
that are not held for trading, an entity may make an irrevocable
election at initial recognition to measure them at fair value with
changes recognised in other comprehensive income.
IFRS 9 does not change classification and measurement principles
for financial liabilities compared to IAS 39. The only change is
related to financial liabilities designated at fair value through profit
or loss (fair value option). The fair value changes related to the
credit risk of such liabilities will be presented in other comprehensive income.
The standard brings uniform impairment model applied both to
financial assets and off balance sheet credit risk bearing exposures
(loan commitments and financial guarantees). At initial recognition of financial instruments loss allowance to reflect credit loss
is recognised to the extent of 12-month expected losses. Lifetime
expected losses will be recognised for all instrument whose credit
risk increases subsequently after initial recognition. Furthermore
the standard brings new rules for accounting for losses resulting
from modification of contractual conditions of financial assets.
The objective of the new hedge accounting model is to reflect in
accounting actual risk management practices of entities hedging
risks. For The Group, the following areas are expected to be relevant to achieve this objective: only the prospective effectiveness
test is required and the retrospective effectiveness test with the
80%125% corridor was abandoned; when options are used as
hedging instruments, the volatility of the time value is recognised
through OCI rather than profit or loss; the possibility of hedging
synthetic items containing derivatives.
This standard will have a significant effect on statement of
financial position items and measurement methods for financial
instruments. The contractual cash flow characteristics of financial assets will have to be reviewed and The Group is at risk that
part of its loan portfolio will have to be measured at fair value
through profit or loss. On the other hand some of debt securities
currently measured at fair value through other comprehensive
income may be measured at amortised cost due to the ’held-tocollect contractual cash’ flows business model applied to them. In
the area of impairment loss allowances are expected to increase
significantly. First estimates of quantitative impacts are expected
to be available in 2015.
Amendments to IFRS 10 and IAS 28: Sale or Contribution of
Assets Between an Investor and its Associate or Joint Venture
Amendments to IFRS 10 and IAS 28 were issued in September
2014 and are effective for annual periods beginning on or after
1 January 2016.
These amendments deal with the sale or contribution of assets or
subsidiary in a transaction between an investor and its associate
or joint venture. The main consequence of the amendments is
102
Income Statement | Statement of Financial Position | Separate Financial Statements
that a full gain or loss is recognised only when the assets or the
subsidiary constitute a business.
Application of these amendments is not expected to have a significant impact on The Group’s financial statements.
Amendments to IFRS 11: Accounting for Acquisitions of
Interest in Joint Operations
Amendments to IFRS 11 were issued in May 2014 and are effective for annual periods beginning on or after 1 January 2016.
The amendments specify that acquirer of an interest in a joint
operation in which the activity constitutes a business, as
defined in IFRS 3, is required to apply all of the principles on
business combinations accounting in IFRS 3 and other IFRSs
with the exception of those principles that conflict with the
guidance in IFRS 11.
Application of these amendments is not expected to have a significant impact on The Group’s financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued in May 2014 and is effective for annual
periods beginning on or after 1 January 2017.
IFRS 15 specifies how and when an entity will recognise revenue from contracts with customers. It also requires such entities
to provide users of financial statements with more informative,
relevant disclosures. The standard provides a single, principles
based five-step model to be applied to all contracts with customers.
As the standard is not focused on recognition of revenues from
financial services, application of this standard is not expected to
have a significant impact on The Group’s financial statements.
Annual Improvements to IFRSs 20102012 and 20112013 Cycle
In December 2013, the IASB issued two sets of amendments to
various standards. The amendments are effective for annual periods
beginning on or after 1 July 2014.
Application of these amendments is not expected to have a significant impact on The Group’s financial statements.
C. Notes to the Statement of Comprehensive Income and the Statement of Financial
Position of Česká spořitelna, a. s.
1. Net Interest Income
CZK Million
Interest Income
Financial Assets Held For Trading
Financial Assets Designated At Fair Value Through Profit Or Loss
Available-For-Sale Financial Assets
Loans And Receivables
Held-To-Maturity Investments
Derivatives - Hedge Accounting, Interest Rate Risk
Other Assets
Total Interest Income
Interest Expenses
Financial Liabilities Held For Trading
Financial Liabilities Measured At Amortised Cost
Derivatives - Hedge Accounting, Interest Rate Risk
Total Interest Expenses
Net Interest Income
2014
2013
102
43
648
24,889
5,114
31
6
229
113
653
26,308
5,366
6
15
30,833
32,690
(32)
(4,481)
353
(40)
(5,712)
314
(4,160)
26,673
(5,438)
27,252
For financial assets or liabilities that are not measured at fair value through profit or loss, the total interest income amounted to CZK 30,561 million (2013: CZK 32,327 million) and the total interest expense to CZK (4,481) million (2013: CZK (5,712) million). Net interest income
for these items is therefore CZK 26,170 million (2013: CZK 26,615 million).
Interest income on impaired financial assets accrued amounted to CZK 517 million (2013: CZK 655 million).
103
Income Statement | Statement of Financial Position | Separate Financial Statements
2. Net fee and Commission Income
CZK million
2014
2013
Securities
Clearing and settlement
Asset management
Custody
Payment services
884
302
516
103
5,973
641
304
113
102
6,118
Customer resources distributed but not managed
Lending business
Other
Net fee and commission income
977
923
2,792
(241)
3,033
60
11,306
11,294
2014
2013
11
39
6
46
3. Dividend Income
CZK million
Financial assets - designated at fair value through profit or loss
Financial assets – available for sale
Dividend income
50
52
4. Net trading and Fair Value Result
CZK million
2014
2013
Net trading result
Securities and derivatives trading
Foreign exchange transactions
Result from financial assets and liabilities designated at fair value through profit or loss
Result from measurement/sale of financial assets designated at fair value through profit or loss
Result from measurement/sale of financial liabilities designated at fair value through profit or loss
Gains or losses from hedge accounting
2,344
1,436
908
(71)
71
(142)
14
2,711
1,444
1,267
(542)
(71)
(471)
14
Net trading and fair value result
With effect from 4 February 2008, Česká spořitelna transferred
its financial markets trading to make use of Erste Group Bank’s
business model. The market risk arising from the sales activities
of the Financial Markets Division (i.e., transactions with retail
and corporate clientele), with the exception of equity risk and
transactions for t Erste Group’s liquidity management purposes
(money market), was transferred to Erste Group Bank using backto-back transactions. Trading gains (i.e. from The Erste Group
Bank’s market positions) are distributed according to approved
2,287
2,183
rules to the relevant banks within the Group and reported in the
‘Net trading result’.
The basic principle underlying these rules involves Erste Group Bank
absorbing potential loss in individual classes of assets in exchange for
the risk premium derived from the Value at Risk (‘VaR’) indicator.
The remaining positive result after deducting expenses (calculated using
the Cost Income Ratio) is reallocated to individual participants in the model
based on the results from the sale of assets in individual asset groups.
The net trading result includes the income from the market positions of Erste Group Bank structured as follows:
CZK million
Realised and unrealised gains on trading assets
Derivative instruments
Foreign exchange trading
Total
2014
2013
528
9
254
465
22
300
791
787
104
Income Statement | Statement of Financial Position | Separate Financial Statements
5. Rental Income From Investment Properties & Other Operating Leases
CZK million
Investment properties
Other operating leases
Rental income from investment properties & other operating leases
2014
2013
760
63
771
57
823
828
6. General Administrative Expenses
2014
2013
Personnel expenses
CZK million
(8,632)
(9,013)
Other administrative expenses
(7,331)
(7,446)
Depreciation and amortization
(2,271)
(2,284)
(18,234)
(18,743)
2014
2013
68
83
Wages and salaries
Compulsory social security
Other personnel expenses
Deposit insurance contribution
IT expenses
Expenses for office space
Office operating expenses
Advertising / marketing
Legal and consulting costs
Sundry administrative expenses
Software and other intangible assets
Owner occupied real estate
Investment property
Office furniture and equipment and sundry property and equipment
General administrative expenses
(6,228)
(1,929)
(475)
(936)
(2,298)
(1,400)
(834)
(848)
(382)
(633)
(824)
(662)
(213)
(572)
(6,471)
(2,069)
(473)
(927)
(2,151)
(1,525)
(1,006)
(900)
(468)
(469)
(777)
(662)
(223)
(622)
Board of Directors and Supervisory Board Remuneration
CZK million
Remuneration
Remuneration to the members of the Board of Directors and Supervisory Board is accounted for as short - term employee benefits.
Average Headcount of Full Time Employees per Reporting Date
Staff
2014
2013
10,504
10,457
7. Gains/losses on Financial Assets and Liabilities Not Measured at Fair Value
Through Profit or Loss, Net
CZK million
From sale of financial assets available for sale
From sale of financial assets held to maturity
From repurchase of liabilities measured at amortised cost
Gains/losses on financial assets and liabilities not measured at fair value through profit
or loss, net
2014
2013
78
87
(19)
80
133
–
146
213
105
Income Statement | Statement of Financial Position | Separate Financial Statements
8. Net Impairment Loss on Financial Assets not Measured at Fair Value Through Profit
or Loss
CZK million
2014
2013
–
–
(3,732)
(6,561)
2,546
(79)
362
4
(52)
(163)
(3,410)
(7,559)
3,821
(29)
357
(13)
(3,728)
(3,638)
CZK million
2014
2013
Result from properties/moveables/other intangible assets other than goodwill
Allocation to/release of other provision
Allocation to/release of provisions for commitments and guarantees given
Other taxes
Result from other operating expenses/income
(249)
(35)
100
(82)
(337)
(535)
(570)
90
(101)
1,156
Financial assets - measured at cost
Financial assets – available for sale
Loans and receivables
Allocation to risk provisions
Release of risk provisions
Direct write-offs
Recoveries recorded directly to the income statement
Financial assets - held to maturity
Net impairment loss on financial assets not measured at fair value through profit or
loss
9. Other Operating Result
Other operating result
(603)
40
10. Taxes on Income
Taxes on income are made up of current taxes on income calculated in each of the Group companies based on the results reported for tax
purposes, corrections to taxes on income for previous years, and the change in deferred taxes.
CZK million
Current tax expense
current period
prior period
Deferred tax expense / income
current period
prior period
Total
2014
2013
(3,624)
(3,560)
(64)
(26)
(29)
3
(4,060)
(3,747)
(313)
156
156
–
(3,650)
(3,904)
The following table reconciles the income taxes reported in the income statement to the pre-tax profit/loss. multiplied by the nominal tax rate.
CZK million
Pre-tax profit/loss
Income tax expense for the financial year at the domestic statutory tax rate (19%)
Non-taxable income
Non-deductible expenses
Other
Prior period over/(under) accrual
Total
Effective tax rate
2014
2013
18,720
(3,557)
536
(464)
(104)
(61)
19,481
(3,701)
542
(526)
94
(313)
(3,650)
19,50%
(3,904)
20,04%
106
Income Statement | Statement of Financial Position | Separate Financial Statements
Tax effects relating to each component of other comprehensive income:
CZK mil.
2014
Before-tax Tax benefit/
amount
(expense)
Available for sale-reserve
Unrealized profits / (losses) on
revaluation
Reclassification adjustments to the
income statement
Cash flow hedge-reserve
Gains and losses on the hedging
instruments
Other comprehensive income
2013
Net-of-tax
amount
Before-tax
amount
Tax benefit
Net-of-tax
amount
1,331
(287)
1,044
(472)
37
(435)
1,409
(318)
1,091
(348)
13
(335)
(78)
31
(47)
(124)
24
(100)
149
(28)
121
(230)
44
(186)
149
(28)
121
(230)
44
(186)
1,480
(315)
1,165
(702)
81
(621)
11. Appropriation of Profit
Management of the Bank has proposed that total dividends of
CZK 11,400 million be declared in respect of the profit for the
year ended 31 December 2014, which represents 75 CZK per both
ordinary and preference share (2013: CZK 9,120 million, that is,
CZK 60 per both ordinary and preference share). The declaration
of dividends is subject to the approval of the Annual General
Meeting. Dividends paid to shareholders are subject to a withholding tax of 15% or a percentage set out in the relevant double
tax treaty. Dividends paid to shareholders that are tax residents of
an European Union member country and whose interest in a subsidiary’s share capital is no less than 10% and that hold the entity’s
shares for at least one year are not subject to withholding tax.
12. Cash and Cash Balances
CZK million
Cash on hand
Cash balances at central banks
Other demand deposits
Cash and cash balances
A portion of ‘Balances with central banks’ includes mandatory reserve deposits in amount of CZK 13,047 million (2013:
CZK 9,309 milion). Mandatory reserve deposits accrue interest at
the CNB’s two week repo rate. The Group is authorised to make
2014
2013
21,814
27,110
5,565
20,631
56,950
–
54,489
77,581
withdrawals of minimum reserve deposits in an amount that exceeds
the actual average level of minimum reserve deposits for the relevant holding period calculated pursuant to the CNB’s regulations.
Cash and Cash Equivalents
CZK million
Cash on hand
Nostro accounts at central banks
Treasury bills and treasury bonds with maturity of less than three months
Nostro accounts with financial institutions
Loro accounts with financial institutions
Total cash and cash equivalents
2014
2013
21,814
14,062
9,910
2,258
(15,276)
20,631
47,641
27,163
2,070
(1,514)
32,768
95,991
107
Income Statement | Statement of Financial Position | Separate Financial Statements
13. Derivatives – Held for Trading
CZK mil.
2014
Notional Positive fair
value
value
Derivatives held in the trading
book
Interest rate
Equity
Foreign Exchange
Credit
Commodity
Other
Total
311,185
7,318
256,930
333
4,675
–
580,441
13,899
235
4,338
3
265
–
18,740
Negative
fair value
2013
Notional Positive fair
value
value
12,668
13
7,650
3
320
–
20,654
326,601
10,329
272,066
329
3,962
88
613,375
11,104
368
9,551
3
54
88
Negative
fair value
10,360
28
13,508
3
125
–
21,168
24,024
CZK mil.
2014
2013
Equity instruments
Debt securities
General governments
Credit institutions
Loans and advances
1
3,144
2,360
784
1,346
2
26,548
26,363
185
–
14. Other Trading Assets
Other trading assets
4,491
26,550
2014
2013
898
374
30
344
704
3,519
1,285
2,234
Money-market intruments classified as trading assets amounted to CZK 1,346 million. CZK.
15. Financial Assets - at Fair Value Through Profit and Loss
CZK million
Equity instruments
Debt securities
General governments
Credit institutions
Financial assets - at fair value through profit and loss
1,272
4,223
16. Financial Assets – Available for Sale
CZK million
Equity instruments
Debt securities
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Financial assets – available for sale
2014
2013
802
98,487
89,300
6,644
278
2,265
1,121
81,174
66,352
11,957
836
2,029
99,289
82,295
108
Income Statement | Statement of Financial Position | Separate Financial Statements
17. Financial Assets – Held to Maturity
CZK mil.
Gross carrying amount
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Financial assets – held to maturity
Collective allowances
Net carrying amount
2014
2013
2014
2014
2013
2014
138,121
11,856
472
1,073
139,482
11,851
2,370
1,030
(5)
(1)
–
(3)
–
–
–
(13)
138,116
11,855
472
1,070
139,482
11,851
2,370
1,017
151,522
154,733
(9)
(13)
151,513
154,720
18. Securities
CZK mil.
Bonds and
other interestbearing
securities
Listed
Unlisted
Equity-related
securities
Listed
Unlisted
Equity
holdings
Total
Loans and Trading assets
advances to
customers
and credit
institutions
Financial assets
At fair value
through profit
or loss
Available for Held to maturity
sale
2014
2013
2014
2013
2014
1,698
1,490
3,144 26,548
374
3,519 98,487 81,174 151,513 154,720 255,216 267,451
–
1,698
1,490
2,269
875
26,548
–
33
341
3,519
–
63,755
34,732
80,575
599
135,300
16,213
–
–
1
2
898
704
705
774
–
–
1,604
1,480
–
–
–
–
1
–
2
–
790
108
78
626
–
705
498
276
–
–
–
–
791
813
578
902
–
–
–
–
97
347
–
–
97
347
3,145 26,550
1,272
–
–
1,698
1,490
Investment funds are disclosed within equity-related securities.
2013
Total
2014
2013
2014
2013
2014
2013
154,720 201,357 265,362
– 53,859
2,089
4,223 99,289 82,295 151,513 154,720 256,917 269,278
transactions are disclosed in Note 36 Transfers of financial assets –
repurchase transactions and securities lending.
Held-to-maturity financial assets include bonds and other interest-bearing securities that are quoted in active markets and are
intended to be held to maturity. Securities lending and repurchase
109
Income Statement | Statement of Financial Position | Separate Financial Statements
19. Loans and Receivables to Credit Institutions
Loans and receivables to credit institutions
CZK million
Gross
Specific
Collective
carrying allowances allowances
amount
As of 31 December 2014
Debt securities
Credit institutions
Loans and receivables
Credit institutions
1,356
1,356
37,186
37,186
Total
As of 31 December 2013
Debt securities
Credit institutions
Loans and receivables
Credit institutions
Total
–
–
(1)
(1)
As at 31 December 2014, the Group granted certain financial institutions loans of CZK 817 million (2013: CZK 19,432 million)
(7)
(7)
(1)
(1)
1,349
1,349
37,184
37,184
38,533
1,289
1,289
74,059
74,059
75,348
38,542
(1)
(8)
1,289
1,289
74,090
74,090
–
–
(31)
(31)
–
–
–
–
75,379
(31)
Net
carrying
amount
–
under reverse repurchase transactions which were collateralised by securities amounting to 901 CZK million (2013:
CZK 19,523 million).
Allowances for Loans and Receivables to Credit Institutions
CZK mil.
Specific allowances
Loans and receivables
Credit institutions
Collective allowances
Debt securities
Credit institutions
Loans and receivables
Credit institutions
Total
CZK mil.
As of
Dec 13
Alloca­
tions
Release
Transfer
between
allowances
As of
Dec 14
(31)
(70)
89
11
(1)
–
(11)
14
(11)
(8)
(31)
(81)
103
–
(9)
Release
As of
Dec 13
(31)
(31)
(31)
(31)
(31)
(31)
–
–
–
–
(70)
(70)
(7)
(7)
(4)
(4)
89
89
–
–
14
14
As of Allocations
Dec 12
11
11
–
–
(11)
(11)
Individuální opravné položky
–
(50)
19
Celkem
– (50)
19
Úvěry a jiné pohledávky
Úvěrové instituce
–
–
(50)
(50)
19
19
(1)
(1)
(7)
(7)
(1)
(1)
110
Income Statement | Statement of Financial Position | Separate Financial Statements
20. Loans and Receivables to Customers
Loans and Receivables to Customers
CZK million
As of 31 December 2014
Debt securities with customers
Non-financial corporations
Loans and receivables to customers
General governments
Other financial corporations
Non-financial corporations
Households
Total
As of 31 December 2013
Debt securities with customers
Non-financial corporations
Loans and receivables to customeres
General governments
Other financial corporations
Non-financial corporations
Households
Total
As at 31 December 2014, the Group provided certain clients with
loans of CZK 0million (2013: CZK 75 million) under reverse repurchase transactions which were collateralised by securities amounting to CZK 0million (2013: CZK 75 million).
Gross
Specific
Collective
carrying allowances allowances
amount
342
342
517,847
20,418
17,231
184,489
295,709
–
–
(16,366)
(4)
(132)
(6,771)
(9,459)
–
–
(1,784)
(1)
(32)
(1,174)
(577)
342
342
499,697
20,413
17,067
176,544
285,673
500,039
201
201
488,993
19,400
23,827
181,936
263,830
489,194
518,189
(16,366)
(1,784)
201
201
507,282
19,421
23,827
190,411
273,623
–
–
(16,857)
(21)
–
(7,596)
(9,240)
–
–
(1,432)
–
–
(879)
(553)
507,483
(16,857)
Net
carrying
amount
(1,432)
As of 1st January 2014 the Group transferred Recipients of other transfers (Unit Owners Associations) in the amount of CZK 10,689 million from Non-financial corporations to Households.
111
Income Statement | Statement of Financial Position | Separate Financial Statements
Allowances for Loans and Receivables to Customers
CZK mil.
Specific allowances
Loans and receivables
to customers
General governments
Other financial
corporations
Non-financial
corporations
Households
Collective allowances
Loans and receivables
to customeres
General governments
Other financial
corporations
Non-financial
corporations
Households
Total
CZK mil.
Specific allowances
Loans and receivables
to customers
General governments
Non-financial
corporations
Households
Collective allowances
Loans and receivables
to customeres
General governments
Non-financial
corporations
Households
Total
As of
Dec 13
Alloca­tions
Use
Release
Interest income from
impaired loans
Transfer between
allowances
Exchange rate and
other changes (+/–)
As of
Dec 14
Amounts written off
Recoveries of
amounts previously
written off
(16,857)
(5,752)
3,976
1,795
517
(31)
(14)
(16,366)
(79)
362
(16,857)
(5,752)
3,976
1,795
517
(31)
(14)
(16,366)
(79)
362
(19)
(5)
–
22
–
–
–
(2)
–
–
–
(13)
–
5
–
(123)
–
(131)
–
–
(7,598)
(2,698)
2,121
1,018
183
212
(14)
(6,776)
(35)
206
(9,240)
(3,036)
1,855
–
648
750
334
–
(267)
(5)
(1,784)
(9,457)
(44)
156
(1,432)
(728)
–
648
–
(267)
(5)
(1,784)
–
–
–
–
–
–
–
(1)
–
(1)
–
–
–
(6)
–
15
–
(41)
–
(32)
–
–
(879)
(587)
–
506
–
(210)
(5)
(1,175)
–
–
(553)
(135)
–
127
–
(15)
–
(576)
–
(1,432)
(728)
(120)
–
–
–
(18,289)
(6,480)
3,976
2,443
517
(298)
(19)
(18,150)
(79)
362
As of
Dec 12
Allocations
Use
Release
Interest income from
impaired loans
Transfer between
allowances
Exchange rate and
other changes (+/–)
As of
Dec 13
Amounts written off
Recoveries of
amounts previously
written off
(16,279)
(6,931)
3,489
3,373
655
(1,100)
(64)
(16,857)
(29)
357
(16,279)
(6,931)
3,489
3,373
655
(1,100)
(64)
(16,857)
(29)
357
(13)
(17)
–
13
–
(2)
–
(19)
–
–
(8,278)
(3,600)
2,425
2,456
242
(779)
(64)
(7,598)
(20)
238
(7,988)
(3,314)
1,064
–
904
429
413
–
(319)
1,100
–
(8)
(9,240)
(1,432)
(9)
119
(2,375)
(578)
–
429
–
1,100
(8)
(1,432)
–
–
(2)
–
–
–
–
2
–
–
–
–
(1,416)
(362)
–
128
–
779
(8)
(879)
–
–
–
319
(2,375)
(957)
(18,654)
(578)
(216)
(7,509)
–
3,489
301
3,802
655
–
–
(72)
(553)
(18,289)
–
–
(29)
–
–
357
112
Income Statement | Statement of Financial Position | Separate Financial Statements
21. Derivatives – Hedge Accounting
CZK mil.
As of 31 December 2014
Notinal Positive fair
value
value
Negative
fair value
As of 31 December 2013
Notinal Positive fair
value
value
Negative
fair value
Fair value hedges
12,071
670
22
23,321
945
271
Cash flow hedge
7,550
208
3
1,400
–
1
1,178
–
144
–
–
150
20,799
878
169
24,721
945
422
2014
2013
898
526
36
705
–
36
Interest rate
Foreign exchange
Interest rate
Hedge of net investments in
a foreign operation
Total
12,071
–
670
–
7,550
208
22
–
3
14,080
9,241
1,400
895
50
–
271
–
1
22. Unconsolidated Structured Entities
CZK million
Carrying amount of assets
Carrying amount of financial liabilities
Notional amount off-balance sheet items given
23. Property, Equipment and Other Assets
a) At cost
CZK mil.
Property and equipment – Acquisition and production costs
Land and
Office
buildings
and plant
(used by equipment /
the Group) other fixed
assets
IT assets
(Hardware)
Property
and
equipment
Investment
properties
Balance as of 1 Jan 2013
20,950
4,991
2,729
28,670
13,580
Balance as of 31 Dec 2013
21,059
4,858
2,853
28,770
12,532
Balance as of 31 Dec 2014
21,040
4,772
2,441
28,253
11,533
Additions in current year (+)
Disposals (-)
Reclassification (+/-)
Exchange-rate fluctulations (+/-)
Additions in current year (+)
Disposals (-)
Reclassification (+/-)
Exchange-rate fluctuations (+/-)
475
(200)
(166)
–
543
(562)
–
–
293
(501)
75
–
260
(318)
(28)
–
155
(122)
91
–
154
(594)
28
–
923
(823)
–
–
957
(1,474)
–
–
30
(1,265)
–
187
12
(1,033)
–
22
113
Income Statement | Statement of Financial Position | Separate Financial Statements
b) Accumulated Depreciation
CZK mil.
Property and equipment – Accumulated depreciation
Land and
Office
buildings
and plant
(used by equipment /
the Group) other fixed
assets
IT assets
(Hardware)
Property
and
equipment
Investment
properties
(14,076)
(1,284)
762
(6)
–
–
–
(14,604)
(1,234)
1,234
(221)
3
–
–
(14,822)
(4,019)
Balance as of 1 Jan 2013
(8,386)
(3,372)
(2,318)
Balance as of 31 Dec 2013
(8,724)
(3,454)
(2,426)
Balance as of 31 Dec 2014
(9,226)
(3,535)
(2,061)
Depreciation (-)
Disposals (+)
Impairment (-)
Reversal of impairment (+)
Reclassification (+/-)
Exchange-rate fluctulations (+/-)
Depreciation (-)
Disposals (+)
Impairment (-)
Reversal of impairment (+)
Reclassification (+/-)
Exchange-rate fluctuations (+/-)
(662)
190
(6)
–
140
–
(662)
340
(180)
–
–
–
(399)
457
–
–
(140)
–
(345)
301
(1)
3
(39)
–
(223)
115
–
–
–
–
(227)
593
(40)
–
39
–
(223)
312
(307)
30
5
(4,202)
(213)
309
(188)
100
–
3
(4,191)
c) Carrying Amounts
CZK mil.
Balance as of 1 Jan 2013
Balance as of 31 Dec 2013
Balance as of 31 Dec 2014
Property and equipment
Land and
buildings
(used by
the Group)
Office
and plant
equipment/
other fixed
assets
IT assets
(Hardware)
Property
and
equipment
Investment
properties
12,564
12,335
1,619
1,404
411
427
14,594
14,166
13,431
9,561
8,330
11,814
Carrying amount of investment properties includes investment
properties under operating leases in amount of CZK 1 million
(2013: CZK 0 million).
In 2014, rental income arising from investment property amounted
to CZK 760 million (2013: CZK 771 million), see Note 5. Operating
expenses related to investment property amounted to CZK 213 million (2013: CZK 211 million).
1,237
380
7,342
Collateral held for investment property financing amounted to
CZK 2,448 million in 2014 (2013: CZK 3,742 million).
The balances as at 31 December 2014 shown above include
CZK 588 million (2013: CZK 512 million) in property and equipment under construction.
The acquisition cost of fully depreciated tangible assets still in use was
CZK 5,266 million as at 31 December 2014 (2013: CZK 5,208 million).
As at 31 December 2014, the fair value of investment property
amounted to CZK 7,429 million (2013: CZK 8,634 million).
114
Income Statement | Statement of Financial Position | Separate Financial Statements
24. Intangible Assets
a) Acquisition and production costs
CZK mil.
Goodwill
Software
acquired
Other
(licenses,
patents,
etc.)
Intangible
assets
Balance as of 1 Jan 2013
43
8,300
7,082
Balance as of 31 Dec 2013
43
9,496
6,272
Balance as of 31 Dec 2014
43
10,432
6,154
15,425
973
(587)
–
15,811
1,150
(332)
–
16,629
Goodwill
Software
acquired
Other
(licenses,
patents,
etc.)
Intangible
assets
Balance as of 1 Jan 2013
(9)
(6,051)
(6,157)
Balance as of 31 Dec 2013
(9)
(6,706)
(5,763)
Balance as of 31 Dec 2014
(9)
(7,248)
(5,779)
(12,217)
(777)
573
(57)
(12,478)
(824)
296
(30)
(13,036)
Goodwill
Software
acquired
Other
(licenses,
patents,
etc.)
Intangible
assets
34
34
2,249
2,790
925
509
3,208
3,333
Additions in current year (+)
Disposals (-)
Reclassification (+/-)
Additions in current year (+)
Disposals (-)
Reclassification (+/-)
–
–
–
–
–
–
775
(75)
496
1,054
(223)
105
198
(512)
(496)
96
(109)
(105)
b) Amortisation
CZK mil.
Amortisation charge (-)
Disposals (+)
Impairment (-)
Amortisation charge (-)
Disposals (+)
Impairment (-)
– – – – – – (670)
69
(54)
(714)
191
(19)
(107)
504
(3)
(110)
105
(11)
c) Carrying Amounts
CZK million
Balance as of 1 Jan 2013
Balance as of 31 Dec 2013
Balance as of 31 Dec 2014
Other intangible assets include licenses and know-how. In addition,
the item includes CZK 908 million in intangibles under construction
as at 31 December 2014 (2013: CZK 684 million).
34
3,184
375
3,593
The acquisition cost of fully amortised intangible assets still
in use was CZK 7,119 million as at 31 December 2014 (2013:
CZK 7,275 million).
115
Income Statement | Statement of Financial Position | Separate Financial Statements
25. Tax Assets and Liabilities
Deferred tax is calculated on all temporary differences under the
liability method using a principal tax rate of 19%, depending on
the year in which the relevant asset/liability will be realised/settled.
The Group has assessed tax losses totalling CZK 1,729 million
(2013: CZK 881 million) that will expire in 2019 and which were
not included in the calculation of the deferred tax asset as it is not
probable that future taxable profit will be available against which
the unused tax losses can be utilised.
Temporary differences relate to the following items:
CZK mil.
Loans and
advances to
credit institutions
and customers
Financial assets available for sale
Property and
equipment
Amortisation
of investments
in subsidiaries
(tax-effective
in subsequent
years)
Financial
liabilities at
amortized cost
(deposits and
bond issues)
Sundry provisions
Carry forward of
tax losses
Other
Effect of netting
gross deferred
tax position
Tax
assets
2014
Tax
Tax
Tax
assets liabilities liabilities
2013
2014
2013
Net variance 2014
Total Through
profit or
loss
Through
other comprehensive
income
Net variance 2013
Total Through Through
profit or
other
loss comprehensive
income
268
162
–
–
106
106
–
234
234
–
–
–
(476)
(196)
(280)
7
(287)
40
3
37
–
–
(529)
(318)
(211)
(211)
–
(259)
(259)
–
–
17
–
–
(17)
(17)
–
17
17
–
17
26
–
–
(9)
(9)
–
2
2
–
125
159
–
–
(34)
(34)
–
(24)
(24)
–
–
3
–
–
(3)
(3)
–
1
1
–
316
357
(36)
(184)
107
135
(28)
226
182
44
(567)
(598)
567
598
–
–
–
–
–
–
159
126
(474)
(100)
(341)
(26)
(315)
237
156
81
543
702
102
228
(45)
(519)
(414)
(514)
Total deferred
taxes
Current taxes
Total taxes
26. Other Assets
CZK million
2014
2013
Prepayments and accrued income
Assets under construction/unfinished goods/inventory
Sundry assets
1,267
282
6,728
1,102
544
8,996
Other assets
‘Sundry assets’ consist mainly of state subsidy of CZK 1,031 million (2013: CZK 1,142 million), receivables from factoring
transactions of CZK 3,625 million (2013: CZK 3,540 million),
receivables from withdrawals from ATMs of CZK 808 million
(2013: CZK 733 million) and receivables for payments with payment cards of CZK 254 million (2013: CZK 352 million)
8,277
10,642
The state subsidy receivable in ‘Sundry assets’ involves claims in
respect of the participants of the building savings scheme offered
by Stavební spořitelna České spořitelny, a. s. The state subsidy is
provided to the participants from the Finance Ministry of the Czech
Republic based on the amount of customer deposits at the year end
with a limit of CZK 2,000 per participant.
116
Income Statement | Statement of Financial Position | Separate Financial Statements
27. Other Trading Liabilities
CZK million
2014
2013
Short positions
Debt securities
Deposits
Credit institutions
Other financial corporations
Non financial corporations
328
328
2,449
200
2,248
1
–
–
–
–
–
–
Other trading liabilities
2,777
Short sales are short-term trading liabilities which mature between
one and three months. Changes in the fair value of these trading
–
liabilities are not analysed since the liabilities are different at each
reporting date.
28. Financial Liabilities Designated at Fair Value Through Profit and Loss
CZK million
2014
2013
Deposits
General governments
Non financial corporations
Households
Debt securities issued
8,874
3
48
8,823
790
790
12,616
–
–
12,616
1,818
1,818
Bonds
Financial liabilities designated at fair value through profit and loss
9,664
14,434
Fair Value Changes That are Attributable to Changes in Own Credit Risk
CZK mil.
Amount of change in fair
values attributable to
changes in credit risk for
the period
Financial liabilities - at fair value through profit or loss
Deposits from customers
Debt securities issued
The change in the fair value arising from the changes in the credit
profile of the issuer (the Bank) is determined as equal to the difference between the fair values of the liabilities as at the previous
Amount of cumulative
change in fair values
attributable to changes
in credit risk
2014
2013
2014
2013
(14)
(4)
(91)
(14)
32
–
46
4
and current reporting dates, net of the effect of the change in fair
value due to the change in the risk-free interest rate.
Debt Securities Issued
CZK million
ISIN
Bonds
CZ0003702284
Bonds
CZ0003702474
Bonds
CZ0003702516
Bonds issued
x)
Date of
issue
Maturity
February
2010
October
2010
December
2010
February
2014
November
2014
January
2015
Interest
rate
2014
2013
x)
–
140
x)
–
853
x)
790
825
790
1,818
Bonds bear no interest, yield is determined as the difference between the rate of issue and the bond value payable at its final maturity date.
The ISINs CZ0003702284, CZ0003702474 and CZ0003702516
issues were placed as structured bonds, the yield of which is
determined as equal to the difference between the issue rate and
‘another value’ in accordance with the issue terms and conditions.
The amount of ‘another value’ will be based on a set of indexes and
an equity bucket and will be payable as of the final maturity of the
bonds. Issued bonds are not traded on any market.
117
Income Statement | Statement of Financial Position | Separate Financial Statements
29. Financial Liabilities Measured at Amortised Costs
CZK million
Deposits
Deposits from banks
Deposits from customers
Debt securities issued
Bonds
Subordinated debt
Other financial liabilities
Financial liabilities measured at amortised costs
Other financial liabilities included mainly payables to creditors
in amount of CZK 973 million, payables to employees including
2014
2013
726,135
54,570
671,565
23,043
22,781
262
2,781
787,013
73,036
713,977
28,646
26,550
2,096
–
751,959
815,659
social security charges in amount of CZK 519 million and Payables
to securities clearing entities CZK 531 million.
Deposits From Banks
CZK million
Overnight deposits
Term deposits
Repurchase agreements
Deposits from banks
2014
2013
17,574
34,857
2,139
32,071
32,105
8,860
54,570
73,036
Deposits From Customers
CZK million
Current accounts/Overnight deposits
General governments
Other financial corporations
Non financial corporations
Households
Term deposits
General governments
Other financial corporations
Non financial corporations
Households
Repurchase agreements
General governments
Other financial corporations
Non financial corporations
Deposits from customers
General governments
Other financial corporations
Non financial corporations
Households
2014
2013
535,151
42,035
15,687
92,466
384,963
124,712
104
732
2,293
121,583
11,702
8,042
3,660
–
448,253
41,914
18,652
85,705
301,982
242,589
9,069
–
6,758
226,762
23,135
19,372
–
3,763
671,565
50,181
20,079
94,759
506,546
713,977
70,355
18,652
96,226
528,744
As of 1st January 2014 the Group transferred Recipients of other transfers (Unit Owners Associations) in the amount of CZK 6,206 milli
on from Non-financial corporations to Households.
118
Income Statement | Statement of Financial Position | Separate Financial Statements
Debt Securities Issued - Bonds
CZK million
ISIN
Date of issue
Maturity
Interest
rate
2014
2013
Mortgage bonds
CZ0002000623
October 2005
Mortgage bonds
CZ0002000755
February 2006
Mortgage bonds
CZ0002000904
October 2006
Mortgage bonds
CZ0002001068
June 2007
Mortgage bonds
CZ0002001084
July 2007
Mortgage bonds
CZ0002001274
November 2007
Mortgage bonds
CZ0002001282
November 2007
Mortgage bonds
CZ0002001415
November 2007
Mortgage bonds
CZ0002001423
December 2007
Mortgage bonds
CZ0002001647
December 2007
Mortgage bonds
CZ0002001654
December 2007
Mortgage bonds
CZ0002002165
November 2009
Mortgage bonds
CZ0002002306
April 2011
Mortgage bonds
CZ0002002330
June 2011
Mortgage bonds
CZ0002002744
December 2012
Mortgage bonds
CZ0002002751
December 2012
Mortgage bonds
CZ0002002769
December 2012
Mortgage bonds
CZ0002002777
December 2012
Mortgage bonds
CZ0002002785
December 2012
Bonds
CZ0003701054 September 2005
Bonds
CZ0003702011
July 2009
Bonds
CZ0003702037
October 2009
Bonds
CZ0003702078
November 2009
Depository bills of
exchange
Cumulative change in carrying amount due to fair value hedging
October 2015
February 2016
October 2014
October 2015
July 2014
November 2014
November 2017
November 2023
December 2017
December 2017
December 2022
November 2014
April 2015
June 2016
December 2021
June 2023
December 2016
June 2018
December 2019
September 2017
January 2014
October 2016
November 2016
4.75%
4.80%
3.65%
4.50%
floating
floating
5.90%
6.15%
5.85%
3.90%
floating
3.55%
0.30%
0.30%
2.75%
3.25%
1.50%
1.75%
2.50%
4,958
4,607
–
759
–
–
1,977
460
4,932
938
110
–
123
40
22
137
55
42
74
272
–
547
587
4,953
4,625
1,044
761
1,517
568
1,999
481
5,094
974
179
615
124
41
18
125
53
40
55
262
623
521
563
1,000
1
xx)
xx)
1,141
Bonds issued
x)
x)
xx)
1,314
22,781
1 314
26,550
Bonds were issued with a combined yield.
Bonds bear no interest, yield is determined as the difference between the rate of issue and the bond value payable at its final maturity date.
xx)
The ISIN CZ0003701054issue was placed with a share index option
which is recorded separately and is remeasured at fair value.
CZ0002002769, CZ0002002777, CZ0002002785 mortgage
bond issues and the ISINs CZ0003702011, CZ0003702037,
CZ0003702078 bond issues are not traded on any regulated market. Other issues of mortgage bonds and bonds are traded on the
official regulated market of the Prague Stock Exchange (‘PSE’).
The difference between the nominal values of the issued mortgage
bonds and the carrying amounts of the relevant issues in the above
table arises from the difference in valuation and from the elimination of bonds held by Group companies.
The ISINs CZ0002001647, CZ0002001654, CZ0002002165,
CZ0002002306, CZ0002002330, CZ0002002744, CZ0002002751,
Assets in cover pools used for covered bond issuance amounted to
CZK 90,386 million (2013: CZK 81,615 million).
Of the aggregate carrying value of the mortgage bonds,
CZK 12,270 million (2013: CZK 12,967 million) was hedged
against interest rate risk through interest rate swaps linked to a market floating rate. In accordance with the applicable accounting
policies, these mortgage bonds are remeasured at fair value to the
extent of the hedged interest rate risk.
Debt Securities Issued – Subordinated Debt
ISIN
Date of issue
Maturity
Interest rate
Nominal
value
5% p.a.
6M
PRIBOR+0.40%
CZ0003701906
12 March 2009
12 March 2019
CZ0003702342
24 March 2010
24 March 2020
Subordinated debt
2014
2013
2,000
–
1,784
1,000
262
312
262
2,096
ISIN CZ0003701906 issue represent subordinated debt in certificate form with option for premature repayment. The Bank exercised its
option in March 2014 and repaid the debt after a lapse of 5 years.
119
Income Statement | Statement of Financial Position | Separate Financial Statements
30. Provisions
CZK million
2014
2013
Pending legal issues and tax litigation
Commitments and guarantees given
Provisions for guarantees - off balance (defaulted customers)
Provisions for guarantees - off balance (non defaulted customers)
Other provisions
Provisions for onerous contracts
Other
1,834
248
67
181
336
1
335
1,801
348
82
266
445
–
445
Provisions
‘Provisions for guarantees - off balance ’ exposures are recorded to
cover losses that result from off-balance sheet exposures.
2,418
2,594
Other provisions include an estimated amount for the Group’s constructive obligation to meet any potential future claims of clients
resulting from statute-barred deposits on anonymous passbooks.
‘Provisions for legal disputes are explained in detail in Note 43.
31. Other Liabilities
CZK million
2014
2013
Deferred income and accrued expenses
Sundry liabilities
422
6,224
459
9,641
Other liabilities
Sundry liabilities consist mainly of payables from factoring transactions of CZK 1,606 million (2013: CZK 1,303 million), unbilled
supplies of CZK 887 million (2013: CZK 921million), costs of
6,646
10,100
staff bonuses for 2014 amounting to CZK 1,359 million (2013:
CZK 1,518 million) and liabilities from payments clearing in
amount of CZK 682 million (2013: CZK 619 million).
32. Total Equity
CZK million
Subscribed capital
Share capital
Additional paid-in capital
Legal and statutory reserve
Retained earnings and other reserves
2014
2013
15,200
15,200
11
3,833
88,765
15,200
15,200
11
3,812
81,637
Owners of parent
107,809
100,660
Total equity1)
107,783
100,976
Non-controlling interests
1)
(26)
316
Details on equity are provided in Section III, Statement of Changes in Total Equity
As of 31 December 2014, subscribed capital consists of 140 788 787
voting ordinary shares and 11 211 213 preference shares. Additional
paid-in capital represents the amount by which the issue price of
the shares exceeded their par value. Retained earnings and other
reserves represent accumulated net profit brought forward, as well
as income and expenses recongied in other comprehensive income.
Number of Shares and Share Capital
Authorised, Issued and Fully Paid Share Capital Is as Follows:
Ordinary shares of CZK 100 each
Preference shares of CZK 100 each
Share capital
2014
2013
Number of CZK million
shares
Number of CZK million
shares
140,788,787
11,211,213
140,788,787
11,211,213
152,000,000
14,079
1,121
15,200 152,000,000
14,079
1,121
15,200
120
Income Statement | Statement of Financial Position | Separate Financial Statements
Preference shareholders are not entitled to vote at the annual shareholders’ meeting. They have a right to receive dividends each year
if the Bank is profitable. The amount of the dividend is proposed by
the Board of Directors and subject to approval at the annual shareholders’ meeting. In the case of liquidation, preference shareholders
have a right to the assets of the Bank before ordinary shareholders
but after other creditors. Preference shareholders have a right to
purchase shares offered by the Bank when it increases its share
capital in the same proportion as the current holding. Preference
shares can only be issued to municipalities and local governments in
the Czech Republic. The preference shares can only be transferred
to entities other than municipalities and local governments of the
Czech Republic subject to the approval of the Board of Directors.
Non-controlling Interest
CZK million
2014
2013
At 1 January
316
122
Profit for the year
Proceeds from sales of subsidiaries
Dividends paid to minority shareholders
Purchase of non-controlling interest
(1)
–
(22)
(319)
At 31 December
33. Segment Reporting
The Group structure of segment reporting is in line with that of Erste
Group Bank and has been divided into the following segments:
–– Retail;
–– Corporate Clientele (‘SME’);
–– Real Estate (‘RE’);
–– Asset and Liability Management and Local Corporate
Center (‘ALM & LCC’);
–– Large Corporate (‘LC’);
–– Group Markets (‘GM’);
For segment reporting the rules used in the Group’s management
report apply. The report is prepared monthly for the Board of
Directors as well as for the Erste Group Bank Board of Directors.
The report is reconciled to the monthly reporting package and
the same segments used in the Group’s controlling report are
used for Erste Group Bank segment reporting.
Retail, Corporate Clientele, RE, ALM and the Corporate Center
form the main activities of the Group for which it is primarily
responsible. Fully consolidated subsidiaries are allocated to the
respective segments in the segment report (see the definitions
below).
Retail
The retail segment comprises branch networks within which
the Bank sells products to citizens, traders, entrepreneurs and
micro-businesses. In addition, the retail segment contains the
capital results of the subsidiaries Stavební spořitelna České
spořitelny, a. s., Česká spořitelna penzijní společnost, a. s., ČS do
domu, a.s, Věrnostní program iBod, a. s. and MOPET CZ, a. s..
Retail provides services to their clients through the branch network, external sales channels and indirect banking. The product
range is very broad: from lending products to assets under management. In order to better understand the retail clients (understanding
(26)
(11)
285
(80)
–
316
their opportunities and meeting their needs) they are differentiated
into the following subsegments:
–– Mass market;
–– Mass affluent;
–– Erste Premier;
–– MSE; and
–– Municipality.
Corporate Clientele
The segment of corporate clients comprises:
–– SME Segment - Clients with an annual turnover of between
CZK 30 million and CZK 1,000 million, where service is provided
by 13 Regional Corporate Centers and headquarters in Prague;
–– Non-profit sector - Clients from non-governmental
organizations (organizations that are neither part of the
government nor conventional profit generating businesses)
such as foundations, political parties, churches, trade unions.
Service is provided from the headquarters in Prague; and
–– Public sector - Governmental (mainly state branches,
counties, statutory towns, health insurance funds, state funds,
public universities and cities). Service is provided from
the headquarters in Prague and by the Regional Corporate
Centres (for cities, public universities and healthcare
organizations).
In addition, the segment contains the capital results of the subsidiaries s Autoleasing, a. s., s Autoleasing SK, s. r. o., Factoring České
spořitelny, a. s., Erste Leasing, a. s. and REICO investiční společnost
České spořitelny, a. s.
Real Estate
The real estate segment covers commercial property projects
financed by Česká spořitelna´s finance group.
Asset and Liability Management (ALM)
The asset and liability management section is responsible for the
management of the statement of financial position structure (banking
121
Income Statement | Statement of Financial Position | Separate Financial Statements
book) taking into account market conditions in order to monitor the
Group’s liquidity position and to secure a high return from capital.
ALM also monitors the transformation margin that arose as a result
of the mismatch in the statement of financial position from a time
and currency perspective. The transformation margin, as well as
ALM’s own activities (financial assets held-to-maturity, financial
assets available-for-sale, financial assets designated upon initial
recognition as at fair value through profit or loss on the asset side
and bonds issued on the liability side) are the main parts of this
segment/section.
The corporate center segment includes the positions and items that
cannot be directly allocated to a business segment. In addition,
it contains the capital result of the subsidiaries Brokerjet České
spořitelny, a. s., Czech TOP Venture Fund B.V., s IT Solutions
CZ, s. r. o., CS Investment Limited, Grantika české spořitelny, a. s.
and Erste Energy Services, a. s.
Corporate center also includes free capital which does not represent
a segment, but the difference between total equity and allocated capital.
Large Corporate
Segment comprises international and biggest domestic companies.
Group Markets
The group markets segment is responsible for trading in foreign
exchange and interest rate products, as well as in securities for
all customer groups. Moreover, it is tasked to design and develop
products that cater to market demand in core markets. GM comprises the divisionalised business units such as Treasury Trading
and Treasury Sales (retail, corporate and institutional transactions).
122
Income Statement | Statement of Financial Position | Separate Financial Statements
Business Segments
CZK mil.
Net interest income
Net fee and commission income
Dividend income
Net trading and fair value result
Rental income from investment properties & other
operating leases
General administrative expenses
Gains/losses from financial assets and liabilities not
measured at fair value through profit or loss, net
Net impairment loss on financial assets not measured at
fair value through profit or loss
Other operating result
Retail
SME
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
18,981
9,719
–
470
18,327
9,887
–
361
3,534
1,177
3
193
3,534
1,134
2
209
728
113
–
23
614
60
–
19
2,573
(276)
47
–
3,675
(496)
50
165
720
489
–
35
726
547
–
54
137
84
–
1,566
376
162
–
1,375
26,673
11,306
50
2,287
27,252
11,294
52
2,183
6
7
–
–
–
–
817
821
–
–
–
–
823
828
(14,353)
(14,673)
(1,969)
(1,996)
(107)
(98)
(959)
(1,103)
(357)
(329)
(489)
(544)
(18,234)
(18,743)
(4)
–
91
–
–
–
41
213
19
–
(1)
–
146
213
(2,484)
(2,319)
(754)
(711)
(247)
(101)
(29)
(280)
(214)
(227)
–
–
(3,728)
(3,638)
123
13
(144)
12
–
–
(584)
178
–
(163)
2
–
(603)
18,720
(3,650)
40
19,481
(3,904)
15,070
1
15,071
15,577
11
15,588
2,184
(441)
Net result for the period
10,142
9,444
1,710
10,144
9,417
Operating income
Operating expenses
29,177
(14,353)
Risk-weighted assets (credit risk, eop)
Average allocated capital
Cost/income ratio
Return on allocated capital
Total assets (eop)
Total liabilities excluding equity (eop)
Total group
2013
2,131
Operating result
GM
2014
11,603
Net result attributable to owners of the parent
Large Corporate
2013
12,458
Net result attributable to non-controlling interests
ALM & LCC
2014
Pre-tax result from continuing operations
Taxes on income
Post-tax result from continuing operations
Real estate
(97)
494
(94)
1,630
3,223
(835)
1,743
413
400
1,191
1,710
1,743
413
400
28,581
(14,673)
4,907
(1,969)
4,879
(1,996)
863
(107)
693
(98)
136,805
13,883
142,575
14,781
128,820
10,589
134,043
11,008
49.20%
73.10%
51.30%
63.90%
40.10%
16.20%
382,522
568,757
436,744
603,423
136,401
76,904
(2,316)
2
14,824
(2,159)
(27)
13,908
(421)
–
2,938
(131)
608
(115)
1,299
1,369
2,388
561
493
1,053
1,109
1,190
2,426
561
493
1,053
1,109
595
3,162
(959)
2,203
4,216
(1,103)
1,244
(357)
1,327
(329)
998
1,786
(489)
1,297
1,913
(544)
1,369
41,139
(18,234)
22,905
41,609
(18,743)
22,866
29,084
2,402
25,774
1,768
27,932
6,881
32,401
8,143
42,865
3,568
40,828
3,068
15,731
2,038
18,178
2,431
381,237
39,361
393,799
41,199
40.90%
15.80%
12.40%
17.10%
14.20%
22.60%
30.30%
17.30%
26.20%
44.90%
28.70%
15.70%
24.80%
16.00%
27.40%
51.60%
28.40%
45.70%
44.30%
38.30%
45.00%
37.80%
144,369
80,181
35,413
3,946
32,107
3,097
287,12
99,348
212,744
110,089
35,419
23,600
35,610
16,761
25,714
22,251
107,149
54,196
902,589
794,806
968,723
867,747
–
2,883
510
–
756
–
(439)
(1)
38
3,113
692
–
887
–
(246)
–
(260)
–
The majority of revenue from external customers is generated in the Czech Republic.
123
Income Statement | Statement of Financial Position | Separate Financial Statements
34. Leases
a) Finance Leases
Finance leases receivables are included under the statement of financial position item ‘Loans and advances to customers’.
The principal assets held under lease arrangements include vehicles and other technical equipment. For the finance lease receivables
included in this item, the reconciliation of the gross investment in leases to the present value of the minimum lease payments is as follows:
CZK million
2014
2013
Outstanding minimum lease payments
2,514
2,675
Gross investment
2,514
2,675
Net investment
Present value of minimum lease payments
2,352
2,352
2,482
2,482
Unrealised financial income
(162)
(193)
The maturity analysis of gross investment in leases and present values of minimum lease payments under non-cancellable leases is as
follows (residual maturities):
CZK million
2014
2013
< 1 year
1-5 years
> 5 years
640
1,650
224
967
1,586
122
Total
2,514
2,675
2014
2013
11
8
13
6
b) Operating Leases
Under operating leases, the Group leases real estate to other parties.
Operating Leases From the View of Česká spořitelna, a. s. as Lessor
Minimum lease payments from non-cancellable operationg leases were as follows:
CZK million
< 1 year
1-5 years
Total
19
19
2014
2013
578
520
193
586
1,254
166
Operating Leases From the View of Česká spořitelna, a. s. as Lessee
Minimum lease payments from non-cancellable operationg leases were as follows:
CZK million
< 1 year
1-5 years
> 5 years
Total
35. Related Party Transactions
Related parties involve connected entities or parties that have a special relationship to the Group.
Parties are considered to be related if one party has the ability to
control the other or exercise significant influence over the other in
making financial or operational decisions. The Group is controlled
by Erste Group Bank AG.
1,291
2,006
The parties that have a special relationship to the Group are
considered to be members of the Group’s statutory and supervisory bodies and management, legal entities exercising control over the Group (including entities with a qualified interest
in these entities and management of these entities), persons
closely related to the members of the Group’s statutory and
supervisory bodies, management, and entities exercising control
over the Group, legal entities in which any of the parties listed
above holds a qualified interest, entities with a qualified interest in the Group and any other legal entity under their control,
124
Income Statement | Statement of Financial Position | Separate Financial Statements
loans, deposits and other transactions. These transactions were
carried out on an arm’s length basis and were settled exclusively
in cash. The interest rates charged to and by related parties are at
normal commercial rates. Outstanding balances at the year-end
are unsecured.
members of the CNB’s Banking Board, and legal entities which
the Group controls.
Pursuant to the definitions outlined above, the categories of the
Group’s related parties principally comprise Erste Group Bank,
members of its Board of Directors and Supervisory Board, and
other related parties, which include companies directly or indirectly
controlled by Erste Group Bank.
For the year ended 31 December 2014 the Group has not made any
provision for doubtful debts relating to amounts owed by related
parties (2013: CZK 0).
A number of banking transactions are entered into with related
parties in the normal course of business. These principally include
Loans and Advances to and Amounts Owed to Related Parties
CZK mil.
Assets
Cash and cash balances
Financial assets - held for trading
Financial assets designated at fair
value through profit or loss
Financial assets - available for sale
Loans and receivables to credit
institutions
Loans and receivables to customers
Derivatives Hedge Accounting
Other assets
Liabilities
Financial liabilities held for trading
Financial liabilities measured at
amortised costs
Other Liabilities
Profit&Loss statement
Net interest income
Net fee and commision income
Dividend income
Net trading and fair value result
Rental income from investment
properties & other operating lease
Other administrative expenses
Other operating result
Loans commitments, financial
guarantees and other
commitments given
Loan commitments, financial
guarantees and other
commitments received
2014
Erste
Group
Bank AG
Other
related
parties
1,636
5,910
2,310
491
–
–
9
–
–
2013
Members of
Erste
the Board of
Group
Directors and Bank AG
Supervisory
Board
Other
related
parties
Members of
the Board of
Directors and
Supervisory
Board
–
3,736
–
434
–
–
–
185
–
–
97
–
4,204
–
–
26,355
1
–
28,688
1,819
–
–
2
–
211
–
43
10
–
–
–
–
10
226
–
94
37
–
–
5,967
–
–
6,184
–
–
14,990
2,483
21
25,203
1,302
32
75
79
–
15
101
–
423
5
–
1,341
(3)
375
10
6
–
–
–
–
584
7
–
1,156
(1)
300
8
356
2
–
–
–
–
12
–
–
–
–
(151)
12
(632)
6
(68)
–
(53)
37
(612)
17
(83)
–
20
36
–
4
57
–
576
771
–
1,474
222
–
125
Income Statement | Statement of Financial Position | Separate Financial Statements
36. Transfers of Financial Assets – Repurchase Transactions and Securities Lending
CZK mil.
2014
2013
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
–
4,475
8,008
–
4,475
9,366
21,790
3,634
5,971
21,764
3,645
6,586
Repurchase agreements
Trading assets
Financial assets – available for sale
Financial assets – held to maturity
Total - repurchase agreements
Securities lendings
12,483
Total
19,878
Financial assets – held to maturity
7,395
13,841
31,395
9,248
–
23,089
31,395
31,995
–
31,995
The transferred financial instruments consist of bonds and other
interest-bearing securities.
respective statement of financial position items for which the transferee has a right to sell or repledge.
The total amount of CZK 19,878 million (2013: CZK 31,395 million) represents the carrying amount of financial assets under the
Liabilities from repo transactions in the amount of CZK 23,089 million (2013: CZK 31,995 million), which are measured at amortised
cost, represent an obligation to repay the borrowed funds.
The following table shows the fair values of the transferred assets and associated liabilities that have recourse only to the transferred assets.
In case of the Group, these assets and liabilities relate to repo transactions.
CZK mil.
Trading assets
Financial assets - available for sale
Financial assets - held to maturity
Total
2014
Fair value of
transferred
assets
Fair value of
associated
liabilities
–
4,475
9,318
–
4,475
9,366
13,793
13,841
2013
Net Fair value of
position
transferred
assets
–
–
(48)
(48)
Fair value of
associated
liabilities
Net
position
21,763
3,645
6,585
27
(11)
(49)
21,790
3,634
6,536
31,960
31,993
(33)
37. Offsetting
Financial Assets Subject to Offsetting and Potential Offsetting Agreements in 2014
CZK mil.
Derivatives
Reverse repurchase agreements
Total
Gross
amounts
in balance
sheet
19,618
817
20,435
Net
Potential effects of netting Net amount
amounts agreements not qualifying for balance
after
in balance
sheet offsetting
potential
sheet
offsetting
Financial
Cash
Non-cash
instruments
collateral
financial
received
collateral
received
19,618
817
20,435
11,578
–
11,578
5,175
–
5,175
–
817
817
2,865
–
2,865
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Income Statement | Statement of Financial Position | Separate Financial Statements
Financial Liabilities Subject to Offsetting and Potential Offsetting Agreements in 2014
CZK mil.
Derivatives
Repurchase agreements
Total
Gross
amounts
in balance
sheet
20,822
13,841
34,663
Net
Potential effects of netting Net amount
amounts agreements not qualifying for balance
after
in balance
sheet offsetting
potential
sheet
offsetting
Financial
Cash
Non-cash
instruments
collateral
financial
pledged
collateral
pledged
20,822
13,841
34,663
11,578
–
11,578
1,138
–
1,138
–
13,793
13,793
8,106
48
8,154
Financial Assets Subject to Offsetting and Potential Offsetting Agreements in 2013
CZK mil.
Derivatives
Repurchase agreements
Total
Gross
amounts
in balance
sheet
22,113
19,507
41,620
Net
Potential effects of netting Net amount
amounts agreements not qualifying for balance
after
in balance
sheet offsetting
potential
sheet
offsetting
Financial
Cash
Non-cash
instruments
collateral
financial
received
collateral
received
22,113
19,507
41,620
11,393
–
11,393
963
–
963
–
19,507
19,507
9,757
–
9,757
Financial Liabilities Subject to Offsetting and Potential Offsetting Agreements in 2013
CZK mil.
Derivatives
Repurchase agreements
Total
Gross Net amounts in
amounts balance sheet
in balance
sheet
24,446
31,995
56,441
24,446
31,995
56,441
The Group. employs repurchase agreements and master netting agreements as a means of reducing credit risk of derivative
and financing transactions. They qualify as potential offsetting
agreements.
Master netting agreements are relevant for counterparties with
multiple derivative contracts. They provide for the net settlement
of all the contracts in the event of default of any counterparty. For
derivatives transactions the amount of assets and liabilities which
would be set off as a result of master netting agreements is presented
in the column Financial instruments. If the net position is further
secured by cash collateral the effect is disclosed in the respective
columns Cash collateral received/pledged.
Potential effects of netting agreements Net amount
not qualifying for balance sheet
after
offsetting
potential
offsetting
Financial
Cash
Non-cash
instruments
collateral
financial
pledged
collateral
pledged
11,393
–
11,393
9,137
–
9,137
–
31,993
31,993
3,916
2
3,918
at a pre-agreed price and time. This ensures that the securities
stay in hands of lender as collateral in case that borrower defaults
in fulfilling any of its obligations. Offsetting effects from repurchase agreements are disclosed in the column Non-cash financial
collateral received / pledged. Collateral is presented at fair value
of the transferred securities. However, if fair value of collateral
exceeds the carrying amount of the receivable/liability from the
repo transaction the value is capped at the level of the carrying
amount. Remaining position may be secured by cash collateral.
Cash and non-cash financial collateral involved in these transactions is restricted from using it by the transferor during the time
of the pledge.
Repurchase agreements are primarily financing transactions. They
are structured as a sale and subsequent repurchase of securities
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Income Statement | Statement of Financial Position | Separate Financial Statements
38. Risk Management
Risk Management Strategy
Risk management is a core function of every bank to take risks in
a conscious and selective manner and to manage such risks professionally. The Risk management strategy of the Group aims to
achieve an optimal balance of risk and return in order to achieve
a sustainable, high return on equity.
The Group uses a control and risk management system that is proactive and tailored to its business and risk profile. It is based on
a clear risk strategy that is consistent with the business strategy
and focused on early identification and management of risks and
trends. In addition to meeting the internal goal of effective and
efficient risk management, the Group control and risk management
systems have been developed to fulfil external and, in particular,
regulatory requirements.
Given the Group business strategy, the key risks for theGroup are
credit risk, market risk, liquidity risk and operational risk..The most
significant risk is credit risk. In addition, the investment portfolio
of the Group is exposed to interest rate risk and liquidity risk.
The risks attached to the trading portfolio include market risks,
specifically foreign exchange, interest rate, commodity and equity
risks and other risks relating to trading with complex instruments.
All financial transactions and other banking activities also carry
operational risk.
Risk Management Organization and Decision
Bodies
Risk management for the Group is performed by a division of
the Bank managed by a member of the Board of Directors exclusively responsible for risk management - the Chief Risk Officer.
This division, which is completely independent of the business
divisions of the Bank, centralises all departments tasked with risk
management, namely:
–– Compliance, Financial Crime and Anti-Fraud Management;
–– Legal services;
–– Strategic Risk Management;
–– Credit Risk Management for Corporate Banking;
–– Credit Risk Management for Retail Banking;
–– Restructuring and Workout and
–– Security.
The Management board deals with risk issues in its regular board
meetings. All types of risks are reported periodically and actions
are taken when needed. In addition, the board is concerned with
current risk issues and, through the internal risk reporting receives
ad hoc reports for all types of risk.
In order to carry out risk management activities and support the
Management Board in its risk taking and risk managing decisions,
certain committees have been established, including the following:
–– Risk Management Committee of the ČS supervisory Board,
–– Credit Risk Committee,
––
––
––
––
Asset Liability Committee,
Operational Liquidity Committee,
Risk management in Financial Market Committee, and
Compliance, Operational Risk and Security Committee.
Risk management activities in the Bank’s subsidiaries are undertaken by persons independent of the business units. The Strategic
Risk Management Department of the Bank provides specialist guidance to and oversees the staff involved in managing credit risk in
the subsidiaries and is responsible for monitoring the subsidiaries’
portfolios. Market risks including interest rate risk and liquidity
within the Group are managed by the Bank.
Management and control systems are continuously reviewed by
the Internal Audit which prepares a verification report annually.
38.1 Risk and Capital Management
Overview
TheGroup’s risk and capital management framework has been continuously strengthened and developed into a comprehensive framework which is part of the Erste Group’s enterprise risk management
system. The fundamental pillar of this system is the Internal Capital
Adequacy Assessment Process (ICAAP), as required under Pillar
2 of the Basel framework.
The risk and capital management and steering system is an integral part of the Group’s overall steering and management system.
To ensure all aspects of regulatory requirements and support the
Group’s management in pursuing its strategy the main components
of this system can be clustered as follows:
–– Risk appetite statement
–– Risk materiality assessment incl. concentration risk
management
–– Stress testing
–– Risk-bearing capacity calculation
–– Risk planning & forecasting
–– Capital allocation and risk adjusted performance measurement,
and
–– Recovery and resolution plans
Risk Appetite Statement and Risk Materiality
Assessment
The risk appetite statement (RAS) serves as a formalised, high-level
steering tool from which top-down targets for the bank’s limit system on lower aggregation levels can be derived. The objective of ČS
Group’s RAS is to contain earnings volatility, avoid net losses and
protect external and internal stakeholders. In order to reach these goals,
general indicators are defined as well as indicators for credit, market
and liquidity risk. To ensure that the RAS is operationally efficient, the
indicators are classified as either targets, limits or principles, where the
main differences are in the mechanisms triggered in case of a breach
of the RAS. Regular reviews are performed and management reports
are prepared in order to ensure effective limit oversight and identify
any excesses
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Income Statement | Statement of Financial Position | Separate Financial Statements
For the purpose of systematically and continuously assessing all
relevant risk types and identifying risks that are significant for the
Group, the Group has defined a clear and structured risk materiality assessment approach that is based on defined quantitative and
qualitative factors for each risk type and is carried out annually.
This process constitutes the basis for the determination of material
risk types to be included in the risk-bearing capacity calculation and
stress testing. Insights generated by the assessment are also used to
improve risk management practices to further mitigate risks within
the Group. The Group has implemented a framework to identify, measure, control, report and manage concentration risks. Concentration
risk management at theGroup covers both intra- and inter-risk concentrations. Concentration risks also comprise an integral part of stress test
analyses. Additionally, the results of concentration risk assessments are
used in defining the Risk Appetite Statement, defining stress factors
for stress tests, and calibrating the Group’s limit system.
Internal Capital Assessment Process and Stress
testing
With respect to the Internal Capital Adequacy Assessment Process
(‘ICAAP’) the Group has been using the Erste Group Bank methodology, which serves as a uniform set of rules for capital management
within the Group.
The Group methodology is continuously updated in order to reflect the
latest trends, best practices and regulatory requirements. The Group’s
approach contains minor modifications driven by local regulatory
requirements or other local specifics.
Within ICAAP, all major risks are quantified and covered by internal
capital. The Group’s economic capital is is measured at a confidence
level of 99.9% and a 1-year holding period. From a modelling point of
view, complex advanced approaches based on VaR methodology are
used for market risk, operational and liquidity risks or IRB for credit
risk. The Group also developed models for other risk types (business,
strategic, reputational and concentration risk). The overall risk of the
Group is calculated as the sum of individual risk requirements, i.e.
no diversification effect is considered among risk types in order to
keep a conservative approach. The resulting aggregate risk exposure
is compared to internal capital resources derived from Pillar 1 capital
resources with some adjustments (mainly profit of the current year is
added to capital resources). Finally, the results of the economic capital
quantification are allocated to business lines in order to compare their
risk adjusted profitability.
Additionally, the Group performs stress testing which is used as an
additional input for internal capital adequacy assessment. The results
of stress testing are updated on a quarterly basis and are reflected into
both pillars – regulatory pillar 1 and internal pillar 2.
The ICAAP results for the Group are submitted to the Board
of Directors on a quarterly basis; the Board decides on any measures
to be adopted with respect to ICAAP as well as risks and capital management in general. The Group meets the internal limits approved by
the Board of Directors with a sufficient buffer.
The Group has also approved a recovery plan in line with BRRD
requirements. The aim of the recovery plan is to be well prepared
for severe unfavourable market developments and, if appropriate,
to take adequate measures in a timely manner.
From the long-time perspective, the Group manages its capital
with the objective of maintaining a strong capital base in order to
support its business activities, to comply with all regulatory capital
requirements including capital buffers (currently conservation,
systemic risk and SREP buffers) and to ensure a stable return for
shareholders.
Statement of Capital for the Bank’s Capital Adequacy Calculation on a Standalone Basis as Reported to
the Regulator in Accordance with Applicable Rules*:
CZK mil.
Total capital
Original capital (Tier 1)
Of which:
Share capital (refer to Note 32)
Share premium
Reserve funds and retained earnings
Deductible items from original capital
Additional capital (Tier 2)
Aggregate amount of all deductible items from original and additional capital
Total risk exposure
Capital adequacy ratio for the year
Capital adequacy ratio – Pillar I capital requirements
2014
2013
75,506
75,653
15,200
2
71,869
(11,782)
217
15,200
2
64,005
(3,043)
2,040
(2,551)
75,289
–
425,974
17,73%
8.00%
76,164
426,738
17.73%
8.00%
* The Bank has not used the possibility stated in the Article 26/2 of the CRR to include in the Common Equity Tier 1 capital reported for the year end 2014 to the regulator the interim
profits nor any credit risk adjustments.
The Group meets all capital adequacy requirements as requested by regulators.
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Income Statement | Statement of Financial Position | Separate Financial Statements
38.2 Credit Risk
In the course of its business, the Group is exposed to credit risk
which is the risk that a counterparty will be unable to pay amounts
owing in full when due.
Credit Risk Management Methodology
In managing credit risk, the Group applies a unified methodology
which sets out applicable procedures, roles and authorities. The
lending policy defines a comprehensive policy for the Group’s
credit risk management. It defines the basic principles related to
identification, measurement, monitoring, controlling and credit risk
management. It contains the basic lending rules including limitations for loan granting and describes individual credit risk management tools, such as the rating system, collateral management, limit
setting, setting of approval policy, monitoring, provision making
policy, reporting, controlling and portfolio management. In addition it defines credit risk management organization and discloses
the lending process.
Breakdown of the Portfolio for Credit Risk
Management Purposes
For the purpose of determining impairment allowances the loans
and advances are segmented into non-default (performing) loans
where the principal and interest is not past due for more than 90
days or there are no other indications that would suggest that the
repayment of the receivable is unlikely (bankruptcy proceedings,
forced restructurings, etc.) and default (non-performing) loans.
There are two large sub-portfolios within these receivables, i.e.
receivables which are individually significant comprising receivables from corporate entities or receivables where the Group’s
credit exposure is higher than CZK 5million, and receivables which
are individually insignificant. Within these two sub-portfolios the
Group also monitors five customer portfolios for individually
significant receivables and 16 product portfolios for individually
insignificant receivables. The Group monitors a number of risk
parameters within these portfolios (PD - probability of default,
LGD - loss given default, CCF - credit conversion factors). PD
is further monitored at the level of various internal rating grades.
Receivables with debtor default correspond to individually
impaired receivables (rating ‘R’). Receivables without debtor
default with internal ratings of 1 - 6 are considered to be unimpaired. Receivables with internal ratings of 7 - 8 are collectively
impaired.
For credit risk management purposes, the Group’s loan portfolio
is broken down as follows:
–– Retail receivables are receivables from individuals/
households and small enterprises with an annual turnover
of up to CZK 30 million and small municipalities
(‘MSE’). The methods of managing the credit risk of retail
receivables are based on statistical models calibrated using
historical data.
–– Receivables from corporate counterparties include
receivables from small and medium sized enterprises
with an annual turnover of between CZK 30 to
1,000 million (‘SME’) receivables from large businesses
(with an annual turnover exceeding CZK 1,000 million)
and public sector receivables, factoring receivables
and lease receivables. While the methods of managing the
credit risk of corporate receivables are based on statistical
models (particularly for the portfolio of receivables from
mid-size enterprises), great emphasis is also put on regular,
discrete analysis of individual customers.
–– Receivables arising from specific products
provided by the subsidiaries represent specialised
financial products that require their own risk management
techniques reflecting their specifics. These largely include
factoring receivables, leasing receivables, instalment
sales, loans issued to finance the acquisition of securities
and construction savings loans. The portfolios of these
products are regularly monitored both on an individual
basis (for individually significant exposures) and
a portfolio basis.
With the exception of a limited number of borderline cases, the
implemented breakdown of the portfolio corresponds to the asset
classes as defined in CNB Regulation 163/2014 Coll. which implements the BASEL II rules.
For the purpose of provisioning, monitoring and predicting losses,
the Group differentiates between individually significant and individually insignificant exposures. The credit risk attached to individually significant exposures is managed on an individual basis
with the minor use of portfolio models. The Group aggregates
individually insignificant exposures into portfolios and manages
the risk on a portfolio basis.
Individually significant loans predominantly include loans from
the Group’s corporate portfolio. These loans are additionally split
into the following sub-portfolios:
–– Large corporate clients with an annual turnover exceeding
CZK 1,000 million (the exposure of which is managed
using a unified method throughout Erste Group Bank and its
subsidiaries (‘the Erste Group’) or at the Group level);
–– Project finance and corporate mortgages;
–– Small and medium sized enterprises (turnover from CZK 30
to 1,000 million);
–– Municipality loans; and
–– Loans in the Workout Department.
Corporate loans match the ‘corporate’ or ‘special funding’ asset
class (segment) under BASEL II.
Individually insignificant loans (below CZK 5million), including MSE loans, principally encompass the Group’s retail loans.
These loans are divided into 20 product portfolios. The key
portfolios include mortgage retail loans (with 5 LTV segments),
credit card loans, overdraft loans and consumer loans. The
Group’s retail loans match the ’Retail’ asset class (segment)
under BASEL II.
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Income Statement | Statement of Financial Position | Separate Financial Statements
Collection of Key Risk Management
Information
In managing credit risk, the Group refers not only to the Bank’s
portfolio information but also the portfolio information of
other members of the Group. The Group also uses information
obtained from external sources such as credit bureaus or ratings
provided by reputable rating agencies. This data provides a basis
for modelling credit risk and supports debt recovery, valuation
of receivables and the calculation of credit losses.
Internal Rating Tools
reflected in the internal rating and corresponding probability
of default of the debtor in the following twelve months. The
definition of default is in line with the requirements set out in
CRR (Regulation EU No 575/2013).
The Group allocates internal ratings to all clients with
credit exposures. The Group uses the rating scale with thirteen grades for non-defaulted counterparties and one grade
for default counterparties (internal rating ‘R’). In the case
of private individuals there are only eight rating grades for
non-defaulted clients.
The internal ratings of the Group reflect the ability of counterparties to meet their financial obligations. The degree of risk is
To allocate the internal rating grade the Group uses several rating models for different counterparty segments. All rating models
comply with Erste Group Bank standards:
Segment
Government (sovereign) and banking
Specialized financing
Corporate customers
MSE
Individuals
Municipal clients
Rating tool
Unified model for the whole Erste Group. The model places great emphasis on
independent external ratings combined with other information
Unified model for the whole Erste Group, which is primarily based on projected cash
flows
Rating based on financial information and soft factors
In addition to the financial results of the company, information about the enterprise
owner or the entrepreneur himself is also taken into account
Behavioural and application scoring
Model based on budget analysis
The Group reviews ratings on a regular basis. The ratings of counterparties from the banking, corporate and sovereign segments are
reviewed at least annually. For retail customers the Group has developed a ‘behavioural rating’ and the client ratings are updated monthly.
The rating instruments are periodically adjusted to reflect changing
economic conditions and the Group’s business plans, validation
(consistency of results testing) and performance testing undertaken
by the Credit Risk Controlling Department.
In the case of counterparties with an external rating provided by an
external rating agency, the Group uses this information as an additional source of information. Based upon its historical experience,
the Group has created a transfer bridge between its own internal
ratings and the external ratings.
In addition to the internal ratings outlined above, the Group allocates each exposure a risk group according to CNB Regulation
No. 163/2014 Coll. In accordance with this regulation, the Group
maintains five groups of risk profiles namely, standard, watch, substandard, doubtful and loss.
In compliance with the regulatory requirements arising from BASEL
II, rating instruments are subject to annual validations performed
by the Credit Risk Controlling Department, Erste Group Bank
Competence Centre and Internal Audit. The application of internal
rating tools is limited for certain specialised products provided by
the subsidiaries, hence the internal rating tools are not used by all
of the entities included in the Group, specifically s Autoleasing a.s.,
Erste Factoring, a. s. and brokerjet České spořitelny, a. s. The principal reason relates to the lack of appropriate input data used in
arriving at the internal rating and monitoring receivables which the
clients are obliged to provide to the Group. As such, these products
require an increased level of loan collateral.
For the purpose of external reporting, internal rating grades of
Group are grouped into the following four risk categories:
Low risk: Typically regional customers with well-established and
rather long-standing relationships with the Group or large internationally recognised customers. Strong and good financial position
and no foreseeable financial difficulties. Retail clients having long
relationships with the bank, or clients with a wide product pool
use. No late payments currently or in the most recent 12 months.
New business is generally done with clients in this risk category.
Management attention: Vulnerable non-retail clients that may
have overdue payments or defaults in their credit history or may
encounter debt repayment difficulties in the medium-term. Retail
clients with limited savings or probable payment problems in the
past triggering early collection reminders. These clients typically
have good recent histories and no current delinquencies.
Substandard: The borrower is vulnerable to negative financial and
economic developments. Such loans are managed in specialised
risk management departments.
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Income Statement | Statement of Financial Position | Separate Financial Statements
Non-performing: One or more of the default criteria under Basel 2
are met: full repayment unlikely, interest or principal payments
on a material exposure more than 90 days past due, restructuring
resulting in a loss to the lender, realisation of a loan loss, or initiation of bankruptcy proceedings. For purposes of analysing non-performing positions, Group applies the customer view. Accordingly,
if an customer defaults on one product then all of that customer’s
performing products are classified as non-performing. For corporate
borrowers in CEE, the customer view is also applied. However, in
the retail and SME segment in some subsidiaries in CEE, Group
uses the product view, so that only the product actually in default is
counted as a non-performing exposure whereas the other products
of the same customer are considered performing.
Exposure Limits
Exposure limits are defined as the maximum exposure that the
Group may accept in respect of a client with a given rating and
underlying collateral. In setting the system of limits, the Group
strives to protect its revenues and capital from concentration risk.
The Group has changed the methodology of Credit VaR calculation
in 2014.
–– Until 2013 the indicator was limited to top 20 exposures,
which was an approximation justified by historical shape
of portfolio, where unexpected loss from top 20 exposures
covered most significant / dominant part of the Group‘s
total unexpected loss.
–– However, size and granularity of credit portfolio has
changed and top 20 exposures represent only a fraction
of overall portfolio. This is why VaR calculation has been
extended to entire Wholesale (=non-retail) portfolio.
–– Also confidence interval has been changed. While 95%
confidence interval has been used until 2013, starting
from 2014 the interval 99.9% is in place. This new setting
corresponds to regulatory expectations, as well as industry
standards.
The VaR of Wholesale portfolio decreased from 2.25% (or
CZK 14.25 bio) in 2014 to 2.03% (or CZK 12.37 bio). This
improvement was partially caused by continuing trend of lower
concentration (decreasing exposure of top 20 clients by 6.5%, more
granular concentration among industries) and slight improvement
of internal ratings (improvement of average portfolio rating).
Also in terms of comparison of VaR to Tier 1 capital the indicator
improved from 18.71% to 16.43%.
Structure of Approval Authorities
The structure of approval authorities is based on the materiality
of the impact of a potential loss from a provided exposure on the
Group’s financial performance and the risk profile of the relevant loan transaction. The highest approval authorities rest with
the Credit Committee and/or Statistical Model Committee of the
Board of Directors, with the Credit Committee of the Supervisory
Board only having an advisory role. Lower approval authorities
are categorised taking into account the seniority of the staff of the
Corporate Credit Risk Management Department and the Retail
Credit Risk Management Department.
Risk Parameters
The Group uses its own internal models in determining the risk
parameters, namely PD, LGD and CCF risk parameters. All of the
models are developed according to BASEL II requirements and
are subject to regular independent validation and review by the
regulator. The monitoring of historical risk parameters and their
prediction serve as a basis for the quantitative management of portfolio credit risk.
The Group currently employs risk parameters for portfolio monitoring, non-performing (defaulted) loan portfolio management,
portfolio protection measurement, risk valuation and prediction
of the Group’s risk profile development under different scenarios.
All models are back tested at least annually and validated by the
Group’s specialists who are independent of the Risk Management
Department.
Impairment Allowance for Loan Losses
The Group recognises impairment allowances for incurred losses.
These losses are determined and recognised in accordance with
IAS 39. The Group uses adjusted risk parameters estimated as
part of the implementation of the BASEL II rules to assess the
amount of loss.
Loan loss impairment allowances are determined for all impaired
loans. The impairment methodology is regularly reviewed and
adjusted if necessary.
Management of Credit Risk in the Trading
Portfolio
The credit risk inherent in the trading portfolio is managed through
the limits system applied to all counterparties.
Collateral
The Group defines collateral as assets that can be realized in case the
primary source of repayment fails. Collateralisation of the Group’s
receivables arising from lending transactions is governed by the
following principles: Collateralisation of the Group’s receivables
represents the Group’s protection as a creditor that may be used as
a secondary source of payment. The selection of individual collateral instruments required to secure a specific deal depends on the
Group’s loan products, requirements and professional assessment
by the Group’s responsible employees. The possibility to pledge
the collateral is always assessed before the collateral is accepted
by the Group.
The value of collateral (nominal value of collateral) is determined
with reference to the market prices of similar types of collateral. If
more than one market price for the collateral is determined using
various valuation techniques in a particular business transaction,
the lowest market price is used.
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Income Statement | Statement of Financial Position | Separate Financial Statements
If the collateral instrument involves real estate, movable assets,
a business or its branch, trademarks, an asset declared as a historical monument, antiquities, paintings, jewels, manuscripts,
etc., the price has to be determined on the basis of an appraisal
made by an expert appraiser contracted by the Group or an
internal appraiser for the purpose of evaluating the loan application. The expert appraisal or price estimate must not be older
than six months at the date on which the loan contract is entered
into. For real estate valuation purposes a detailed, in-house
methodology is used.
Stress Testing
The realisable value of collateral is determined by using the valuation rates set in the Collateral Catalogue. In determining the valuation rates, it is necessary to assess individual instruments by their
specific features, e.g. real estate by the character of its construction,
etc. and always following a physical inspection. The overall setup
of maximum valuation rates is reviewed annually.
The Group implemented the new forbearance methodology according to the EBA regulation in 2014. Forborne exposures are exposures
where the debtor is considered unable to comply with the contract due
to its financial difficulties and the Group decided to grant a concession to a debtor. Forbearance measure can be either modification of
terms and conditions or refinancing of the contract. Modification of
terms includes payment schedule changes (deferrals or reductions of
regular payments, extended maturities, etc.), interest rate reductions
or penalty interest waivers.
The expert valuation always has to be reviewed. Other conditions
taken into account in determining the realisable value of collateral
are, among others, as follows:
–– A comprehensive assessment of all available and, with
respect to the particular case, significant circumstances
and background documentation;
–– Any insurance or pledges of receivables from insurance
proceeds in favour of the Group;
–– The possibility of realising the collateral at a particular
time and place and the amount of realisation costs which,
in most cases, needs to be viewed as a sale in distress; and
–– Comparison to market trends.
The Collateral Catalogue also includes requirements for the periodic revaluation of collateral. Typically, the collateral value is
analysed and updated upon the regular monitoring/credit review
of clients. With respect to product portfolios of retail mortgages,
the Group uses portfolio models for updating nominal collateral
values. In addition, the Group regularly monitors the loan-to-value
ratio, mainly in respect of mortgage loans and project financing
loans.
Credit Risk Pricing
The accepted risk is reflected in risk margins used in the pricing of
individual types of counterparties and deals. The risk margins are
based on estimated risk parameters, the expected development of
the macroeconomic environment and changes in the credit process
within the Group, which may have an impact on risk level within
the credit portfolio.
The Group regularly performs stress testing of the sensitivity of its
portfolio to the deterioration of the credit quality of receivables. In
addition to the sensitivity of the portfolio to stress changes in the
PD and LGD risk factors, the Group performs scenario analyses
modelling the impact of adverse developments in macroeconomic
factors (such as changes in the economic growth rate, changes in
interest rates and changes in inflation). The breakdown of credit risk
by industries is shown in Note 38.2
Forborne Exposures
Forborne exposure initially receives default rating “R”; such exposure
is classified as non-performing defaulted forborne exposure. After
minimum 12 months and when the pre-defined conditions are fulfilled
the exposure can be reclassified into performing forborne exposure.
The performing forborne exposure has to be closely monitored during
the probation period which takes minimum 2 years. When the exposure within the probation period defaults the exposure is downgraded
into the non-performing forborne exposures. If after 2 years’ probation period the stated conditions are met the exposure ceases to be
classified as forborne.
Quantitative information in respect of Forbearance is attached
in the table bellow f) Exposures with forbearance measures as at
31 December 2014.
Write-offs
Write-offs are generally recorded after all reasonable restructuring
or collection activities have taken place and the possibility of further recovery is considered remote. The loan is written-off against
the related account ‘Net impairment loss on financial assets not measured at fair value through profit or loss’ in the income statement. If the
reason for provisioning is no longer deemed appropriate, the redundant impairment charge is released into income. The relevant amount
and recoveries of loans and advances previously written-off are also
reflected in the income statement through ‘Net impairment loss on
financial assets not measured at fair value through profit or loss’.
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Income Statement | Statement of Financial Position | Separate Financial Statements
a) Structure of Credit Risk by On-balance Sheet and Off-balance Sheet Items
The Group is exposed to credit risk arising from the following items:
CZK mil.
Credit risk exposures relating to on-balance sheet items
Balances at central banks and other demand deposits
Financial assets held for trading – derivatives
Financial assets held for trading – debt securities
Financial assets designated at fair value through profit or loss – debt securities
Available-for-sale financial assets – debt securities
Loans and receivables to credit institutions
Loans and receivables to customers
General governments
Other financial corporations
Non-financial corporations
Households
Held-to-maturity investments
Derivatives – Hedge accounting
Credit risk exposure relating to off-balance sheet items
Irrevocable financial guarantees given
Irrevocable loan commitments given
Total
The resulting credit exposure as at 31 December 2014 and 2013
represents a worst case scenario, without taking into account any
collateral held or other related credit enhancements. For presented
assets, the exposures set out above are based on net carrying
amounts as reported in the statement of financial position.
2014
2013
32,675
18,740
4,490
374
98,487
38,533
500,039
20,413
17,067
176,887
285,672
151,513
878
56,950
21,168
26,548
3,519
81,174
75,348
489,194
19,400
23,827
182,138
263,829
154,720
945
21,410
72,413
21,975
75,248
939,552
1,006,789
As shown above, 57,3% of the total exposure is derived from loans
and advances to financial institutions and customers (2013: 56,1%);
27,1% represents investments in debt securities (2013: 26,4%).
The Group has no outstanding exposure to the sovereign debt of
Greece, Italy, Ireland, Portugal or Spain.
Collateral securing the above receivables is as follows:
CZK mil.
Loans and advances to credit institutions
Loans and advances to customers
Contingent liabilities
Total
The value of collateral is the lower of the collateral’s nominal value
multiplied by a valuation rate and the receivable balance. It is not
always certain that the estimated collateral values will be realised.
2014
2013
1,965
265,302
10,477
1,459
252,635
12,962
277,744
267,056
For details of the determination of collateral fair values, refer to
the description above.
134
Income Statement | Statement of Financial Position | Separate Financial Statements
b) Credit Risk Exposure by Industry and Financial Instrument
The following tables present Group’s credit risk exposure by industry, broken down by financial instruments, as of each reporting date indicated.
Gross Credit Risk Exposure by Industry and Financial Instrument in 2014
Fair value
Balances at central Loans and advances Loans and advances
banks and other to credit institutions
to customers
demand deposits
Held to maturity
At amortised cost
Agriculture and forestry
Mining
Manufacturing
Energy and water supply
Construction
Trade
Transport and communication
Hotels and restaurants
Financial and insurance services
Real estate and housing
Services
Public administration
Education, health and art
Private households
Other
Total
–
–
–
–
–
–
–
–
32,675
–
–
–
–
–
–
32,675
Trading assets At fair value through
profit or loss
Debt instruments Positive fair value of Contingent liabilities Credit risk exposure
derivative financial
Available for sale
instruments
Fair value
–
–
–
–
–
–
–
–
38,542
–
–
–
–
–
–
38,542
14,176
1,997
39,164
16,555
6,593
33,732
11,667
3,287
16,697
64,373
9,904
19,466
7,561
271,239
1,778
518,189
–
–
127
–
–
–
943
–
12,417
3
–
138,032
–
–
–
151,522
–
–
–
–
–
–
–
–
2,131
–
–
2,359
–
–
–
4,490
–
–
–
–
–
–
–
–
374
–
–
–
–
–
–
374
–
–
200
–
–
–
2,065
–
6,921
–
–
89,301
–
–
–
98,487
167
1
634
1,027
19
170
734
5
12,728
368
51
3,576
108
28
2
19,618
1,094
102
17,333
5,528
10,316
8,793
4,036
224
873
5,420
4,498
5,401
1,369
28,836
–
93,823
15,437
2,100
57,458
23,110
16,928
42,695
19,445
3,516
123,358
70,164
14,453
258,135
9,038
300,103
1,780
957,720
Gross Credit Risk Exposure by Industry and Financial Instrument in 2013
Debt instruments
Balances at central Loans and advances Loans and advances
banks and other to credit institutions
to customers
demand deposits
Held to maturity
At amortised cost
Agriculture and forestry
Mining
Manufacturing
Energy and water supply
Construction
Trade
Transport and communication
Hotels and restaurants
Financial and insurance services
Real estate and housing
Services
Public administration
Education, health and art
Private households
Other
Total
–
–
–
–
–
–
–
–
56,950
–
–
–
–
–
–
56,950
Trading assets At fair value through
profit or loss
Debt instruments Positive fair value of Contingent liabilities Credit risk exposure
derivative financial
Available for sale
instruments
Fair value
–
–
–
–
–
–
–
–
75,379
–
–
–
–
–
–
75,379
11,328
2,709
39,284
12,333
8,154
34,223
12,093
3,105
13,482
62,259
9,720
17,791
7,908
272,844
250
507,483
–
–
–
–
480
–
551
–
14,215
3
–
139,484
–
–
–
154,733
–
–
–
–
–
–
–
–
185
–
–
26,363
–
–
–
26,548
–
–
–
–
–
–
–
–
2,278
–
–
1,241
–
–
–
3,519
–
–
–
1,527
–
–
503
–
13,606
563
–
64,975
–
–
–
81,174
498
3
762
616
72
172
416
7
10,841
382
118
8,129
97
22,113
1,012
164
19,320
5,258
10,888
6,866
4,056
198
5,495
4,508
4,159
5,494
1,056
28,749
–
97,223
12,838
2,876
59,366
19,734
19,594
41,261
17,619
3,310
192,431
67,715
13,997
263,477
9,061
301,593
250
1,025,122
135
Income Statement | Statement of Financial Position | Separate Financial Statements
c) Credit Risk Exposure by Risk Category
The following table presents the credit risk exposure of Group divided by risk category as of 31 December 2014, compared with the credit
risk exposure as of 31 December 2013.
Gross Credit Risk Exposure by Risk Category
CZK million
Total exposure as of 31 Dec 2014
Share of credit risk exposure
Total exposure as of 31 Dec 2013
Share of credit risk exposure
Change in credit risk exposure in 2014
Change
Low risk Management Substandard
attention
864,696
90,3%
924,774
90,2%
(60,078)
(6.5%)
59,217
6,2%
63,924
6,2%
(4,707)
(7.4%)
10,715
1,1%
12,764
1,2%
(2,049)
(16.1%)
Nonperforming
Credit risk
exposure
23,092
2,4%
23,660
2,3%
(568)
(2.4%)
957,720
100,0%
1,025,122
100,0%
(67,403)
(6.6%)
Credit Risk Exposure by Industry and Risk Category
The following tables present the credit risk exposure of the Group broken down by industry and risk category as of 31 December 2014
and 31 December 2013, respectively.
Gross Credit Risk Exposure by Industry and Risk Category in 2014
CZK million
Agriculture and forestry
Mining
Manufacturing
Energy and water supply
Construction
Trade
Transport and communication
Hotels and restaurants
Financial and insurance services
Real estate and housing
Services
Public administration
Education, health and art
Private households
Other
Total
Low risk Management Substandard
attention
13,338
2,076
45,339
18,415
11,143
32,592
17,544
1,499
117,941
56,823
10,899
255,628
7,194
272,487
1,778
864,696
1,528
14
7,111
3,372
3,321
6,850
937
905
5,416
9,385
2,581
2,462
1,610
13,725
–
59,217
249
1
2,023
979
1,155
1,381
565
525
177
1,645
152
39
99
1,725
–
10,715
Nonperforming
Credit risk
exposure
322
9
2,984
343
1,310
1,846
399
587
213
2,311
822
7
135
11,804
–
15,437
2,100
57,457
23,109
16,929
42,669
19,445
3,516
123,747
70,164
14,454
258,136
9,038
299,741
1,778
957,720
23,092
136
Income Statement | Statement of Financial Position | Separate Financial Statements
Gross Credit Risk Exposure by Industry and Risk Category in 2013
CZK mil.
Agriculture and forestry
Mining
Manufacturing
Energy and water supply
Construction
Trade
Transport and communication
Hotels and restaurants
Financial and insurance services
Real estate and housing
Services
Public administration
Education, health and art
Private households
Other
Total
Low risk Management
attention
10,336
2,812
44,988
15,237
12,819
30,912
14,681
1,441
179,943
53,523
10,237
271,939
5,460
270,446
–
924,774
1,635
46
9,365
2,069
3,396
7,379
1,718
909
2,000
9,145
3,127
3,251
3,247
16,637
–
63,924
Substandard
Nonperforming
Credit risk
exposure
234
2
2,261
654
1,156
925
340
547
19
1,600
318
34
261
4,413
–
202
18
3,399
222
1,743
2,164
880
413
458
3,300
422
–
93
10,096
250
12,407
2,878
60,013
18,182
19,114
41,380
17,619
3,310
182,420
67,568
14,104
275,224
9,061
301,592
250
1,025,122
12,764
23,660
d) Financial Assets Past Their Due Dates
As at 31 December 2014 and 2013, the Group reports the following financial assets which are past their due dates, but not individually
impaired:
As at 31 December 2014
CZK mil.
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total
As at 31 December 2013
CZK mil.
General governments
Other financial corporations
Non-financial corporations
Households
Total
Credit risk exposure
Total
Thereof
31–60 days
past due
–
18
6
2
1,572
4,707
6,305
–
7
–
1
217
1,021
1,246
Thereof
Thereof
61–90 days 91–180 days
past due
past due
–
–
–
–
83
448
531
–
2
–
–
8
15
25
Thereof
more than
180 days
past due
–
–
–
–
18
8
26
Credit risk exposure
Total
Thereof
31–60 days
past due
13
16
1,908
5,650
7,587
–
1
279
1,059
1,339
Thereof
Thereof
61–90 days 91–180 days
past due
past due
–
–
226
442
668
–
–
2
11
13
Thereof
more than
180 days
past due
–
–
6
10
16
137
Income Statement | Statement of Financial Position | Separate Financial Statements
e) Analysis of Individually Impaired Financial Assets
CZK mil.
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total
2014
2013
4
222
268
12,297
13,106
18
242
–
13,955
12,584
25,897
26,799
Nonperfroming
forborne
exposure
of which:
Defaulted
1,916
2,768
1,084
2,655
f) Exposures with Forbearance Measures as at 31 December 2014
CZK mil.
Forborne Performing
exposures
forborne
exposure
Non-financial corporations
Households
2,361
3,908
Total
38.3 Market Risk
The Group is exposed to the impact of market risks. Market risks
arise from open positions in interest rate, currency, equity, commodity financial instruments and even the credit spread included in
the relevant positions within banking book (i.e. the credit spread is
a part of a discounting factor). The value of open positions changes
subject to general and specific financial market movements. The
Group is exposed to the market risk arising from open positions in
the trading book. However, a significant component of market risk
is also the interest rate risk associated with assets and liabilities
and credit spread risk associated with marked-to-market positions
included in the banking book. There are several reasons why credit
spread was included: 1. The requirement in calculating economic
capital to include the credit spread and to cover the impact of this
risk factor; 2. A more precise calculation of security prices; and 3.
To reflect the credit rating of issuers/counterparties.
Trading book transactions in the capital, money, interbank and
derivative markets can be segmented as follows:
–– Client quotations and client transactions, execution of client
orders;
–– Interbank and derivative market quotations (market
making); and
–– Managing open positions in the interbank, derivative and
capital markets arising from above mentioned activities.
The Group trades in the following derivative financial instruments
through the OTC market:
–– Foreign currency forwards (including non-delivery
forwards) and swaps;
–– Foreign currency options;
–– Interest rate swaps;
–– Asset swaps;
–– Forward rate agreements;
6,269
––
––
––
––
445
1,140
1,585
4,684
3,739
Cross-currency swaps;
Interest rate options such as swaptions, caps and floors;
Commodity derivatives; and
Credit derivatives.
In the area of exchange traded derivatives, the Group trades the
following instruments:
–– Bond futures;
–– Equity and equity indices futures;
–– Interest rate futures;
–– Commodity futures; and
–– Options in respect of bond futures.
The Group also trades, on behalf of its clients, with other less
common currency options, such as digital or barrier. Certain option
contracts or options on various underlying equity baskets or equity
indices form part of other financial instruments as embedded
derivatives.
Derivative financial instruments are also entered into to hedge
against interest rate risk inherent in the banking book (interest rate
swaps, FRA, swaptions) and to refinance the mismatch between
foreign currency assets and liabilities (foreign exchange swaps and
cross currency swaps).
The majority of open positions arising from client transactions in
the Group’s trading book are transferred to the Erste Group Bank
portfolio through back-to-back transactions. As such, the market
risk arising from the Group’s OTC transactions is managed within
the Erste Group Bank portfolio. The Group retains in the trading portfolio the money market risk due to liquidity management
(money market), equity risk and partially a residual risk from previously closed transactions. This residual risk is dynamically hedged
at a macro level in line with the Group’s limits trading strategy and
set for market risk.
138
Income Statement | Statement of Financial Position | Separate Financial Statements
In addition to the calculation of sensitivities to individual risk factors, the Group uses the value at risk methodology to estimate and
manage the market risk of open positions held and to determine
the maximum losses expected on these positions. The VaR values
are calculated on a confidence level of 99% for a period of one
trading day. To calculate the values, the KvaR+ system is used
along with historical simulations based on the last 520 trading
days. Assuming a normal distribution of losses, VaR is also determined for a period of one month, or possibly one year and for
higher probability levels (99.9%, 99.98%). The Board of Directors
establishes VaR limits for the trading and banking book portfolio as
the Group’s maximum acceptable exposure to market risk. For the
trading portfolio VaR sub-limits (1 day, 99%) in respect of individual trading desks are established and limits for sensitivity values
of the trading portfolio to individual risk factors such as foreign
exchange rates, equity prices, interest rates, volatility, commodity
and other risk parameters of option contracts facilitate the maintenance of the overall market risk profile. These limits are approved
by the Financial Market and Risk Management Committee and are
monitored on a daily basis.
As at
31 December 2014
CZK mil.
Trading book
Daily value
Monthly value
Average of daily
values per year
Average of monthly
values per year
Banking book
Daily value
Monthly value
Average of daily
values per year
Average of monthly
values per year
As at
31 December 2013
CZK mil.
Trading book
Daily value
Monthly value
Average of daily
values per year
Average of monthly
values per year
Banking book
Daily value
Monthly value
Average of daily
values per year
Average of monthly
values per year
Total Correlation
Market Risk
Effect
The market risk VaR indicator is also calculated for the banking
book using special models for current accounts and other liabilities
without specified maturity. The VaR (1 month, 99%) of the banking
book is reported to the Assets and Liabilities Committee (‘ALCO’)
on a monthly basis while compliance with the limit is monitored by
Risk Management on a daily basis. The acceptable level of risk is
based on the assessment of the capital available to cover risks based
on the ‘ICAAP’ methodology. The overall VaR is subsequently
allocated to individual sub-portfolios of the banking book, taking
into account both the perspective of strategic portfolio management
and the accounting measurement of securities portfolios.
The table below summarizes the VaR values as at
31 December 2014 and 2013 on the confidence level of 99%. The
table has been extended because of the inclusion of credit spread
risk into the relevant positions of the banking book and the trading
book portfolios. The table shows only the Bank’s amounts:
Interest
Rate Risk
Foreign Equity Risk Commodity
Credit
Currency
Risk Spread risk
Risk
5
23
(3)
(13)
3
14
3
12
–
–
–
–
2
10
7
(3)
5
3
–
–
2
31
(23)
26
14
1
2
11
238
1,114
(124)
(581)
197
923
2
9
6
27
–
–
157
736
212
(86)
153
2
10
–
133
994
(400)
719
8
45
–
622
Total Correlation
Market Risk
Effect
Interest
Rate Risk
Foreign Equity Risk Commodity
Credit
Currency
Risk Spread risk
Risk
6
28
(4)
(18)
5
23
5
22
–
–
–
1
–
–
6
(3)
5
4
–
–
–
28
(14)
21
18
1
2
–
230
1,080
(85)
(390)
194
908
2
7
12
55
–
–
107
500
220
(102)
196
4
26
–
96
1,034
(476)
917
18
123
–
452
139
Income Statement | Statement of Financial Position | Separate Financial Statements
In addition, the Group uses stress testing or an analysis of impacts
of adverse developments in market risk factors on the market value
of the trading book and on the parts of the banking book revalued
to market values. Scenarios are developed on the basis of historical
experience and expert opinions of the Macroeconomic Analyses
Department. The stress testing is undertaken on a monthly basis
and its results are reported to ALCO. In addition, the Group monitors financial news, analyses market movements and prepares for
different scenarios with respect to the position of the economy.
38.3.1 Interest Rate Risk
Interest rate risk is the risk that the value of financial instruments
will fluctuate due to changes in market interest rates. The Group
manages the interest rate risk of the banking (investment) book by
monitoring the repricing dates of the Group’s assets and liabilities
and using models which show the potential impact that changes in
interest rates may have on the Group’s net interest income.
For monitoring and measuring the banking book interest rate exposures, the Group uses a simulation model focused on monitoring
potential impacts of market interest rate movements on the net
interest income. Simulations are performed over a period of 36
months. A basic analysis focuses on the sensitivity of the net interest
income to one-off changes of market interest rates (‘rate shock’). In
addition, the Group performs the traditional gap analysis.
The banking book interest rate exposures analyses are performed
on a monthly basis. The current level of the interest rate risk exposure is assessed by ALCO on a monthly basis in the context of the
overall development of financial markets and the Czech banking
sector, as well as any structural changes in the Group’s statement
of financial position.
In order to measure the interest rate risk exposure within the
trading portfolio, the Group uses the present value of a basis
point gap (‘PVBP gap’) defined as a matrix of sensitivity factors
to interest rates by currency for individual portfolios of interest
rate products. These factors measure the portfolio market value
sensitivity with a parallel shift of the yield curve of the relevant
currency within the predefined period to maturity. The system
of PVBP gap limits is set in respect of each interest rate product
portfolio by currency.
The following table is based on the exposure of the Group to
interest rates for derivative and non-derivative instruments as of
the reporting date. The model assumes a fixed structure of the
statement of financial position according to interest rate sensitivity. The determined changes which occurred at the beginning
of the year are constant during the reported period, i.e. the model
is based on the assumption that the funds released as a result of
the payment or sale of interest rate assets and liabilities will be
re-invested in assets and liabilities with the same interest rate
sensitivity and residual maturity. A new calculation method which
also takes credit spreads into account was implemented from 2014.
The following table shows the impact on the income statement
and other comprehensive income of the Group if the CZK or EUR
yield curves sharply increased/decreased by 100 points at the
beginning of the respective year and other interest rates remained
unchanged.
CZK million
2015
2014
Interest rate Interest rate Interest rate Interest rate
increase
decrease
increase
decrease
CZK
Income statement
Other comprehensive income
1,412
(1,901)
(324)
1,073
1,622
(631)
(490)
573
Income statement
Other comprehensive income
(53)
(87)
79
21
9
(130)
(4)
116
EUR
38.3.2 Foreign Currency Risk
Foreign currency risk is the risk that the value of financial
instruments in both the trading and banking books will fluctuate due to changes in foreign exchange rates. The Group
manages this risk by establishing and monitoring limits on
open positions, also including delta equivalents of currency
options. In addition, the Group monitors special sensitivity
limits for foreign currency option contracts known as ‘greeks’
sensitivity analysis. The foreign currency risk of all financial
instruments is transferred via the currency positions which
are managed by the Trading Department in accordance with
set currency sensitivity limits. In addition to the monitoring
of limits, the Group uses the VaR concept for measuring the
risk arising from open positions in all currency instruments.
Foreign currency exposures are primarily carried by the Bank
and real estate companies within the Group as they generate
the bulk of their rental income in EUR. The foreign currency
risk of other Group entities is limited. With regard to real
estate companies, the Group uses ‘inherent’ hedging where
the companies exposed to foreign currency risk as a result
of EUR denominated rental income are refinanced by loans
denominated in EUR.
140
Income Statement | Statement of Financial Position | Separate Financial Statements
38.3.3 Equity Risk
To monitor and manage the equity risk inherent in the trading and
banking books, the Group uses VaR methodology and sensitivity
analysis which is based on the exposure to the risk of changes in the
price of shares as of the reporting date. With respect to the increased
volatility of share prices, the equity risk represents a significant
component of risks despite smaller volumes of share positions.
38.3.4 Commodity Risk
The commodity instruments appear solely in the trading portfolio
as supporting instruments for client transactions. The major part
of commodity derivatives are secured on a ‘back-to-back’ basis
with a third party.
The Group is active in trading on electricity energy market where
it hedges on macro basis transactions closed with its customers.
Residual position is then managed on the Group´s trading book and
is managed by Structured products trading desk within approved
market limits.
38.4 Liquidity Risk
Definition and Overview
The liquidity risk is defined in the Group in line with the principles
set out by the Basel Committee on Banking Supervision and the
CNB. Accordingly, a distinction is made between market liquidity
risk, which is the risk that the Group entities cannot easily offset or
close a position at the market price because of inadequate market
depth or market disruption, and funding liquidity risk, which is the
risk that credit institutions in the Group will not be able to meet
efficiently both expected and unexpected current and future cash
flow and collateral needs without affecting either daily operations
or the financial condition of the Group members.
Funding liquidity risk is further divided into insolvency risk and
structural liquidity risk. The former is the short-term risk that current or future payment obligations cannot be met in full and on time
in an economically justified manner, while structural liquidity risk
is the long-term risk of losses due to a change in the Group’s own
refinancing cost or spread.
Methods and Instruments Employed
Short-term insolvency risk is monitored by calculating the survival
period for significant currencies. This analysis determines the maximum period during which the entity can survive a severe combined
market and idiosyncratic crisis while relying on its pool of liquid
assets. The monitored worst-case scenario simulates very limited
money market and capital market access and at the same time customers’ deposits significant outflow. Furthermore, the simulation
assumes increased drawdown on guarantees and loan commitments
dependent on the type of the customer, as well as the potential
outflows from collateralised derivative transactions estimating the
effect from collateral outflow in case of adverse market movements.
As far back as 2011, the Bank’s risk control has been based on the
new Basel III liquidity risk measures, especially Liquidity Coverage
Ratio (LCR) and Net Stable Funding Ratio (NSFR). In the past
years, the Bank took part in the Quantitative Impact Study (QIS)
coordinated by the European Banking Authority (EBA) that is monitoring Group LCR and NSFR on a quarterly basis. Internally, the
ratios are monitored on entity level, and from 2012 on internal
targets are set for them. In 2014, the Bank successfully started the
official monitoring phase. At the end of 2014, both LCR and NSFR
for fhe Group were above 100%.
In 2013 the Bank introduced Intraday Liquidity Buffer for intraday
liquidity risk management. The Buffer consists of highly liquid
assets (central bank reserves, CZ T-bills) which can be used intraday
in case of abrupt crisis. The Buffer is constructed to cover intraday
operational and counterparty stress. The internal limit is set based
on central bank clearing account transfers and is reviewed periodically to reflect current market conditions. The other entities of the
Group take only minor part in intraday transactions therefore the
Buffer is applied only for the Bank on individual level.
Methods and Instruments of Risk Mitigation
General standards of liquidity risk controlling and management
(standards, limits and analysis) have been defined and are continuously reviewed and improved by Erste Group.
The short-term liquidity risk is managed by limits resulting from
the survival period model and by internal LCR targets and Intraday
liquidity buffer target. Limit breaches are reported to the Asset
Liability Committee. The Comprehensive Contingency Funding
Plan ensures the necessary coordination of all parties involved in
the liquidity management process in case of crisis and is reviewed
on a regular basis.
Analysis of Liquidity Risk
Liquidity Gap
The long-term liquidity position is managed using liquidity gaps
on the basis of expected cash flows. This liquidity position is calculated for each significant currency and based on the assumption
of ordinary business activity.
Expected cash flows are broken down by contractual maturities in
accordance with the amortisation schedule and arranged in maturity
ranges. For demand deposits, expected cash flows are calculated
based on their liquidity profile which is also used for FTP.
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Income Statement | Statement of Financial Position | Separate Financial Statements
The following table shows the liquidity gaps as of 31 December 2014 and 31 December 2013
CZK mil.
Liquidity GAP
< 1 month
1–12 months
1–5 years
> 5 years
2014
2013
2014
2013
2014
2013
2014
2013
156,223
2,225
(88,023)
221
(10,701)
88,217
39,016
28,292
An excess of assets over liabilities is indicated by a positive value,
while an excess of liabilities over assets is indicated by a negative
value. The cash inflows from liquid securities, which are accepted
as collateral by the central banks to which the Group has access,
are shifted to the first time bucket instead of showing them at their
contractual maturity.
Counterbalancing Capacity
The Group regularly monitors its counterbalancing capacity, which consists of cash, excess minimum reserve at the central banks as well
as unencumbered central bank eligible assets and other liquid securities, including changes from repos, reverse repos and securities lending
transactions. These assets can be mobilised in the short term to offset potential cash outflows in a crisis situation. The term structure of the
Group’s counterbalancing capacity as of year-end 2014 and year-end 2013 are shown in the tables below:
As at 31 December 2014
CZK mil.
< 1 week
Cash, excess reserve
Liquid assets
Other central bank eligible assets
36,329
194,843
1,556
Counterbalancing capacity
232,728
As at 31 December 2013
CZK mil.
< 1 week
Cash, excess reserve
Liquid assets
Other central bank eligible assets
68,833
168,153
2,170
Counterbalancing capacity
239,156
The figures above show the total amount of potential liquidity available for the Group in a going concern situation.
Financial Liabilities
Maturities of contractual undiscounted cash flows from financial liabilities as of 31 December 2014 and 31 December 2013 respectively,
were as follows:
As at 31 December 2014 CZK mil.
Non-derivative liabilities
Deposits by banks
Customer deposits
Debt securities in issue
Subordinated liabilities
Other financial liabilities
Derivative liabilities
Contingent liabilities
Financial guarantees
Irrevocable commitments
Total
Carrying Contractual
amounts cash flows
< 1 month 112 months
15 years
> 5 years
764,399
759,661
613,773
71,414
56,645
17,829
20,823
93,823
14,502
93,823
3,161
819
11,341
59,758
–
31,114
–
2,132
617,753
142,513
87,759
54,770
682,687
23,571
262
3,109
21,410
72,413
879,045
55,210
676,647
24,392
303
3,109
21,410
72,413
867,986
22,602
586,296
1,766
–
3,109
339
480
2,489
62,104
6,817
4
–
7,023
52,735
15,259
26,344
15,015
27
–
11,919
19,195
14,860
1,903
794
272
–
2,129
3
19,961
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Income Statement | Statement of Financial Position | Separate Financial Statements
As at 31 December 2013 CZK mil.
Non-derivative liabilities1
Deposits by banks
Customer deposits
Debt securities in issue
Subordinated liabilities
Derivative liabilities
Contingent liabilities
Financial guarantees
Irrevocable commitments
Total
Carrying Contractual
amounts cash flows
< 1 month 112 months
15 years
> 5 years
830,093
815,192
555,841
112,957
65,816
80,578
24,446
97,223
44,319
97,223
22,831
3,687
21,488
48,818
–
32,880
–
11,838
183,263
98,696
92,416
73,036
726,593
28,368
2,096
21,975
75,248
951,762
65,890
721,129
26,135
2,038
21,975
75,248
956,734
38.5 Operational Risk
In accordance with regulatory requirements, the Group defines
operational risk as the risk of losses arising from the inappropriateness or failure of internal processes, human errors or failures of
systems or the risk of losses arising from external events, including
losses due to the breach of or failure to fulfil legal regulations.
With assistance from Erste Group Bank, the Group put in place
a standardised categorisation of operational risks. This classification became the basis of the ‘Book of Risks of Česká spořitelna’,
developed in cooperation with the Risk Management and Internal
Audit departments. The Book of Risks is a tool used to achieve
unification of risk categorisation in order to ensure consistent risk
monitoring and evaluation.
The Group has cooperated with an external supplier in developing
a specialised software application to collect data about operational
risk which conforms to the data collection requirements. The data
is not only used with a view to quantifying operational risks and
monitoring trends in the development of these risks but also for the
purpose of preventing recurrence of operational risks. In addition
to monitoring actual occurrence of operational risk, the Group also
pays attention to how the operational risk is perceived by management. In this respect, the Group has introduced and is further
expanding methods with the aim of identifying severe potential
threats in order to implement preventative measures before losses
materialise. For this purpose, the following tools are used: Risk
and Control Self-Assessment, Key Risk Indicators and Scenario
Analysis. The Group also actively manages risks related to outsourced activities. Depending on the specific method, this type
of assessment is done on a continuous, monthly or annual basis.
The Group successfully passed validation for managing of operational risk according to Advanced Measurement Approaches
(AMA). Based on this method a capital charge related to operational
risk is properly computed and allocated since July 1st, 2009.
An important tool in mitigating losses arising from operational
risks is the Group’s insurance programme which was put in place
in 2002. This insurance programme involves insurance against
property damage as well as risks arising from banking activities
32,083
523,240
518
–
1,606
2,081
582,359
2,994
105,303
4,660
–
9,533
39,285
12,384
33,235
20,197
–
10,073
22,807
18,429
59,351
760
2,038
763
11,075
and liability risks. Since 2004, the Group has been a member of the
Erste Group insurance programme which enhances the insurance
protection specifically with regard to damages that may materially
impact the income statement.
Top management of the Bank is informed quarterly about the risk
profile and the most important operational risk events via the CORS
(Compliance, Operational Risk and Security) committee. The chairman of the committee is the Chief Risk Officer (member of the
Board of Directors responsible for risk management).
39. Hedge Accounting
The interest rate and FX risk of the banking book is managed by
The Group’s ALM department. Preference in managing interest
rate risk is given to using bonds, loans or derivatives, with hedge
accounting for derivatives applied in accordance with IFRS. The
main guideline for interest rate risk positioning is the Group Interest
Rate Risk Strategy that is approved by the Group ALCO for the
relevant time period.
Fair value hedges are employed to reduce interest rate risk of issued
bonds, purchased securities, loans or deposits on the Group statement of financial position. In general, the Group policy is to swap
substantial fixed or structured issued bonds to floating items and
as such to manage the targeted interest rate risk profile by other
statement of financial position items. Interest rate swaps are the
most common instruments used for fair value hedges. Concerning
loans, purchased securities and securities in issuance, fair value is
also hedged by means of cross-currency swaps, swaptions, caps,
floors and other types of derivative instruments.
Cash flow hedges are used to eliminate uncertainty in future cash
flows in order to stabilise net interest income. The most common
such hedge in The Group consists of interest rate swaps hedging
variable cash flows of floating assets into fixed cash flows. Floors
or caps are used to secure the targeted level of interest income in
a changing interest rate.
Net investment hedges are used to hedge the foreign exchange
risk arising from net investments in a foreign operation which are
included into consolidated financial statements (i.e. consolidated
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Income Statement | Statement of Financial Position | Separate Financial Statements
financial statements of entity whose functional currency is other
than the one of the foreign operation).
The changes in fair values of hedging instruments that are attributable to the fluctuation of foreign currency exchange rates are
recognised in the ‘Translation reserve’ within equity. Foreign currency derivatives and foreign currency financial liabilities serve as
hedging instruments.
In the reporting period, CZK 14 million (2013: CZK 1 million) was
taken from the cash flow hedge reserve and recognised as expense
in the consolidated income statement (2013: as expense); while
CZK 186 million (2013: CZK 11 million) was recognised directly
in other comprehensive income. The majority of the hedged cash
flows are likely to occur within the next five years and will then be
recognised in the consolidated income statement.
As at 31 December 2014, the loss on hedging derivatives used for
fair value hedging was CZK 229 million (2013: loss CZK 237 million); the gain due to changes in the fair value of hedged items was
CZK 244 million (2013: gain CZK 250 million).
Fair values of hedging instruments are disclosed in the following table:
CZK mil.
2014
Positive fair
value
Hedging instrument - fair value hedge
Hedging instrument - cash flow hedge
Total
40. Fair Value of Assets and Liabilities
Determination of Fair Value
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
The best indication of an asset’s or liability’s fair value is provided
by quoted market prices in an active market. Where quoted market
prices in an active market are available, they are used to measure
the asset’s or liability’s value (level 1 of the fair value hierarchy).
The measurement of fair value by the Group is based primarily on
external sources of data (stock market prices or broker quotes in
highly liquid market segments). Where no market prices are available, fair value is determined on the basis of valuation models that
are based on observable market information (level 2 of the fair value
hierarchy). In some cases, the fair value of an asset or liability can
be determined neither on the basis of market prices nor of valuation
models that rely entirely on observable market data. In such cases,
individual valuation parameters not observable in the market are
estimated on the basis of reasonable assumptions (level 3 of the fair
value hierarchy). For level 3 valuations typically market PDs determined from historical PDs mapped to a basket of liquid bonds/CDS
are used as unobservable parametres.
If any unobservable input in the valuation model is significant and the
price quote used is updated infrequently the instrument is classified
as level 3 of the fair value hierarchy.
Fair Values of Financial Instruments
All financial instruments are measured at fair value on recurring basis.
670
208
878
2013
Negative Positive fair
fair value
value
22
147
169
945
–
945
Negative
fair value
271
151
422
Financial Instruments Measured at Fair Value in
the Statement of Financial Position
The measurement of fair value at The Group, a. s. is based primarily
on external sources of data (stock market prices or broker quotes
in highly liquid market segments). Financial instruments for which
fair value is determined on the basis of quoted market prices are
mainly listed securities and derivatives as well as liquid OTC bonds.
Description of the Valuation Models and Inputs
The Group, a. s. uses only valuation models which have been tested
internally and for which the valuation parameters (such as interest
rates, exchange rates, volatilities and credit spreads) have been
determined independently.
Securities
For plain vanilla (fixed and floating) debt securities the fair
value is calculated by discounting the future cash-flows using
a discounting curve depending on the interest rate for respective
issuance currency and a spread adjustment. The spread adjustment
is usually derived from the credit spread curve of the issuer. If
no issuer curve is available the spread is derived from a proxy
instrument and adjusted for differences in the risk profile of the
instruments. If no close proxy is available, the spread adjustment
is estimated using other information, including estimation of the
credit spread based on internal ratings and PDs or management
judgment. For more complex debt securities (e.g. including
option-like features as callable, cap/floor, index-linked) the fair
value is determined using combinations of discounted cash-flow
models and more sophisticated modeling techniques including
also methods described for OTC-derivatives. The fair value of
144
Income Statement | Statement of Financial Position | Separate Financial Statements
financial liabilities designated at Fair Value through Profit and
Loss under the fair value option is determined in consistency
with similar instruments held as assets. The spread adjustment for
Erste Group’s own credit risk is derived from buy-back levels of
own issuances. Techniques for equity securities may also include
models based on earnings multiples.
OTC-Derivative Financial Instruments
Derivative instruments traded in liquid markets (e.g. interest rate
swaps and options, foreign exchange forward and options, options
on listed securities and indices, credit default swaps, commodity
swaps) are valued by standard valuation models. These models
include discounting cash flow models and option models of BlackScholes-. Models are calibrated on quoted market data (including
implied volatilities). Valuation model for more complex instruments also use Monte-Carlo-techniques. For instruments in less
liquid markets, data obtained from less frequent transactions or
extrapolation techniques are used.
The Group values derivatives at mid-market levels. For year 2014
the effect of potential bid-ask-spread of the relevant positions
adjustment based on market liquidity was estimated and assesed
as not significant. Nevetheless the Group is preparing methodology
which will justify that as a significant player in the market (market
maker) is able to exit the position at mid price. The Bank will
demonstrate this to the local regulator bi-annually for regulatory
purposes since 2015.
Credit value adjustments (CVA) for counterparty risk and debt
value adjustments (DVA) for the own default credit risk are applied
to OTC derivatives. For the CVA, the adjustment is driven by
the expected positive exposure of all derivatives and the credit
quality of the counterparty. DVA is driven by the expected negative exposure and the Group’s credit quality. Modeling of the
expected exposure is based on option replication strategies. This
modeling approach is considered for the most relevant portfolios
and products. The exposure for Ministry of Finance of the Czech
Republic is based on Monte Carlo simulations considering netting.
The methodology for the remaining entities and products is determined by market value plus add-on considerations. The probability
of default of counterparties which are not traded in an active market
is determined from internal PDs mapped to a basket of liquid titles
being present in the central European market. Thereby market
based valuation concepts have been incorporated. Counterparties
with liquid bond or CDS markets are valued by the respective
single-name market based PD derived from the prices. The Group’s
probability of default has been derived from the buy-back levels
of the Group’s issuances. For counterparties with Credit Support
Annex (‘CSA’) agreements in place no CVA/DVA was taken into
account for all cases with small threshold amounts.
According to the described methodology the cumulative CVAadjustments amounts to CZK (535) million and the total DVAadjustment amounts to CZK 303 million.
Description of the Valuation Process for Fair
Value Measurements Categorised Within Level 3
A level 3 position involves one or more significant inputs that
are not directly observable on the market. The responsibility for
valuation of a position of measured at fair value is independent
from trading units.
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Income Statement | Statement of Financial Position | Separate Financial Statements
Fair Value Hierarchy
The table below details the methods used to determine the fair value with respect to levels of fair value hierarchy.
CZK mil.
Quoted market
Marked to model
prices in active based on observable
markets Level 1 market data Level 2
Marked to model
based on nonobservable inputs
Level 3
Total
2014
2013
2014
2013
2014
2013
2014
2013
2,345
3,394
19,757
44,324
1,129
–
23,231
47,718
2,345
88
3,306
17,611
2,146
21,080
23,244
1,129
–
–
–
18,740
4,491
21,168
26,550
30
1,240
1,134
2,874
108
109
1,272
4,223
62,989
53,814
35,887
28,150
413
331
99,289
82,295
–
–
878
945
–
–
878
945
65,364
58,448
57,656
76,293
1,650
440
124,670
135,181
329
–
23,102
24,024
–
–
23,431
24,024
–
329
–
–
20,654
2,448
24,024
–
–
–
–
–
20,654
2,777
24,024
–
–
–
9,664
14,434
–
–
9,664
14,434
–
–
8,874
12,616
–
–
8,874
12,616
–
–
790
1,818
–
–
790
1,818
Assets
Financial assets - held
for trading
Derivatives
Other trading assets
Financial assets
designated at fair value
through profit or loss
Financial assets available for sale
Derivatives Hedge
Accounting
Total assets
Liabilities
Financial liabilities held
for trading
Derivatives
Other trading liabilities
Financial liabilities
designated at fair value
through profit or loss
Deposits from
customers
Debt securities issued
Derivatives Hedge
Accounting
Total liabilities
–
–
169
422
–
–
169
422
329
–
32 935
38 880
–
–
33 264
38 880
Changes in Volumes of Level 1 and Level 2
This paragraph describes the changes in Volumes of Level 1 and Level 2 of financial instruments measured at fair value in the statement
of financial position.
CZK mil.
Securities
Net transfer from Level 1
Net transfer from Level 2
Purchases/sales/expiries
Changes in derivatives
Total year-to-date change
2014
2013
Level 1
Level 2
Level 1
Level 2
(1,397)
345
8,056
(88)
1,397
(345)
(16,220)
(3,469)
(3,483)
502
(10,365)
68
3,483
(502)
8,577
(4,736)
6,916
(18,637)
(13,278)
6,822
The reclassification from Level 1 to Level 2 resulted from decreases in market depth for the relevant securities
The quoted bond was reclassified from Level 2 to Level 1 as a result that quoted price (observable input) exists as at 31 of December 2014.
146
Income Statement | Statement of Financial Position | Separate Financial Statements
Movements in Level 3 of Financial Instruments Measured at Fair Value
The following tables show the development of fair value of securities for which valuation models are based on non-observable inputs:
CZK mil.
Dec 2013
Gain/loss
in profit or
loss
Gain/loss Purchases
Sales/
in other
Settlements
comprehensive
income
Transfer Currency
into translation
Level 3
2014
–
–
–
–
–
1,129
–
1,129
–
–
–
–
–
1,129
–
1,129
109
(20)
–
17
–
–
2
108
331
–
93
48
(62)
–
3
413
440
(20)
93
65
(62)
1,129
5
1,650
Dec 2012
Gain/loss
in profit or
loss
Gain/loss Purchases
in other
comprehensive
income
Sales/
Settlements
Transfers
Currency
out of translation
Level 3
2013
110
(13)
–
12
–
–
109
226
–
16
109
–
(20)
–
331
336
(13)
16
121
–
(20)
–
440
Assets
Financial assets held for trading
Derivatives
Financial assets
designated
at fair value
through profit or
loss
Financial assets available for sale
Total assets
CZK mil.
Assets
Financial assets
designated at fair
value through
profit or loss
Financial assets available for sale
Total assets
A part of the OTC derivatives was categorized as Level 3 because
credit valuation adjustment (CVA) has a material impact in market
value for these derivatives and is calculated based on unobservable
parameters (i.e. internal estimates of PDs and LGDs).
Gains or losses on Level 3 instruments held at the reporting period’s end and which are included in profit or loss are as follow:
CZK mil.
2014
2013
Unrealized
gain/loss in
profit or loss
Unrealized
gain/loss in
profit or loss
(20)
(13)
Assets
Financial assets designated at fair value through profit or loss
The volume of Level 3 financial assets can be allocated to the
following two categories:
–– Market values of derivatives where the credit value
adjustment (CVA) has a material impact and is calculated
based on unobservable parameters (i.e. internal estimates of
PDs and LGDs).
–– Illiquid bonds, shares and funds not quoted in an active
market where either valuation models with non-observable
parameters have been used (e.g. credit spreads) or broker
quotes have been used that cannot be allocated to Level 1
or Level 2.
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Income Statement | Statement of Financial Position | Separate Financial Statements
Sensitivity Analysis for Level 3 Measurements
The following table shows the sensitivity analysis using reasonably possible alternatives per product type:
CZK mil.
Positive fair value
changes when applying
alternative valuation
parameters
Derivatives
Income statement
Equity instruments
Income statement
Other comprehensive income
Total
Income statement
Other comprehensive income
Negative fair value
changes when applying
alternative valuation
parameters
Dec 13
Dec 14
Dec 13
Dec 14
–
–
14
2
12
84
84
18
2
16
–
–
(28)
(4)
(24)
(124)
(124)
(37)
(5)
(32)
14
2
12
102
86
16
(28)
(4)
(24)
(161)
(129)
(32)
In estimating these impacts, mainly changes in credit spreads (for
bonds), PDs, LGDs (for CVA of derivatives) and market values of
comparable equities were considered. An increase (decrease) of
spreads, PDs and LGDs result in a decrease (increase) of the corresponding market values.
for debt securities range of credit spreads between +100 basis points
and – 75 basis points,
Following ranges of reasonably possible alternatives of the unobservable inputs were considered in the sensitivity analysis table:
for CVA on derivatives PDs rating upgrade/downgrade by one
notch, the range for LGD between -5% and +10%.
for equity related instruments the price range between -10% and
+5%,
Financial Instruments Whose Fair Value is Disclosed in the Notes
The following table shows fair values and fair value hierarchy of financial instruments whose fair value is disclosed in the notes for the
year-end 2014 and for the year-end 2013.
2014
CZK mil.
Assets
Cash and cash balances
Financial assets - held to maturity
Loans and receivables to credit
institutions
Loans and receivables to customers
Carrying
amount
Fair value
Quoted
Marked to
Marked to
market prices model based model based
in active on observable
on nonmarkets
market data
observable
Level 1
Level 2 inputs Level 3
54,489
151,513
54,489
175,215
–
160,498
–
14,717
–
–
38,533
38,384
–
–
38,384
500,039
493,145
–
371
492,774
751,959
755,936
–
23,573
732,363
54,570
671,565
23,043
2,781
54,520
674,062
24,573
2,781
–
–
–
–
–
–
23,573
–
54,520
674,062
1,000
2,781
21,410
72,413
27,108
71,288
–
–
–
–
27,108
71,288
Liabilities
Financial liabilities measured at
amortised costs
Deposits from banks
Deposits from customers
Debt securities issued
Other financial liabilities
Financial guarantees and
commetments
Financial guarantees
Irrevocable commitments
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Income Statement | Statement of Financial Position | Separate Financial Statements
2013
CZK mil.
Assets
Cash and cash balances
Financial assets - held to maturity
Loans and receivables to credit
institutions
Loans and receivables to customers
Carrying
amount
Fair value
Quoted
Marked to
Marked to
market prices model based model based
in active on observable
on nonmarkets
market data
observable
Level 1
Level 2 inputs Level 3
77,581
154,720
77,581
170,489
–
131,676
–
38,813
–
–
75,348
71,355
–
–
71,355
489,194
463,267
–
202
463,065
815,659
798,161
–
30,823
767,338
73,036
713,977
28,646
–
71,210
696,128
30,823
–
–
–
–
–
–
–
30,823
–
71,210
696,128
–
–
21,975
75,248
21,975
75,248
–
–
–
–
21,975
75,248
Liabilities
Financial liabilities measured at
amortised costs
Deposits from banks
Deposits from customers
Debt securities issued
Other financial liabilities
Financial guarantees and
commetments
Financial guarantees
Irrevocable commitments
The fair value of loans and advances to customers and credit institutions has been calculated by discounting future cash flows while
taking into consideration interest and credit spread effects. The
interest rate impact is based on the movements of market rates,
while credit spread changes are derived from PD’s used for internal risk calculations. For the calculation of fair value loans and
advances were grouped into homogeneous portfolios based on
rating method, rating grade, maturity and the country where they
were granted.
The fair value of issued securities and subordinated liabilities measured at amortized cost is based on market prices or on observable
market parameters, if these are available, otherwise it is estimated
by taking into consideration the actual interest rate environment
and in this case they are allocated to Level 3.
The fair values of financial assets held to maturity are either taken
directly from the market or they are determined by directly observable input parameters (i.e. yield curves).
The fair value of off-balance sheet liabilities (i.e. financial guarantees and unused loan commitments) is estimated with the help
of regulatory credit conversion factors. The resulting loan equivalents are treated like other on-balance sheet assets. The difference
between the calculated market value and the notional amount of
the hypothetical loan equivalents represents the fair value of these
contingent liabilities.
For liabilities without contractual maturities (e.g. demand deposits),
the carrying amount represents the minimum of their fair value.
The fair value of other liabilities measured at amortized cost is
estimated by taking into consideration the actual interest rate environment and own credit spreads, and these are allocated to Level 3.
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Income Statement | Statement of Financial Position | Separate Financial Statements
Fair Values of Non-Financial Assets
The following table shows fair values and fair value hierarchy of non-financial instruments at the year-end 2014 and 2013:
2014
CZK mil.
Assets whose Fair Value is disclosed in
the notes
Investment property
2013
CZK mil.
Assets whose Fair Value is disclosed in
the notes
Investment property
Investment Property
Carrying
amount
Fair value
7,342
7,429
Carrying
amount
Fair value
8,330
8,634
The valuations of investment property were performed by an
accredited independent valuer with a recognised and relevant professional qualification. The valuation of investment property is
carried out using the comparative and investment methods. The
assessment is made on the basis of a comparison and analysis of
appropriate comparable investment and rental transactions, together
with evidence of demand within the vicinity of the relevant property. The characteristics of such similar transactions are then applied
to the property, taking into account size, location, terms, covenant
and other material factors.
Quoted
Marked to
Marked to
market model based model based
prices on observable
on nonin active
market data
observable
markets
Level 2 inputs Level 3
Level 1
–
–
7,429
Quoted
Marked to
Marked to
market model based model based
prices on observable
on nonin active
market data
observable
markets
Level 2 inputs Level 3
Level 1
–
–
8,634
41. Financial Instruments per Category
According to IAS 39
The Bank classifies financial instruments into trading and banking (investment) portfolios in accordance with BASEL II rules
as per CNB Regulation No. 123/2007 as amended by Regulation
282/2008 Coll., on the rules of prudent business of banks, savings and lending associates and securities traders (henceforth
‘Regulation 123/2007’). The Bank applies various techniques to
the management of the risk within the banking and trading books
(refer to Note 38).
150
Income Statement | Statement of Financial Position | Separate Financial Statements
The table below shows the classes of financial assets and liabilities reported by the Bank according to IFRS 7 requirements.
CZK mil.
As of 31 December 2014
Category of financial instruments
Assets
Cash and cash balances
Loans and receivables to credit institutions
Loans and receivables to customers
Derivative financial instruments
Trading assets
Financial assets - at fair value through
profit or loss
Financial assets - available for sale
Financial assets - held to maturity
Total financial assets
Liabilities
Deposits from banks
Deposits from customers
Debt securities in issue
Other financial liabilities
Derivative financial instruments
Trading liabilities
Subordinated liabilities
Total financial liabilities
Loans and receivables
Held to maturity
Trading
Designated at fair
value
Available for sale
Financial liabilities at
amortised cost
Derivatives
designated as
hedging instruments
Finance lease according
to IAS 17
Total
54,489
38,533
487,176
–
–
–
–
–
–
–
–
–
–
18,740
4,491
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
878
–
–
–
12,863
–
–
54,489
38,533
500,039
19,618
4,491
–
–
–
1,272
–
–
–
–
1,272
–
–
–
151,513
–
–
99,289
–
–
–
–
–
–
–
99,289
151,513
869,244
54,570
680,439
23,571
2,781
20,823
2,777
262
785,223
580,198
151,513
23,231
1,272
99,289
–
878
12,863
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,654
2,777
–
–
8,874
790
–
–
–
–
–
–
–
54,570
671,565
22,781
2,781
–
–
262
–
–
–
–
169
–
–
–
–
–
–
–
–
–
–
–
23,431
–
–
–
9,664
–
751,959
169
CZK mil.
–
As of 31 December 2013
Category of financial instruments
Assets
Cash and cash balances
Loans and receivables to credit institutions
Loans and receivables to customers
Derivative financial instruments
Trading assets
Financial assets - at fair value through
profit or loss
Financial assets - available for sale
Financial assets - held to maturity
Total financial assets
Liabilities
Deposits from banks
Deposits from customers
Debt securities in issue
Derivative financial instruments
Subordinated liabilities
Total financial liabilities
Loans and receivables
Held to maturity
Trading
Designated at fair
value
Available for sale
Financial liabilities at
amortised cost
Derivatives
designated as
hedging instruments
Finance lease according
to IAS 17
Total
77,581
75,348
477,575
–
–
–
–
–
–
–
–
–
–
21,168
26,550
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
945
–
–
–
11,619
–
–
77,581
75,348
489,194
22,113
26,550
–
–
–
4,223
–
–
–
–
4,223
–
–
630,504
–
154,720
154,720
–
–
47,718
–
–
4,223
82,295
–
82,295
–
–
–
–
–
945
–
–
11,619
82,295
154,720
932,024
–
–
–
–
–
–
–
–
–
–
–
–
–
24,024
–
–
12,616
1,818
–
–
–
–
–
–
–
73,036
713,977
26,550
–
2,096
–
–
–
422
–
–
–
–
–
–
73,036
726,593
28,368
24,446
2,096
854,539
–
–
24,024
14,434
–
815,659
422
–
151
Income Statement | Statement of Financial Position | Separate Financial Statements
42. Audit Fees and Other Consultancy Fees
The following table contains fundamental audit fees and other fees charged by the auditors (of Česká spořitelna, a. s. and subsidiaries; the
auditors primarily being Ernst & Young) in the financial years 2014 and 2013:
CZK mil.
Audit fees
Other consultancy fees
Total
43. Contingent Assets and Liabilities
In the ordinary course of business, the Group becomes party to various financial transactions that are not reflected in the statement of
financial position and are referred to as off-balance sheet financial
instruments. The following represent the notional amounts of these
off-balance sheet financial instruments, unless stated otherwise.
It is not practicable to disclose the information about uncertainties
relating to the amounts or timing of any outflows related to contingent liabilities or the possibility of any related reimbursements.
Legal Disputes
At the reporting date the Group was involved in various claims and
legal proceedings of a nature considered normal to its business. The
Czech legal environment is still evolving, legal disputes are costly
and their outcome unpredictable. Many parts of the legislation
remain untested and there is uncertainty about the interpretation
that courts may apply in a number of areas. The impact of these
uncertainties cannot be quantified and will only be known as the
specific legal disputes in which the Group is named are resolved.
The Group is involved in various claims and legal proceedings of
a special nature. The Group also acts as a defendant in a number of
legal disputes filed with the arbitration court. The Group does not
disclose the details underlying the disputes as the disclosure may
have an impact on the outcome of the disputes and may seriously
harm the Group’s interests.
Whilst no assurance can be given with respect to the ultimate outcome of any such claim or litigation, the Group believes that the
various asserted claims and litigation in which it is involved will
not materially affect its financial position, future operating results
or cash flows.
If, in connection with the litigation, the Group has a present obligation (legal or constructive) as a result of a past event and it is
CZK mil.
Amounts owed under guarantees and letters of credit
Undrawn loan commitments
Total
2014
2013
37
5
43
4
42
47
probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can
be made of the obligation, the Group recognises a provision for
legal disputes (refer to Note 30).
Commitments to Extend Credit and Commitments
from Guarantees and Letters of Credit
Guarantees and standby letters of credit, which represent irrevocable assurances that the Group will make payments in the event
that a customer cannot meet its obligations to third parties, carry
the same credit risk as loans. Documentary and commercial letters
of credit, which are written undertakings by the Group on behalf
of a customer authorising a third party 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 and therefore carry less risk than a direct borrowing.
Commitments to extend credit represent unused portions of clients’
authorisations to extend credit in the form of loans, guarantees
or letters of credit. The credit risk attached to commitments to
extend credit represents a potential loss for the Group. The Group
estimates the potential loss on the basis of historical developments
of CCFs, PDs and LGDs. CCFs indicate the likelihood of the Group
paying out on a guarantee or having to grant a loan on the basis of
an issued commitment to extend credit.
Guarantees, irrevocable letters of credit and undrawn loan commitments are subject to similar credit risk monitoring and credit
policies as utilised in the extension of loans. Management of the
Group believes that the market risk associated with guarantees, irrevocable letters of credit and undrawn loan commitments is minimal.
In 2014, the Group recorded impairment allowances for off-balance sheet risks to cover potential losses that may be incurred
in connection with these off-balance sheet transactions. As at
31 December 2014, the aggregate balance of these allowances
was CZK 248 million (2013: CZK 348 million). Refer to Note 30.
2014
2013
21,410
72,413
21,975
75,248
93,823
97,223
152
Income Statement | Statement of Financial Position | Separate Financial Statements
44. Analysis of Remaining Maturities
The breakdown of the Group’s assets and liabilities based on contractual maturities as at 31 December 2014 and 2013 was as follows:
CZK mil.
Cash and cash balances
Financial assets held for trading
Financial assets designated at fair value through profit or loss
Available-for-sale financial assets
Loans and receivables
Held-to-maturity investments
Derivatives – Hedge accounting
Tangible assets
Investment property
Intangible assets
Tax assets
Other assets
Total Assets
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities measured at amortised cost
Derivatives – Hedge accounting
Provisions
Commitments and guarantees given
Other provisions
Tax liabilities
Other liabilities
Total liabilities
2014
2013
< 1 Year
> 1 Year
< 1 Year
> 1 Year
54,489
23,231
500
30,179
139,103
18,797
878
–
–
–
590
8,104
–
–
772
69,110
399,469
132,716
77,581
47,718
23
24,198
170,281
14,245
895
–
–
–
155
10,319
–
–
4,200
58,097
394,261
140,475
50
14,166
8,330
3,333
73
323
275,871
23,431
6,263
253,784
169
3
1
197
6,443
290,291
13,431
7,342
3,593
112
173
626,718
345,415
623,308
504,515
350,396
517,351
–
3,401
498,175
–
1,833
245
336
322
203
24,024
7,681
308,750
265
–
1
6
479
9,190
–
6,753
506,909
157
1,801
347
439
35
910
45. Details of the Companies Wholly or Partly Owned by the Group a.s. as of
31 December 2014
The tables below present material, fully consolidated subsidiaries, investments in associates accounted for at equity and other investments.
Company name, registered office
2014
2013
Interest in% Interest in%
Fully consolidated subsidiaries
Credit institutions
Stavební spořitelna České spořitelny, a. s.
Other financial institutions
brokerjet České spořitelny, a. s.
CEE Property Development Portfolio 2 a.s. (‘CPDP 2 a.s.’)
CEE Property Development Portfolio B.V. (‘CPDP B.V.’)
CS Investment Limited
CS Property Investment Limited (‘CSPIL’)
Czech and Slovak Property Fund B.V. (‘CSPF B.V.’)
Czech TOP Venture Fund B.V.(‘CTVF B.V.’)
Česká spořitelna – penzijní společnost, a. s.
Erste Leasing, a. s.
Factoring České spořitelny, a. s.
MOPET CZ a.s.
REICO investiční společnost České spořitelny, a. s.
s Autoleasing SK, s. r. o.
s Autoleasing, a. s.
Prague
100.0%
95.0%
Prague
Prague
The
Netherlands
Guernsey
Cyprus
The
Netherlands
The
Netherlands
Prague
Znojmo
Prague
Prague
Prague
Slovakia
Prague
100.0%
100.0%
51.0%
100.0%
20.0%
20.0%
100.0%
100.0%
100.0%
100.0%
20.0%
20.0%
84.0%
84.0%
100.0%
100.0%
100.0%
93.9%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
91.0%
100.0%
100.0%
100.0%
153
Income Statement | Statement of Financial Position | Separate Financial Statements
Company name, registered office
2014
2013
Interest in% Interest in%
Transformovaný fond penzijního připojištění se státním příspěvkem Česká
spořitelna – penzijní společnost, a. s. (‘ČSPS Transformed Fund’)
Other
Atrium Center s. r. o.
BECON s. r. o.
BGA Czech, s. r. o.
Campus Park a.s.
CP Praha s. r. o.
CPDP 2003 s. r. o.
CPDP Logistics Park Kladno I a.s.
CPDP Logistics Park Kladno II a.s.
CPDP Polygon s. r. o.
CPDP Prievozská a.s.
CPDP Shopping Mall Kladno, a. s.
CPP Lux S.A.R.L.
ČS do domu, a. s.
Erste Corporate Finance, a. s.
Erste Energy Services, a. s.
Erste Grantika Advisory, a. s.
Euro Dotácie, a. s.
Gallery MYŠÁK a.s.
Nové Butovice Development s. r. o.
Realitní společnost České spořitelny, a. s.
s IT Solutions CZ, s. r. o.
Smíchov Real Estate, a. s.
Trenčín Retail Park a.s.
VĚRNOSTNÍ PROGRAM IBOD, a. s.
Other investments
Other financial institutions
DINESIA a.s.
Genesis Private Equity Fund B L.P.
Other
CBCB - Czech Banking Credit Bureau, a. s.
Erste Group Shared Services (EGSS), s. r. o.
Investičníweb s.r.o
ÖCI-Unternehmensbeteiligungs G.m.b.H.
Procurement Services CZ, s. r. o.
První certifikační autorita, a. s.
RVG Czech, s.r.o
s IT Solutions SK, spol. s r.o.
S SERVIS, s. r. o.
Trenčín Retail Park 1 a.s.
Trenčín Retail Park 2 a.s.
In spite of the fact that the Group only holds 40% of the issued
share capital of the company and does not have a majority of voting
rights or statutory body representation,the Group’s investment in
s IT Solutions CZ, s. r. o. is also presented as an equity investment
in subsidiary undertakings as the Group is entitled to substantially
all of the profits from the company in accordance with the provisions of the Memorandum of Association on the partners’ share in
the distributable profits.
Prague
0%
100.0%
Slovakia
Prague
Prague
Prague
Prague
Prague
Prague
Prague
Prague
Slovakia
Prague
Luxemburg
Prague
Prague
Prague
Brno
Slovakia
Prague
Prague
Prague
Prague
Prague
Slovakia
Prague
0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
0%
100.0%
100.0%
99.9%
100.0%
100.0%
100.0%
100.0%
66.0%
100.0%
100.0%
100.0%
40.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
99.9%
100.0%
100.0%
100.0%
100.0%
66.0%
100.0%
100.0%
100.0%
40.0%
100.0%
100.0%
100.0%
Prague
Guernsey
100.0%
0%
100.0%
100.0%
Prague
Hodonín
Prague
Austria
Prague
Prague
Prague
Slovakia
Znojmo
Slovakia
Slovakia
20.0%
40.0%
100.0%
40.0%
40.0%
23.3%
100.0%
23.5%
100.0%
100.0%
100.0%
20.0%
40.0%
100.0%
40.0%
40.0%
23.3%
100.0%
23.5%
100.0%
100.0%
100.0%
The Group fully consolidates the investments in the real estate funds
CPDP B.V., and CSPF B.V. in its consolidated financial statements.
While the Group holds 20% of the issued share capital of CPDP
B.V., and CSPF B.V., and does not have a majority of voting rights
or Board representation, it has provided significant additional funding to the funds for investment purposes which results in the Group
receiving substantially all of the rewards and bearing substantially
all of the risks of the investment.
154
Income Statement | Statement of Financial Position | Separate Financial Statements
All investments consolidated in previous periods using the equity
method were sold in 2013. With a view to managing foreign currency risk exposures associated with the Bank’s investments in the
foreign subsidiaries CS Investment Limited, CSPIL, CTVF and
CSPF B.V. denominated in EUR, the Bank has defined these investments as hedged items within a net investment hedge. Hedging
instruments include foreign currency interest rate swaps. The portion of the gain or loss on the hedging instrument that is determined
to be an effective hedge is recognised through Other comprehensive
income directly in equity.
During the year ended 31 December 2014, the portfolio of subsidiary
and associate undertakings underwent the following changes:
–– In February 2014 Genesis Private Equity Fund B L.P. closed
its business.
–– In April 2014 GRANTIKA České spořitelny, a.s changed its
name to Erste Grantika Advisory, a. s.
–– In May 2014 sold 100% of its interest in Atrium Center s. r. o.
–– In June 2014 the Bank bought additional shares in Brokerjet a.
s. for CZK 87 million from the existing shareholders and
–– increased the share capital held by the Bank from 51% to
100%.
–– In August 2014 MOPET CZ a.s. decided to increase its
share capital by CZK 25 million and the Bank as the only
shareholder participated in this shares’subscription ; the
share capital held by the Bank increased from 91% to 94%.
–– In October 2014 CPDP 2 N.V. moved its registered seat
and head office from Netherland into Czech Republic and
changed legal status from joint - stock company (N.V.)
to joint - stock company (a.s.) - i.e. to CPDP 2 a.s.. This
change was acknowledged by the Czech commercial
register in October 2014.
–– In October 2014 sold 100% of its interest in Polygon s. r. o.
for CZK 103 million.
–– In December 2014 the Bank bought additional shares
In Stavební spořitelna České spořitelny, a. s. for
CZK 318 million. from the existing shareholders and
increased the share capital held by the Bank from 95% to
100%.
46. Events After the Balance Sheet Date
In its Resolution of 27 January 2015 Municipal Court of Prague
approved the restructuring as the method that CP Praha s.r.o plans to
resolve its current solvency issues. This does not anyhow affect the
going concern basis on which the consolidated financial statements
of the Group have been prepared.
155
Statement of Financial Position | Separate Financial Statements | Independent Auditor’s Report
Separate Financial Statements
For the Year Ended 31 December 2014
Prepared in Accordance with International Financial Reporting
Standards as Adopted by the European Union
Independent Auditors’ Report
Income Statement and Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Shareholders’ Equity
Statement of Cash Flows
Notes to the Separate Financial Statements
148
149
150
151
152
153
156
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Česká spořitelna, a. s.:
We have audited the accompanying financial statements of Česká spořitelna, a. s., which comprise the statement of financial position as
at 31 December 2014, and the income statement, statement of comprehensive income, statement of changes in total equity and cash flow
statement for the year then ended, and a summary of significant accounting policies and other explanatory information. For details of Česká
spořitelna, a. s., see part A to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial
Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with
the Act on Auditors and International Standards on Auditing as amended by implementation guidance of the Chamber of Auditors of the
Czech Republic. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including an assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of Česká spořitelna, a. s. as at
31 December 2014, and its financial performance and its cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union.
License No. 401
Roman Hauptfleisch, Auditor
License No. 2009
3 March 2015
Prague, Czech Republic
A member firm of Ernst & Young Global Limited,
Ernst & Young Audit, s. r. o. with its registred office at Na Florenci 2116/15, 110 00 Prague 1 – Nové Město,
has been incorporated in the Commercial Register administered by the Municipal Court in Prague,
Section C, entry No. 88504, under Identification No. 26704153.
157
Independent Auditor’s Report | Income Statement and Statement of Comprehensive Income | Statement of Financial Position
Income Statement and Statement of
Comprehensive Income
For the Year ended 31 December 2014
Income Statement
CZK mil.
Net interest income
Net fee and commission income
Dividend income
Net trading and fair value result
Rental income from investment properties & other operating leases
Personnel expenses
Other administrative expenses
Depreciation and amortisation
Gains/losses from financial assets and liabilities not measured at fair value
through profit or loss, net
Net impairment loss on financial assets not measured at fair value through profit
or loss
Other operating result
Pre-tax result from continuing operations
Taxes on income
Post-tax result from continuing operations
Net result for the period
Notes
2014
2013
reclassified
1
2
3
4
5
6
6
6
24,820
10,486
641
2,342
106
(7,561)
(7,155)
(1,937)
25,532
11,051
1,881
2,100
79
(7,908)
(7,310)
(1,950)
7
149
209
8
(3,284)
(3,240)
9
10
(390)
(509)
18,217
19,935
14,801
14,801
16,220
16,220
(3,416)
(3,715)
Statement of Comprehensive Income
CZK mil.
Notes
Net result for the period
Items that may be reclassified to profit or loss
2014
2013
14,801
1,429
16,220
(79)
Available for sale reserve
Gain/(loss) during the period
Cash flow hedge reserve
Gain/(loss) during the period
10
1,589
(109)
10
175
11
Gain/(loss) during the period
10, 25
Deferred taxes relating to items that may be reclassified
Total
Total other comprehensive income
Total comprehensive income for the year
(335)
1,429
1,429
16,230
19
(79)
(79)
16,141
The accompanying notes are an integral part of these financial statements.
158
Income Statement and Statement of Comprehensive Income | Statement of Financial Position | Statement of Changes in Total Equity
Statement of Financial Position
As of 31 December 2014
CZK mil.
Assets
Cash and cash balances
Financial assets - held for trading
Derivatives
Other trading assets
Financial assets – designated at fair value through profit or loss
Financial assets - available for sale
Financial assets - held to maturity
Loans and receivables to credit institutions
Loans and receivables to customers
Derivatives - hedge accounting
Property and equipment
Intangible assets
Investments in subsidaries and associates
Current tax assets
Deferred tax assets
Other assets
Notes
2014
2013
reclassified
1 January
2013
12
50,157
23,312
18,821
4,491
679
99,033
141,326
37,233
465,525
878
13,019
3,289
8,029
499
–
1,859
76,440
47,865
21,315
26,550
4,101
61,158
134,380
49,384
456,208
895
13,732
3,043
5,968
–
2
2,703
21,491
66,755
25,874
40,881
7,144
45,671
159,955
47,975
434,676
1,120
12,686
2,936
6,396
–
–
1,990
13
14,18
15,18
16,18
17,18
19
20
21
22
23
24
25
25
26
Total assets
Liabilities and equity
Financial liabilities - held for trading
Derivatives
Other trading liabilities
Financial liabilities – designated at fair value through profit or loss
Deposits from customers
Debt securities issued
Financial liabilities measured at amortised cost
Deposits from banks
Deposits from customers
Debt securities issued
Other financial liabilities
Derivatives - hedge accounting
Provisions
Current tax liabilities
Deferred tax liabilities
Other liabilities
Total equity
Total liabilities and equity
13
27
28
29
21
30
25
25
31
32
844,838
855,879
808,795
23,441
20,664
2,777
9,664
8,874
790
701,816
73,397
587,234
38,710
2,475
169
2,323
–
312
3,802
24,029
24,029
–
14,433
12,615
1,818
711,612
97,830
568,470
45,312
–
265
2,460
347
–
6,532
26,177
26,174
3
17,903
15,908
1,995
666,827
63,671
549,406
53,750
–
48
2,150
102
172
7,823
103,311
844,838
96,201
855,879
87,593
808,795
The accompanying notes are an integral part of these financial statements.
These separate financial statements were prepared by the Bank and authorized for issue by the Board of Directors on 3 March 2015 and
are subject to approval at the General Meeting of shareholders.
Pavel Kysilka
Chairman of the Board of Directors
Wolfgang Schopf
Vice-chairman of the Board of Directors
159
Statement of Financial Position | Statement of Changes in Total Equity | Statement of Cash Flow Statement of Cash Flow
Statement of Changes in Total Equity
For the Year ended 31 December 2014
CZK mil.
Subscribed capital
Capital reserves
Retained earnings
Legal and statutory
reserve
15,200
12
68,498
3,040
–
–
9
–
(88)
–
–
16,220
–
–
–
–
–
–
As of 31 December 2013
15,200
As of 1 January 2014
As of 31 December 2014
As of 1 January 2013
Dividends paid
Total comprehensive income
Net result for the period
Other comprehensive income
Retained earnings of the dissolving
company
Dividends paid
Total comprehensive income
Net result for the period
Other comprehensive income
Equity attributable to
owners of the parent
Total equity
843
87,593
87,593
–
–
16,220
16,220
–
9
(88)
(79)
(79)
67
–
–
–
67
67
12
77,185
3,040
9
755
96,201
96,201
15,200
12
77,185
3,040
9
755
96,201
96,201
15,200
12
82,866
3,040
2,042
103,311
103,311
–
–
–
–
–
–
–
–
–
–
–
–
(7,600)
16,220
(9,120)
14,801
14,801
–
–
–
–
–
–
–
Cash flow hedge reserve Available for sale reserve
–
142
–
142
151
–
1,287
–
1,287
(7,600)
16,141
(9,120)
16,230
14,801
1,429
(7,600)
16,141
(9,120)
16,230
14,801
1,429
The accompanying notes are an integral part of these financial statements.
160
Statement of Changes in Total Equity | Statement of Cash Flow Statement of Cash Flow | Notes to the Financial Statements
Statement of Cash Flow Statement of Cash
Flow
For the year ended 31 December 2014
CZK mil.
Net profit/loss for the year
Non-cash adjustments for items in net profit/loss for the year
Allocation to and release of provisions (including risk provisions)
Depreciation, amortisation, impairment and reversal of impairment, revaluation of
assets
Gains/(losses) from the sale of assets
Change in fair values of derivatives
Accrued interest, amortisation of discount and premium
Other adjustments
Changes in assets and liabilities from operating activities after adjustment for non-cash
components
Deposits with CNB
Loans and advances to credit institutions
Loans and advances to customers
Trading assets
Financial assets - at fair value through profit or loss
Financial assets - available for sale
Other assets from operating activities
Deposits by banks
Customer deposits
Trading liabilities
Other liabilities from operating activities
Payments for taxes on income
Notes
6
Cash flow from operating activities
2014
2013
Reclassified
18,217
19,935
3,768
3,270
1,937
1,950
(59)
(950)
(1,865)
150
(25)
2,804
745
1
(6,111)
12,318
(11,871)
15,518
3,378
(37,014)
704
(38,459)
18,568
(1,991)
21
(4,304)
(6,924)
(1,193)
(26,256)
19,357
3,193
(4,784)
(549)
35,788
19,478
(3,472)
(1,398)
(3,780)
3,141
296
47,570
59
(17,011)
(1,959)
(2,688)
605
(29,893)
(1,759)
(962)
845
(9,026)
(94)
(1,904)
1,418
(6,200)
(7,522)
(78)
(169)
1,925
(10,140)
(28,045)
Proceeds of disposal
Financial assets - held to maturity and associated companies
Property and equipment, intangible assets and investment properties
Acquisition of
Financial assets - held to maturity and associated companies
Property and equipment, intangible assets and investment properties
Acquisition of subsidiaries (net of cash and cash equivalents acquired)
Disposal of subsidiaries
58,140
Cash flow from investing activities
(17,616)
Cash flow from financing activities
Cash and cash equivalents at beginning of period
(15,806)
93,923
(15,984)
35,907
32,456
93,923
Dividends paid to equity holders of the parent
Dividends paid to non-controlling interests
Other financing activities (mainly changes of subordinated liabilities)
Proceeds from bonds issued
Repurchase of bonds in issue
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash and cash equivalents at end of period
Cash flows related to taxes, interest and dividends
Payments for taxes on income (included in cash flow from operating activities)
Interest received
Dividends received
Interest paid
Dividends paid
The accompanying notes are an integral part of these financial statements.
12
(28,045)
(17,616)
(15,806)
(4,304)
25,713
641
3,353
(9,120)
15,860
58,140
15,860
(15,984)
(3,780)
30,359
1,881
4,385
(7,600)
161
Statement of Cash Flow Statement of Cash Flow | Notes to the Financial Statements | Income Statement
Notes to the Financial Statements
For the year ended 31 December 2014
A. General Information
Česká spořitelna, a. s. (‘the Bank’), having its registered office
address at Olbrachtova 1929/62, Prague 4, 140 00, Corporate
ID 45244782, is the legal successor of the Czech State Savings
Bank and was founded as a joint stock company in the Czech
Republic on 30 December 1991. The Bank is a universal bank
offering retail, corporate and investment banking services within
the Czech Republic.
The Bank’s majority shareholder is EGB Ceps Holding GmbH,
which is a 100% subsidiary of EGB Ceps Beteiligungen GmbH,
a wholly-owned subsidiary of Erste Group Bank AG (‘Erste Group
Bank’) which is the ultimate parent. The Bank together with subsidiaries and associated companies forms the Group.
The Bank is subject to the regulatory requirements of the Czech
National Bank (‘CNB’), the banking Act and EU guidelines/
directives. These regulations include those pertaining to minimum
capital adequacy requirements, categorization of exposures and
off-balance sheet commitments, credit risk connected with clients
of the Bank, liquidity, interest rate risk, foreign currency positions
and operating risk.
The Bank offers a complete range of banking and other financial
services, such as savings and current accounts, asset management,
consumer credit and mortgage lending, investment banking, securities and derivatives trading, portfolio management, project finance,
foreign trade financing, corporate finance, capital and money market services and foreign exchange trading.
B. Significant Accounting Policies
a) Basis of Preparation
The financial statements of the Bank for the 2014 financial year
and the comparative information were prepared in compliance with
applicable International Financial Reporting Standards as adopted
by the European Union (‘IFRS’) on the basis of IAS Regulation
(EC) No. 1606/2002.
The financial statements have been prepared on a historical cost
basis, except for financial assets available-for-sale, derivative financial instruments, financial assets and liabilities held for trading, and
financial assets and liabilities designated at fair value through profit
or loss, all of which have been measured at fair value. The carrying
values of recognised assets and liabilities that are designated as
hedged items in fair value hedges that would otherwise be carried
at amortised cost are adjusted to record changes in the fair values
attributable to the risks that are being hedged in effective hedge
relationships.
The financial statements have been prepared on a going concern
basis.
Except as otherwise indicated, all amounts are stated in millions
of Czech crowns (‘CZK’). The tables in this report may contain
rounding differences.
b) Accounting and Measurement
Methods
Changes in the Structure of the Statement of
Financial Position and the Income Statement
In 2014 the Bank changed the structure of its statement of financial
position and income statement, in order to provide reliable and more
relevant information about its financial position and performance.
Consequently, the structure of numerous explanatory notes was
adapted and the related figures were reclassified.
The new structure has also been introduced in order to generate
synergies in addressing the new IFRS-based Financial Reporting
regulatory requirements (“FINREP”). FINREP was introduced
in 2014 by the European Banking Authority (“EBA”) and it represents a mandatory regulatory reporting framework applicable to
EU based banking institutions. Due to harmonization, the comparability between published reports of the regulators and the Bank
has been significantly improved.
Application of changed structure has no impact to already published
results or Financial statements of the Bank in the past. Comparative
information in Financial statements of the Bank for year ended
31 December 2014 has been changed based on new structure.
162
Statement of Cash Flow Statement of Cash Flow | Notes to the Financial Statements | Income Statement
Summary of major changes in the structure in income statement:
–– Dividend income and Rental income from investment
properties and other operating leases are disclosed each on
separate line in Income statement
–– Contribution to Deposit insurance fund is now part of Other
administrative expenses (in the past part of Other operating
result).
–– Separate line for “Net impairment loss on financial assets
and liabilities not measured at fair value through profit or
loss” includes net impairment loss for all financial assets
and liabilities classified as not measured at fair value
through profit or loss
–– Consolidation of net trading and fair value result into one
line „ Net trading and fair value result“
–– Split of general administrative expenses into three separate
lines „Personnel expenses“, „ Other administrative
expenses“ and „Depreciation and amortisation“
Summary of major changes in the structure in statement of financial
position:
–– Loans and receivables to credit institutions and Loans and
receivables to customers are reported at the carrying amount
net of allowances due to impairment
–– Reallocation of hedging derivatives into separate line
Derivatives - hedge accounting
–– Reallocation of subordinated liabilities into separate lines
based on the categories of respective financial liablities.
–– Reclassification of Other financial liabilities as of
1 January 2014 to Financial liabilities measured at
amortised costs in amout of CZK 1,677 million.
–– Reclassification of Other financial assets incl. Allowances
for other financial assets as of 1 January 2014 in amount
of CZK 1.011 million from Other assets to Loans and
receivables to credit institutions, Loans and receivables
to customers and Allowances for loans and receivables to
customers.
–– Reclassification of Other financial assets as of
1 January 2014 in amount of CZK 247 million from Other
assets to Loans and receivables to customers.
–– Reclassification of Other demand deposits as of
1 January 2014 in amount of CZK 12,161 million from
Loans and receivables to credit institutions into Cash
and cash balances and Other financial assets in amount
of CZK 764 million from Other assets to Loans and
receivables to credit institutions.
The Following Tables show the relationships between the old and
new statement of financial position and income statement line items
163
Notes to the Financial Statements | Income Statement | Statement of Financial Position
Income Statement
CZK mil.
Switch of
dividend
income
Dec 13 Old structure
27,492 Net interest and similar income
(2,951) Impairment allowance for credit risk
11,050 Net fee and commission income
2,593 Net trading result
Total general administrative
(16,309)
expenses
(915) Other operating result: Other
Other operating result: Result from
(493) financial instruments – at fair value
through profit or loss
Other operating result: Result from
financial assets - available for sale
Other operating result: Result from
121
financial assets - held to maturity
(653)
(1,881)
–
Switch of Split of general
rental and administrative
leasing
expenses
income
(79)
–
–
–
Consolidation Reallocation
of net trading
of other
and fair value
operating
result
result
–
–
–
–
Reallocation
of deposit
insurance
contribution
Switch of
Commitments
and guarantees
given
–
–
–
(90)
Switch of
Switch of
Switch of
realised AfS impairment on off balance
or HtM gains/ financial assets
sheet
losses
(HTM, AFS) provisions
–
–
–
–
–
3,041
Rounding
New structure
–
–
–
–
–
–
–
–
–
–
1,881
–
–
–
–
–
–
(2,593)
–
–
–
–
–
–
–
–
–
–
–
–
– Net interest income
–
Net fee and
1
commission income
– Dividend income
–
–
–
16,309
–
–
–
–
–
–
–
–
–
–
–
–
928
–
–
–
(13)
–
–
–
–
–
2,593
–
–
–
–
–
–
–
–
79
–
–
–
–
–
–
–
–
–
–
–
(7,908)
–
–
–
–
–
–
–
–
–
–
(6,451)
–
–
(859)
–
–
–
–
–
–
–
(1,950)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
195
13
–
1
–
–
–
–
–
–
–
(74)
727
–
–
–
–
–
–
–
–
–
(121)
–
–
–
–
–
–
–
–
–
–
–
(199)
(3,041)
–
–
–
–
(928)
859
90
–
(528)
–
19,935 Profit before tax
–
–
–
–
–
–
–
–
–
–
(3,715) Income tax expense
–
–
–
–
–
–
–
–
–
–
16,220 Post-tax profit
–
–
–
–
–
–
–
–
–
–
16,220 Profit for the year
–
–
–
–
–
–
–
–
–
–
Net trading and fair
value result
Rental income
from investment
properties & other
operating leases
Personnel expenses
Other administrative
expenses
Depreciation and
amortisation
Gains/losses from
financial assets
and liabilities not
measured at fair
value through profit
or loss, net
Net impairment loss
on financial assets
– not measured at fair
value through profit
or loss
Other operating
(2)
result
Pre-tax result
– from continuing
operations
– Taxes on income
Post-tax result
– from continuing
operations
result for the
– Net
period
Dec 13
25,532
11,051
1,881
2,100
79
(7,908)
(7,310)
(1,950)
209
(3,240)
(509)
19,935
(3,715)
16,220
16,220
164
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Statement of Financial Position
Assets
CZK mil.
Switch to net
book value
of loans and
receivables
Product
split into
measurement
categories
Rounding
Dec 13 Old structure
76,441
Cash and balances
with the Czech National
Bank
Loans and advances to
financial institutions, net
Loans and advances to
customers
Impairment allowances
for loans and advances
to customers
New structure
–
–
(49,384)
–
–
–
(472,886)
–
–
–
16,679
–
–
–
–
–
–
–
(895)
–
–
–
(1)
–
–
–
–
–
–
–
–
–
–
49,384
–
–
–
456,207
–
1
–
–
895
–
–
–
–
–
–
–
–
–
–
5,968
–
–
–
–
– Deferred tax assets
1 Other assets
2
2,703
49,384
472,886
(16,679)
22,210
26,551
4,101
61,158
134,380
Positive fair value of
derivative transactions
Trading assets
Financial assets
designated at fair value
through profit or loss
Financial assets
available for sale
Financial assets held to
maturity, net
13,732 Property and equipment
3,043 Intangible assets
Equity investments
5,968 in subsidiary and
associate undertakings
2 Deferred tax assets
2,702 Other assets
855,879 Total assets
–
–
(1) Cash and cash balances
Dec 13
Financial assets - held
for trading
Derivatives
Other trading assets
Financial assets
designated at fair value
through profit or loss
Financial assets available for sale
Financial assets - held
to maturity
Loans and receivables
to credit institutions
Loans and receivables
to customers
Derivatives - hedge
accounting
Property and equipment
Intangible assets
– Total assets
76,440
–
21,315
26,550
4,101
61,158
134,380
49,384
456,207
895
13,732
3,043
855,879
165
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Statement of Financial Position
Liabilities and Equity
CZK mil.
Reallocation
of
subordinated
liabilities
Reallocation
derivatives
Product
split into
measurement
categories
–
–
–
– New structure
–
–
–
–
–
24,029
–
–
–
–
–
–
–
–
12,615
–
–
–
1,818
–
–
–
–
–
–
–
–
–
–
–
–
2,096
–
–
–
265
–
–
(24,294)
–
–
–
–
(14,433)
(1)
–
–
–
347 Income tax liability
–
–
–
6,531 Other liabilities
2,096 Subordinated debt
96,201 Total equity
–
–
–
–
–
–
–
–
–
–
–
–
Dec 13 Old structure
Amounts owed
97,830 to financial
institutions
Amounts owed to
568,470
customers
43,216 Bonds in issue
Negative fair
24,294 value of derivative
transactions
Financial liabilities
14,434
at fair value
2,460 Provisions
liabilities
855,879 Total
and equity
Foreign Currency Translation
The financial statements are presented in Czech crowns, which is the
functional currency of the Bank. The functional currency is the currency of the primary business environment in which the Bank operates.
Rounding
Financial
liabilities - held
for trading
Derivatives
Financial
liabilities
designated
at fair value
through profit
or loss
Deposits from
customers
Debt
securities
issued
Financial
liabilities
measured at
amortised cost
Deposits from
banks
Deposits from
customers
Debt
–
securities
issued
Derivatives
– - hedge
accounting
–
– Provisions
Current tax
–
liabilities
1 Other liabilities
–
– Total equity
Total
– liabilities and
equity
Dec 13
24,029
12,615
1,818
97,830
568,470
45,312
265
2,460
347
6,532
96,201
855,879
For foreign currency translation, exchange rates quoted by the
Czech National Bank are used.
166
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
(i) Transactions and Balances in Foreign
Currency
Transactions in foreign currencies are initially recorded at the
functional currency exchange rate effective as of the date of the
transaction. Subsequently, monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
exchange rate as of the balance sheet date. All resulting exchange
differences that arise are recognised in the income statement under
the line item ‘Net trading and fair value result’. Non-monetary
items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as of the dates of
the initial transactions. Non–monetary items measured at fair value
in a foreign currency are translated using the exchange rates at the
date when the fair value was determined.
Financial Instruments – Recognition and
Measurement
A financial instrument is any contract giving rise to a financial
asset of one party and a financial liability or equity instrument of
another party. In accordance with IAS 39, all financial assets and
liabilities – which also include derivative financial instruments –
have to be recognised on the statement of financial position and
measured in accordance with their assigned categories.
Bank uses the following categories of financial instruments:
–– financial assets or financial liabilities at fair value through
profit or loss
–– available-for-sale financial assets
–– held-to-maturity investments
–– loans and receivables
–– financial liabilities measured at amortised cost
IAS 39 categories of financial instruments are not necessarily
the line items presented on thestatement of financial position.
Relationships between the statement of financial position line items
and categories of financial instruments are described in the table
at point (xii).
(i) Initial Recognition
Financial instruments are initially recognised when the Bank
becomes a party to the contractual provisions of the instrument.
Regular way (spot) purchases and sales of financial assets stated
at fair value are recognised at trade date and for financial assets
not stated at fair value at settlement date . Regular way trades
are purchases or sales of financial assets that require delivery of
assets within the time frame generally established by regulation
or convention in the market place. The classification of financial
instruments at initial recognition depends on their characteristics
as well as the purpose and management’s intention for which the
financial instruments were acquired.
(ii) Initial Measurement of Financial Instruments
Financial instruments are measured initially at their fair value
including transaction costs. In the case of financial instruments at
fair value through profit or loss, however, transaction costs are not
included but are recognised directly in profit or loss. Subsequent
measurement is described in the chapters below.
(iii) Cash and Cash Balances
The Bank considers cash and deposits with the CNB, treasury bills and
treasury bonds with a residual maturity of three months or less and nostro and loro accounts with financial institutions to be cash equivalents.
Cash balances include only claims (deposits) against central banks
and credit institutions that are repayable on demand. Repayable
on demand means that they may be withdrawn at any time or with
a term of notice of only one business day or 24 hours. Mandatory
minimum reserves are also shown under this item.
(iv) Derivative Financial Instruments
Derivatives used by the Bank include mainly interest rate swaps,
futures, forward rate agreements, interest rate options, currency
swaps and currency options as well as credit default swaps.
Derivatives are measured at fair value. Derivatives are carried as
assets when their fair value is positive and as liabilities when their
fair value is negative.
For presentation purposes derivatives are split into
–– derivatives – held for trading; and
–– derivatives – hedge accounting
Derivatives – held for trading are those which are not designated as hedging instruments. They are presented in the line item
‘Derivatives’ under the heading ‘Financial assets / financial liabilities – held for trading’. All kinds of non-hedging derivatives without
regard to their internal classification, i.e. both derivatives held in
the trading book and banking book are presented in this line item.
Changes in fair value (clean price) of derivatives – held for trading
are recognised in the income statement in the line item ‘Net trading
and fair value result’.
Interest income/expense related to derivatives – held for trading is
recognised in the income statement under the line item ‘Net interest
income’ if held in the banking book or under the line item ‘Net
trading and fair value result’ if held in the trading book.
Derivatives – hedge accounting are those which are designated as
hedging instruments in hedges fulfilling the conditions of IAS 39.
In the statement of financial position, they are presented in the line
item ‘Derivatives - hedge accounting’ on asset or liability side.
Changes in fair value (clean price) of derivatives in fair value
hedges are recognised in the income statement in the line item ‘Net
trading and fair value result’. Effective part of changes in fair value
(dirty price) of derivatives in cash flow hedges is reported in other
comprehensive income in the line item ‘Cash flow hedge reserve’.
Ineffective part of changes in fair value (dirty price) of derivatives
in cash flow hedges is recognised in the income statement under
the line item ‘Net trading and fair value result’.
167
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Interest income/expense related to derivatives in fair value hedges
is recognised in the income statement in the line item ‘Net interest
income’. Interest income/expense from hedging derivatives in cash
flow hedges is part of the dirty price measurement which is split
into effective part and ineffective part as described above.
(v) Financial Assets and Financial Liabilities Held for Trading
Financial assets and financial liabilities – held for trading comprise
derivatives and other trading assets and liabilities. Treatment of
derivatives – held for trading is discussed above in (iv).
Other trading assets and liabilities are non-derivative instruments.
They include debt securities as well as equity instruments acquired
or issued principally for the purpose of selling or repurchasing in the
near term. In the statement of financial position, they are presented
as ‘Other trading assets’ or ‘Other trading liabilities’ under the
heading ‘Financial assets / financial liabilities – held for trading’ .
Changes in fair value (clean price for debt instruments) resulting
from other trading assets and liabilities are reported in the income
statement under the line item ‘Net trading and fair value result’.
Interest income and expenses are reported in the income statement under the line item ‘Net interest income’. Dividend income
is shown under the line item ‘Dividend income’.
If securities purchased under agreement to resell or borrowed
through securities lending transactions are subsequently sold to
third parties, the obligation to return the securities is recorded as
a short sale within ‘Other trading liabilities’.
(vi) Financial Assets or Financial Liabilities
Designated at Fair Value Through Profit or Loss
Financial assets or financial liabilities classified in this category
are those that have been designated by management on initial recognition (fair value option).
The Bank uses the fair value option in the case of financial assets
managed on a fair value basis. In accordance with a documented
investment strategy, the performance of the portfolio is evaluated
and regularly reported to the management board. The portfolio
contains mostly items of Funds, Financials and Sovereigns.
Financial assets - designated at fair value through profit or loss are
recorded on the statement of financial position at fair value under
the line item ‘Financial assets - designated at fair value through
profit or loss’, with changes in fair value recognised in the income
statement under the line item ‘Net trading and fair value result’.
Interest earned on debt instruments is reported under the line item
‘Net interest income’. Dividend income on equity instruments is
shown under the line item ‘Dividend income’.
Furthermore, the Bank uses the fair value option in case of some
hybrid financial liabilities. This is relevant when:
–– such classification eliminates or significantly reduces
an accounting mismatch between the financial liability
otherwise measured at amortised cost and the related
derivative measured at fair value; or
–– the entire hybrid contract is designated at fair value
through profit or loss due to the existence of an embedded
derivative.
The amount of fair value change attributable to changes in own
credit risk for financial liabilities designated at fair value through
profit or loss is calculated by the method described by IFRS 7.
This amount is the difference between the present value of the
liability and the observed market price of the liability at the end
of the period. The rate used for discounting the liability is the sum
of the observed (benchmark) interest rate at the end of the period
and the instrument-specific component of the internal rate of return
determined at the start of the period.
Financial liabilities designated at fair value through profit or loss
are reported in the statement of financial position under the line
item ‘Financial liabilities designated at fair value through profit
or loss’ further broken down into ‘Deposits from customers’ and
‘Debt securities issued’. Changes in fair value are recognised in
the income statement under the line item ‘Net trading and fair
value result’. Interest incurred is reported under the line item ‘Net
interest income’.
(vii) Financial Assets – Available for Sale
Available-for-sale financial assets include debt and equity securities
as well as other interests in entities with lower than significant
influence. Equity investments classified as available for sale are
those that are neither classified as held for trading nor designated
at fair value through profit or loss. Debt securities in this category
are those that are intended to be held for an indefinite period of
time and that may be sold in response to needs for liquidity or in
response to changes in market conditions.
Available-for-sale financial assets are measured at fair value. On the
statement of financial positin, available-for-sale financial assets are
disclosed under the line item ‘Financial assets – available for sale’.
Unrealised gains and losses are recognised in other comprehensive
income and reported in the ‘Available for sale reserve’ until the
financial asset is disposed of or impaired. If available-for-sale assets
are disposed of or impaired, the cumulative gain or loss previously
recognised in other comprehensive income is reclassified to profit or
loss and reported in the line item ‘Gains/losses on financial assets
and liabilities not measured at fair value through profit or loss, net’
in case of sale or in the line item ‘Net impairment loss on financial
assets’ in case of impairment.
Interest income on available-for-sale financial assets is reported
under the line item ‘Net interest income’. Dividend income is
reported under the line item ‘Dividend income’.
If the fair value of investments in non-quoted equity instruments
cannot be measured reliably, they are recorded at cost less impairment. This is the case when the range of reasonable fair value
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estimates as calculated by valuation models is significant and the
probabilities of the various estimates cannot be reasonably assessed.
There is no market for such investments.
(viii) Financial Assets – Held to Maturity
Non-derivative financial assets with fixed or determinable payments
and fixed maturities are classified as held-to-maturity and reported
on the statement of financial position as ‘Financial assets – held
to maturity’ if the Bank has the intention and ability to hold them
until maturity. After initial recognition, held-to-maturity financial
assets are measured at amortised cost. Amortised cost is calculated
by taking into account any discount, premium and/or transaction
costs that are an integral part of the effective interest rate.
Interest earned on financial assets held to maturity is reported in the
income statement under the line item ‘Net interest income’. Losses
arising from impairment of such financial assets are presented as
‘Net impairment loss on financial assets’. Occasional realised gains
or losses from selling are recognised in the income statement under
the line item ‘Gains/losses on financial assets and liabilities not
measured at fair value through profit or loss, net’.
–– those for which the Bank may not recover substantially
all of its initial investment, other than because of credit
deterioration.
After initial recognition, loans and receivables are measured at
amortised cost. Interest income earned is included under the line
item ‘Net interest income’ in the income statement.
Impairment losses arising from loans and receivables are recognised
in the income statement under the line item ‘Net impairment loss
on financial assets’.
(x) Financial Liabilities Measured at Amortised
Cost
Financial liabilities are measured at amortised cost, unless they are
measured at fair value through profit or loss.
For presentation in the statement of financial position the line item
‘Financial liabilities measured at amortised cost’ is used. The liabilities
are further broken down by ‘Deposits from banks’, ‘Deposits from
customers’, ‘Debt securities issued’ and ‘Other financial liabilities’.
(ix) Loans and Receivables
Interest expenses incurred are reported in the line item ‘Net interest
income’ in the income statement. Gains and losses from derecognition (mainly repurchase) of financial liabilities at amortised cost
are reported under the line item ‘Gains/losses from financial assets
and liabilities not measured at fair value through profit or loss, net’.
Loans and receivables are non-derivative financial assets (including
debt securities) with fixed or determinable payments that are not
quoted in an active market, other than:
–– those that the Bank intends to sell immediately or in the
near term and those that the Bank upon initial recognition
designates as at fair value through profit or loss;
–– those that the Bank, upon initial recognition, designates as
available for sale; or
(xi) ‘Day 1’ Profit
The statement of financial position line items ‘Loans and receivables to credit institutions’ and ‘Loans and receivables to customers’ include financial assets meeting the definition of loans and
receivables.
Where the transaction price differs from the fair value derived from
other observable transactions for the identical instrument in active
market or derived using valuation techinique that has all significant
inputs based on observable markets data, the Bank immediately
recognises the difference between the transaction price and the fair
value (a Day 1 profit) in the income statement in line item ‘Net
trading and fair value result’.
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(xii) Relationships Between Statement of Financial Position Items, Measurement Methods and
Categories of Financial Instruments:
Statement of financial position position
Measurement principle Financial instrument category
Fair value
At
amortised
cost
Assets
Cash and cash balances
x
Financial assets - held for trading
Derivatives
x
Other trading assets
x
Financial assets - at fair value through profit
or loss
Financial assets - available for sale
Financial assets - held to maturity
Loans and receivables to credit institutions
Loans and receivables to customers
Derivatives - hedge accounting
x
x
x
x
x
x
Other
Nominal
value
n/a
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Available for sale financial assets
Held to maturity investments
Loans and receivables
Loans and receivables
n/a
Liabilities and equity
Financial liabilities - held for trading
Derivatives
x
Other trading liabilities
x
Financial liabilities - at fair value through profit
or loss
x
Financial liabilities measured at amortised cost
Derivatives - hedge accounting
x
x
Furthermore, two additional classes of financial instruments which
are not presented in the table above are part of IFRS 7 disclosures.
These are financial guarantees and irrevocable credit commitments.
Embedded Derivatives
Financial liabilities - at fair value
through profit or loss
Financial liabilities - at fair value
through profit or loss
Financial liabilities - at fair value
through profit or loss
Financial liabilities measured at
amortised cost
n/a
and deposits that contain interest caps, floors or collars that were
in the money at origination, contractual features linking payments
to non-interest variables such as FX rates, equity and commodity
prices and indices, or third-party credit risk.
The Bank, as part of its business, is confronted with debt instruments containing structured features. Structured features mean that
a derivative is embedded in the host instruments. Embedded derivatives are separated from the host debt instruments if
–– the economic characteristics of the derivatives are not
closely related to the economic characteristics and risks of
the host debt instruments;
–– the embedded derivative meets the IAS 39 definition of
derivative; and
–– the hybrid instrument is not a financial asset or liability held
for trading or designated at fair value through profit or loss.
Reclassifications of Financial Assets
Embedded derivatives that are separated are accounted for as
stand-alone derivatives and presented on the statement of financial
position under the line item ‘Derivatives’ in financial assets – held
for trading.
Derecognition of Financial Assets and Financial
Liabilities
At the Bank, derivatives that are not closely related and are separated are predominantly embedded in issued host debt instruments
recognised as liabilities. The most typical cases are issues of bonds
IAS 39 provides various possibilities to reclassify financial assets
between categories of financial instruments. It also places restrictions on some reclassifications. The Bank makes use of reclassification alternatives only in the case of held-to-maturity financial assets.
If a significant credit deterioration in a held-to-maturity financial
asset results in a change in the intention and ability to hold the
asset until maturity, the asset is reclassified into available-for-sale
financial assets category. Such reclassifications are not included
in the limit that triggers automatic reclassification of the entire
held-to-maturity portfolio.
A financial asset (or where applicable part of a financial asset or
part of a group of similar financial assets) is derecognised when:
–– the contractual rights to receive cash flows from the asset
have expired; or
–– the Bank has transferred its rights to receive cash flows
from the asset
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or has assumed an obligation to pay the received cash flows in
full without material delay to a third party under a ‘pass-through’
arrangement;
and either:
–– it has transferred substantially all the risks and rewards
connected with the ownership of the asset, or
–– has neither transferred nor retained substantially all the risks
and rewards connected with the ownership of the asset but
has transferred control of the asset.
instruments of the same type, quality and quantity and will pay
a fee determined by the duration of the lending. The transfer of
the securities to counterparties via securities lending does not
result in derecognition. Substantially all the risks and rewards of
ownership are retained by the Bank as a lender because the securities are received at the end of the securities lending transaction.
Furthermore, the Bank is the beneficiary of all the coupons and
other income payments received on the transferred assets over the
period of the securities lendings.
A financial liability is derecognised when the obligation under the
liability is discharged, cancelled or expires.
Securities borrowed are not recognised on the statement of financial
position unless they are then sold to third parties. In this case, the
obligation to return the securities is recorded as ‘Other trading
liability’.
Repurchase and Reverse Repurchase
Agreements
Transactions where securities are sold under an agreement to repurchase at a specified future date are also known as ‘repos’ or ‘sale and
repurchase agreements’. Securities sold are not derecognised from
the statement of financial position, as the Bank retains substantially
all the risks and rewards of ownership because the securities are
repurchased when the repo transaction ends. Furthermore, the Bank
is the beneficiary of all the coupons and other income payments
received on the transferred assets over the period of the repo transactions. These payments are remitted to the Bank or are reflected
in the repurchase price.
The corresponding cash received is recognised on the statement
of financial position with a corresponding obligation to return it
as a liability under the line item ‘Financial liabilities measured at
amortised cost’, sub-items ‘Deposits from banks’ or ‘Deposits from
customers’ reflecting the transaction’s economic substance as a loan
to the Bank. The difference between the sale and repurchase prices
is treated as interest expense and recorded in the income statement
under the line item ‘Net interest income’ and is accrued over the life
of the agreement. Financial assets transferred out by the Bank under
repurchase agreements remain on the Bank’s statement of financial
position and are measured according to the rules applicable to the
respective statement of financial position item.
Conversely, securities purchased under agreements to resell at
a specified future date are not recognised on the statement of financial position. Such transactions are also known as ‘reverse repos’.
The consideration paid is recorded on the statement of financial
position under the respective line items ‘Loans and receivables to
credit institutions’ or ‘Loans and receivables to customers’, reflecting the transaction’s economic substance as a loan by the Bank.
The difference between the purchase and resale prices is treated
as interest income and is accrued over the life of the agreement
and recorded in the income statement under the line item ‘Net
interest income’.
Securities Lending and Borrowing
In securities lending transactions, the lender transfers ownership
of securities to the borrower on the condition that the borrower
will retransfer, at the end of the agreed loan term, ownership of
Impairment of Financial Assets and Credit Risk
Losses of Contingent Liabilities
The Bank assesses at each balance sheet date whether there is
any objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or group of financial assets is
deemed to be impaired if, and only if, there is objective evidence
of impairment as a result of one or more events that have occurred
after the initial recognition of the asset (an incurred ‘loss event’)
and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or the group of financial assets that
can be reliably estimated.
The Bank uses the Basel II definition of default as a primary indicator of loss events. Default, as a loss event, occurs when
–– the obligor is more than 90 days past due on any material
credit obligation;
–– as a result of specific information or an event, the obligor
is unlikely to fulfil its credit obligations in full, without
recourse to actions such as realising security;
–– the obligor is subject to distressed restructuring, i.e.
a change in contract terms, for clients in financial
difficulties, resulting in a material loss;
–– the obligor is subject to bankruptcy or similar protection
proceedings.
For assessment at portfolio level, the Bank uses the incurred but
not reported losses concept. It identifies the time period between
the moment of the loss event causing future problems and actual
detection of the problems by the Bank at the moment of default.
Credit risk losses resulting from contingent liabilities are recognised
if it is probable that there will be an outflow of resources to settle
a credit risk bearing contingent liability that will result in a loss.
(i) Financial Assets Carried at Amortised Cost
The Bank first assesses individually for significant loans and
held-to-maturity securities whether objective evidence of impairment exists. If no objective evidence of impairment exists for an
individually assessed financial asset, the Bank includes the asset
in a group of financial assets with similar credit risk characteristics
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and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss
is, or continues to be, recognised are not included in a collective
assessment of impairment.
If an impairment loss has been incurred, the amount of the loss is
measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows discounted at
the original effective interest rate. The calculation of the present
value of the estimated future cash flows of a collateralised financial
asset also reflects the cash flows that may result from foreclosure
less costs for obtaining and selling the collateral.
Impairment losses on financial assets carried at amortised cost are
recognised as loss allowance. On the statement of financial position, loss allowances decrease the value of the assets, i.e. the net
carrying amount of the financial asset presented in the statement
of financial position is the difference between the gross carrying
amount and the cumulative loss allowance. This treatment holds
for loss allowances for loans and receivables and for incurred but
not reported losses (i.e. portfolio allowances) on held-to-maturity
financial assets. Reconciliation of changes in these loss allowance accounts is disclosed in the notes. However, individual loss
allowances for held to maturity financial assets are treated as direct
reduction of the asset carrying amount and therefore reconciliation
of changes is not disclosed in the notes.
In the income statement, impairment losses and their reversals are
presented in the line item ‘Net impairment loss on financial assets’.
Loans together with the associated allowance are removed from the
statement of financial position when there is no realistic prospect of
future recovery and all collaterals have been realised by the Bank.
If in a subsequent year, the amount of the estimated impairment loss
increases or decreases the previously recognised impairment loss
is increased or reduced by adjusting the loss allowance.
(ii) Available-for-Sale Financial Assets
In cases of debt instruments classified as available for sale, the
Bank assesses individually whether there is objective evidence of
impairment based on the same criteria as used for financial assets
carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between
the amortised cost and the current fair value, less any impairment
loss on that asset previously recognised in the income statement.
On recognising impairment, any amount of losses retained in the
other comprehensive income item ‘Available for sale reserve’ is
reclassified to the income statement and shown as impairment loss
under the line item ‘Net impairment loss on financial assets’.
If, in a subsequent period, the fair value of a debt instrument
increases, the impairment loss is reversed through the income statement under the line item ‘Net impairment loss on financial assets’.
Impairment losses and their reversals are recognised directly against
the assets on the statement of financial position.
In cases of equity investments classified as available for sale, objective evidence also includes a ‘significant’ or ‘prolonged’ decline
in the fair value of the investment below its cost. For this purpose
at the Bank, ‘significant’ decline means a market price below 80%
of the acquisition cost and ‘prolonged’ decline refers to a market
price that is permanently below the acquisition cost for a period of
nine months up to the reporting date.
Where there is evidence of impairment on equity investments, the
cumulative loss measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that
investment previously recognised in the income statement, is shown
as an impairment loss in the income statement under the line item
‘Net impairment loss on financial assets’. Any amount of losses
previously recognised under the other comprehensive income item
‘Available for sale reserve’ has to be reclassified to the income
statement as part of an impairment loss under the line item ‘Net
impairment loss on financial assets’.
Impairment losses on equity investments are not reversed through
the income statement; increases in the fair value after impairment
are recognised directly in other comprehensive income. Impairment
losses and their reversals are recognised directly against the assets
on the statement of financial position.
For investment in unquoted equity instruments carried at cost
because their fair value cannot be determined reliably the amount
of the impairment loss is measured as the difference between the
carrying amount of the financial asset and the present value of
estimated future cash flows discounted at the current market rate
of return for a similar financial asset. Such impairment losses shall
not be reversed.
(iii) Contingent Liabilities
Provisions for credit losses of contingent liabilities (particularly
financial guarantees as well as credit commitments) are included
under the statement of financial position line item ‘Provisions’. The
related expense or its reversal is reported in the income statement
under the line item ‘Other operating result’.
Hedge Accounting
The Bank makes use of derivative instruments to manage exposures to interest rate risk and foreign currency risk. At inception of
a hedge relationship, the Bank formally documents the relationship
between the hedged item and the hedging instrument, including
the nature of the risk, the objective and strategy for undertaking
the hedge and the method that will be used to assess the effectiveness of the hedging relationship. A hedge is expected to be highly
effective if the changes in fair value or cash flows attributable to
the hedged risk during the period for which the hedge is designated
are expected to offset the fair value changes of the hedging instrument in a range of 80% to 125%. Hedge effectiveness is assessed
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at inception and throughout the term of each hedging relationship.
Exact conditions for particular types of hedges and for testing the
hedge effectiveness by the Bank are specified internally in hedge
policy.
(i) Fair Value Hedges
Fair value hedges are employed to reduce market risk. For qualifying and designated fair value hedges, the change in the fair value
(clean price) of a hedging instrument is recognised in the income
statement under the line item ‘Net trading and fair value result’.
Interest income and expenses on hedging derivatives are reported
under the line item ‘Net interest income’. The change in the fair
value of the hedged item attributable to the hedged risk is also
recognised in the income statement under the line item ‘Net trading and fair value result’ and adjusts the carrying amount of the
hedged item.
If the hedging instrument expires, is sold, is terminated or is exercised, or when the hedge no longer meets the criteria for hedge
accounting, the hedge relationship is terminated. In this case, the
fair value adjustment of the hedged item is amortised to the income
statement under the line item ‘Net interest income’ until maturity
of the financial instrument.
(ii) Cash Flow Hedges
Cash flow hedges are used to eliminate uncertainty in the future
cash flows in order to stabilise net interest income. For designated
and qualifying cash flow hedges, the effective portion of the gain or
loss on the hedging instrument is recognised in other comprehensive income and reported under the ‘Cash flow hedge reserve’. The
ineffective portion of the gain or loss on the hedging instrument is
recognised in the income statement under the line item ‘Net trading
and fair value result’. For determination of the effective and ineffective portions, the derivative is considered at its dirty price, i.e.
including the interest component. If the hedged cash flow affects
the income statement, the gain or loss on the hedging instrument is
reclassified from other comprehensive income in the corresponding income or expense line item in the income statement (mainly
‘Net interest income’). As far as accounting for hedged items in
cash flow hedges is concerned there is no change compared to the
situation when no hedging is applied.
When a hedging instrument expires, is sold, is terminated, is
exercised, or when a hedge no longer meets the criteria for hedge
accounting, the hedge relationship is terminated. In this case, the
cumulative gain or loss on the hedging instrument that has been
recognised in other comprehensive income remains separate in
‘Cash flow hedge reserve’ until the transaction occurs.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net
amount is reported on the statement of financial position if, and
only if, there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net basis
or to realise the asset and settle the liability simultaneously.
Determination of Fair Value
Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between knowledgeable market participants at the measurement date.
Details on valuation techniques applied for fair value measurement
and on fair value hierarchy are disclosed in Note 40 Fair value of
assets and liabilities.
Leasing
A lease is an agreement whereby the lessor conveys to the lessee
the right to use an asset for an agreed period of time in return for
a payment or series of payments. A finance lease at the Bank is
a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. All other lease agreements at the
Bank are classified as operating leases.
The Bank as a Lessor
In the case of operating leases, the leased asset is reported by the
lessor in ‘Property and equipment’ and is depreciated in accordance with the principles applicable to the assets involved. Lease
income is recognised on a straight-line basis over the lease term
in the income statement under the line item ‘Rental income from
investment properties & other operating leases’.
The Bank as a Lessee
As a lessee, the Bank has not entered into any leases meeting the
conditions of finance leases. Operating lease payments are recognised as an expense in the income statement on the line item
‘Other administrative expenses’ on a straight-line basis over the
lease term.
Property and Equipment
Property and equipment is measured at cost less accumulated depreciation and accumulated impairment. Borrowing costs for qualifying assets are capitalised into the costs of property and equipment.
Depreciation is calculated using the straight-line method to write
down the cost of property and equipment to their residual values
over their estimated useful lives. Depreciation is recognised in the
income statement on the line item ‘Depreciation and amortisation’
and impairment under the line item ‘Other operating result’.
The estimated useful lives are as follows:
Useful life in years
Buildings
Office furniture and equipment
Passenger cars
Computer hardware
15– 50
4– 10
4– 8
4–6
Land is not depreciated.
Property and equipment is derecognised on disposal or when no
future economic benefits are expected from its use. Any gain or
loss arising on disposal of the asset (calculated as the difference
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between the net disposal proceeds and the carrying amount of the
asset) is recognised in the income statement under the line item
‘Other operating result’.
Intangible Assets
The Bank’s intangible assets include computer software, licences,
know-how and other intangible assets. An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable
to it will flow to the Bank.
Costs of internally generated software are capitalised if the Bank
can demonstrate the technical feasibility and intention of completing the software, the ability to use it, how it will generate
probable economic benefits, the availability of resources and the
ability to measure the expenditures reliably. Intangible assets
acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible assets are carried at cost
less any accumulated amortisation and any accumulated impairment losses.
Intangible assets with finite lives are amortised over their useful
economic lives using the straight-line method. The amortisation
period and method are reviewed at least at each financial year-end
and adjusted if necessary. The amortisation expense on intangible
assets with finite lives is recognised in the income statement under
the line item ‘Depreciation and amortisation’.
The estimated useful lives are as follows:
Useful life in years
Buildings
Office furniture and
equipment
Passenger cars
4– 8
10– 20
5,5
Impairment of Non-financial Assets (Property and
Equipment, Intangible Assets)
The Bank assesses at each reporting date whether there is an
indication that a non-financial asset may be impaired. Testing
for impairment is done at individual asset level if the asset generates cash inflows that are largely independent of those from
other assets.
If any indication of impairment exists, or when annual impairment
testing for an asset is required, the Bank estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of the
asset’s or cash generating unit’s (CGU) fair value less costs of
disposal and its value in use. If the carrying amount of an asset
or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. In measuring value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the
risks specific to the asset.
At each reporting date an assessment is made as to whether there
is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such an indication exists, the Bank estimates the asset’s or CGU’s recoverable
amount. The previously recognised impairment loss is reversed
only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment
loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount
or does not exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years.
Impairments and their reversals are recognised in the income
statement under the line item ‘Other operating result’.
Financial Guarantees
In the ordinary course of business, the Bank provides financial
guarantees, consisting of various types of letters of credit and
guarantees. According to IAS 39, a financial guarantee is a contract that requires the guarantor to make specified payments to
reimburse the holder for a loss it incurs in case a specified debtor
fails to make a payment when due in accordance with the original
or modified terms of a debt instrument.
If the Bank is in a position of being a guarantee holder, the financial guarantee is not recorded on the statement of financial position but is taken into consideration as collateral when determining
impairment of the guaranteed asset.
The Bank as a guarantor recognises financial guarantees as soon
as it becomes a contracting party (i.e. when the guarantee offer
is accepted). Financial guarantees are initially measured at fair
value. Generally, the initial measurement is the premium received
for a guarantee. If no premium is received at contract inception,
the fair value of a financial guarantee is nil, as this is the price
that would be paid to transfer the liability in an orderly transaction between market participants. Subsequent to initial recognition, the financial guarantee contract is reviewed for the possibility
that provisioning will be required under IAS 37. Such provisions
are presented in the statement of financial position under the line
‘Provisions’.
The premium received is recognised in the income statement under
the line item ‘Net fee and commission income’ on a straight-line basis
over the life of the guarantee.
Provisions
Provisions are recognised when the Bank has a present obligation
as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation,
and a reliable estimate can be made of the amount of the obligation.
On the statement of financial position, provisions are reported under
the line item ‘Provisions’. They include credit risk loss provisions
for contingent liabilities (particularly financial guarantees and loan
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commitments) as well as provisions for litigation and restructuring.
Expenses or income related to provisions are reported under the line
item ‘Other operating result’.
Dividends on Ordinary Shares
Taxes
Recognition of Income and Expenses
(i) Current Tax
Current tax assets and liabilities for the current and prior years are
measured as the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the
amounts are those enacted by the balance sheet date.
(ii) Deferred Tax
Deferred tax is recognised for temporary differences between the
tax bases of assets and liabilities and their carrying amounts as of the
balance sheet date. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all
deductible temporary differences and unused tax losses to the extent
that it is probable that taxable profit will be available against which
the deductible temporary differences and carry forward of unused tax
losses can be utilised. Deferred taxes are not recognised on temporary
differences arising from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the
deferred tax asset to be utilised. Unrecognised deferred tax assets are
reassessed at each balance sheet date and are recognised to the extent
that it has become probable that future taxable profit will allow the
deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the asset is realised or the liability
is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted as of the balance sheet date.
Deferred tax relating to items recognised in other comprehensive
income is recognised in other comprehensive income and not in the
income statement.
Deferred tax assets and deferred tax liabilities are offset if a legally
enforceable right to offset exists and the deferred taxes relate to the
same taxation authority.
Share Capital
The issued capital (registered, subscribed and paid) as at the end of
the reporting period is accounted for at an amount recorded in the
Commercial register.
Fiduciary Assets
The Bank provides trust and other fiduciary services that result in the
holding or investing of assets on behalf of its clients. Assets held in
a fiduciary capacity are not reported in the financial statements, as
they are not the assets of the Bank.
Dividends on ordinary shares are recognised as a liability and deducted
from equity when they are approved by the Bank’s shareholders.
Revenue is recognised to the extent that the economic benefits will
flow to the entity and the revenue can be reliably measured. The
description and revenue recognition criteria of the line items reported
in the income statement are as follows:
(i) Net Interest Income
Interest income or expense is recorded using the effective interest
rate (EIR) method. The calculation includes origination fees resulting
from the lending business as well as transaction costs that are directly
attributable to the instrument and are an integral part of the EIR (apart
from financial instruments at fair value through profit or loss), but no
future credit losses. Interest income from individually impaired loans
and receivables and held-to-maturity financial assets is calculated by
applying the original effective interest rate used to discount the estimated cash flows for the purpose of measuring the impairment loss.
Interest income includes interest income on loans and receivables
to credit institutions and customers, on cash balances and on bonds
and other interest-bearing securities in all financial assets categories.
Interest expenses include interest paid on deposits from customers,
deposits from banks, debt securities issued and other financial liabilities in all financial liabilities categories.
In net interest income also interest on derivative financial instruments
held in the banking book is included.
(ii) Net Fee and Commission Income
The Bank earns fee and commission income from a diverse range of
services that it provides to its customers.
Fees earned for the provision of services over a period of time are
accrued over that period. These fees include lending fees, guarantee fees, commission income from asset management, custody and
other management and advisory fees as well as fees from insurance brokerage, building society brokerage and foreign exchange
transactions.
Fee income earned from providing transaction services, such as
arranging the acquisition of shares or other securities or the purchase or sale of businesses, is recognised upon completion of the
underlying transaction.
(iii) Dividend Income
Dividend income is recognised when the right to receive the payment is established.
This line item includes dividend from shares and other equity-related securities in all portfolios as well as income from other investments in companies categorised as available for sale.
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
(iv) Net Trading and Fair Value Result
Results arising from trading activities include all gains and losses
from changes in fair value (clean price) on financial assets and
financial liabilities classified as held for trading, including all
derivatives not designated as hedging instruments. In addition,
for derivative financial instruments held in the trading book, net
trading result also contains interest income or expense. However,
interest income or expenses on non-derivative trading assets and
liabilities and on derivatives held in the banking book are not part
of net trading result as they are reported as ‘Net interest income’.
It also includes any ineffective portions recorded in fair value and
cash flow hedge transactions as well as foreign exchange gains
and losses.
Fair value result relates to changes in the clean price of assets and
liabilities designated at fair value through profit or loss.
(v) Rental Income From Investment
Properties & Other Operating Leases
Rental income from investment properties and other operating
leases is recognised on a straight-line basis over the lease term.
(vi) Personnel Expenses
Personnel expenses include wages and salaries, bonuses, statutory
and voluntary social security contributions, staff-related taxes and
levies. They also include service cost for severance payment.
are considered as part of impairment losses. This line item also
includes recoveries on written-off loans removed from the statement of financial position.
(xi) Other Operating Result
Other operating result reflects all other income and expenses not
directly attributable to the Bank’s ordinary activities.
Other operating result includes impairment losses or any reversal
of impairment losses as well as results on the sale of property
and equipment and intangible assets. Also included here are any
impairment losses on goodwill.
In addition, other operating result encompasses the following:
expenses for other taxes; income from the release of and expenses
for allocations to provisions; impairment losses (and their reversal
if any) as well as selling gains and losses on equity investments
accounted for using the equity method; and gains or losses from
derecognition of subsidiaries.
c) Significant Accounting Judgements,
Assumptions and Estimates
Other administrative expenses include information technology
expenses, expenses for office space, office operating expenses,
advertising and marketing, expenditures for legal and other
consultants as well as sundry other administrative expenses.
Furthermore the line item contains deposit insurance contributions expenses.
The separate financial statements contain amounts that have
been determined on the basis of judgements and by the use of
estimates and assumptions. The estimates and assumptions used
are based on historical experience and other factors, such as
planning as well as expectations and forecasts of future events
that are currently deemed to be reasonable. As a consequence of
the uncertainty associated with these assumptions and estimates,
actual results could in future periods lead to adjustments in the
carrying amounts of the related assets or liabilities. The most
significant uses of judgements, assumptions and estimates are
as follows:
(vii) Depreciation and Amortisation
Fair Value of Financial Instruments
(vii) Other Administrative Expenses
This line item comprises depreciation of property and equipment,
and amortisation of intangible assets.
(ix) Gains/losses on Financial Assets and
Liabilities Not Measured at Fair Value Through
Profit or Loss, Net
This line item includes selling and other derecognition gains
or losses on available-for-sale and held-to-maturity financial
assets, loans and receivables and financial liabilities measured
at amortised cost. However, if such gains/losses relate to individually impaired financial assets they are included as part of
net impairment loss.
(x) Net Impairment Loss on Financial Assets
Net impairment losses on financial assets comprise impairment
losses and reversals of impairment on loans and receivables,
held-to-maturity and available-for-sale financial assets. Net impairment losses relate to allowances recognised both at individual
and portfolio (incurred but not reported) level. Direct write-offs
Where the fair values of financial assets and financial liabilities
recorded on the statement of financial position cannot be derived
from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The
inputs to these models are derived from observable market data
where possible, but where observable market data is not available judgement is required to establish fair values. Disclosures
for valuation models, the fair value hierarchy and fair values of
financial instruments can be found in Note 40 Fair value of assets
and liabilities.
Impairment of Financial Assets
The Bank reviews its financial assets not measured at fair value
through profit or loss at each balance sheet date to assess whether
an impairment loss should be recorded in the income statement.
In particular, it is required to determine whether there is objective evidence of impairment as a result of a loss event occurring
after initial recognition and to estimate the amount and timing of
future cash flows when determining an impairment loss.
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Disclosures concerning impairment are provided in Note 38 Risk
management in the ‘Credit risk’ subsection ’. The development
of loan loss provisions is described in Note 8 Net impairment
loss on financial assets not measured at fair value through profit
or loss.
Impairment of Non-Financial Assets
The Bank reviews its non-financial assets at each balance sheet
date to assess whether there is an indication of impairment loss
that should be recorded in the income statement. Judgement
and estimates are required to determine the value in use and
fair value less costs of disposal by estimating the timing and
amount of future expected cash flows and the discount rates.
Assumptions and estimates used for impairment on non-financial assets calculations are described in the part ‘Impairment of
non-financial assets (property and equipment, intangible assets)’
in the Accounting Policies.
Deferred Tax Assets
Deferred tax assets are recognised in respect of tax losses and
deductible temporary differences to the extent that it is probable
that taxable profit will be available against which the losses can
be utilised. Judgement is required to determine the amount of
deferred tax assets that can be recognised, based upon the likely
timing and level of future taxable profits, together with future
tax planning strategies. Disclosures concerning deferred taxes
are in Note 25 Tax assets and liabilities.
Provisions
Recognition of provisions requires judgement with respect to
whether the Bank has a present obligation as a result of a past
event and whether it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation. Furthermore, estimates are necessary with respect to
the amount and timing of future cash flows when determining
the amount of provisions. Provisions are disclosed in Note 30
Provisions and further details on provisions for contingent credit
liabilities in Note 43. Legal proceedings that do not meet the
criteria for recognition of provisions are described in Note 43
Contingent assets and liabilities.
Leases
From the Bank’s perspective as a lessor, judgement is required to
distinguish whether a given lease is a finance or operating lease
based on the transfer of substantially all the risk and rewards
from the lessor to the lessee. Disclosures concerning leases are
in Note 34 Leases.
d) Application of Amended and New
IFRS/IAS
The accounting policies adopted are consistent with those
used in the previous financial year except for standards and
interpretations that became effective for financial years beginning on or after 1 January 2014. As regards new standards
and interpretations and their amendments, only those that are
relevant for the business of the Bank are listed below.
Effective Standards and Interpretations
The following standards and their amendments have been mandatory since 2014:
–– IAS 27 (revised 2011) Separate Financial Statements
–– IAS 28 (revised 2011) Investments in Associates and
Joint Ventures
–– Amendments to IAS 32 – Offsetting Financial Assets
and Liabilities
–– Amendments to IAS 36 – Recoverable Amounts
Disclosures for Non-financial Assets
–– IFRS 12 Disclosure of Interests in Other Entities
–– Amendment IFRS 12 – Transition guidance
–– Amendments to, IFRS 12 and IAS 27 – Investment
entities
–– IFRIC 21 Levies
Application of other standards and amendments had no material
effect on the financial statements of the Bank.
Standards and Interpretations Not Yet
Effective
The standards and interpretations shown below were issued by
the IASB but are not yet effective.
Thereof, the following standards have been endorsed by the EU:
–– Annual Improvements to IFRSs 20102012 and 20112013
Cycle
Although they have been endorsed by the EU, the Bank decided
not to apply them before they become effective.
Amendments to IAS 16 and IAS 38: Clarification
of Acceptable Methods of Depreciation and
Amortisation
Amendments to IAS 16 and IAS 38 were issued in May 2014
and are effective for annual periods beginning on or after
1 January 2016.
The amendments prohibit the use of revenue-based depreciation
for property, plant and equipment and significantly limiting
the use of revenue-based amortisation for intangible assets.
Application of These Amendments is Not Expected to Have
a Significant Impact on the Bank’s Financial Statements.
The amendments clarify that contributions from employees or third
parties that are linked to service must be attributed to periods of service using the same attribution method as used for the gross benefit.
However, the contribution may be recognised as a reduction in the
service cost if the amount of the contributions is independent of the
number of years of service.
177
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Application of these amendments is not expected to have a significant
impact on the Bank’s financial statements.
Amendments to IAS 39 – Novation of Derivatives and
Continuation of Hedge Accounting
Amendments to IAS 39 were issued in June 2013 and are effective for
annual periods beginning on or after 1 January 2014.
Under the amendments there would be no need to discontinue hedge
accounting if a hedging derivative were novated, provided certain
criteria are met.
Application of these amendments is not expected to have a significant impact on the Bank’s financial statements.
IFRS 9: Financial Instruments
IFRS 9 was issued in July 2014 and is effective for annual periods
beginning on or after 1 January 2018.
IFRS addresses three main areas of accounting for financial instruments: classification and measurement, impairment and hedge
accounting.
IFRS 9 introduces two classification criteria for financial assets: 1)
an entity’s business model for managing the financial assets, and
2) the contractual cash flow characteristics of the financial assets.
As a result, a financial asset is measured at amortised cost only if
both the following conditions are met: a) the contractual terms of
the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal outstanding and b) the asset is held within a business model whose
objective is to hold assets in order to collect contractual cash flows.
Measurement a fair value through other comprehensive income is
applicable to financial assets which meet the condition a) but the
business model applied to them is focused both on holding the assets
to collect contractual cash flows and selling the assets. All other
financial assets are measured at fair value with changes recognised
in profit or loss. For investments in equity instruments that are not
held for trading, an entity may make an irrevocable election at initial
recognition to measure them at fair value with changes recognised
in other comprehensive income.
commitments and financial guarantees). At initial recognition of financial instruments loss allowance to reflect credit loss is recognised to the
extent of 12-month expected losses. Lifetime expected losses will be
recognised for all instrument whose credit risk increases subsequently
after initial recognition. Furthermore the standard brings new rules
for accounting for losses resulting from modification of contractual
conditions of financial assets.
The objective of the new hedge accounting model is to reflect in
accounting actual risk management practices of entities hedging risks.
For the Bank, the following areas are expected to be relevant to achieve
this objective: only the prospective effectiveness test is required and
the retrospective effectiveness test with the 80%125% corridor was
abandoned; when options are used as hedging instruments, the volatility of the time value is recognised through OCI rather than profit or
loss; the possibility of hedging synthetic items containing derivatives.
This standard will have a significant effect on balance sheet items and
measurement methods for financial instruments. The contractual cash
flow characteristics of financial assets will have to be reviewed and the
Bank is at risk that part of its loan portfolio will have to be measured
at fair value through profit or loss. On the other hand some of debt
securities currently measured at fair value through other comprehensive may be measured at amortised cost due to the ’held-to-collect
contractual cash’ flows business model applied to them. In the area of
impairment loss allowances are expected to increase significantly. First
estimates of quantitative impacts are expected to be available in 2015.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued in May 2014 and is effective for annual periods
beginning on or after 1 January 2017.
IFRS 15 specifies how and when an entity will recognise revenue from
contracts with customers. It also requires such entities to provide users
of financial statements with more informative, relevant disclosures.
The standard provides a single, principles based five-step model to
be applied to all contracts with customers.
As the standard is not focused on recognition of revenues from financial services, application of this standard is not expected to have a significant impact on the Bank’s financial statements.
IFRS 9 does not change classification and measurement principles
for financial liabilities compared to IAS 39. The only change is
related to financial liabilities designated at fair value through profit or
loss (fair value option). The fair value changes related to the credit risk
of such liabilities will be presented in other comprehensive income.
In December 2013, the IASB issued two sets of amendments to various standards. The amendments are effective for annual periods
beginning on or after 1 July 2014.
The standard brings uniform impairment model applied both to financial assets and off balance sheet credit risk bearing exposures (loan
Application of these amendments is not expected to have a significant impact on the Bank’s financial statements.
Annual Improvements to IFRSs 20102012 and 20112013
Cycle
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
C. Notes to the Statement of Comprehensive Income and the Statement of Financial
Position of Česká spořitelna, a. s.
1. Net Interest Income
CZK mil.
Interest income
Financial assets held for trading
Financial assets designated at fair value through profit or loss
Available-for-sale financial assets
Loans and receivables
Held-to-maturity investments
Derivatives - Hedge accounting, interest rate risk
Other assets
Total interest income
Interest expenses
Financial liabilities held for trading
Financial liabilities measured at amortised cost
Derivatives - Hedge accounting, interest rate risk
Total interest expenses
Net interest income
For financial assets or liabilities that are not measured at fair
value through profit or loss, the total interest income amounted to
CZK 27,736 million (2013: CZK 29,229 million) and the total interest expense to CZK (3,410) million (2013: CZK (4,320) million).
2014
2013
102
42
646
22,293
4,791
31
6
229
112
607
23,593
5,012
6
16
27,911
29,575
(34)
(3,410)
353
(38)
(4,319)
314
(3,091)
24,820
(4,043)
25,532
Net interest income for these items is therefore CZK 24,326 million
(2013: CZK 24,909 million). Interest income on impaired
financial assets accrued amounted to CZK 516 million (2013:
CZK 654 million).
2. Net Fee and Commission Income
CZK mil.
2014
2013
Securities
Own issues
Transfer orders
Clearing and settlement
Asset management
Custody
Payment services
Card business
Other
Customer resources distributed but not managed
Insurance products
Building society brokerage
Forreign exchange transactions
Other
Lending business
Loan commitments given, loan commitments received
Guarantees given, guarantees received
Other lending business
Other
829
122
707
302
153
126
5,709
1,023
4,686
947
577
322
–
48
2,495
57
192
2,246
(75)
752
203
549
334
141
117
6,110
1,347
4,763
1,019
540
446
33
–
2,770
82
139
2,549
(192)
Net fee and commission income
10,486
11,051
179
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
3. Dividend Income
CZK mil.
Financial assets - designated at fair value through profit or loss
Financial assets – available for sale
Dividend income from equity investments
Dividend income
2014
2013
11
29
601
6
38
1,837
641
1,881
4. Net Trading and Fair Value Result
CZK mil.
2014
2013
Net trading result
Securities and derivatives trading
Foreign exchange transactions
Result from financial assets and liabilities designated at fair value through profit or loss
Result from measurement/sale of financial assets designated at fair value through profit or loss
Result from measurement/sale of financial liabilities designated at fair value through profit or loss
Gains or losses from hedge accounting
2,372
1,447
925
(44)
98
(142)
14
2,621
1,408
1,213
(535)
(64)
(471)
14
Net trading and fair value result
With effect from 4 February 2008, the Bank transferred its financial
markets trading to make use of Erste Group Bank’s business model.
The market risk arising from the sales activities of the Financial
Markets Division (i.e., transactions with retail and corporate clientele), with the exception of equity risk and transactions for the
Bank’s liquidity management purposes (money market), is regularly
transferred to Erste Group Bank using back - to - back transactions.
Trading gains (i.e. from Erste Group Bank’s market positions) are
distributed according to approved rules to the relevant banks within
2,342
2,100
the Group and reported in the ‘Net trading result’. The basic principle underlying these rules involves Erste Group Bank absorbing
potential loss in individual classes of assets in exchange for the
risk premium derived from the Value at Risk (‘VaR’) indicator. The
remaining positive result after deducting expenses (calculated using
the Cost Income Ratio) is reallocated to individual participants in
the model based on the results from the sale of assets in individual
asset groups.
The net trading result includes the income from the market positions of the Bank structured as follows:
CZK mil.
Realised and unrealised gains on trading assets
Derivative instruments
Foreign exchange trading
Total
2014
2013
528
9
254
465
22
300
791
787
2014
2013
5. Rental Income From Investment Properties & Other Operating Leases
CZK mil.
Other operating leases
Rental income from investment properties & other operating leases
106
106
79
79
180
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
6. General Administrative Expenses
2014
2013
Personnel expenses
CZK mil.
(7,561)
(7,908)
Other administrative expenses
(7,155)
(7,310)
Depreciation and amortization
(1,937)
(1,950)
(16,653)
(17,168)
Wages and salaries
Compulsory social security
Other personnel expenses
Deposit insurance contribution
IT expenses
Expenses for office space
Office operating expenses
Advertising / marketing
Legal and consulting costs
Sundry administrative expenses
Software and other intangible assets
Owner occupied real estate
Office furniture and equipment and sundry property and equipment
General administrative expenses
(5,442)
(1,685)
(434)
(873)
(2,631)
(1,407)
(690)
(724)
(275)
(555)
(745)
(654)
(538)
(5,663)
(1,809)
(436)
(859)
(2,643)
(1,458)
(881)
(743)
(334)
(392)
(713)
(653)
(584)
Remuneration to the Members of the Board of Directors and Supervisory Board is Accounted for as
Short - Term Employee Benefits
CZK mil.
Remuneration
2014
2013
68
83
Average Headcount of Full Time Employees per Reporting Date
Staff
2014
2013
9,448
9,369
7. Gains/losses on Financial Assets and Liabilities Not Measured at Fair Value
Through Profit or Loss, Net
CZK mil.
From sale of financial assets available for sale
From sale of financial assets held to maturity
From sale of loans and receivables
From repurchase of liabilities measured at amortised cost
Gains/losses on financial assets and liabilities not measured at fair value through profit
or loss, net
2014
2013
78
87
3
(19)
75
134
–
–
149
209
181
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
8. Net Impairment Loss on Financial Assets Not Measured at Fair Value Through Profit
or Loss
CZK mil.
2014
2013
–
–
(3,288)
(5,243)
1,679
(10)
286
4
(36)
(163)
(3,028)
(6,126)
2,780
(13)
331
(13)
(3,284)
(3,240)
CZK million
2014
2013
Result from properties/moveables/other intangible assets other than goodwill
Allocation to/release of other provision
Allocation to/release of provisions for commitments and guarantees given
Other taxes
Result from other operating expenses/income
(240)
(32)
101
(60)
(159)
(536)
(525)
90
(71)
533
Financial assets - measured at cost
Financial assets – available for sale
Loans and receivables
Allocation to risk provisions
Release of risk provisions
Direct write-offs
Recoveries recorded directly to the income statement
Financial assets - held to maturity
Net impairment loss on financial assets not measured at fair value through profit or
loss
9. Other Operating Result
Other operating result
(390)
(509)
10. Taxes on Income
Taxes on income are made up of current taxes on income based on the results reported for tax purposes, corrections to taxes on income for
previous years, and the change in deferred taxes.
CZK mil.
Current tax expense / income
current period
prior period
Deferred tax expense / income
current period
Total
2014
2013
(3,437)
(3,367)
(70)
21
21
(3,871)
(3,850)
(21)
156
156
(3,416)
(3,715)
The following table reconciles the income taxes reported in the income statement to the pre-tax profit/loss. multiplied by the nominal
Czech tax rate.
CZK mil.
Pre-tax profit/loss
Income tax expense for the financial year at the domestic statutory tax rate (19%)
Non-taxable income
Non-deductible expenses
Other
Prior period over/(under) accrual
Total
Effective tax rate
2014
2013
18,217
(3,461)
403
(328)
40
(70)
19,935
(3,788)
350
(258)
2
(21)
(3,416)
18,75%
(3,715)
18,64%
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Tax effects relating to each component of other comprehensive income:
CZK mil.
2014
Before-tax Tax benefit/
amount
(expense)
Available for sale-reserve
Unrealized profits / (losses) on
revaluation
Reclassification adjustments to the
income statement
Cash flow hedge-reserve
Gains and losses on the hedging
instruments
Reclassification adjustments to the
income statement
Other comprehensive income
Net-of-tax
amount
2013
Before-tax Tax benefit/
amount
(expense)
Net-of-tax
amount
1,589
(302)
1,287
(109)
21
(88)
1,667
(317)
1,350
15
(3)
12
(78)
15
(63)
(124)
24
(100)
175
(33)
142
11
(2)
9
175
(33)
142
11
(2)
9
–
–
–
–
–
–
1,764
(335)
1,429
(98)
19
(79)
11. Appropriation of Profit
Management of the Bank has proposed that total dividends of
CZK 11,400 million be declared in respect of the profit for the
year ended 31 December 2014, which represents 75 CZK per both
ordinary and preference share (2013: CZK 9,120 million, that is,
CZK 60 per both ordinary and preference share). The declaration
of dividends is subject to the approval of the Annual General
Meeting. Dividends paid to shareholders are subject to a withholding tax of 15% or a percentage set out in the relevant double tax
treaty. Dividends paid to shareholders that are tax residents of an
European Union member country and whose interest in a subsidiary’s share capital is no less than 10% and that hold the entity’s
shares for at least one year are not subject to withholding tax.
12. Cash and Cash Balances
CZK million
Cash on hand
Cash balances at central banks
Other demand deposits
Cash and cash balances
A portion of ‘Balances with central banks’ includes mandatory reserve deposits in amount of CZK 12,022 million (2013:
CZK 8,170 milion). Mandatory reserve deposits accrue interest
at the CNB’s two week repo rate. The Bank is authorised to make
withdrawals of minimum reserve deposits in an amount that exceeds
2014
2013
21,813
26,086
2,258
20,630
55,810
–
50,157
76,440
the actual average level of minimum reserve deposits for the relevant holding period calculated pursuant to the CNB’s regulations.
Other demand deposits consist of current accounts and overnight
deposits with credit institutions.
Cash and Cash Equivalents
CZK million
Cash on hand
Nostro accounts at central banks
Treasury bills and treasury bonds with maturity of less than three months
Nostro accounts with financial institutions
Loro accounts with financial institutions
Total cash and cash equivalents
2014
2013
21,813
14,064
9,910
2,258
(15,589)
20,630
47,641
25,117
2,070
(1,535)
32,456
93,923
183
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
13. Derivatives – Held For Trading
CZK mil.
2014
Notional Positive fair
value
value
Negative
fair value
2013
Notional Positive fair
value
value
Negative
fair value
Derivatives held in the trading
book
581,956
18,821
20,664
615,028
21,315
24,029
Total
311,534
7,318
256,900
333
5,871
–
581,956
13,939
235
4,338
3
306
–
12,667
13
7,650
3
331
–
327,581
10,329
272,013
329
4,688
88
11,229
368
9,551
3
76
88
10,360
28
13,507
3
131
–
Interest rate
Equity
Foreign exchange
Credit
Commodity
Other
18,821
20,664
615,028
21,315
24,029
CZK mil.
2014
2013
Equity instruments
Debt securities
General governments
Credit institutions
Loans and advances
1
3,144
2,360
784
1,346
2
26,548
26,363
185
–
14. Other Trading Assets
Other trading assets
4,491
26,550
2014
2013
344
335
–
335
627
3,474
1,241
2,233
Money-market intruments classified as trading assets amounted to CZK 1,346 million. CZK
15. Financial Assets Designated at Fair Value Through Profit and Loss
CZK mil.
Equity instruments
Debt securities
General governments
Credit institutions
Financial assets designated at fair value through profit and loss
679
4,101
2014
2013
763
98,270
89,083
6,644
278
2,265
584
60,574
51,643
7,592
836
503
16. Financial Assets – Available for Sale
CZK mil.
Equity instruments
Debt securities
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Financial assets – available for sale
99,033
61,158
184
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
17. Financial Assets – Held to Maturity
CZK mil.
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Financial assets – held to maturity
Gross carrying amount
Collective allowances
Net carrying amount
2014
2013
2014
2013
2014
2013
127,934
11,856
472
1,073
141,335
119,142
11,909
2,312
1,030
134,393
(5)
(1)
–
(3)
(9)
–
–
–
(13)
(13)
127,929
11,855
472
1,070
141,326
119,142
11,909
2,312
1,017
134,380
185
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
18. Securities
CZK mil.
Loans and advances to customers
and credit institutions
Trading assets
Financial assets
At fair value through profit or loss
Available for sale
Total
Held to maturity
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
1,698
1,490
3,144
26,548
335
3,474
98,270
60,574
141,326
134,380
244,773
226,466
Listed
Unlisted
–
1,698
–
1,490
2,269
875
26,548
–
–
335
3,474
–
63,539
34,731
59,975
599
125,118
16,208
134,380
–
190,926
53,847
Listed
Unlisted
–
–
–
–
–
–
1
–
–
2
–
–
294
50
–
–
627
–
–
763
8,029
289
295
5,968
–
–
–
–
–
–
295
813
8,029
224,377
2,089
1,213
291
922
5,968
233,647
Bonds and other
interest-bearing
securities
Equity-related securities
Equity holdings
Total
–
1,698
–
1,490
1
3,145
2
344
26,550
679
627
4,101
763
107,062
584
67,126
–
141,326
–
134,380
1,108
253,910
Investment funds are disclosed within equity-related securities.
Securities lending and repurchase transactions are disclosed in Note 36 Transfers of financial assets – repurchase transactions and securities lending.
186
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
19. Loans and Receivables to Credit Institutions
Loans and Receivables to Credit Institutions
CZK mil.
Gross
Specific
Collective
carrying allowances allowances
amount
As of 31 December 2014
Debt securities
Credit institutions
Loans and receivables
Credit institutions
1,356
1,356
35,886
35,886
Total
As of 31 December 2013
Debt securities
Credit institutions
Loans and receivables
Credit institutions
Total
–
–
(1)
(1)
1,349
1,349
35,884
35,884
37,242
(1)
(8)
37,233
1,289
1,289
48,126
48,126
–
–
(31)
(31)
–
–
–
–
1,289
1,289
48,095
48,095
49,415
As at 31 December 2014, the Bank granted certain financial institutions loans of CZK 817 million (2013: CZK 734 million) under
(7)
(7)
(1)
(1)
Net
carrying
amount
(31)
–
49,384
reverse repurchase transactions which were collateralised by securities amounting to 901 CZK million (2013: CZK 824 million).
Allowances for Loans and Receivables to Credit Institutions
CZK mil.
Specific allowances
Loans and receivables
Credit institutions
Collective allowances
Debt securities
Credit institutions
Loans and receivables
Credit institutions
Total
CZK mil.
As of Dec 13 Allocations
Release
Transfer
between
allowances
As of Dec 14
(31)
(70)
89
11
(1)
–
(11)
14
(11)
(8)
(31)
(81)
103
–
(9)
Release
As of Dec 13
(31)
(31)
–
–
–
–
(70)
(70)
(7)
(7)
(4)
(4)
89
89
–
–
14
14
As of Dec 12 Allocations
11
11
–
–
(11)
(11)
(1)
(1)
(7)
(7)
(1)
(1)
Specific allowances
–
(50)
19
(31)
Collective allowances
Total
–
–
–
(50)
–
19
–
(31)
Loans and receivables
Credit institutions
–
–
(50)
(50)
19
19
(31)
(31)
187
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
20. Loans and Receivables to Customers
Loans and Receivables to Customers
CZK mil.
As of 31 December 2014
Debt securities with customers
Non-financial corporations
Loans and receivables to customers
General governments
Other financial corporations
Non-financial corporations
Households
Total
As of 31 December 2013
Debt securities with customers
Non-financial corporations
Loans and receivables to customeres
General governments
Other financial corporations
Non-financial corporations
Households
Total
As at 31 December 2014, the Bank provided certain clients with
loans of CZK 0 million (2013: CZK 75 million) under reverse
repurchase transactions which were collateralised by securities
amounting to CZK 0 million (2013: CZK 75 million).
Gross
Specific
Collective
carrying allowances allowances
amount
342
342
481,691
20,418
30,473
174,945
255,855
–
–
(15,085)
(4)
(132)
(6,738)
(8,211)
–
–
(1,423)
(1)
(32)
(864)
(526)
Net
carrying
amount
342
342
465,183
20,413
30,309
167,343
247,118
482,033
(15,085)
(1,423)
465,525
201
201
472,686
19,407
27,936
189,606
235,737
–
–
(15,316)
(21)
–
(7,148)
(8,147)
–
–
(1,363)
–
–
(876)
(487)
201
201
456,007
19,386
27,936
181,582
227,103
472,887
(15,316)
(1,363)
456,208
As of 1st January 2014 the Bank transferred Recipients of other
transfers (Unit Owners Associations) in the amount of CZK 10,68
9 million from Non-financial corporations to Households.
188
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Allowances for Loans and Receivables to Customers
CZK mil.
As of
Dec 13
Allocations
Use
Release
Interest income
from impaired loans
Transfer between
allowances
Exchange rate and
other changes (+/–)
(15,316)
(4,573)
3,561
1,043
517
(303)
(14)
(15,085)
286
(10)
(1,363)
(589)
–
533
–
–
(4)
(1,423)
–
–
2013
Specific allowances
Loans and receivables to customers
General governments
Other financial corporations
Non-financial corporations
Households
Collective allowances
Loans and receivables to customeres
General governments
Other financial corporations
Non-financial corporations
Households
Total
(15,316)
(19)
–
(7,150)
(8,147)
(1,363)
–
–
(876)
(487)
(16,679)
As of
Recoveries of Amounts written off
Dec 14 amounts previously
written off
2014
(4,573)
(5)
(13)
(2,420)
(2,135)
(589)
–
(6)
(464)
(119)
(5,162)
3,561
–
–
1,999
1,562
1,043
22
5
833
183
–
–
–
–
–
533
–
15
397
121
3,561
517
–
–
183
334
–
–
–
–
–
1,576
517
(303)
–
(123)
(172)
(8)
–
(1)
(41)
82
(40)
(303)
(14)
–
–
(14)
–
(4)
–
–
(4)
–
(18)
(15,085)
(2)
(131)
(6,741)
(8,211)
(1,423)
(1)
(32)
(865)
(525)
(16,508)
286
–
–
179
107
–
–
–
–
–
286
(10)
–
–
(3)
(7)
–
–
–
–
–
(10)
Related Party’s provisions for doubtful debts related to the amount of outstanding balances were CZK 345 million (2013: CZK 345 million).
CZK mil.
As of
Dec 12
Allocations
Use
Release
Interest income
from impaired loans
Transfer between Exchange rate and
allowances other changes (+/–)
(14,492)
(5,653)
2,849
2,490
655
(1,100)
(65)
(15,316)
331
(13)
(2,303)
(423)
–
271
–
1,100
(8)
(1,363)
–
–
2012
Specific allowances
Loans and receivables to customers
General governments
Non-financial corporations
Households
Collective allowances
Loans and receivables to customeres
General governments
Non-financial corporations
Households
Total
(14,492)
(13)
(7,384)
(7,095)
(2,303)
(2)
(1,416)
(885)
(16,795)
As of
Recoveries of Amounts written off
Dec 13 amounts previously
written off
2013
(5,653)
(17)
(2,964)
(2,672)
(423)
–
(359)
(64)
(6,076)
2,849
–
1,822
1,027
–
–
–
–
2,849
2,490
13
1,978
499
271
–
128
143
2,761
655
–
242
413
–
–
–
–
655
(1,100)
(2)
(779)
(319)
1,100
2
779
319
0
(65)
–
(65)
0
(8)
–
(8)
–
(73)
(15,316)
(19)
(7,150)
(8,147)
(1,363)
–
(876)
(487)
(16,679)
331
–
212
119
–
–
–
–
331
(13)
–
(4)
(9)
–
–
–
–
(13)
189
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
21. Derivatives – Hedge Accounting
CZK mil.
As of 31 December 2014
Notional Positive fair
value
value
Negative
fair value
As of 31 December 2013
Notional Positive fair
value
value
Negative
fair value
Fair value hedges
13,249
670
166
16,135
895
264
Cash flow hedge
7,550
208
3
1,400
–
1
20,799
878
Interest rate
Foreign exchange
Interest rate
Total
12,071
1,178
7,550
670
–
208
22
144
3
169
13,630
2,505
1,400
17,535
895
–
–
895
–
264
1
265
22. Property, Equipment and Other Assets
a) At Cost
CZK mil.
Property and equipment – Acquisition and
production costs
Land and
Office
buildings
and plant
(used by equipment /
the Bank) other fixed
assets
IT assets
(Hardware)
Property
and
equipment
Balance as of 1 Jan 2013
18,734
4,878
2,513
26,125
Balance as of 31 Dec 2013
20,579
4,700
2,640
27,919
Balance as of 31 Dec 2014
20,566
4,613
2,237
27,416
Additions in current year (+)
Disposals (-)
Reclassification (+/-)
Additions in current year (+)
Disposals (-)
Reclassification (+/-)
2,044
(200)
1
539
(552)
–
405
(497)
(86)
239
(298)
(28)
154
(116)
89
149
(580)
28
2,603
(813)
4
927
(1,430)
–
b) Accumulated Depreciation
CZK mil.
Property and equipment – Accumulated
depreciation
Land and
Office
buildings
and plant
(used by equipment /
the Bank) other fixed
assets
IT assets
(Hardware)
Property
and
equipment
Balance as of 1 Jan 2013
(7,992)
(3,311)
(2,136)
(13,439)
Balance as of 31 Dec 2013
(8,616)
(3,342)
(2,229)
(14,187)
Balance as of 31 Dec 2014
(9,114)
(3,421)
(1,862)
(14,397)
Depreciation (-)
Disposals (+)
Impairment (-)
Reclassification (+/-)
Depreciation (-)
Disposals (+)
Impairment (-)
Reversal of impairment (+)
Reclassification (+/-)
(809)
191
(6)
–
(654)
330
(174)
–
–
(509)
477
–
1
(326)
284
(1)
3
(39)
(204)
112
–
(1)
(212)
580
(40)
–
39
(1,522)
780
(6)
–
(1,192)
1,194
(215)
3
–
190
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
c) Carrying Amounts
CZK mil.
Balance as of 1 Jan 2013
Balance as of 31 Dec 2013
Balance as of 31 Dec 2014
Additions to Property and equipment and related depreciation
as at 31 December 2013 also include tangible assets of the
company IT Centrum s. r. o. in the amount of CZK 1,726 million, respectively CZK 285 million, i.e. the net book value of
CZK 1,441 million.
Property and equipment
Land and
buildings
(used by
the Bank)
Office
and plant
equipment/
other fixed
assets
IT assets
(Hardware)
Property
and
equipment
10,742
11,963
1,567
1,358
377
411
12,686
13,732
11,452
1,192
375
13,019
The balances as at 31 December 2014 shown above include
CZK 567 million (2013: CZK 500 million) in property and equipment under construction.
The acquisition cost of fully depreciated tangible assets still in use was
CZK 5,110 million as at 31 December 2014 (2013: CZK 5,074 million).
23. Intangible Assets
a) At Cost
CZK mil.
Acquisition and production costs
Software
acquired
Other
(licenses,
patents,
etc.)
Intangible
assets
Balance as of 1 Jan 2013
7,497
7,038
14,535
Balance as of 31 Dec 2013
8,612
6,229
14,841
Balance as of 31 Dec 2014
9,431
6,109
15,540
Additions in current year (+)
Disposals (-)
Reclassification (+/-)
Additions in current year (+)
Disposals (-)
Reclassification (+/-)
693
(69)
491
937
(223)
105
192
(504)
(497)
90
(105)
(105)
885
(573)
(6)
1,027
(328)
–
b) Amortisation
CZK mil.
Amortisation
Software
acquired
Other
(licenses,
patents,
etc.)
Intangible
assets
Balance as of 1 Jan 2013
(5,464)
(6,135)
(11, 599)
Balance as of 31 Dec 2013
(6,061)
(5,737)
(11,798)
Balance as of 31 Dec 2014
(6,503)
(5,748)
(12,251)
Amortisation charge (-)
Disposals (+)
Impairment (-)
Amortisation charge (-)
Disposals (+)
Impairment (-)
(611)
68
(54)
(640)
223
(25)
(102)
504
(4)
(105)
105
(11)
(713)
572
(58)
(745)
328
(36)
191
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
c) Carrying Amounts
CZK mil.
Balance as of 1 Jan 2013
Balance as of 31 Dec 2013
Balance as of 31 Dec 2014
Software
acquired
Other
(licenses,
patents,
etc.)
Intangible
assets
2,033
2,551
903
492
2,936
3,043
2,928
361
3,289
The acquisition cost of fully amortised intangible assets still
in use was CZK 6,879 million as at 31 December 2014 (2013:
CZK 7,048 million).
Other intangible assets include licenses and know-how. In addition,
the item includes CZK 880 million in intangibles under construction
as at 31 December 2014 (2013: CZK 678 million).
24. Investments in Subsidaries and Associates
As of 31 December 2014
Investments in subsidaries
Share
capital
in MCZK/
TEUR
Currency Ownership%
Voting
power in%
Net
Carrying
amount in
MCZK
129
–
842
–
471
736
30
15
73
30
986
–
841
13
–
–
1,423
4
742
1,515
10
brokerjet ČS, a. s.
CEE Property Development Portfolio B.V.
CEE Property Development Portfolio 2 a.s.
CS Investment Limited
CS Property Investment Limited
Czech and Slovak Property Fund B.V.
Czech TOP Venture Fund B.V.
Erste Corporate Finance, a. s.
Erste Energy Services, a. s.
Erste Grantika Advisory, a. s.
Factoring ČS, a. s.
ČS do domu, a. s.
Česká spořitelna - penzijní společnost, a. s.
Mopet, a. s.
Realitní společnost ČS, a. s.
REICO investiční společnost ČS, a. s.
sAutoleasing, a. s.
s IT Solutions CZ, s. r. o.
Erste Leasing, a. s.
Stavební spořitelna ČS, a. s.
Věrnostní program IBOD, a. s.
120.0
20.0
2.0
0.1
120.0
30.0
19.0
6.0
2.0
7.0
114.0
4.0
350.0
76.8
2.0
25.2
500.0
0.2
200.0
750.0
2.0
CZK
EUR
CZK
EUR
EUR
EUR
EUR
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
100%
20%
100%
100%
100%
20%
84%
100%
100%
100%
100%
100%
100%
93.91%
100%
100%
100%
40%
100%
100%
100%
100%
20%
100%
100%
100%
20%
84%
100%
100%
100%
100%
100%
100%
93.91%
100%
100%
100%
40%
100%
100%
100%
CBCB-Czech Banking Credit Bureau, a. s.
Erste Group Shared Services (EGSS), s. r. o.
ÖCI-Unternehmensbeteiligungs
Procurement Services CZ, s. r. o.
První certifikační autorita, a. s.
s IT Solutions SK, spol. s r.o.
1.2
0.2
18.2
0.2
20.0
6.8
CZK
CZK
EUR
CZK
CZK
EUR
20%
40%
40%
40%
23.25%
23.50%
20%
40%
40%
40%
23.25%
23.50%
Subtotal
Investments in associates
Subtotal
Foreign exchange differences hedges relating to
equity investments denominated in EUR
Total
7,860
0.24
0.08
0.19
0.08
7.94
0.00
9
160
8,029
192
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
As of 31 December 2013
Investments in subsidaries
Share
capital
in MCZK/
TEUR
Currency Ownership%
Voting
power in%
Net
Carrying
amount in
MCZK
82
–
842
14
964
746
30
15
60
167
30
–
841
–
–
–
676
4
148
1,198
10
brokerjet ČS, a. s.
CEE Property Development Portfolio B.V.
CEE Property Development Portfolio 2 B.V.
CS Investment Limited
CS Property Investment Limited
Czech and Slovak Property Fund B.V.
Czech TOP Venture Fund B.V.
Erste Corporate Finance, a. s.
Erste Energy Services, a. s.
Factoring ČS, a. s.
Grantika České spořitelny, a. s.
ČS do domu, a. s.
Česká spořitelna - penzijní společnost, a. s.
Mopet, a. s.
Realitní společnost ČS, a. s.
REICO investiční společnost ČS, a. s.
sAutoleasing, a. s.
s IT Solutions CZ, s. r. o.
Erste Leasing, a. s.
Stavební spořitelna ČS, a. s.
Věrnostní program IBOD, a. s.
160.0
20.0
45.0
0.5
120.0
30.0
19.0
6.0
2.0
114.0
7.0
4.0
350.0
144.0
2.0
25.2
500.0
0.2
200.0
750.0
2.0
CZK
EUR
EUR
EUR
EUR
EUR
EUR
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
CZK
51%
20%
100%
100%
100%
20%
84%
100%
100%
100%
100%
100%
100%
90.97%
100%
100%
100%
40%
100%
95%
100%
51%
20%
100%
100%
100%
20%
84%
100%
100%
100%
100%
100%
100%
91%
100%
100%
100%
40%
100%
95%
100%
CBCB-Czech Banking Credit Bureau, a. s.
Erste Group Shared Services (EGSS), s. r. o.
ÖCI-Unternehmensbeteiligungs
Procurement Services CZ, s. r. o.
První certifikační autorita, a. s.
s IT Solutions SK, spol. s r.o.
1.2
0.2
18.2
0.2
20.0
6.8
CZK
CZK
EUR
CZK
CZK
EUR
20%
40%
40%
40%
23.25%
23.50%
20%
40%
40%
40%
23.25%
23.50%
Subtotal
Investments in associates
Subtotal
Foreign exchange differences hedges relating to
equity investments denominated in EUR
Total
5,827
0.24
0.08
0.19
0.08
7.94
0.00
9
132
5,968
193
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Name of company
Registered
office
Principal activities
Investment services
Erste Corporate Finance, a. s.
Erste Energy Services, a. s.
Erste Grantika Advisory, a. s.
Factoring ČS, a. s.
ČS do domu, a. s.
Česká spořitelna - penzijní společnost, a. s.
Mopet, a. s.
Realitní společnost ČS, a. s.
REICO investiční společnost ČS, a. s.
sAutoleasing, a. s.
Prague
The
Netherlands
Prague
Guernsey
Cyprus
The
Netherlands
The
Netherlands
Prague
Prague
Brno
Prague
Prague
Prague
Prague
Prague
Prague
Prague
s IT Solutions CZ, s. r. o.
Prague
Erste leasing, a. s.
Stavební spořitelna ČS, a. s.
Věrnostní program IBOD, a. s.
Znojmo
Prague
Prague
CBCB-Czech Banking Credit Bureau, a. s.
Prague
Erste Group Shared Services (EGSS), s. r. o.
ÖCI-Unternehmensbeteiligungs
Procurement Services CZ, s. r. o.
První certifikační autorita, a. s.
s IT Solutions SK, spol. s r.o.
Hodonín
Austria
Prague
Prague
Slovakia
Investments in subsidaries
brokerjet ČS, a. s.
CEE Property Development Portfolio B.V.
CEE Property Development Portfolio 2 a.s.
CS Investment Limited
CS Property Investment Limited
Czech and Slovak Property Fund B.V.
Czech TOP Venture Fund B.V.
Investments in associates
Real estate investment
Real estate investment
Investments and equity holdings
Investments in securities, issuance of loans
Real estate investment
Management and financing services
Consultancy
Electricity and gas trading
Business consulting
Factoring
Financial advisory network
Pension insurance
Mobile payment services
Real estate activities
Real estate investment
Leasing
Provision of software and advisory involving hardware and
software
Leasing
Construction savings bank
Management of loyalty program
Provision of information from the client information banking
register
Foreign payments services
Provision of management services
Provision of procurement services
Digital signature certification services
Provision of software
194
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
25. Tax Assets and Liabilities
Deferred tax is calculated on all temporary differences under the liability method using a principal tax rate of 19%, depending on the year
in which the relevant asset/liability will be realised/settled.
CZK mil.
Tax assets
2014
Tax assets
2013
Tax liabilities
2014
Tax liabilities
2013
–
188
248
–
60
60
–
33
33
–
–
(177)
(479)
–
(302)
–
(302)
21
–
21
–
(248)
(227)
–
21
21
–
26
26
–
–
140
108
–
(32)
(32)
–
114
114
–
–
99
38
–
(61)
(28)
(33)
(20)
(18)
(2)
–
2
(312)
–
(314)
21
(335)
174
155
19
499
–
–
(347)
499
2
(312)
(347)
Temporary
differences
relate to the
following
items:
Loans and
advances
to credit
institutions
and
customers
Financial
assets available for
sale
Property and
equipment
Sundry
provisions
Other
Total
deferred
taxes
Current
taxes
Total taxes
Net variance 2014
Total Through
profit or
loss
Through
other
comprehensive
income
Net variance 2013
Total Through
profit or
loss
Through
other
comprehensive
income
26. Other Assets
CZK mil.
2014
2013
Prepayments and accrued income
Sundry assets
328
1,531
104
2,599
Other assets
‘Sundry assets’ consist mainly of Receivables from withdrawals from ATMs of CZK 808 million (2013: CZK 733 million),
Receivables for payments with payment cards of CZK 254 million
1,859
2,703
(2013: CZK 352 million) and Not invoiced receivables from customers relations of CZK 510 million (2013: CZK 462 million).
27. Other Trading Liabilities
CZK mil.
2014
2013
Short positions
Debt securities
Deposits
Credit institutions
Other financial corporations
Non financial corporations
328
328
2,449
200
2,248
1
–
–
–
–
–
–
Other trading liabilities
2,777
–
195
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Short sales are short-term trading liabilities which mature between
one and three months. Changes in the fair value of these trading
liabilities are not analysed since the liabilities are different at each
reporting date.
28. Financial Liabilities Designated at Fair Value Through Profit and Loss
CZK mil.
2014
2013
Deposits
General governments
Non financial corporations
Households
Debt securities issued
Bonds
8,874
3
48
8,823
790
790
12,615
–
–
12,615
1,818
1,818
Financial liabilities designated at fair value through profit and loss
CZK mil.
9,664
Amount of change in fair
values attributable to
changes in credit risk for
the period
Amount of cumulative
change in fair values
attributable to changes
in credit risk
2014
2013
2014
2013
–
(14)
(4)
–
–
(91)
(14)
–
–
32
–
–
–
46
4
–
Financial liabilities - at fair value through profit or loss
Deposits from banks
Deposits from customers
Debt securities issued
Other financial liabilities
The change in the fair value arising from the changes in the credit
profile of the issuer (the Bank) is determined as equal to the difference between the fair values of the liabilities as at the previous
14,433
and current reporting dates, net of the effect of the change in fair
value due to the change in the risk-free interest rate.
Debt Securities Issued
CZK mil.
ISIN
Bonds
CZ0003702284
Bonds
CZ0003702474
Bonds
CZ0003702516
Bonds issued
x)
Date of
issue
Maturity
February
2010
October
2010
December
2010
February
2014
November
2014
January
2015
Interest
rate
2014
2013
x)
–
140
x)
–
853
x)
790
825
790
1,818
Bonds bear no interest, yield is determined as the difference between the rate of issue and the bond value payable at its final maturity date.
The ISINs CZ0003702284, CZ0003702474 and CZ0003702516
issues were placed as structured bonds, the yield of which is
determined as equal to the difference between the issue rate and
‘another value’ in accordance with the issue terms and conditions.
The amount of ‘another value’ will be based on a set of indexes and
an equity bucket and will be payable as of the final maturity of the
bonds. Issued bonds are not traded on any market.
196
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
29. Financial Liabilities Measured at Amortised Costs
CZK mil.
Deposits
Deposits from banks
Deposits from customers
Debt securities issued
Bonds
Subordinated debt
Other financial liabilities
Financial liabilities measured at amortised costs
Other financial liabilities included mainly payables to creditors
in amount of CZK 943 million, payables to employees including
2014
2013
660,631
73,397
587,234
38,710
38,448
262
2,475
666,300
97,830
568,470
45,312
43,216
2,096
–
701,816
711,612
social security charges in amount of CZK 477 million and Payables
to securities clearing entities CZK 531 million.
Deposits from Banks
CZK mil.
Current accounts/Overnight deposits
Term deposits
Repurchase agreements
Deposits from banks
2014
2013
15,589
55,669
2,139
30,694
58,276
8,860
73,397
97,830
Deposits from Customers
CZK mil.
Current accounts/Overnight deposits
General governments
Other financial corporations
Non financial corporations
Households
Term deposits
General governments
Other financial corporations
Non financial corporations
Households
Repurchase agreements
General governments
Other financial corporations
Non financial corporations
Deposits from customers
General governments
Other financial corporations
Non financial corporations
Households
2014
2013
533,187
42,035
15,912
93,015
382,225
42,345
104
732
2,283
39,226
11,702
8,042
3,660
–
468,079
41,914
19,864
86,155
320,146
77,256
9,068
–
6,726
61,462
23,135
19,372
–
3,763
587,234
50,181
20,304
95,298
421,451
568,470
70,354
19,864
96,644
381,608
As of 1st January 2014 the Bank transferred Recipients of other transfers (Unit Owners Associations) in the amount of CZK 6,206 millio
n from Non-financial corporations to Households.
197
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Debt Securities Issued - Bonds
CZK mil.
ISIN
Mortgage bonds
CZ0002000623
Mortgage bonds
CZ0002000755
Mortgage bonds
CZ0002000904
Mortgage bonds
CZ0002001068
June 2007
Mortgage bonds
Mortgage bonds
CZ0002001084
CZ0002001134
Mortgage bonds
CZ0002001191
Mortgage bonds
CZ0002001274
Mortgage bonds
CZ0002001282
Mortgage bonds
CZ0002001407
Mortgage bonds
CZ0002001415
Mortgage bonds
CZ0002001423
Mortgage bonds
CZ0002001647
Mortgage bonds
CZ0002001654
Mortgage bonds
CZ0002002165
Mortgage bonds
Mortgage bonds
CZ0002002306
CZ0002002330
Mortgage bonds
CZ0002002744
Mortgage bonds
CZ0002002751
Mortgage bonds
CZ0002002769
Mortgage bonds
CZ0002002777
July 2007
August 2007
October
2007
November
2007
November
2007
December
2007
November
2007
December
2007
December
2007
December
2007
November
2009
April 2011
June 2011
December
2012
December
2012
December
2012
December
2012
December
2012
September
2005
Mortgage bonds
CZ0002002785
Bonds
CZ0003701054
Bonds
CZ0003702011
Bonds
CZ0003702037
Bonds
CZ0003702078
Date of
issue
Maturity
October
2005
February
2006
October
2006
October
2015
February
2016
October
2014
October
2015
July 2014
August 2017
October
2022
November
2014
November
2017
December
2022
November
2023
December
2017
December
2017
December
2022
November
2014
April 2015
June 2016
December
2021
July 2009
October
2009
November
2009
Depository bills of exchange
Cumulative change in carrying amount due to fair value hedging
Interest
rate
2014
2013
4.75%
7,620
7,667
4.80%
7,887
7,961
3.65%
–
1,509
4.50%
759
761
floating
floating
–
3,003
1,517
3,004
floating
2,002
2,003
floating
–
967
5.90%
1,977
1,999
floating
3,999
3,999
6.15%
1,181
1,202
5.85%
4,932
5,094
3.90%
938
974
floating
110
179
3.55%
–
615
0.30%
0.30%
123
40
124
41
2.75%
22
18
June 2023
3.25%
137
125
December
2016
1.50%
55
53
June 2018
1.75%
42
40
2.50%
74
55
x)
272
262
xx)
–
623
xx)
547
521
xx)
587
563
1,000
1,141
26
1,314
December
2019
September
2017
January
2014
October
2016
November
2016
Bonds issued
38,448
43,216
Bonds were issued with a combined yield.
xx)
Bonds bear no interest, yield is determined as the difference between the rate of issue and the bond value payable at its final maturity date.
x)
Of the aggregate carrying value of the mortgage bonds,
CZK 12,270 million (2013: CZK 12,967 million) was hedged
against interest rate risk through interest rate swaps linked to a market floating rate. In accordance with the applicable accounting
policies, these mortgage bonds are remeasured at fair value to the
extent of the hedged interest rate risk.
The ISIN CZ0003701054 issues was placed with a share index
option which is recorded separately and is remeasured at fair value.
The ISINs CZ0002001647, CZ0002001654, CZ0002002165,
CZ0002002306, CZ0002002330, CZ0002002744, CZ0002002751,
CZ0002002769, CZ0002002777, CZ0002002785 mortgage
198
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
bonds and the carrying amounts of the relevant issues in the above
table arises from the difference in valuation.
bond issues and the ISINs CZ0003702011, CZ0003702037,
CZ0003702078 bond issues are not traded on any regulated market. Other issues of mortgage bonds and bonds are traded on the
official regulated market of the Prague Stock Exchange (‘PSE’).
The difference between the nominal values of the issued mortgage
Assets in cover pools used for covered bond issuance amounted to
CZK 90,386 million (2013: CZK 81,615 million).
Debt Securities Issued – Subordinated Debt
CZK mil.
ISIN
Date of issue
Maturity
Interest rate
CZ0003701906
CZ0003702342
12 March 2009
24 March 2010
12 March 2019
24 March 2020
5% p.a.
6M PRIBOR+0.40%
Subordinated debt
ISIN CZ0003701906 issue represent subordinated debt in certificate form with option for premature repayment. The Bank
exercised its option in March 2014 as it was entitled to repay the
Nominal
value
2014
2013
2,000
1,000
–
262
1,784
312
262
2,096
CZ0003701906 issue bonds prematurely at 100% of the bonds’
nominal value together with any unpaid interest to date.
30. Provisions
CZK mil.
2014
2013
Pending legal issues and tax litigation
Commitments and guarantees given
Provisions for guarantees - off balance (defaulted customers)
Provisions for guarantees - off balance (non defaulted customers)
Other provisions
Provisions for onerous contracts
Other
1,751
245
67
178
327
1
326
1,724
347
82
265
389
–
389
Provisions
‘Provisions for guarantees - off balance ’ exposures are recorded to
cover losses that result from off-balance sheet exposures.
2,323
2,460
Other provisions include an estimated amount for the Bank’s constructive obligation to meet any potential future claims of clients
resulting from statute-barred deposits on anonymous passbooks.
‘Provisions for legal disputes are explained in detail in Note 43.
31. Other Liabilities
CZK mil.
2014
2013
Deferred income and accrued expenses
Sundry liabilities
365
3,437
434
6,098
Other liabilities
Sundry liabilities consist mainly of unbilled supplies of
CZK 887 million (2013: CZK 921million), costs of staff bonuses for
2014 amounting to CZK 1,359 million (2013: CZK 1,518 million)
3,802
6,532
and liabilities from payments clearing in amount of CZK 682 million (2013: CZK 619 million).
199
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
32. Total Equity
CZK mil.
Subscribed capital
Share capital
Additional paid-in capital
Retained earnings and other reserves
Total equity1)
1)
2014
2013
15,200
15,200
12
88,099
15,200
15,200
12
80,989
103,311
96,201
Details on equity are provided in Section III, Statement of Changes in Total Equity
As of 31 December 2014, subscribed capital consists of 140 788 787
voting ordinary shares and 11 211 213 preference shares. Additional
paid-in capital represents the amount by which the issue price of
the shares exceeded their par value. Retained earnings and other
reserves represent accumulated net profit brought forward, as well
as income and expenses recognized in other comprehensive income.
Number of Shares and Share Capital
Authorised, Issued and Fully Paid Share Capital Is as Follows:
2014
Ordinary shares of CZK 100 each
Preference shares of CZK 100 each
Share capital
2013
Number of
shares
CZK mil.
Number of
shares
CZK mil.
140,788,787
11,211,213
14,079
1,121
140,788,787
11,211,213
14,079
1,121
152,000,000
15,200
152,000,000
15,200
Preference shareholders are not entitled to vote at the annual shareholders’ meeting. They have a right to receive dividends each year
if the Bank is profitable. The amount of the dividend is proposed
by the Board of Directors and subject to approval at the annual
shareholders’ meeting. In the case of liquidation, preference shareholders have a right to the assets of the Bank before ordinary
shareholders but after other creditors. Preference shareholders have
a right to purchase shares offered by the Bank when it increases
its share capital in the same proportion as the current holding.
Preference shares can only be issued to municipalities and local
governments in the Czech Republic. The preference shares can
only be transferred to entities other than municipalities and local
governments of the Czech Republic subject to the approval of the
Board of Directors.
33. Segment Reporting
Retail
The Bank structure of segment reporting is in line with that of Erste
Group Bank and has been divided into the following segments:
–– Retail;
–– Corporate Clientele (‘SME’);
–– Real Estate (‘RE’);
–– Asset and Liability Management and Local Corporate
Center (‘ALM & LCC’);
–– Large Corporate (‘LC’);
–– Group Markets (‘GM’).
For segment reporting the rules used in the Bank’s management
report apply. The report is prepared monthly for the Board of
Directors as well as for the Erste Group Bank Board of Directors.
The report is reconciled to the monthly reporting package and the
same segments used in the Group’s controlling report are used for
Erste Group Bank segment reporting.
Retail, Corporate Clientele, RE, ALM and the Corporate Center
form the main activities of Česká spořitelna’s finance group for
which it is primarily responsible.
The retail segment comprises branch networks within which
the Bank sells products to citizens, traders, entrepreneurs and
micro-businesses.
Retail provides services to their clients through the branch network,
external sales channels and indirect banking. The product range is
very broad: from lending products to assets under management.
In order to better understand the retail clients (understanding their
opportunities and meeting their needs) they are differentiated into
the following subsegments:
–– Mass market;
–– Mass affluent;
–– Erste Premier;
–– MSE; and
–– Municipality.
Corporate Clientele
The segment of corporate clients comprises:
–– SME Segment - Clients with an annual turnover of
between CZK 30 million and CZK 1,000 million, where
200
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
service is provided by 13 Regional Corporate Centers and
headquarters in Prague;
–– Non-profit sector - Clients from non-governmental
organizations (organizations that are neither part of the
government nor conventional profit generating businesses)
such as foundations, political parties, churches, trade
unions. Service is provided from the headquarters in
Prague; and
–– Public sector - Governmental (mainly state branches,
counties, statutory towns, health insurance funds, state
funds, public universities and cities). Service is provided
from the headquarters in Prague and by the Regional
Corporate Centres (for cities, public universities and
healthcare organizations).
Real Estate
The real estate segment covers commercial property projects
financed by Česká spořitelna.
Asset and Liability Management and Local
Corporate Center (ALM&LCC)
The asset and liability management section is responsible for the
management of the statement of financial position structure (banking book) taking into account market conditions in order to monitor
the Group’s liquidity position and to secure a high return from
capital. ALM also monitors the transformation margin that arose
as a result of the mismatch in the statement of financial position
from a time and currency perspective. The transformation margin,
as well as ALM’s own activities (financial assets held-to-maturity,
financial assets available-for-sale, financial assets designated upon
initial recognition as at fair value through profit or loss on the asset
side and bonds issued on the liability side) are the main parts of
this segment/section.
The corporate center segment includes the positions and items that
cannot be directly allocated to a business segment.
Corporate center also includes free capital which does not represent
a segment, but the difference between total equity and allocated
capital.
Large Corporate
Segment comprises international and biggest domestic companies.
Group Markets
The group markets segment is responsible for trading in foreign
exchange and interest rate products, as well as in securities for
all customer groups. Moreover, it is tasked to design and develop
products that cater to market demand in core markets. GM comprises the divisionalised business units such as Treasury Trading
and Treasury Sales (retail, corporate and institutional transactions).
201
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Business Segments
CZK mil.
Retail
SME
Real estate
ALM & LCC
Large Corporate
GM
Total group
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
17,187
9,616
–
361
17,817
9,219
–
470
2,862
848
–
224
2,823
920
–
200
614
60
–
19
728
113
–
23
3,767
(182)
1,881
67
2,595
(339)
641
48
726
547
–
54
720
489
–
35
376
162
–
1,375
137
84
–
1,566
25,532
11,051
1,881
2,100
24,820
10,486
641
2,342
–
–
–
–
–
–
79
106
–
–
–
–
79
106
(13,943)
(13,552)
(1,620)
(1,581)
(98)
(107)
(634)
(567)
(329)
(357)
(544)
(489)
(17,168)
(16,653)
–
–
–
90
–
–
209
41
–
19
–
(1)
209
149
(2,100)
(2,178)
(532)
(616)
(101)
(247)
(280)
(29)
(227)
(214)
–
–
(3,240)
(3,284)
5
35
135
–
–
–
(486)
(427)
(163)
–
–
2
(509)
(390)
11,126
11,811
1,917
1,836
494
510
4,421
2,069
608
692
1,369
1,299
19,935
18,217
(2,114)
9,012
(2,244)
9,567
9,567
(364)
1,553
1,553
(349)
1,487
1,487
(94)
400
(97)
413
413
(768)
3,653
3,653
(348)
1,721
1,721
(115)
493
(131)
561
561
(260)
1,109
1,109
(246)
1,053
1,053
(3,715)
16,220
16,220
(3,416)
14,801
14,801
Operating income
Operating expenses
27,164
(13,943)
27,506
(13,552)
3,934
(1,620)
3,943
(1,581)
693
(98)
864
(107)
757
5,612
(634)
4,978
3,051
(567)
2,484
1,327
(329)
1,244
(357)
887
1,913
(544)
1,369
1,787
(489)
1,298
40,643
(17,168)
23,475
38,395
(16,653)
21,742
Risk-weighted assets (credit risk, eop)
Average allocated capital
122,187
12,817
119,107
12,303
134,043
11,008
109,278
9,130
25,774
1,768
29,084
2,402
32,401
8,143
24,571
6,571
40,828
3,068
42,865
3,568
18,178
2,431
15,731
2,038
373,411
39,235
340,636
36,012
51.3%
70.3%
49.3%
77.8%
41.2%
14.1%
40.1%
16.3%
14.1%
22.6%
12.4%
17.1%
11.3%
44.9%
18.6%
26.2%
24,8%
16.0%
28.7%
15.7%
28.4%
45.7%
27.4%
51.6%
42.2%
41.3%
43.4%
41.1%
286,645
454,499
295,870
483,298
126,634
62,405
119,699
58,660
32,107
3,097
35,413
3,946
267,733
168,722
332,723
149,772
35,610
16,761
35,419
23,600
107,150
54,194
25,714
22,251
855,879
759,678
844,838
741,527
Net interest income
Net fee and commission income
Dividend income
Net trading and fair value result
Rental income from investment
properties & other operating leases
General administrative expenses
Gains/losses from financial assets and
liabilities not measured at fair value through
profit or loss, net
Net impairment loss on financial assets not
measured at fair value through profit or loss
Other operating result
Pre-tax result from continuing
operations
Taxes on income
Post-tax result from continuing operations
Net result for the period
Operating result
Cost/income ratio
Return on allocated capital
Total assets (eop)
Total liabilities excluding equity (eop)
9,012
13,221
13,954
2,314
2,362
400
595
493
998
The majority of revenue from external customers is generated in the Czech Republic.
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
34. Leases
a) Finance Leases
The Bank leases no real estate and moveable property to other parties under finance lease arrangements.
b) Operating Leases
Under operating leases, the Bank. leases both real estate and moveable property from other parties.
Operating Leases from the View of the Bank as Lessee
Minimum lease payments from non-cancellable operationg leases were as follows:
CZK mil.
2014
2013
< 1 year
1-5 years
> 5 years
578
520
193
586
1,255
166
Total
Lease payments from operating leases recognised as expense in
the period amounted to CZK 617 million (2013: CZK 605 million)
35. Related party Transactions
Related parties involve connected entities or parties that have a special
relationship to the Bank.
Parties are considered to be related if one party has the ability to
control the other or exercise significant influence over the other in
making financial or operational decisions. The Bank is controlled
by Erste Group Bank over which DIE ERSTE österreichische SparCasse Privatstiftung exercises significant influence. The remaining
investment in Erste Group Bank is held by minority shareholders
and institutional investors via publicly traded shares on the stock
exchanges in Vienna, Prague and Bucharest.
The parties that have a special relationship to the Bank are considered
to be members of the Bank’s statutory and supervisory bodies and
management, legal entities exercising control over the Bank (including
entities with a qualified interest in these entities and management of
these entities), persons closely related to the members of the Bank’s
statutory and supervisory bodies, management, and entities exercising
control over the Bank, legal entities in which any of the parties listed
1,291
2,007
above holds a qualified interest, entities with a qualified interest in the
Bank and any other legal entity under their control, members of the
CNB’s Banking Board, and legal entities which the Bank controls.
Pursuant to the definitions outlined above, the categories of the Bank’s
related parties principally comprise Erste Group Bank, the Bank’s
subsidiaries, which include both direct and indirect investments
with controlling influence, members of its Board of Directors and
Supervisory Board, and other related parties, which include companies directly or indirectly controlled by Erste Group Bank.
A number of banking transactions are entered into with related
parties in the normal course of business. These principally include
loans, deposits and other transactions. These transactions were
carried out on an arm’s length basis and were settled exclusively
in cash. The interest rates charged to and by related parties are at
normal commercial rates. Outstanding balances at the year-end
are unsecured except for loans to finance investment property and
property under construction.
Guarantees received represent payment guarantees related to the
Bank’s credit exposures. Issued guarantees relate to amounts
owed by the Bank’s subsidiaries to financial institutions outside
of the Group. They are provided under standard market conditions.
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Loans and Advances to and Amounts Owed to Related Parties
CZK mil.
2014
2013
Erste Group Bank AG
Investments in subsidaries
Other related parties
Members of the Board of
Directors and Supervisory
Board
Erste Group Bank AG
Investments in subsidaries
Other related parties
Members of the Board of
Directors and Supervisory
Board
1,636
–
27
–
–
–
–
–
5,910
82
491
–
3,921
148
434
–
26,355
–
1
–
28,688
–
53
–
–
16,954
211
10
–
17,778
226
37
2
–
–
–
–
–
–
–
–
98
40
–
8
264
86
–
5,967
10
–
–
6,184
7
–
–
14,990
39,307
1,774
21
25,203
48,678
1,055
32
75
149
61
–
15
54
81
–
424
(139)
5
–
436
(392)
5
2
5
225
365
–
7
728
302
–
–
593
1
–
–
1,830
–
–
1,434
5
65
–
1,114
(82)
356
–
–
43
12
–
–
21
8
–
(151)
(1,022)
(295)
(68)
(53)
(1,039)
(303)
(83)
12
46
6
–
(31)
56
7
–
20
5,891
39
–
4
5,313
55
–
576
–
771
–
1,474
–
222
–
Assets
Cash and cash balances
Financial assets - held for
trading
Loans and receivables to
credit institutions
Loans and receivables to
customers
Derivatives Hedge
Accounting
Other assets
Liabilities
Financial liabilities held for
trading
Financial liabilities measured
at amortised costs
Other Liabilities
Profit&Loss statement
Net interest income
Net fee and commision
income
Dividend income
Net trading and fair value
result
Rental income from
investment properties & other
operating lease
Other administrative
expenses
Other operating result
Loans commitments,
financial guarantees and
other commitments given
Loan commitments,
financial guarantees
and other commitments
received
‘Other related parties’ include relationships to investments to companies wholly or partly owned by Erste Group Bank .
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36. Transfers of Financial Assets – Repurchase Transactions and Securities Lending
CZK mil.
2014
2013
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
–
4,475
8,008
–
4,475
9,366
21,790
3,634
5,971
21,764
3,645
6,586
Repurchase agreements
Trading assets
Financial assets – available for sale
Financial assets – held to maturity
Total - repurchase agreements
12,483
Securities lendings
Financial assets – held to maturity
13,841
7,395
Total - securities lendings
Total
31,395
9,248
7,395
19,878
31,995
–
9,248
23,089
–
–
31,395
–
31,995
The transferred financial instruments consist of bonds and other interest-bearing securities.
The following table shows the fair values of the transferred assets and associated liabilities that have recourse only to the transferred assets.
In case of the Bank, a. s., these assets and liabilities relate to repo transactions.
CZK mil.
2014
Fair value of
transferred
assets
Fair value of
associated
liabilities
–
–
–
4,475
4,475
9,318
13,793
Trading assets
Financial assets - available for
sale
Financial assets - held to
maturity
Total
2013
Net position Fair value of
transferred
assets
Fair value of
associated
liabilities
Net position
21,790
21,763
27
–
3,634
3,645
(11)
9,366
(48)
6,536
6,585
(49)
13,841
(48)
31,960
31,993
(33)
37. Offsetting
Financial Assets Subject to Offsetting and Potential Offsetting Agreements in 2014
CZK mil.
Derivatives
Reverse repurchase
agreements
Total
Gross
amounts
in balance
sheet
Amounts
set off
against
financial
liabilities
Net
Potential effects of netting Net amount
amounts agreements not qualifying for balance
after
in balance
sheet offsetting
potential
sheet
offsetting
Financial
Cash
Non-cash
instruments
collateral
financial
received
collateral
received
19,699
–
19,699
11,578
5,175
–
2,946
817
–
817
–
–
817
–
20,516
–
20,516
11,578
5,175
817
2,946
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Financial Liabilities Subject to Offsetting and Potential Offsetting Agreements in 2014
CZK mil.
Derivatives
Repurchase
agreements
Total
Gross
amounts
in balance
sheet
Amounts
set off
against
financial
assets
Net
Potential effects of netting Net amount
amounts agreements not qualifying for balance
after
in balance
sheet offsetting
potential
sheet
offsetting
Financial
Cash
Non-cash
instruments
collateral
financial
pledged
collateral
pledged
20,833
–
20,833
11,578
1,138
–
8,117
13,841
–
13,841
–
–
13,793
48
34,674
–
34,674
11,578
1,138
13,793
8,165
Financial Assets Subject to Offsetting and Potential Offsetting Agreements in 2013
CZK mil.
Derivatives
Reverse repurchase
agreements
Total
Gross
amounts
in balance
sheet
Amounts
set off
against
financial
liabilities
Net
Potential effects of netting Net amount
amounts agreements not qualifying for balance
after
in balance
sheet offsetting
potential
sheet
offsetting
Financial
Cash
Non-cash
instruments
collateral
financial
received
collateral
received
22,210
–
22,210
11,386
963
–
9,861
809
–
809
–
–
809
–
23,019
–
23,019
11,386
963
809
9,861
Financial Liabilities Subject to Offsetting and Potential Offsetting Agreements in 2013
CZK mil.
Derivatives
Repurchase
agreements
Total
Gross
amounts
in balance
sheet
Amounts
set off
against
financial
assets
Net
Potential effects of netting Net amount
amounts agreements not qualifying for balance
after
in balance
sheet offsetting
potential
sheet
offsetting
Financial
Cash
Non-cash
instruments
collateral
financial
pledged
collateral
pledged
24,294
–
24,294
11,386
9,137
–
3,771
31,994
–
31,994
–
–
31,960
34
56,288
–
56,288
11,386
9,137
31,960
3,805
The Bank employs repurchase agreements and master netting agreements as a means of reducing credit risk of derivative and financing
transactions. They qualify as potential offsetting agreements.
Master netting agreements are relevant for counterparties with
multiple derivative contracts. They provide for the net settlement
of all the contracts in the event of default of any counterparty. For
derivatives transactions the amount of assets and liabilities which
would be set off as a result of master netting agreements is presented
in the column Financial instruments. If the net position is further
secured by cash collateral the effect is disclosed in the respective
columns Cash collateral received/pledged.
Repurchase agreements are primarily financing transactions.
They are structured as a sale and subsequent repurchase of
securities at a pre-agreed price and time. This ensures that
the securities stay in hands of lender as collateral in case that
borrower defaults in fulfilling any of its obligations. Offsetting
effects from repurchase agreements are disclosed in the column
Non-cash financial collateral received / pledged. Collateral is
presented at fair value of the transferred securities. However,
if fair value of collateral exceeds the carrying amount of the
receivable/liability from the repo transaction the value is
capped at the level of the carrying amount. Remaining position
may be secured by cash collateral.
Cash and non-cash financial collateral involved in these transactions is restricted from using it by the transferor during the time
of the pledge.
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38. Risk Management
Risk Management Strategy
Risk management is a core function of every bank to take risks
in a conscious and selective manner and to manage such risks
professionally. The Risk management strategy of the Bank aims
to achieve an optimal balance of risk and return in order to achieve
a sustainable, high return on equity.
The Bank uses a control and risk management system that is proactive and tailored to its business and risk profile. It is based on
a clear risk strategy that is consistent with the business strategy
and focused on early identification and management of risks and
trends. In addition to meeting the internal goal of effective and
efficient risk management, the Bank control and risk management
systems have been developed to fulfil external and, in particular,
regulatory requirements.
Given Česka spořitelna’s business strategy, the key risks are credit
risk, market risk, liquidity risk and operational risk.The most significant risk is credit risk. In addition, the investment portfolio of
the Bank is exposed to interest rate risk and liquidity risk. The
risks attached to the trading portfolio include market risks, specifically foreign exchange, interest rate, commodity and equity
risks and other risks relating to trading with complex instruments.
All financial transactions and other banking activities also carry
operational risk.
Risk Management Organization and Decision
Bodies
Risk management for the Bank is performed by a division of the
Bank managed by a member of the Board of Directors exclusively
responsible for risk management - the Chief Risk Officer. This
division, which is completely independent of the business divisions
of the Bank, centralises all departments tasked with risk management, namely:
–– Compliance, Financial Crime and Anti-Fraud Management;
–– Legal services;
–– Strategic Risk Management;
–– Credit Risk Management for Corporate Banking;
–– Credit Risk Management for Retail Banking;
–– Restructuring and Workout and
–– Security.
The Management board deals with risk issues in its regular board
meetings. All types of risks are reported periodically and actions
are taken when needed. In addition, the board is concerned with
current risk issues and, through the internal risk reporting receives
ad hoc reports for all types of risk.
In order to carry out risk management activities and support the
Management Board in its risk taking and risk managing decisions,
certain committees have been established, including the following:
–– Risk Management Committee of the ČS supervisory Board,
–– Credit Risk Committee,
––
––
––
––
Asset Liability Committee,
Operational Liquidity Committee,
Risk management in Financial Market Committee, and
Compliance, Operational Risk and Security Committee.
Management and control systems are continuously reviewed by
the Internal Audit which prepares a verification report annually.
38.1 Risk and Capital Management
Overview
The Bank’s risk and capital management framework has been continuously strengthened and developed into a comprehensive framework which is part of the Erste Group’s enterprise risk management
system. The fundamental pillar of this system is the Internal Capital
Adequacy Assessment Process (ICAAP), as required under Pillar
2 of the Basel framework.
The risk and capital management and steering system is an integral part of the Bank’s overall steering and management system.
To ensure all aspects of regulatory requirements and support the
Bank’s management in pursuing its strategy the main components
of this system can be clustered as follows:
–– Risk appetite statement
–– Risk materiality assessment including concentration risk
management
–– Stress testing
–– Risk-bearing capacity calculation
–– Risk planning & forecasting
–– Capital allocation and risk adjusted performance
measurement, and
–– Recovery and resolution plans
Risk Appetite Statement and Risk Materiality
Assessment
The risk appetite statement (RAS) serves as a formalised, high-level
steering tool from which top-down targets for the Bank’s limit system on lower aggregation levels can be derived. The objective of the
Bank’s RAS is to contain earnings volatility, avoid net losses and
protect external and internal stakeholders. In order to reach these
goals, general indicators are defined as well as indicators for credit,
market and liquidity risk. To ensure that the RAS is operationally
efficient, the indicators are classified as either targets, limits or principles, where the main differences are in the mechanisms triggered
in case of a breach of the RAS. Regular reviews are performed and
management reports are prepared in order to ensure effective limit
oversight and identify any excesses.
For the purpose of systematically and continuously assessing all
relevant risk types and identifying risks that are significant for the
Bank, the Bank has defined a clear and structured risk materiality assessment approach that is based on defined quantitative and
qualitative factors for each risk type and is carried out annually.
This process constitutes the basis for the determination of material
risk types to be included in the risk-bearing capacity calculation
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and stress testing. Insights generated by the assessment are also
used to improve risk management practices to further mitigate
risks within the Bank. The Bank has implemented a framework to
identify, measure, control, report and manage concentration risks.
Concentration risk management at the Bank covers both intra- and
inter-risk concentrations. Concentration risks also comprise an integral part of stress test analyses. Additionally, the results of concentration risk assessments are used in defining the Risk Appetite
Statement, defining stress factors for stress tests, and calibrating
the Bank’s limit system.
Internal Capital Assessment Process and
Stresstesting
With respect to the ‘ICAAP’,the Bank has been using the Erste
Group Bank methodology, which serves as a uniform set of rules
for capital management within the Bank.
The Bank methodology is continuously updated in order to reflect
the latest trends, best practices and regulatory requirements. The
Bank’s approach contains minor modifications driven by local regulatory requirements or other local specifics.
Within ICAAP, all major risks are quantified and covered by internal capital. The Bank’s economic capital is measured at a confidence level of 99.9% and a 1-year holding period. From a modelling
point of view, complex advanced approaches based on VaR methodology are used for market risk, operational and liquidity risks or
IRB for credit risk. The Bank also developed models for other risk
types (business, strategic, reputational and concentration risk). The
overall risk of the Bank is calculated as the sum of individual risk
requirements, i.e. no diversification effect is considered among risk
types in order to keep a conservative approach. The resulting aggregate risk exposure is compared to internal capital resources derived
from Pillar 1 capital resources with some adjustments (mainly profit
of the current year is added to capital resources). Finally, the results
of the economic capital quantification are allocated to business lines
in order to compare their risk adjusted profitability.
Additionally, the Bank performs stress testing which is used as
an additional input for internal capital adequacy assessment. The
results of stress testing are updated on a quarterly basis and are
reflected into both pillars – regulatory Pillar 1 and internal Pillar 2.
The ICAAP results for the Bank are submitted to the Board
of Directors on a quarterly basis; the Board decides on any measures to be adopted with respect to ICAAP as well as risks and
capital management in general. The Bank meets the internal limits
approved by the Board of Directors with a sufficient buffer.
The Bank has also approved a recovery plan in line with BRRD
requirements. The aim of the recovery plan is to be well prepared
for severe unfavourable market developments and, if appropriate,
to take adequate measures in a timely manner.
From the long-time perspective, the Bank manages its capital with
the objective of maintaining a strong capital base in order to support its business activities, to comply with all regulatory capital
requirements including capital buffers (currently conservation,
systemic risk and SREP buffers) and to ensure a stable return for
shareholders.
Statement of Capital for the Bank’s Capital Adequacy Calculation on a Standalone Basis as Reported to
the Regulator in Accordance with Applicable Rules*:
CZK mil.
Total capital
Original capital (Tier 1)
Of which:
Share capital (refer to Note 32)
Share premium
Reserve funds and retained earnings
Deductible items from original capital
Additional capital (Tier 2)
Aggregate amount of all deductible items from original and additional capital
Total risk exposure
Capital adequacy ratio for the year
2014
2013
75,506
75,653
15,200
2
71,869
(11,782)
217
–
15,200
2
64,005
(3,043)
2,040
(2,551)
75,289
425,974
17.73%
76,164
426,738
17.73%
*The Bank has not used the possibility stated in the Article 26/2 of the CRR to include in the Common Equity Tier 1 capital reported for the year end 2014 to the regulator the interim
profits nor any credit risk adjustments.
The Bank meets all capital adequacy requirements as requested by regulators.
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38.2 Credit Risk
In the course of its business, the Bank is exposed to credit risk
which is the risk that a counterparty will be unable to pay amounts
owing in full when due.
Credit Risk Management Methodology
In managing credit risk, the Bank applies a unified methodology
which sets out applicable procedures, roles and authorities. The
lending policy defines a comprehensive policy for the Bank’s credit
risk management. It defines the basic principles related to identification, measurement, monitoring, controlling and credit risk management. It contains the basic lending rules including limitations
for loan granting and describes individual credit risk management
tools, such as the rating system, collateral management, limit setting, setting of approval policy, monitoring, provision making policy, reporting, controlling and portfolio management. In addition
it defines credit risk management organization and discloses the
lending process.
Breakdown of the Portfolio for Credit Risk
Management Purposes
For the purpose of determining impairment allowances the loans
and advances are segmented into non-default (performing) loans
where the principal and interest is not past due for more than 90
days or there are no other indications that would suggest that the
repayment of the receivable is unlikely (bankruptcy proceedings,
forced restructurings, etc.) and default (non-performing) loans.
There are two large sub-portfolios within these receivables, i.e.
receivables which are individually significant comprising receivables from corporate entities or receivables where the Bank’s credit
exposure is higher than CZK 5million, and receivables which are
individually insignificant. Within these two sub-portfolios the Bank
also monitors five customer portfolios for individually significant
receivables and 16 product portfolios for individually insignificant
receivables. The Bank monitors a number of risk parameters within
these portfolios (PD - probability of default, LGD - loss given
default, CCF - credit conversion factors). PD is further monitored
at the level of various internal rating grades.
Receivables with debtor default correspond to individually impaired
receivables (rating ‘R’). Receivables without debtor default with
internal ratings of 1 - 6 are considered to be unimpaired. Receivables
with internal ratings of 7 - 8 are collectively impaired.
For credit risk management purposes, the Bank’s loan portfolio is
broken down as follows:
–– Retail receivables are receivables from individuals/
households and small enterprises with an annual turnover
of up to CZK 30 million and small municipalities
(‘MSE’). The methods of managing the credit risk of retail
receivables are based on statistical models calibrated using
historical data.
–– Receivables from corporate counterparties include
receivables from small and medium sized enterprises
with an annual turnover of between CZK 30 to
1,000 million (‘SME’) receivables from large businesses
(with an annual turnover exceeding CZK 1,000 million)
and public sector receivables. While the methods of
managing the credit risk of corporate receivables are
based on statistical models (particularly for the portfolio
of receivables from mid-size enterprises), great emphasis
is also put on regular, discrete analysis of individual
customers.
With the exception of a limited number of borderline cases, the
implemented breakdown of the portfolio corresponds to the asset
classes as defined in CNB Regulation 163/2014 Coll. which implements the BASEL II rules.
For the purpose of provisioning, monitoring and predicting losses,
the Bank differentiates between individually significant and individually insignificant exposures. The credit risk attached to individually significant exposures is managed on an individual basis
with the minor use of portfolio models. The Bank aggregates individually insignificant exposures into portfolios and manages the
risk on a portfolio basis.
Individually significant loans predominantly include loans from
the Bank’s corporate portfolio. These loans are additionally split
into the following sub-portfolios:
–– Large corporate clients with an annual turnover exceeding
CZK 1,000 million (the exposure of which is managed
using a unified method throughout Erste Group Bank and its
subsidiaries (‘the Erste Group’) or at the Bank level);
–– Project finance and corporate mortgages;
–– Small and medium sized enterprises (turnover from CZK 30
to 1,000 million);
–– Municipality loans; and
–– Loans in the Workout Department.
Corporate loans match the ‘corporate’ or ‘special funding’ asset
class (segment) under BASEL II.
Individually insignificant loans (below CZK 5million), including
MSE loans, principally encompass the Bank’s retail loans. These
loans are divided into 20 product portfolios. The key portfolios
include mortgage retail loans (with 5 LTV segments), credit card
loans, overdraft loans and consumer loans. The Bank’s retail loans
match the ’Retail’ asset class (segment) under BASEL II.
Collection of Key Risk Management Information
In managing credit risk, the Bank refers not only to the Bank’s
portfolio information but also the portfolio information of other
members of the Group. The Bank also uses information obtained
from external sources such as credit bureaus or ratings provided by
reputable rating agencies. This data provides a basis for modelling
credit risk and supports debt recovery, valuation of receivables and
the calculation of credit losses.
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Internal Rating Tools
The internal ratings of the Bank reflect the ability of counterparties to meet their financial obligations. The degree of risk
is reflected in the internal rating and corresponding probability
of default of the debtor in the following twelve months. The
definition of default is in line with the requirements set out in
CRR (Regulation EU No 575/2013).
The Bank allocates internal ratings to all clients with credit
exposures. The Bank uses the rating scale with thirteen grades
for non-defaulted counterparties and one grade for default
counterparties (internal rating ‘R’). In the case of private individuals there are only eight rating grades for non-defaulted
clients.
To allocate the internal rating grade the Bank uses several rating models for different counterparty segments. All rating models
comply with Erste Group Bank standards:
Segment
Government (sovereign) and banking
Specialized financing
Corporate customers
MSE
Individuals
Municipal clients
Rating tool
Unified model for the whole Erste Group. The model places great emphasis on
independent external ratings combined with other information
Unified model for the whole Erste Group, which is primarily based on projected cash
flows
Rating based on financial information and soft factors
In addition to the financial results of the company, information about the enterprise
owner or the entrepreneur himself is also taken into account
Behavioural and application scoring
Model based on budget analysis
The Bank reviews ratings on a regular basis. The ratings of counterparties from the banking, corporate and sovereign segments are
reviewed at least annually. For retail customers the Bank has developed a ‘behavioural rating’ and the client ratings are updated monthly.
foreseeable financial difficulties. Retail clients having long relationships with the Bank, or clients with a wide product pool use. No late
payments currently or in the most recent 12 months. New business is
generally done with clients in this risk category.
The rating instruments are periodically adjusted to reflect changing
economic conditions and the Bank’s business plans, validation (consistency of results testing) and performance testing undertaken by the
Credit Risk Controlling Department.
Management attention: Vulnerable non-retail clients that may have
overdue payments or defaults in their credit history or may encounter
debt repayment difficulties in the medium-term. Retail clients with
limited savings or probable payment problems in the past triggering
early collection reminders. These clients typically have good recent
histories and no current delinquencies.
In the case of counterparties with an external rating provided by an
external rating agency, the Bank uses this information as an additional
source of information. Based upon its historical experience, the Bank
has created a transfer bridge between its own internal ratings and the
external ratings.
In addition to the internal ratings outlined above, the Bank allocates each exposure a risk group according to CNB Regulation
No. 163/2014 Coll. In accordance with this regulation, the Bank
maintains five groups of risk profiles namely, standard, watch, substandard, doubtful and loss.
Substandard: The borrower is vulnerable to negative financial and
economic developments. Such loans are managed in specialised risk
management departments.
For the purpose of external reporting, internal rating grades of the
Bank are grouped into the following four risk categories:
Non-performing: One or more of the default criteria under Basel 2
are met: full repayment unlikely, interest or principal payments on
a material exposure more than 90 days past due, restructuring resulting in a loss to the lender, realisation of a loan loss, or initiation of
bankruptcy proceedings. For purposes of analysing non-performing
positions, the Bank applies the customer view. Accordingly, if an customer defaults on one product then all of that customer’s performing
products are classified as non-performing. For corporate borrowers
in CEE, the customer view is also applied. However, in the retail
and SME segment in some subsidiaries in CEE, the Bank uses the
product view, so that only the product actually in default is counted
as a non-performing exposure whereas the other products of the same
customer are considered performing.
Low risk: Typically regional customers with well-established and
Exposure Limits
In compliance with the regulatory requirements arising from BASEL
II, rating instruments are subject to annual validations performed by the
Credit Risk Controlling Department, Erste Group Bank Competence
Centre and Internal Audit.
rather long-standing relationships with the Bank or large internationally recognised customers. Strong and good financial position and no
Exposure limits are defined as the maximum exposure that the Bank
may accept in respect of a client with a given rating and underlying
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
collateral. In setting the system of limits, the Bank strives to protect
its revenues and capital from concentration risk.
The Bank has changed the methodology of Credit VaR calculation
in 2014.
–– Until 2013 the indicator was limited to top 20 exposures,
which was an approximation justified by historical shape
of portfolio, where unexpected loss from top 20 exposures
covered most significant / dominant part of Bank‘s total
unexpected loss.
–– However, size and granularity of credit portfolio has
changed and top 20 exposures represent only a fraction
of overall portfolio. This is why VaR calculation has been
extended to entire Wholesale (=non-retail) portfolio.
–– Also confidence interval has been changed. While 95%
confidence interval has been used until 2013, starting
from 2014 the interval 99.9% is in place. This new setting
corresponds to regulatory expectations, as well as industry
standards.
The VaR of Wholesale portfolio decreased from 2.25% (or
CZK 14,250 million) in 2014 to 2.03% (or CZK 12,370 million).
This improvement was partially caused by continuing trend of
lower concentration (decreasing exposure of top 20 clients by
6.5%, more granular concentration among industries) and slight
improvement of internal ratings (improvement of average portfolio
rating). Also in terms of comparison of VaR to Tier 1 capital the
indicator improved from 18.71% to 16.43%.
Structure of Approval Authorities
The structure of approval authorities is based on the materiality
of the impact of a potential loss from a provided exposure on
the Bank’s financial performance and the risk profile of the relevant loan transaction. The highest approval authorities rest with
the Credit Committee and/or Statistical Model Committee of the
Board of Directors, with the Credit Committee of the Supervisory
Board only having an advisory role. Lower approval authorities
are categorised taking into account the seniority of the staff of the
Corporate Credit Risk Management Department and the Retail
Credit Risk Management Department.
Risk Parameters
The Bank uses its own internal models in determining the risk
parameters, namely PD, LGD and CCF risk parameters. All of the
models are developed according to BASEL II requirements and
are subject to regular independent validation and review by the
regulator. The monitoring of historical risk parameters and their
prediction serve as a basis for the quantitative management of portfolio credit risk.
The Bank currently employs risk parameters for portfolio monitoring, non-performing (defaulted) loan portfolio management,
portfolio protection measurement, risk valuation and prediction
of the Bank’s risk profile development under different scenarios.
All models are back tested at least annually and validated by the
Bank’s specialists who are independent of the Risk Management
Department.
Impairment Allowance for Loan Losses
The Bank recognises impairment allowances for incurred losses.
These losses are determined and recognised in accordance with IAS
39. The Bank uses adjusted risk parameters estimated as part of the
implementation of the BASEL II rules to assess the amount of loss.
Loan loss impairment allowances are determined for all impaired
loans. The impairment methodology is regularly reviewed and
adjusted if necessary.
Management of Credit Risk in the Trading
Portfolio
The credit risk inherent in the trading portfolio is managed through
the limits system applied to all counterparties.
Collateral
The Bank defines collateral as assets that can be realized in case the
primary source of repayment fails. Collateralisation of the Bank’s
receivables arising from lending transactions is governed by the
following principles: Collateralisation of the Bank’s receivables
represents the Bank’s protection as a creditor that may be used as
a secondary source of payment. The selection of individual collateral instruments required to secure a specific deal depends on the
Bank’s loan products, requirements and professional assessment
by the Bank’s responsible employees. The possibility to pledge
the collateral is always assessed before the collateral is accepted
by the Bank.
The value of collateral (nominal value of collateral) is determined
with reference to the market prices of similar types of collateral. If
more than one market price for the collateral is determined using
various valuation techniques in a particular business transaction,
the lowest market price is used.
If the collateral instrument involves real estate, movable assets,
a business or its branch, trademarks, an asset declared as a historical
monument, antiquities, paintings, jewels, manuscripts, etc., the
price has to be determined on the basis of an appraisal made by an
expert appraiser contracted by the Bank or an internal appraiser
for the purpose of evaluating the loan application. The expert
appraisal or price estimate must not be older than six months at
the date on which the loan contract is entered into. For real estate
valuation purposes a detailed, in-house methodology is used.
The realisable value of collateral is determined by using the valuation rates set in the Collateral Catalogue. In determining the valuation rates, it is necessary to assess individual instruments by their
specific features, e.g. real estate by the character of its construction,
etc. and always following a physical inspection. The overall setup
of maximum valuation rates is reviewed annually.
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
The expert valuation always has to be reviewed. Other conditions
taken into account in determining the realisable value of collateral
are, among others, as follows:
–– A comprehensive assessment of all available and, with
respect to the particular case, significant circumstances
and background documentation;
–– Any insurance or pledges of receivables from insurance
proceeds in favour of the Bank;
–– The possibility of realising the collateral at a particular time
and place and the amount of realisation costs which, in most
cases, needs to be viewed as a sale in distress; and
–– Comparison to market trends.
The Collateral Catalogue also includes requirements for the periodic revaluation of collateral. Typically, the collateral value is analysed and updated upon the regular monitoring/credit review of
clients. With respect to product portfolios of retail mortgages, the
Bank uses portfolio models for updating nominal collateral values.
In addition, the Bank regularly monitors the loan-to-value ratio,
mainly in respect of mortgage loans and project financing loans.
Credit Risk Pricing
The accepted risk is reflected in risk margins used in the pricing of
individual types of counterparties and deals. The risk margins are
based on estimated risk parameters, the expected development of
the macroeconomic environment and changes in the credit process
within the Bank, which may have an impact on risk level within
the credit portfolio.
Stress Testing
The Bank regularly performs stress testing of the sensitivity of its
portfolio to the deterioration of the credit quality of receivables.
In addition to the sensitivity of the portfolio to stress changes in
the PD and LGD risk factors, the Bank performs scenario analyses
modelling the impact of adverse developments in macroeconomic
factors (such as changes in the economic growth rate, changes in
interest rates and changes in inflation). The breakdown of credit
risk by industries is shown in Note 38.2 Credit risk.
Forborne Exposures
The Bank implemented the new forbearance methodology according to the EBA regulation in 2014. Forborne exposures are exposures where the debtor is considered unable to comply with the
contract due to its financial difficulties and the Bank decided to
grant a concession to a debtor. Forbearance measure can be either
modification of terms and conditions or refinancing of the contract.
Modification of terms includes payment schedule changes (deferrals or reductions of regular payments, extended maturities, etc.),
interest rate reductions or penalty interest waivers.
Forborne exposure initially receives default rating ‘R’; such exposure is classified as non-performing defaulted forborne exposure.
After minimum 12 months and when the pre-defined conditions are
fulfilled the exposure can be reclassified into performing forborne
exposure. The performing forborne exposure has to be closely monitored during the probation period which takes minimum 2 years.
When the exposure within the probation period defaults the exposure is downgraded into the non-performing forborne exposures.
If after 2 years’ probation period the stated conditions are met the
exposure ceases to be classified as forborne.
Quantitative information in respect of Forbearance is attached
in the table bellow f) Exposures with forbearance measures as at
31 December 2014.
Write-offs
Write-offs are generally recorded after all reasonable restructuring
or collection activities have taken place and the possibility of further recovery is considered remote. The loan is written-off against
the related account ‘Net impairment loss on financial assets not
measured at fair value through profit or loss’ in the income statement. If the reason for provisioning is no longer deemed appropriate, the redundant impairment charge is released into income.
The relevant amount and recoveries of loans and advances previously written-off are also reflected in the income statement through
‘Net impairment loss on financial assets not measured at fair value
through profit or loss’.
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
a) Structure of Net Credit Risk by On-balance Sheet and Off-balance Sheet Items
The Bank is exposed to credit risk arising from the following items:
CZK mil.
Net credit risk exposures relating to on-balance sheet items
Balances at central banks and other demand deposits
Financial assets held for trading – derivatives
Financial assets held for trading – debt securities
Financial assets designated at fair value through profit or loss – debt securities
Available-for-sale financial assets – debt securities
Loans and advances with banks
Loans and advances with customers
General governments
Other financial corporations
Non-financial corporations
Households
Held-to-maturity investments
Derivatives – Hedge accounting
Credit risk exposure relating to off-balance sheet items
Irrevocable financial guarantees given
Irrevocable loan commitments given
Total
The resulting credit exposure as at 31 December 2014 and 2013
represents a worst case scenario, without taking into account any
collateral held or other related credit enhancements. For presented
assets, the exposures set out above are based on net carrying
amounts as reported in the statement of financial position.
2014
2013
28,344
18,821
4,491
335
98,270
37,233
465,525
20,413
30,309
167,685
247,118
141,326
878
55,810
21,315
26,550
3,474
60,574
49,384
456,208
19,386
27,936
181,783
227,103
134,380
895
27,108
71,288
27,287
74,048
893,619
909,925
As shown above, 56% of the total exposure is derived from loans
and advances to financial institutions and customers (2013: 56%);
27% represents investments in debt securities (2013: 25%).
The Bank has no outstanding exposure to the sovereign debt of
Greece, Italy, Ireland, Portugal or Spain.
Collateral securing the above receivables is as follows:
CZK mil.
Loans and advances to credit institutions
Loans and advances to customers
Contingent liabilities
Total
The value of collateral is the lower of the collateral’s nominal value
multiplied by a valuation rate and the receivable balance. It is not
always certain that the estimated collateral values will be realised.
2014
2013
1,965
253,932
10,267
2,193
241,736
12,962
266,164
256,891
For details of the determination of collateral fair values, refer to
the description above.
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b) Gross Credit Risk Exposure by Industry and Financial Instrument
The following tables present Bank’s credit risk exposure by industry, broken down by financial instruments, as of each reporting date indicated.
Gross Credit Risk Exposure by Industry and Financial Instrument in 2014
CZK mil.
Balances at central
banks and other
demand deposits
Loans and advances
to credit institutions
Loans and advances
to customers
Debt instruments
Held to maturity
At amortised cost
Agriculture and forestry
Mining
Manufacturing
Energy and water supply
Construction
Trade
Transport and
communication
Hotels and restaurants
Financial and insurance
services
Real estate and housing
Services
Public administration
Education, health and
art
Private households
Other
Total
Trading assets
At fair value through
profit or loss
Available for sale
Positive fair value of
derivative financial
instruments
Contingent liabilities
Credit risk exposure
Fair value
–
–
–
–
–
–
–
–
–
–
–
–
10,576
1,947
37,218
16,543
6,190
29,848
–
–
127
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200
–
–
–
167
1
634
1,049
19
170
1,094
102
17,333
5,528
10,316
8,768
11,837
2,050
55,512
23,120
16,525
38,786
–
–
10,481
943
–
–
2,065
734
4,036
18,259
–
–
3,067
–
–
–
–
5
224
3,296
28,344
37,242
29,937
12,328
2,131
335
6,921
12,800
6,544
136,582
–
–
–
–
–
–
63,847
8,374
19,460
3
–
127,934
–
2,360
–
–
–
–
–
89,084
357
51
3,576
5,036
4,498
5,401
69,243
12,923
247,815
–
–
7,407
–
–
–
–
108
1,369
8,884
–
–
–
–
235,361
1,777
–
–
–
–
–
–
–
–
28
–
28,147
–
263,536
1,777
28,344
37,242
482,033
141,335
4,491
335
98,270
19,699
98,396
910,145
Debt instruments
Contingent liabilities
Credit risk exposure
Credit Risk Exposure by Industry and Financial Instrument in 2013
CZK mil.
Balances at central
banks and other
demand deposits
Loans and advances
to credit institutions
Loans and advances
to customers
Held to maturity
At amortised cost
Agriculture and forestry
Mining
Manufacturing
Energy and water supply
Construction
Trade
Transport and
communication
Hotels and restaurants
Financial and insurance
services
Real estate and housing
Services
Public administration
Education, health and
art
Private households
Other
Total
Trading assets
At fair value through
profit or loss
Available for sale
Positive fair value of
derivative financial
instruments
Fair value
–
–
–
–
–
–
–
–
–
–
–
–
11,221
2,689
38,110
12,246
8,296
33,417
–
–
–
–
480
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
67
3
930
613
72
290
1,012
164
19,320
5,282
10,888
7,044
12,300
2,856
58,360
18,141
19,736
40,751
–
–
11,234
551
–
–
503
416
4,056
16,760
–
–
2,937
–
–
–
–
7
198
3,142
55,810
49,415
27,695
14,215
185
2,233
7,864
11,044
10,900
179,361
–
–
–
–
–
–
63,044
9,047
17,790
3
–
119,144
–
–
26,365
–
–
1,241
563
–
51,644
317
224
8,130
4,048
4,189
5,492
67,975
13,460
229,806
–
–
7,759
–
–
–
–
97
1,056
8,912
–
–
–
–
227,152
250
–
–
–
–
–
–
–
–
–
–
27,686
–
254,838
250
55,810
49,415
472,887
134,393
26,550
3,474
60,574
22,210
101,335
926,648
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c) Credit Risk Exposure by Risk Category
The following table presents the credit risk exposure of the Bank divided by risk category as of 31 December 2014, compared with the
credit risk exposure as of 31 December 2013.
Credit Risk Exposure by Risk Category
CZK mil.
Total exposure as of 31 Dec 2014
Share of credit risk exposure
Total exposure as of 31 Dec 2013
Share of credit risk exposure
Change in credit risk exposure in 2014
Change
Low risk Management
attention
823,411
90.5%
831,774
89.8%
(8,363)
–1.0%
55,325
6.1%
60,715
6.6%
(5,390)
(8.9%)
Substandard
Nonperforming
Credit risk
exposure
10,283
1.1%
11,911
1.3%
(1,628)
(13.7%)
21,126
2.3%
22,248
2.4%
(1,122)
(5.0%)
910,145
100.0%
926,648
100.0%
(16,503)
(1.8%)
Credit Risk Exposure by Industry and Risk Category
The following tables present the credit risk exposure of the Bank broken down by industry and risk category as of 31 December 2014 and
31 December 2013, respectively.
Credit Risk Exposure by Industry and Risk Category in 2014
CZK mil.
Agriculture and forestry
Mining
Manufacturing
Energy and water supply
Construction
Trade
Transport and communication
Hotels and restaurants
Financial and insurance services
Real estate and housing
Services
Public administration
Education, health and art
Private households
Other
Total
Low risk Management
attention
10,027
2,029
43,765
18,449
10,538
29,749
16,494
1,347
132,319
55,771
9,694
245,308
7,066
239,078
1,777
823,411
1,397
14
7,007
3,360
3,234
6,213
877
873
3,873
9,320
2,407
2,461
1,594
12,695
–
55,325
Substandard
Nonperforming
Credit risk
exposure
170
–
1,945
977
1,118
1,277
550
511
177
1,876
130
39
97
1,416
–
243
7
2,795
334
1,635
1,547
338
565
213
2,276
692
7
127
10,347
–
11,837
2,050
55,512
23,120
16,525
38,786
18,259
3,296
136,582
69,243
12,923
247,815
8,884
263,536
1,777
10,283
21,126
910,145
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Credit Risk Exposure by Industry and Risk Category in 2013
CZK mil.
Agriculture and forestry
Mining
Manufacturing
Energy and water supply
Construction
Trade
Transport and communication
Hotels and restaurants
Financial and insurance services
Real estate and housing
Services
Public administration
Education, health and art
Private households
Other
Total
Low risk Management
attention
10,251
2,797
43,783
15,213
13,015
30,680
14,333
1,331
176,905
53,877
9,780
226,519
5,350
227,940
–
831,774
1,624
41
9,189
2,065
3,282
7,070
1,458
868
1,981
9,226
2,968
3,253
3,220
14,470
–
60,715
Substandard
Nonperforming
Credit risk
exposure
232
1
2,124
652
1,126
898
259
542
19
1,582
312
34
259
3,871
–
193
17
3,264
211
2,313
2,103
710
401
456
3,290
400
0
83
8,557
250
12,300
2,856
58,360
18,141
19,736
40,751
16,760
3,142
179,361
67,975
13,460
229,806
8,912
254,838
250
11,911
22,248
926,648
d) Financial Assets Past Their Due Dates
As at 31 December 2014 and 2013, the Bank reports the following financial assets which are past their due dates, but not individually impaired:
K 31. prosinci 2014
CZK mil.
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total
K 31. prosinci 2013
CZK mil.
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total
Credit risk exposure
Total
18
6
1
1,282
3,718
5,025
Thereof
Thereof
31–60 days 61–90 days
past due
past due
7
–
1
158
846
1,012
–
–
–
79
381
460
Thereof
91–180
days past
due
Thereof
more than
180 days
past due
2
–
–
1
14
–
–
–
6
6
17
12
Credit risk exposure
Total
13
–
9
1,403
4,574
5,999
Thereof
Thereof
31–60 days 61–90 days
past due
past due
–
–
–
227
843
1,070
–
–
–
210
378
588
Thereof
91–180
days past
due
Thereof
more than
180 days
past due
–
–
–
2
10
–
–
–
1
10
12
11
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
e) Analysis of Individually Impaired Financial Assets
CZK mil.
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total
2014
2013
4
222
268
11,736
11,219
18
242
–
13,621
10,672
23,449
24,553
Nonperfroming
forborne
exposure
of which:
Defaulted
1,875
2,568
1,043
2,461
f) Exposures with Forbearance Measures as at 31 December 2014
CZK mil.
Non-financial corporations
Households
Total
38.3 Market Risk
The Bank is exposed to the impact of market risks. Market risks
arise from open positions in interest rate, currency, equity, commodity financial instruments and even the credit spread included in
the relevant positions within banking book (i.e. the credit spread is
a part of a discounting factor). The value of open positions changes
subject to general and specific financial market movements. The
Bank is exposed to the market risk arising from open positions in
the trading book. However, a significant component of market risk
is also the interest rate risk associated with assets and liabilities
and credit spread risk associated with marked-to-market positions
included in the banking book. There are several reasons why credit
spread was included: 1. The requirement in calculating economic
capital to include the credit spread and to cover the impact of this
risk factor; 2. A more precise calculation of security prices; and 3.
To reflect the credit rating of issuers/counterparties.
Trading book transactions in the capital, money, interbank and
derivative markets can be segmented as follows:
–– Client quotations and client transactions, execution of client
orders;
–– Interbank and derivative market quotations (market
making); and
–– Managing open positions in the interbank, derivative and
capital markets arising from above mentioned activities.
The Bank trades in the following derivative financial instruments
through the OTC market:
–– Foreign currency forwards (including non-delivery
forwards) and swaps;
–– Foreign currency options;
–– Interest rate swaps;
–– Asset swaps;
–– Forward rate agreements;
–– Cross-currency swaps;
Forborne Performing
exposures
forborne
exposure
2,318
3,685
6,003
443
1,117
1,560
4,443
3,504
–– Interest rate options such as swaptions, caps and floors;
–– Commodity derivatives; and
–– Credit derivatives.
In the area of exchange traded derivatives, the Bank trades the
following instruments:
–– Bond futures;
–– Equity and equity indices futures;
–– Interest rate futures;
–– Commodity futures; and
–– Options in respect of bond futures.
The Bank also trades, on behalf of its clients, with other less common currency options, such as digital or barrier. Certain option
contracts or options on various underlying equity baskets or equity
indices form part of other financial instruments as embedded
derivatives.
Derivative financial instruments are also entered into to hedge against
interest rate risk inherent in the banking book (interest rate swaps,
FRA, swaptions) and to refinance the mismatch between foreign currency assets and liabilities (foreign exchange swaps and cross currency
swaps).
The majority of open positions arising from client transactions in the
Bank’s trading book are transferred to the Erste Group Bank portfolio
through back-to-back transactions. As such, the market risk arising
from the Bank’s OTC transactions is managed within the Erste Group
Bank portfolio. The Bank retains in the trading portfolio the money
market risk due to liquidity management (money market), equity
risk and partially a residual risk from previously closed transactions.
This residual risk is dynamically hedged at a macro level in line with
the Bank’s limits trading strategy and set for market risk.
In addition to the calculation of sensitivities to individual risk factors,
the Bank uses the value at risk methodology to estimate and manage the
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
market risk of open positions held and to determine the maximum losses expected on these positions. The VaR values are
calculated on a confidence level of 99% for a period of one
trading day. To calculate the values, the KvaR+ system is used
along with historical simulations based on the last 520 trading
days. Assuming a normal distribution of losses, VaR is also
determined for a period of one month, or possibly one year
and for higher probability levels (99.9%, 99.98%). The Board
of Directors establishes VaR limits for the trading and banking
book portfolio as the Bank’s maximum acceptable exposure to
market risk. For the trading portfolio VaR sub-limits (1 day,
99%) in respect of individual trading desks are established
and limits for sensitivity values of the trading portfolio to
individual risk factors such as foreign exchange rates, equity
prices, interest rates, volatility, commodity and other risk
parameters of option contracts facilitate the maintenance of
the overall market risk profile. These limits are approved by
the Financial Market and Risk Management Committee and
are monitored on a daily basis.
The market risk VaR indicator is also calculated for the banking
book using special models for current accounts and other liabilities without specified maturity. The VaR (1 month, 99%) of the
banking book is reported to the Assets and Liabilities Committee
(‘ALCO’) on a monthly basis while compliance with the limit is
monitored by Risk Management on a daily basis. The acceptable
level of risk is based on the assessment of the capital available
to cover risks based on the ‘ICAAP’ methodology. The overall
VaR is subsequently allocated to individual sub-portfolios of
the banking book, taking into account both the perspective of
strategic portfolio management and the accounting measurement
of securities portfolios.
The table below summarizes the VaR values as at 31 December 2014 and 2013 on the confidence level of 99%. The table has been extended
because of the inclusion of credit spread risk into the relevant positions of the banking book and trading book portfolios.
As at
31 December 2014
CZK mil.
Trading book
Total Correlation
Market Risk
Effect
Interest
Rate Risk
Foreign Equity Risk Commodity
Credit
Currency
Risk Spread risk
Risk
Daily value
Monthly value
Average of daily values
per year
Average of monthly
values per year
5
23
(3)
(13)
3
14
3
12
–
–
–
–
2
10
7
(3)
5
3
–
–
2
31
(23)
26
14
1
2
11
Daily value
Monthly value
Average of daily values
per year
Average of monthly
values per year
238
1,114
(124)
(581)
197
923
2
9
6
27
–
–
157
736
212
(86)
153
2
10
–
133
994
(400)
719
8
45
–
622
Total Correlation
Market Risk
Effect
Interest
Rate Risk
Banking book
As at
31 December 2013
CZK mil.
Trading book
Foreign Equity Risk Commodity
Credit
Currency
Risk Spread risk
Risk
Daily value
Monthly value
Average of daily values
per year
Average of monthly
values per year
6
28
(4)
(18)
5
23
5
22
–
–
–
1
–
–
6
(3)
5
4
–
–
–
28
(14)
21
18
1
2
–
Daily value
Monthly value
Average of daily values
per year
Average of monthly
values per year
230
1,080
(85)
(390)
194
908
2
7
12
55
–
–
107
500
220
(102)
196
4
26
–
96
1,034
(476)
917
18
123
–
452
Banking book
In addition, the Bank uses stress testing or an analysis of impacts
of adverse developments in market risk factors on the market value
of the trading book and on the parts of the banking book revalued
to market values. Scenarios are developed on the basis of historical
experience and expert opinions of the Macroeconomic Analyses
Department. The stress testing is undertaken on a monthly basis
218
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
and its results are reported to ALCO. In addition, the Bank monitors financial news, analyses market movements and prepares for
different scenarios with respect to the position of the economy.
38.3.1 Interest Rate Risk
Interest rate risk is the risk that the value of financial instruments
will fluctuate due to changes in market interest rates. The Bank
manages the interest rate risk of the banking book by monitoring
the repricing dates of the Bank’s assets and liabilities and using
models which show the potential impact that changes in interest
rates may have on the Bank’s net interest income.
For monitoring and measuring the banking book interest rate
exposures, the Bank uses a simulation model focused on monitoring potential impacts of market interest rate movements on
the net interest income. Simulations are performed over a period
of 36 months. A basic analysis focuses on the sensitivity of the
net interest income to one-off changes of market interest rates
(‘rate shock’). In addition, the Bank performs the traditional
gap analysis.
The banking book interest rate exposures analyses are performed
on a monthly basis. The current level of the interest rate risk exposure is assessed by ALCO on a monthly basis in the context of the
overall development of financial markets and the Czech banking
sector, as well as any structural changes in the Bank’s statement
of financial position.
In order to measure the interest rate risk exposure within the trading portfolio, the Bank uses the present value of a basis point gap
(‘PVBP gap’) defined as a matrix of sensitivity factors to interest
rates by currency for individual portfolios of interest rate products.
These factors measure the portfolio market value sensitivity with
a parallel shift of the yield curve of the relevant currency within
the predefined period to maturity. The system of PVBP gap limits
is set in respect of each interest rate product portfolio by currency.
The following table is based on the exposure of the Bank to interest
rates for derivative and non-derivative instruments as of the reporting
date. The model assumes a fixed structure of the statement of financial
position according to interest rate sensitivity. The determined changes
which occurred at the beginning of the year are constant during the
reported period, i.e. the model is based on the assumption that the
funds released as a result of the payment or sale of interest rate assets
and liabilities will be re-invested in assets and liabilities with the same
interest rate sensitivity and residual maturity. A new calculation method
which also takes credit spreads into account was implemented from
2014. The following table shows the impact on the income statement
and other comprehensive income of the Bank if the CZK or EUR yield
curves sharply increased/decreased by 100 points at the beginning
of the respective year and other interest rates remained unchanged.
CZK mil.
2015
2014
Interest
rate
increase
Interest
rate
decrease
Interest
rate
increase
Interest
rate
decrease
Income statement
Other comprehensive income
1,264
(1,900)
(321)
1,072
1,409
(631)
(412)
573
Income statement
Other comprehensive income
(52)
(87)
79
21
10
(130)
(4)
116
CZK
EUR
38.3.2 Foreign Currency Risk
38.3.3 Equity Risk
Foreign currency risk is the risk that the value of financial instruments in both the trading and banking books will fluctuate due
to changes in foreign exchange rates. The Bank manages this
risk by establishing and monitoring limits on open positions,
also including delta equivalents of currency options. In addition,
the Bank monitors special sensitivity limits for foreign currency
option contracts known as ‘greeks’ sensitivity analysis. The foreign currency risk of all financial instruments is transferred
via the currency positions which are managed by the Trading
Department in accordance with set currency sensitivity limits.
In addition to the monitoring of limits, the Bank uses the VaR
concept for measuring the risk arising from open positions in
all currency instruments.
To monitor and manage the equity risk inherent in the trading and
banking books, the Bank uses VaR methodology and sensitivity
analysis which is based on the exposure to the risk of changes in the
price of shares as of the reporting date. With respect to the increased
volatility of share prices, the equity risk represents a significant
component of risks despite smaller volumes of share positions.
38.3.4 Commodity Risk
The commodity instruments appear solely in the trading portfolio
as supporting instruments for client transactions. The major part
of commodity derivatives are secured on a ‘back-to-back’ basis
with a third party.
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38.4 Liquidity Risk
Definition and Overview
The liquidity risk is defined in the Bank in line with the principles
set out by the Basel Committee on Banking Supervision and Czech
National Bank. Accordingly, a distinction is made between market
liquidity risk, which is the risk that the Bank cannot easily offset or
close a position at the market price because of inadequate market
depth or market disruption, and funding liquidity risk, which is the
risk that the Bank will not be able to meet efficiently both expected
and unexpected current and future cash flow and collateral needs
without affecting either daily operations or the financial condition
of the Bank members.
Funding liquidity risk is further divided into insolvency risk and
structural liquidity risk. The former is the short-term risk that current or future payment obligations cannot be met in full and on time
in an economically justified manner, while structural liquidity risk
is the long-term risk of losses due to a change in the Bank’s own
refinancing cost or spread.
Methods and Instruments Employed
Short-term insolvency risk is monitored by calculating the survival
period for significant currencies. This analysis determines the maximum period during which the entity can survive a severe combined
market and idiosyncratic crisis while relying on its pool of liquid
assets. The monitored worst-case scenario simulates very limited
money market and capital market access and at the same time customers’ deposits significant outflow. Furthermore, the simulation
assumes increased drawdown on guarantees and loan commitments
dependent on the type of the customer, as well as the potential
outflows from collateralised derivative transactions estimating the
effect from collateral outflow in case of adverse market movements.
As far back as 2011, the Bank’s risk control has been based on
the new Basel III liquidity risk measures, especially Liquidity
Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). In
the past years, the Bank took part in the Quantitative Impact Study
(QIS) coordinated by the European Banking Authority (EBA) that
is monitoring Group LCR and NSFR on a quarterly basis. Internally,
the ratios are monitored on entity level, and from 2012 on internal
targets are set for them. In 2014, the Bank successfully started the
official monitoring phase. At the end of 2014, both LCR and NSFR
for fhe Bank were above 100%.
In 2013 the Bank introduced Intraday Liquidity Buffer for intraday
liquidity risk management. The Buffer consists of highly liquid
assets (central bank reserves, CZ T-bills) which can be used intraday in case of abrupt crisis. The Buffer is constructed to cover
intraday operational and counterparty stress. The internal limit is
set based on central bank clearing account transfers and is reviewed
periodically to reflect current market conditions.
Methods and Instruments of Risk Mitigation
General standards of liquidity risk controlling and management
(standards, limits and analysis) have been defined and are continuously reviewed and improved by Erste Group.
The short-term liquidity risk is managed by limits resulting
from the survival period model and by internal LCR targets and
Intraday liquidity buffer target. Limit breaches are reported to the
ALCO. The Comprehensive Contingency Funding Plan ensures
the necessary coordination of all parties involved in the liquidity
management process in case of crisis and is reviewed on a regular basis.
Analysis of Liquidity Risk
Liquidity Gap
The long-term liquidity position is managed using liquidity gaps
on the basis of expected cash flows. This liquidity position is calculated for each significant currency and based on the assumption
of ordinary business activity.
Expected cash flows are broken down by contractual maturities in
accordance with the amortisation schedule and arranged in maturity
ranges. For demand deposits, expected cash flows are calculated
based on their liquidity profile which is also used for FTP.
The following table shows the liquidity gaps as of 31 December 2014 and 31 December 2013
CZK mil.
Liquidity GAP
< 1 month
1–12 months
1–5 years
> 5 years
2014
2013
2014
2013
2014
2013
2014
2013
177,915
(6,924)
(51,679)
51,579
(23,398)
68,228
(18,721)
6,083
An excess of assets over liabilities is indicated by a positive
value, while an excess of liabilities over assets is indicated by
a negative value. The cash inflows from liquid securities, which
are accepted as collateral by the central banks to which the Bank
has access, are shifted to the first time bucket instead of showing
them at their contractual maturity.
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Counterbalancing Capacity
The Bank regularly monitors its counterbalancing capacity, which consists of cash, excess minimum reserve at the central banks
as well as unencumbered central bank eligible assets and other liquid securities, including changes from repos, reverse repos and
securities lending transactions. These assets can be mobilised in the short term to offset potential cash outflows in a crisis situation.
The term structure of the Bank’s counterbalancing capacity as of year-end 2014 and year-end 2013 are shown in the tables below
As at 31 December 2014
CZK mil.
< 1 week
Cash, excess reserve
Liquid assets
Other central bank eligible assets
35,304
184,751
1,556
Counterbalancing capacity
221,611
As at 31 December 2013
CZK mil.
< 1 week
Cash, excess reserve
Liquid assets
Other central bank eligible assets
67,694
157,999
2,170
Counterbalancing capacity
227,863
1 week–1 1–3 months 3–6 months
month
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 week–1 1–3 months 3–6 months
month
6–12
months
–
–
–
–
–
6–12
months
–
–
–
–
–
–
–
–
–
–
–
–
The figures above show the total amount of potential liquidity available for the Bank in a going concern situation.
Financial Liabilities
Maturities of contractual undiscounted cash flows from financial liabilities as of 31 December 2014 and 31 December 2013 respectively,
were as follows:
As at 31 December 2014
CZK mil.
Non-derivative liabilities
Deposits by banks
Customer deposits
Debt securities in issue
Subordinated liabilities
Other financial liabilities
Derivative liabilities
Contingent liabilities
Financial guarantees
Irrevocable commitments
Total
As at 31 December 2013 CZK mil.
Carrying Contractual
amounts cash flows
< 1 month 112 months
15 years
> 5 years
714,257
718,277
618,837
27,379
49,024
23,037
20,833
98,396
14,501
98,396
3,161
1,448
11,340
62,414
–
32,402
–
2,132
623,446
101,133
81,426
25,169
< 1 month 112 months
15 years
> 5 years
73,597
598,357
39,238
262
2,803
27,108
71,288
833,486
73,623
601,020
40,528
303
2,803
27,108
71,288
831,174
Carrying Contractual
amounts cash flows
22,534
591,731
1,769
–
2,803
1,355
93
11,832
5,904
9,639
4
–
10,416
51,998
24,194
3,385
21,418
27
–
13,208
19,194
15,063
–
7,702
272
–
2,129
3
Non-derivative liabilities
726,045
717,274
561,667
56,117
65,910
33,580
Derivative liabilities
Contingent liabilities
24,294
101,335
44,319
101,335
22,831
3,687
21,488
47,618
–
37,280
–
12,750
Total
851,674
862,928
588,185
125,223
103,190
46,330
Deposits by banks
Customer deposits
Debt securities in issue
Subordinated liabilities
Financial guarantees
Irrevocable commitments
97,830
581,085
45,034
2,096
27,287
74,048
96,988
576,163
42,085
2,038
27,287
74,048
39,810
521,339
518
–
1,606
2,081
13,192
37,415
5,510
–
9,533
38,085
25,046
12,167
28,697
–
14,473
22,807
18,940
5,242
7,360
2,038
1,675
11,075
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
38.5 Operational Risk
In accordance with regulatory requirements, the Bank defines operational risk as the risk of losses arising from the inappropriateness
or failure of internal processes, human errors or failures of systems
or the risk of losses arising from external events, including losses
due to the breach of or failure to fulfil legal regulations.
With assistance from Erste Group Bank, the Bank put in place
a standardised categorisation of operational risks. This classification
became the basis of the ‘Book of Risks of The Bank’, developed in
cooperation with the Risk Management and Internal Audit departments. The Book of Risks is a tool used to achieve unification of
risk categorisation in order to ensure consistent risk monitoring
and evaluation.
The Bank has cooperated with an external supplier in developing
a specialised software application to collect data about operational
risk which conforms to the data collection requirements. The data
is not only used with a view to quantifying operational risks and
monitoring trends in the development of these risks but also for the
purpose of preventing recurrence of operational risks. In addition to
monitoring actual occurrence of operational risk, the Bank also pays
attention to how the operational risk is perceived by management.
In this respect, the Bank has introduced and is further expanding
methods with the aim of identifying severe potential threats in
order to implement preventative measures before losses materialise.
For this purpose, the following tools are used: Risk and Control
Self-Assessment, Key Risk Indicators and Scenario Analysis. The
Bank also actively manages risks related to outsourced activities.
Depending on the specific method, this type of assessment is done
on a continuous, monthly or annual basis.
The Bank successfully passed validation for managing of operational risk according to Advanced Measurement Approaches
(AMA). Based on this method a capital charge related to operational risk is properly computed and allocated since July 1, 2009.
An important tool in mitigating losses arising from operational
risks is the Bank’s insurance programme which was put in place
in 2002. This insurance programme involves insurance against
property damage as well as risks arising from banking activities
and liability risks. Since 2004, the Bank has been a member of the
Erste Group insurance programme which enhances the insurance
protection specifically with regard to damages that may materially
impact the income statement.
Top management of the bank is informed quarterly about the risk
profile and the most important operational risk events via the CORS
(Compliance, Operational Risk and Security) committee. The chairman of the committee is the Chief Risk Officer (member of the
Board of Directors responsible for risk management).
39. Hedge Accounting
The interest rate and FX risk of the banking book is managed by the
Bank’s ALM department. Preference in managing interest rate risk is
given to using bonds, loans or derivatives, with hedge accounting for
derivatives applied in accordance with IFRS. The main guideline for
interest rate risk positioning is the Group Interest Rate Risk Strategy
that is approved by the Group ALCO for the relevant time period.
Fair value hedges are employed to reduce interest rate risk of issued
bonds, purchased securities, loans or deposits on the Erste Bank’s
statement of financial position. In general, the Erste Bank’s policy is
to swap substantial fixed or structured issued bonds to floating items
and as such to manage the targeted interest rate risk profile by other
statement of financial position items. Interest rate swaps are the
most common instruments used for fair value hedges. Concerning
loans, purchased securities and securities in issuance, fair value is
also hedged by means of cross-currency swaps, swaptions, caps,
floors and other types of derivative instruments.
Cash flow hedges are used to eliminate uncertainty in future cash
flows in order to stabilize net interest income. The most common
such hedge in the Bank consists of interest rate swaps hedging
variable cash flows of floating assets into fixed cash flows. Floors
or caps are used to secure the targeted level of interest income in
a changing interest rate.
In the reporting period, CZK 14 million (2013: CZK 1 million)
was taken from the cash flow hedge reserve and recognised as
expense in the income statement; while CZK 186 million (2013:
CZK 11 million) was recognised directly in other comprehensive
income.
As at 31 December 2014, the loss on hedging derivatives used for
fair value hedging was CZK 229 million (2013: loss CZK 237 million); the gain due to changes in the fair value of hedged items was
CZK 244 million (2013: gain CZK 250 million).
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Fair values of hedging instruments are disclosed in the following table:
CZK mil.
2014
Positive fair
value
Hedging instrument – fair value hedge
Hedging instrument – cash flow hedge
Total
40. Fair Value of Assets and Liabilities
Determination of Fair Value
The best indication of fair value is quoted market prices in an active
market. Where such prices are available, they are used to measure
the fair value (level 1 of the fair value hierarchy).
In case a market quote is used for valuation but due to restricted
liquidity the market does not qualify as active (derived from available market liquidity indicators) the instrument is classified as level
2. If no market prices are available the fair value is measured by
using valuation models which are based on observable market data.
If all the significant inputs in the valuation model are observable
the instrument is classified as level 2 of the fair value hierarchy. For
level 2 valuations typically yield curves, credit spreads and implied
volatilities are used as observable market parameters.
In some cases, the fair value can be determined neither on the
basis of sufficiently frequent quoted market prices nor of valuation
models that rely entirely on observable market data. In these cases
individual valuation parameters not observable in the market are
estimated on the basis of reasonable assumptions. If any unobservable input in the valuation model is significant or the price quote
used is updated infrequently the instrument is classified as level
3 of the fair value hierarchy. For level 3 typically credit spreads
derived from internally calculated historical probability of default
(PD) and loss given default (LGD) measures are used as unobservable parameters.
Fair values of Financial Instruments
All financial instruments are measured at fair value on recurring
basis.
Financial Instruments Measured at Fair Value in
the Statement of Financial Position
The measurement of fair value at the Bank is based primarily on
external sources of data (stock market prices or broker quotes in
highly liquid market segments). Financial instruments for which
fair value is determined on the basis of quoted market prices are
mainly listed securities and derivatives as well as liquid OTC
bonds.
Description of the Valuation Models and Inputs
The Bank, a. s. uses only valuation models which have been tested
internally and for which the valuation parameters (such as interest
670
208
878
2013
Negative Positive fair
fair value
value
166
3
169
895
–
895
Negative
fair value
264
1
265
rates, exchange rates, volatilities and credit spreads) have been
determined independently.
Securities
For plain vanilla (fixed and floating) debt securities the fair value is
calculated by discounting the future cash-flows using a discounting
curve depending on the interest rate for respective issuance currency and a spread adjustment. The spread adjustment is usually
derived from the credit spread curve of the issuer. If no issuer
curve is available the spread is derived from a proxy instrument
and adjusted for differences in the risk profile of the instruments.
If no close proxy is available, the spread adjustment is estimated
using other information, including estimation of the credit spread
based on internal ratings and PDs or management judgment. For
more complex debt securities (e.g. including option-like features as
callable, cap/floor, index-linked) the fair value is determined using
combinations of discounted cash-flow models and more sophisticated modeling techniques including also methods described for
OTC-derivatives. The fair value of financial liabilities designated
at Fair Value through Profit and Loss under the fair value option is
determined in consistency with similar instruments held as assets.
The spread adjustment for Erste Banks’s own credit risk is derived
from buy-back levels of own issuances. Techniques for equity securities may also include models based on earnings multiples.
OTC-Derivative Financial Instruments
Derivative instruments traded in liquid markets (e.g. interest rate
swaps and options, foreign exchange forward and options, options
on listed securities and indices, credit default swaps, commodity
swaps) are valued by standard valuation models. These models
include discounting cash flow models and option models of BlackScholes. Models are calibrated on quoted market data (including
implied volatilities). Valuation model for more complex instruments
also use Monte-Carlo-techniques. For instruments in less liquid
markets, data obtained from less frequent transactions or extrapolation techniques are used.
The Bank values derivatives at mid-market levels. For year 2014
the effect of potential bid-ask-spread of the relevant positions
adjustment based on market liquidity was estimated and assesed
as not significant. Nevetheless the Bank is preparing methodology
which will justify that as a significant player in the market (market
maker) is able to exit the position at mid price. The Bank will
demonstrate this to the local regulator bi-annually for regulatory
purposes since 2015.
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Credit value adjustments (CVA) for counterparty risk and debt
value adjustments (DVA) for the own default credit risk are applied
to OTC derivatives. For the CVA, the adjustment is driven by the
expected positive exposure of all derivatives and the credit quality of the counterparty. DVA is driven by the expected negative
exposure and the Bank’s credit quality. Modeling of the expected
exposure is based on option replication strategies. This modeling
approach is considered for the most relevant portfolios and products. The exposure for Ministry of Finance of the Czech Republic
is based on Monte Carlo simulations considering netting. The methodology for the remaining entities and products is determined by
market value plus add-on considerations. The probability of default
of counterparties which are not traded in an active market is determined from internal PDs mapped to a basket of liquid titles being
present in the central European market. Thereby market based valuation concepts have been incorporated. Counterparties with liquid
bond or CDS markets are valued by the respective single-name
market based PD derived from the prices. The Bank’s probability
of default has been derived from the buy-back levels of the Bank’s
issuances. For counterparties with Credit Support Annex (‘CSA’)
agreements in place no CVA/DVA was taken into account for all
cases with small threshold amounts.
According to the described methodology the cumulative CVAadjustments amounts to CZK (535) million and the total DVAadjustment amounts to CZK 303 million.
Description of the Valuation Process for Fair
Value Measurements Categorised Within Level 3
A level 3 position involves one or more significant inputs that
are not directly observable on the market. The responsibility for
valuation of a position measured at fair value is independent from
trading units.
Fair Value Hierarchy
The table below details the methods used to determine the fair value with respect to levels of fair value hierarchy.
CZK mil.
Quoted market prices
in active markets
Level 1
Marked to model
based on observable
market data Level 2
Marked to model
based on nonobservable inputs
Level 3
Total
2014
2013
2014
2013
2014
2013
2014
2013
2,345
3,394
19,838
44,471
1,129
–
23,312
47,865
–
88
17,692
21,227
1,129
–
18,821
21,315
2,345
3,306
2,146
23,244
–
–
4,491
26,550
–
1,185
629
2,873
50
43
679
4,101
62,772
35,191
35,887
25,673
374
294
99,033
61,158
–
–
878
895
–
–
878
895
65,117
39,770
57,232
73,912
1,553
337
123,902
114,019
328
–
23,113
24,029
–
–
23,441
24,029
–
–
20,664
24,029
–
–
20,664
24,029
328
–
2,449
–
–
–
2,777
–
–
–
9,664
14,433
–
–
9,664
14,433
–
–
8,874
12,615
–
–
8,874
12,615
–
–
790
1,818
–
–
790
1,818
–
–
169
265
–
–
169
265
328
–
32,946
38,727
–
–
33,274
38,727
Assets
Financial assets held for trading
Derivatives
Other trading
assets
Financial assets
designated at fair
value through profit
or loss
Financial assets available for sale
Derivatives Hedge
Accounting
Total assets
Liabilities
Financial liabilities
held for trading
Derivatives
Other trading
liabilities
Financial liabilities
designated at fair
value through profit
or loss
Deposits from
customers
Debt securities
issued
Derivatives Hedge
Accounting
Total liabilities
The allocation of positions to levels and any changes between the levels are reflected at the end of the reporting period.
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Changes in Volumes of Level 1 and Level 2
This paragraph describes the changes in Volumes of Level 1 and Level 2 of financial instruments measured at fair value in the statement
of financial position.
CZK mil.
Securities
Net transfer from Level 1
Net transfer from Level 2
Purchases/sales/expiries
Changes in derivatives
Total year-to-date change
2014
2013
Level 1
Level 2
Level 1
Level 2
(900)
345
25,990
(88)
900
(345)
(13,683)
(3,552)
(2,074)
–
(10,029)
68
2,074
–
8,053
(4,852)
25,347
(16,680)
(12,035)
5,275
The reclassification from Level 1 to Level 2 resulted from decreases in market depth for the relevant securities
The quoted bond was reclassified from Level 2 to Level 1 as a result that quoted price (observable input) exists as at 31st of December 2014.
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Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Movements in Level 3 of Financial Instruments Measured at Fair Value
The following tables show the development of fair value of securities for which valuation models are based on non-observable inputs:
CZK mil.
Assets
Financial assets - held for trading
Derivatives
Financial assets designated at fair value
through profit or loss
Financial assets - available for sale
Total assets
CZK mil.
Dec 2013 Gain/loss in profit Gain/loss in other
or loss
comprehensive
income
Purchases
Sales/
Settlements
Additions to the Disposal of group
group
Transfer into
Level 3
Transfers out of
Level 3
Currency
translation
2014
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,129
1,129
–
–
–
–
1,129
1,129
43
7
–
–
–
–
–
–
–
–
50
294
337
–
7
93
48
(61)
93
48
(61)
Dec 2012 Gain/loss in profit Gain/loss in other
or loss
comprehensive
income
Purchases
Sales/
Settlements
–
–
–
–
–
–
–
–
374
–
1,129
–
–
1,553
Additions to the Disposal of group
group
Transfer into
Level 3
Transfers out of
Level 3
Currency
translation
2013
–
–
–
43
Assets
Financial assets designated at fair value
through profit or loss
Financial assets - available for sale
Total assets
59
190
249
(16)
–
(16)
–
15
15
109
109
–
–
–
–
–
–
–
–
–
–
(20)
(20)
–
–
294
337
226
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
A part of the OTC derivatives was categorized as Level 3 because
credit valuation adjustment (CVA) has a material impact in market
value for these derivatives and is calculated based on unobservable
parameters (i.e. internal estimates of PDs and LGDs).
Gains or losses on Level 3 instruments held at the reporting period’s end and which are included in profit or loss are as follow:
CZK mil.
2014
2013
Unrealized gain/
loss in profit or
loss
Unrealized gain/
loss in profit or
loss
Assets
Financial assets designated at fair value through profit or loss
7
Total
The volume of Level 3 financial assets can be allocated to the
following two categories:
–– Market values of derivatives where the credit value
adjustment (CVA) has a material impact and is calculated
based on unobservable parameters (i.e. internal estimates of
PDs and LGDs).
(16)
7
(16)
–– Illiquid bonds, shares and funds not quoted in an active
market where either valuation models with non-observable
parameters have been used (e.g. credit spreads) or broker
quotes have been used that cannot be allocated to Level 1
or Level 2.
Sensitivity Analysis for Level 3 Measurements
The following table shows the sensitivity analysis using reasonably possible alternatives per product type:
CZK mil.
Derivatives
Income statement
Equity instruments
Income statement
Other comprehensive income
Total
Income statement
Other comprehensive income
In estimating these impacts, mainly changes in credit spreads (for
bonds), PDs, LGDs (for CVA of derivatives) and market values of
comparable equities were considered. An increase (decrease) of
spreads, PDs and LGDs result in a decrease (increase) of the corresponding market values.
Positive fair value
changes when applying
alternative valuation
parameters
Negative fair value
changes when applying
alternative valuation
parameters
Dec 13
Dec 14
Dec 13
Dec 14
–
–
14
2
12
84
84
18
2
16
–
–
(28)
(4)
(24)
(124)
(124)
(37)
(5)
(32)
14
2
12
102
86
16
(28)
(4)
(24)
(161)
(129)
(32)
Following ranges of reasonably possible alternatives of the unobservable inputs were considered in the sensitivity analysis table:
–– for debt securities range of credit spreads between +100
basis points and – 75 basis points,
–– for equity related instruments the price range between -10%
and +5%,
–– for CVA on derivatives PDs rating upgrade/downgrade by
one notch, the range for LGD between -5% and +10%.
227
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
Financial Instruments Whose Fair Value is Disclosed in the Notes
The following table shows fair values and fair value hierarchy of financial instruments whose fair value is disclosed in the notes for the
year-end 2014 and for the year-end 2013 .
2014
CZK mil.
Carrying
amount
Fair value
Quoted
market
prices
in active
markets
Level 1
Cash and cash balances
Financial assets - held to maturity
Loans and receivables to credit institutions
Loans and receivables to customers
50,157
141,326
37,233
465,525
50,157
163,599
36,524
456,251
–
148,887
–
–
–
14,712
–
371
–
–
36,524
455,880
Financial liabilities measured at amortised costs
Deposits from banks
Deposits from customers
Debt securities issued
Other financial liabilities
701,816
73,397
587,234
38,710
2,475
703,384
73,324
586,647
40,938
2,475
–
–
–
–
–
39,831
–
–
39,831
–
663,553
73,324
586,647
1,107
2,475
27,108
71,288
27,108
71,288
–
–
–
–
27,108
71,288
Carrying
amount
Fair value
Quoted
market
prices
in active
markets
Level 1
Cash and cash balances
Financial assets - held to maturity
Loans and receivables to credit institutions
Loans and receivables to customers
76,440
134,380
49,384
456,208
76,440
147,947
46,767
432,029
–
125,833
–
–
–
22,114
–
202
–
–
46,767
431,827
Financial liabilities measured at amortised costs
Deposits from banks
Deposits from customers
Debt securities issued
711,612
97,830
568,470
45,312
698,398
95,384
554,258
48,756
–
–
–
–
48,756
–
–
48,756
649,642
95,384
554,258
–
27,287
74,048
27,287
74,048
–
–
–
–
27,287
74,048
Asset
Liabilities
Financial guarantees and commetments
Financial guarantees
Irrevocable commitments
2013
CZK mil.
Asset
Liabilities
Financial guarantees and commetments
Financial guarantees
Irrevocable commitments
The fair value of loans and advances to customers and credit institutions has been calculated by discounting future cash flows while
taking into consideration interest and credit spread effects. The
interest rate impact is based on the movements of market rates,
while credit spread changes are derived from PD’s used for internal risk calculations. For the calculation of fair value loans and
advances were grouped into homogeneous portfolios based on
rating method, rating grade, maturity and the country where they
were granted.
Marked
Marked to
to model model based
based on
on nonobservable
observable
market data inputs Level 3
Level 2
Marked
Marked to
to model model based
based on
on nonobservable
observable
market data inputs Level 3
Level 2
The fair values of financial assets held to maturity are either taken
directly from the market or they are determined by directly observable input parameters (i.e. yield curves).
For liabilities without contractual maturities (e.g. demand deposits), the carrying amount represents the minimum of their fair
value.
228
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
The fair value of issued securities and subordinated liabilities measured at amortized cost is based on market prices or on observable
market parameters, if these are available, otherwise it is estimated
by taking into consideration the actual interest rate environment
and in this case they are allocated to Level 3.
The fair value of other liabilities measured at amortized cost is
estimated by taking into consideration the actual interest rate
environment and own credit spreads, and these are allocated
to Level 3.
The fair value of off-balance sheet liabilities (i.e. financial guarantees and unused loan commitments) is estimated with the help
of regulatory credit conversion factors. The resulting loan equivalents are treated like other on-balance sheet assets. The difference
between the calculated market value and the notional amount of
the hypothetical loan equivalents represents the fair value of these
contingent liabilities.
41. Financial Instruments per Category
According to IAS 39
The Bank classifies financial instruments into trading and banking (investment) portfolios in accordance with BASEL II rules
as per CNB Regulation No. 123/2007 as amended by Regulation
282/2008 Coll., on the rules of prudent business of banks, savings and lending associates and securities traders (henceforth
‘Regulation 123/2007’). The Bank applies various techniques to
the management of the risk within the banking and trading books
(refer to Note 38).
229
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
The table below shows the classes of financial assets and liabilities reported by the Bank according to IFRS 7 requirements.
CZK mil.
As of 31 December 2014
Category of financial instruments
Assets
Cash and balances with central banks
Loans and advances to credit institutions
Loans and advances to customers
Derivative financial instruments
Trading assets
Financial assets - at fair value through profit or loss
Financial assets - available for sale
Financial assets - held to maturity
Total financial assets
Liabilities
Deposits by banks
Customer deposits
Debt securities in issue
Other financial liabilities
Derivative financial instruments
Trading liabilities
Subordinated liabilities
Total financial liabilities
Other financial
assets
Derivatives
designated
as hedging
instruments
Total
–
–
–
878
–
–
–
–
50,157
37,233
465,525
19,699
4,491
679
99,033
141,326
Loans and
receivables
Held to maturity
Trading
Designated at fair
value
Available for sale
Financial liabilities
at amortised cost
50,157
37,233
465,525
–
–
–
–
–
–
–
–
–
–
–
–
141, 326
–
–
–
18,821
4,491
–
–
–
–
–
–
–
–
679
–
–
–
–
–
–
–
–
99,033
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
878
818,143
73,397
587,234
38,448
2,475–
–
–
262
–
–
–
–
–
–
–
–
–
–
–
169
–
–
73,397
596,108
39,238
2,475
20,833
2,777
262
552,915
141, 326
23,312
679
99,033
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,664
2,777
–
–
8,874
790
–
–
–
–
–
–
–
–
–
–
–
–
23,441
9,664
–
–
701,816
–
CZK mil.
Assets
Total financial assets
Liabilities
Deposits by banks
Customer deposits
Debt securities in issue
Derivative financial instruments
Subordinated liabilities
Total financial liabilities
735,090
As of 31 December 2013
Category of financial instruments
Cash and balances with central banks
Loans and advances to credit institutions
Loans and advances to customers
Derivative financial instruments
Trading assets
Financial assets - at fair value through profit or loss
Financial assets - available for sale
Financial assets - held to maturity
169
Other financial
assets
Derivatives
designated
as hedging
instruments
Total
–
–
–
895
–
–
–
–
76,440
49,384
456,208
22,210
26,550
4,101
61,158
134,380
Loans and
receivables
Held to maturity
Trading
Designated at fair
value
Available for sale
Financial liabilities
at amortised cost
76,440
49,384
456,208
–
–
–
–
–
–
–
–
–
–
–
–
134,380
–
–
–
21,315
26,550
–
–
–
–
–
–
–
–
4,101
–
–
–
–
–
–
–
–
61,158
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
895
830,431
–
–
–
–
–
–
–
–
265
–
97,830
581,085
45,034
24,294
2,096
582,032
134,380
47,865
4,101
61,158
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24,029
–
–
12,615
1,818
–
–
–
–
–
–
–
97,830
568,470
43,216
–
2,096
–
–
24,029
14,433
–
711,612
–
265
750,339
230
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
42. Audit Fees and Other Consultancy Fees
The following table contains fundamental audit fees and other fees charged by the auditors (of the Bank; the auditors primarily being
Ernst & Young) in the financial years 2014 and 2013:
CZK mil.
Audit fees
Other consultancy fees
Total
43. Contingent Assets and Liabilities
In the ordinary course of business, the Bank becomes party to various financial transactions that are not reflected in the statement of
financial position and are referred to as off-balance sheet financial
instruments. The table below presents the notional amounts of these
off-balance sheet financial instruments, unless stated otherwise.
It is not practicable to disclose the information about uncertainties
relating to the amounts or timing of any outflows related to contingent liabilities or the possibility of any related reimbursements.
Legal Disputes
At the reporting date the Bank was involved in various claims and
legal proceedings of a nature considered normal to its business. The
Czech legal environment is still evolving, legal disputes are costly
and their outcome unpredictable. Many parts of the legislation
remain untested and there is uncertainty about the interpretation
that courts may apply in a number of areas. The impact of these
uncertainties cannot be quantified and will only be known as the
specific legal disputes in which the Bank is named are resolved.
The Bank is involved in various claims and legal proceedings of
a special nature. The Bank also acts as a defendant in a number of
legal disputes filed with the arbitration court. The Bank does not
disclose the details underlying the disputes as the disclosure may
have an impact on the outcome of the disputes and may seriously
harm the Bank’s interests.
Whilst no assurance can be given with respect to the ultimate outcome of any such claim or litigation, the Bank believes that the
various asserted claims and litigation in which it is involved will
not materially affect its financial position, future operating results
or cash flows.
If, in connection with the litigation, the Bank has a present obligation (legal or constructive) as a result of a past event and it is
probable that an outflow of resources embodying economic benefits
CZK mil.
Amounts owed under guarantees and letters of credit
Undrawn loan commitments
2014
2013
23
3
26
4
26
30
will be required to settle the obligation and a reliable estimate can
be made of the obligation, the Bank recognises a provision for legal
disputes (refer to Note 30).
Commitments to Extend Credit and
Commitments from Guarantees and Letters of
Credit
Guarantees and standby letters of credit, which represent irrevocable assurances that the Bank will make payments in the event
that a customer cannot meet its obligations to third parties, carry
the same credit risk as loans. Documentary and commercial letters
of credit, which are written undertakings by the Bank on behalf
of a customer authorising a third party 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 and therefore carry less risk than a direct borrowing.
Commitments to extend credit represent unused portions of clients’
authorisations to extend credit in the form of loans, guarantees or
letters of credit. The credit risk attached to commitments to extend
credit represents a potential loss for the Bank. The Bank estimates
the potential loss on the basis of historical developments of CCFs,
PDs and LGDs. CCFs indicate the likelihood of the Bank paying
out on a guarantee or having to grant a loan on the basis of an issued
commitment to extend credit.
Guarantees, irrevocable letters of credit and undrawn loan commitments are subject to similar credit risk monitoring and credit
policies as utilised in the extension of loans. Management of the
Bank believes that the market risk associated with guarantees,
irrevocable letters of credit and undrawn loan commitments is
minimal.
In 2014, the Bank recorded impairment allowances for off-balance sheet risks to cover potential losses that may be incurred
in connection with these off-balance sheet transactions. As at
31 December 2014, the aggregate balance of these allowances
was CZK 245 million (2013: CZK 347 million). Refer to Note 30.
2014
2013
27,108
71,288
27,287
74,048
231
Income Statement | Statement of Financial Position | Report on Relations between Related Parties
44. Analysis of Remaining Maturities
The breakdown of the Banks’s assets and liabilities based on contractual maturities as at 31 December 2014 and 2013 was as follows:
CZK mil.
Cash and cash balances at central banks
Financial assets held for trading
Financial assets designated at fair value through profit or loss
Available-for-sale financial assets
Loans and receivables
Held-to-maturity investments
Derivatives – Hedge accounting
Tangible assets
Intangible assets
Investments in subsidaries, joint ventures and associates
Tax assets
Other assets
2014
2013
< 1 Year
> 1 Year
< 1 Year
> 1 Year
50,157
23,312
8
30,177
132,989
17,266
878
–
–
–
499
1,859
–
–
671
68,856
369,769
124,060
–
13,019
3,289
8,029
–
–
76,440
47,865
23
22,888
142,206
11,977
895
–
–
–
–
2,703
–
–
4,078
38,270
363,386
122,403
–
13,732
3,043
5,968
2
–
Total Assets
257,145
587,693
304,997
550,882
Total Liabilities
242,642
498,885
320,793
438,885
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities measured at amortised cost
Derivatives – Hedge accounting
Provisions
Commitments and guarantees given
Other provisions
Tax liabilities
Other liabilities
23,441
6,263
208,967
169
–
–
–
–
3,802
–
3,401
492,849
–
1,751
245
327
312
–
24,029
7,681
281,939
265
–
–
–
347
6,532
–
6,752
429,673
–
1,724
347
389
–
–
45. Events After the Balance Sheet Date
There were no significant events after the balance sheet date.
232
Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
Report on Relations between Related
Parties
Pursuant to Section 82 of Act No. 90/2012 Coll., on Business Corporations
For the accounting period from 1 January 2014 to 31 December 2014
Česká spořitelna, a. s., a corporation with its registered seat in Prague
4, Olbrachtova 1929/62, post code 140 00, ID No.: 45244782, registered in the Commercial Register maintained by the Municipal
Court in Prague, Section B, Entry 1171 (hereinafter referred to as
“Ceska sporitelna” or the “Author“), is a member of a business
group in which the following relationships exist between Ceska
sporitelna and controlling parties, and between Ceska sporitelna
and parties controlled by the same controlling parties (hereinafter
referred to as “Related Parties“).
This Report on Relations between the parties stated below has
been drawn up in line with Section 82 of Act No. 90/2012 Coll.,
on Business Corporations, as amended, for the accounting period
from 1 January 2014 to 31 December 2014 (hereinafter referred to
as the “Accounting Period“). The valid agreements set out below
were concluded between Ceska sporitelna and the parties stated
below, and the following legal acts and other factual measures were
taken in that period. The Report on Relations features a financial
Erste Group Bank
expression of relationships with related entities for the accounting
period from 1 January 2014 to 31 December 2014.
A. Chart of Parties whose Relationships
are Described
B. Controlling Parties
–– Erste Group Bank AG,
Am Graben 21, Vienna, Austria (“Erste Group Bank“)
–– EGB Ceps Beteiligungen GmbH,
Am Graben 21, Vienna, Austria (“EGB Ceps
Beteiligungen“)
–– EGB Ceps Holding GmbH,
Am Graben 21, Vienna, Austria (“EGB Ceps Holding“)
C. Other Related Parties whose
Relationships are Described
Other Related Parties, Erste Group Bank
other related parties*
–– Banca Comerciala Romana s.a.,
Regina Elisabeta Blvd 5, Bucharest, Romania
EGB Ceps Beteiligungen
EGB Ceps Holding
–– Bausparkasse der österreichischen Sparkassen AG,
Beatrixgasse 27, Vienna, Austria
Česká spořitelna
Brokerjet ČS
Campus Park
CPDP 2
CPDP 2003
CPDP SMK
ČS do domu
CSIL
ČSPS
Dinesia
Erste Corporate Finance
Erste Energy Services
Erste Leasing
Factoring ČS
Gallery Myšák
Grantika ČS
Investičníweb
Mopet
Realitní společnost ČS
Reico ČS
s Autoleasing
S IT Solutions CZ
Stavební spořitelna ČS
VP Ibod
* Enterprises listed in Part C, Other related parties, Erste Group Bank
–– Brokerjet Bank AG,
Mariahilfer Strasse 121, Vienna, Austria
–– Erste Bank der oesterreichischen Sparkassen AG,
Am Graben 21, Vienna, Austria
–– Erste Bank Hungary Nyrt,
Hold utca 16, Budapest, Hungary
–– Erste Group Card Processor d.o.o.,
Radnička cesta 45, Zagreb, Croatia
–– Erste Group Immorent ČR, s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
233
Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
–– Erste Group IT International, spol. s r.o.,
Tomášikova 48, Bratislava, Slovakia
–– Lambda Immorent s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Erste Group IT SK, spol. s r.o.,
Tomášikova 48, Bratislava, Slovakia
–– LogCap ČR s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Erste Group Shared Services (EGSS), s. r. o.,
Národní třída 44, Hodonín, Czech Republic
–– ÖCI – Unternehmensbeteiligungs-gesellschaft. m.b.H.,
Am Graben 21, Vienna, Austria
–– Erste-Sparinvest Kapitalanlagegesellschaft m.b.H.,
Habsburgergasse 1, Vienna, Austria
–– Procurement Services CZ, s. r. o.,
Budějovická 1912/64b, Prague 4, Czech Republic
–– Erste & Steiermärkische bank d.d.,
Jadranski trg 3, Rijeka, Croatia
–– Proxima Immorent, s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Grand Hotel Marienbad s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– S IT Solutions AT Spardat GmbH,
Geiselbergstrasse 21-25, Vienna, Austria
–– Immorent Brno Retail, s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– S IT Solutions HR d.o.o.,
Preradoviceva b.b.,
Bjelovar, Croatia
–– Immorent Cheb s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Immorent Inprox Budweis s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Immorent Jilská s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Immorent Orange Ostrava s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Immorent Orange s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Immorent Orion, s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Immorent Plzeň s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Immorent PTC, s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Immorent TMIS s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Imobilia KIK s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Investiční společnost České spořitelny, a. s.,
Evropská 2690/17, Prague 6, Czech Republic
–– S IT Solutions SK, s. r. o.,
Tomášikova 48, Bratislava, Slovakia
–– Slovenská sporiteľňa, a. s.,
Tomášikova 48, Bratislava, Slovakia
–– Theta Immorent s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
–– Waldviertler Sparkasse Bank AG,
Sparkassenplatz 3, Zwettl, Austria
–– Zeta Immorent s. r. o.,
Budějovická 1518/13a, Prague 4, Czech Republic
Other Related Parties, Ceska Sporitelna Group
–– Brokerjet České spořitelny, a. s.,
Evropská 2690/17, Prague 6, Czech Republic
(“Brokerjet ČS“)
–– Campus Park a.s.,
Vodičkova 710/31, Prague 1, Czech Republic (“Campus
Park“)
–– CEE Property Development Portfolio 2 a.s.,
Olbrachtova 1929/62, Prague 4, Czech Republic
(“CPDP 2“)
–– CPDP 2003 s. r. o.,
Vodičkova 710/31, Prague 1, Czech Republic (“CPDP
2003“)
234
Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
–– CPDP Shopping Mall Kladno, a. s.,
Vodičkova 710/31, Prague 1, Czech Republic (“CPDP
SMK“)
–– s Autoleasing, a. s.,
Budějovická 1518/13a, Prague 4, Czech Republic (“s
Autoleasing“)
–– CS Investment Limited, Ogier House, St Julian’s Avenue,
St Peter Port, Guernsey (“CSIL“)
–– S IT Solutions CZ, s. r. o.,
Antala Staška 32/1292, Prague 4, Czech Republic (“S IT
Solutions CZ“)
–– ČS do domu, a. s.,
Poláčkova 1976/2, Prague 4, Czech Republic (“ČS do
domu“)
–– Česká spořitelna-penzijní společnost, a. s.,
Poláčkova 1976/2, Prague 4, Czech Republic (“ČSPS“)
–– Dinesia a.s.,
Střelničná 8, Prague 8, Czech Republic (“Dinesia“)
–– Erste Corporate Finance, a. s.,
Evropská 2690/17, Prague 6, Czech Republic (“Erste
Corporate Finance“)
–– Erste Energy Services, a. s.,
Evropská 2690/17, Prague 6, Czech Republic (“Erste
Energy Services“)
–– Erste Grantika Advisory, a. s.,
Jánská 448/10, Brno, Czech Republic (“Erste Grantika“)
–– Erste Leasing, a. s.,
Horní náměstí 264/18, Znojmo, Czech Republic (“Erste
Leasing“)
–– Factoring České spořitelny, a. s.,
Budějovická 1518/13B, Prague 4, Czech Republic
(“Factoring ČS“)
–– Gallery Myšák a.s.,
Vodičkova 710/31, Prague 1, Czech Republic (“Gallery
Myšák“)
–– Investičníweb s. r. o.,
Evropská 2690/17, Prague 6, Czech Republic
(“Investičníweb“)
–– Mopet CZ a.s.,
Hvězdova 1716/2b, Prague 4, Czech Republic (“Mopet“)
–– Realitní společnost České spořitelny, a. s.,
Vinohradská 180/1632, Prague 3, Czech Republic (“Realitní
společnost ČS“)
–– Reico investiční společnost České spořitelny, a. s.,
Antala Staška 2027/79, Prague 4, Czech Republic
(“Reico ČS“)
–– Stavební spořitelna České spořitelny, a. s.,
Vinohradská 180/1632, Prague 3, Czech Republic
(“Stavební spořitelna ČS“)
–– Věrnostní program Ibod, a. s.,
Olbrachtova 1929/62, Prague 4, Czech Republic (“VP
Ibod“)
D. Structure of Relations between
Related Parties, Role of the Controlled
Party, Method and Means of Control
Ceska sporitelna is a member of the Erste Group, with the group
parent being Erste Group Bank AG. Ceska sporitelna is also the
managing party of the Ceska sporitelna Financial Group. The Ceska
sporitelna Financial Group (CSFG) is a business grouping of legal
entities in which Ceska sporitelna is the managing party, within the
meaning of the applicable provisions of Act No. 90/2012 Coll.,
on business corporations and cooperatives (the Act on Business
Corporations), and other members of CSFG are managed parties.
CSFG is a group whose purpose is to attain long-term prosperity
and stability. Ceska sporitelna is thus playing a dual role: of a managed party and of the managing party. The structure of relations
in the Erste Group and in the Ceska sporitelna Financial Group is
graphically depicted in Sections A to C.
Erste Group is a leading provider of financial services in Central
and Eastern Europe. It has 16.4 million clients in seven European
countries (Czech Republic, Croatia, Hungary, Austria, Romania,
Slovakia, and Serbia), most of which are European Union members. The advantages of belonging to a major European banking
group are clear. It enables Ceska sporitelna to take advantage of
extensive synergies that flow from the experience, knowledge of the
environment, systems used and shared know-how of sister banks
within Erste Group. It takes advantage of cooperation on projects
across the group that allow for economies of scale and system
unification and centralisation of support activities. Other advantages include the use of the capacity resources available (personnel,
technical, material) in sales and support activities and, above all,
full use of the business potential of Central European markets in
all client segments. Ceska sporitelna, however, is a universal bank
with the greatest number of clients and the greatest volume of primary deposits in the Czech Republic. This makes Ceska sporitelna
largely independent of external circumstances, which significantly
reduces the potential external risks. Centralisation of business support activities could involve a certain level of risk in exceptional
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Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
situations; to that end, Ceska sporitelna has drawn up and tests
Business Continuity Plans.
Erste Group Bank AG is the principal owner of Ceska sporitelna,
holding more than 99% of shareholder voting rights. Ceska sporitelna’s supreme body is its general meeting. Erste Group Bank AG
performs its role at general meetings by exercising its shareholder
rights. The powers of a general meeting include the election of
Supervisory Board members. The number of shareholder rights
held by Erste Group Bank AG allows it to have its representatives
on the Ceska sporitelna Supervisory Board. The Ceska sporitelna
Supervisory Board oversees the exercise of the responsibilities
of the Ceska sporitelna Management Board and the execution
of Ceska sporitelna’s business activities. Among other things,
the Supervisory Board’s powers include the election and recall
of Management Board members and recommending candidates
for the Management Board Chairman and Vice Chairman to the
Management Board. The Management Board of Ceska sporitelna
is Ceska sporitelna’s statutory body, which manages the operations of Ceska sporitelna and represents it. The Ceska sporitelna
Management Board carries out its responsibilities with due professional care and is liable for the exercise of its duties to the extent
stipulated by Czech law.
Management rules have been adopted within Erste Group, which
have been approved by the Ceska sporitelna Management Board.
These rules set out the principles on which the relations between
Ceska sporitelna, as a subsidiary, and Erste Group Bank, as the
parent company, are based.
Relations between Ceska sporitelna and Erste Group Bank are
based on the following principles:
–– Decisions pertaining to the business management of
Ceska sporitelna are adopted by the responsible bodies
and managers of Ceska sporitelna. Responsible bodies and
managers of Ceska sporitelna are obliged to make their
decisions with due professional care.
–– Ceska sporitelna does not take instructions from Erste
Group Bank. This means that the bodies and managers
of Ceska sporitelna must not accept instructions from the
bodies and managers of Erste Group Bank.
–– Any instruction or consent, whether general or specific,
issued by an Erste Group Bank body or manager and
addressed to Ceska sporitelna, is only considered to be
a recommendation.
–– Prior to making a decision, responsible bodies and
managers of Ceska sporitelna consult on questions specified
in the Group Management – Matrix of Consulting Duties
document and other Ceska sporitelna guidelines, with
responsible bodies and managers of Erste Group Bank.
Any position or recommendation of Erste Group Bank on
such issues is also considered to be a recommendation.
Responsible bodies and managers of Ceska sporitelna
will agree with responsible bodies and managers of Erste
Group Bank on the form and procedure of compulsory
consultations (including deadlines for responding). Unless
otherwise agreed, consulting can be provided in any form
(including telephone or e-mail). An auditable record must
be made about a consultation.
–– If the Erste Group Bank recommendation is not acceptable
to the responsible body or manager of Ceska sporitelna, the
Ceska sporitelna manager or body:
–– Discusses the issue with the Erste Group Bank body
or manager concerned, in order to achieve a mutually
acceptable solution;
–– If agreement cannot be reached, the decision is escalated
to a higher level of management (the higher level of
management concerned may decide to escalate it yet
again to the next level of management);
–– Must inform the EGB body or manager concerned about
the outcome of the escalation; if CS does not accept the
Erste Group Bank recommendation, it must explain the
reasons for doing so, to the Erste Group Bank body or
manager concerned (the “comply or explain” principle).
CSFG members also apply a uniform group management system,
whose goal is to ensure the influence of the managing party in
advancing individual group policies and in the policy management
of major components or activities in the group’s business. The
uniform group management system is embodied primarily in Erste
Group standards. Aside from CSFG members, also entities that
are not CSFG members can adopt the uniform group management
system. CSFG members form the foundation of the consolidated
group unit that is characterised by group strategic goals, consolidated results and reports, consolidated risk management rules,
regulatory restrictions, and consolidated supervision.
E. Transactions with Related Parties
Česká spořitelna identified relationships with the related parties
listed in Sections B and C and grouped them into the following
categories.
Related Party Transactions Recorded on the
Asset Side of Ceska sporitelna’s Statement of
Financial Position
Loans and Receivables to Credit Institutions
Within approved general limits, Ceska sporitelna provided funds to
related parties that are credit institutions, on the basis of contracts
for, inter alia, the provision of loans, term deposits, current account
administration and overdraft facilities, under standard market conditions, in an aggregate amount of CZK 28,020 million. Ceska
sporitelna incurred no detriment as a result of these transactions
during the current accounting period.
Loans and Receivables to Customers
Within approved general limits, Ceska sporitelna provided funds
to related parties that are not credit institutions, on the basis of
contracts for, inter alia, the provision of loans and overdraft
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Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
facilities, under standard market conditions, in an aggregate amount
of CZK 15,948 million. Ceska sporitelna incurred no detriment
as a result of these transactions during the current accounting
period.
Financial Assets - Held for Trading
Ceska sporitelna holds held-for-trading bonds and similar securities issued by related parties, which were purchased under standard
market conditions in an aggregate amount of CZK 784 million.
Ceska sporitelna incurred no detriment as a result of these transactions during the current accounting period.
Positive Fair Value of Derivative Transactions
Ceska sporitelna entered into contracts for trading or hedging
derivatives with related parties under standard market conditions,
the positive fair value of which at the end of the accounting period
was CZK 5,700 million. Ceska sporitelna incurred no detriment as
a result of these transactions during the current accounting period.
Other Assets
Other assets and other financial assets include other trade receivables of Ceska sporitelna from related parties recorded on the
asset side of Ceska sporitelna’s statement of financial position
in an aggregate amount of CZK 138 million. Ceska sporitelna
incurred no detriment as a result of these transactions during the
current accounting period.
Related Party Transactions Recorded on the
Liability Side of Ceska sporitelna’s Statement of
Financial Position
Deposits from Banks
During the accounting period, Ceska sporitelna provided related
parties that are credit institutions with monetary services associated, inter alia, with the administration of current and term
accounts, received loans and loro accounts based on contracts
for the opening and administration of accounts under standard
market conditions with an aggregate volume of balances at the end
of the accounting period of CZK 39,164 million. Ceska sporitelna
incurred no detriment as a result of these transactions during the
current accounting period.
Deposits from Customers
During the accounting period, Ceska sporitelna provided related
parties that are not credit institutions with monetary services
associated, inter alia, with the administration of current and
term accounts, loans received, and credit balances on overdraft
facilities, based on contracts for the opening and administration
of accounts under standard market conditions with an aggregate volume of balances at the end of the accounting period of
CZK 1,004 million. Ceska sporitelna incurred no detriment as
a result of the performance of these contracts during the current
accounting period.
Debt Securities Issued
Related parties hold bonds and similar securities issued by Ceska
sporitelna, which were purchased under standard market conditions in an aggregate amount of CZK 15, 667 million. Ceska
sporitelna incurred no detriment as a result of these transactions
during the current accounting period.
Negative Fair Value of Derivative Transactions
Ceska sporitelna entered into contracts for trading or hedging
financial derivatives under standard market conditions with related
parties, the negative fair value of which at the end of the accounting period was CZK 5,977 million. Ceska sporitelna incurred
no detriment as a result of these transactions during the current
accounting period.
Other Liabilities
Other liabilities includes other trade payables of Ceska sporitelna from related parties recorded on the liability side of Česká
spořitelna’s statement of financial position in an aggregate amount
of CZK 249 million. Ceska sporitelna incurred no detriment as
a result of these transactions during the current accounting period.
Related Party Transactions Impacting Ceska
sporitelna’s Income Statement
Interest Income
During the accounting period, Ceska sporitelna generated total
interest income of CZK 740 million from transactions with related
parties executed under standard market conditions. Ceska sporitelna incurred no detriment as a result of these transactions
during the current accounting period.
Interest Expense
During the accounting period, Ceska sporitelna incurred a total
interest expense of CZK 468 million from transactions with
related parties executed under standard market conditions. Ceska
sporitelna incurred no detriment as a result of these transactions
during the current accounting period.
Fee and Commission Income
During the accounting period, Ceska sporitelna received fee and
commission income, primarily comprising fees and commissions
for asset management, depository services, and the sale of subsidiaries’ products, in an aggregate amount of CZK 1,039 million,
as a part of transactions with related parties executed under standard market conditions. Ceska sporitelna incurred no detriment as
a result of these transactions during the current accounting period.
Fee and Commission Expense
During the accounting period, Ceska sporitelna incurred fee and
commission expenses, primarily comprising transaction fees and
payments for the loyalty programme, in an aggregate amount of
CZK 443 million, as a part of transactions with related parties
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Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
enacted under standard market conditions. Ceska sporitelna
incurred no detriment as a result of these transactions during the
current accounting period.
Other Banking and Trading Relationships with
Related Parties
Dividend Income
Ceska sporitelna has instituted approved general limits for related
party transactions; these apply to current and term deposits,
loans, repurchase transactions, own securities, letters of credit
and guarantees provided and received in an aggregate amount
of CZK 120,793 million. Under these limits, the total exposure
to related parties was CZK 67,125 million. Ceska sporitelna
incurred no detriment as a result of these transactions during
the current accounting period.
Ceska sporitelna received dividends in an aggregate amount of
CZK 595 million from related parties of which Ceska sporitelna is
a shareholder. Ceska sporitelna incurred no detriment as a result of
these payments during the current accounting period.
Net Trading and Fair Value Result
During the accounting period, Ceska sporitelna incurred a net profit
of CZK 1,505 million from securities transactions, foreign currency
transactions and similar transactions with related parties, enacted
under standard market conditions. Ceska sporitelna incurred no detriment as a result of these transactions during the current accounting
period.
Rental Income from Investment Properties & Other
Operating Leases
During the accounting period, Ceska sporitelna received income
amounting to CZK 56 million from related parties from leasing executed under standard market conditions. Ceska sporitelna incurred
no detriment as a result of these transactions during the current
accounting period.
General Administrative Expenses
During the accounting period, Ceska sporitelna incurred
CZK 1,468 million in general administrative expenses in respect
of related parties, in particular for the purchase of goods, materials,
insurance and advisory, professional, consulting or maintenance
services under standard market conditions. Ceska sporitelna incurred
no detriment as a result of these transactions during the current
accounting period.
Other Income / Expenses
During the accounting period, Ceska sporitelna reported a positive
balance of other income and expenses in an aggregate amount of
CZK 63 million as part of other transactions with related parties, in particular the provision of outsourcing services and client centre services, etc.,
all executed under standard market conditions. Ceska sporitelna
incurred no detriment as a result of these transactions during the
current accounting period.
General Limits
Guarantees Provided and Received
Ceska sporitelna provided related parties with guarantees based
on guarantee contracts entered into under standard market conditions. Guarantees provided totalled CZK 5,950 million. Ceska
sporitelna received related party guarantees based on contracts
for the acceptance of bank guarantees under standard market
conditions in an aggregate amount of CZK 1,346 million. Ceska
sporitelna incurred no detriment as a result of the performance
of these contracts during the current accounting period.
Fixed-term Contracts
During the accounting period, Ceska sporitelna entered into
fixed - term contracts with related parties under standard market conditions. The nominal value of fixed - term contracts was
250,810 million at the end of 2014. Ceska sporitelna incurred
no detriment as a result of these transactions during the current
accounting period.
Equity Transactions with Related Parties
During the accounting period, Ceska sporitelna, as a market
maker, purchased and sold shares of related parties under
standard market conditions with an aggregate turnover of
CZK 4,381 million. Ceska sporitelna incurred no detriment
as a result of these transactions during the current accounting
period.
Dividends Paid
Based on a 23 April 2014 General Meeting decision, Ceska sporitelna paid dividends totalling CZK 9,026 million to related
parties during the accounting period. Ceska sporitelna incurred
no detriment as a result of the execution of this decision.
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Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
F. Non-Banking Contractual Relationships
In previous accounting periods, Ceska sporitelna entered into contracts with related parties listed in Sections B and C pertaining to non - banking relations, the financial details of which are presented in Section E for the accounting period. Below is a list of valid contracts with the
related parties listed in Sections B and C pertaining to non - banking relations. Contracts of a similar nature entered into with a particular
related party are grouped.
Name
Contractual party
Description
Date
Detriment
Share purchase agreement
Bausparkasse der
österreichischen
Sparkassen AG
Purchase of 250 shares of Stavební
spořitelna České spořitelny, a. s.
2014
None
incurred
Share purchase agreement
Brokerjet Bank AG
2014
None
incurred
Master agreement
Brokerjet Bank AG
2013 – 2014
None
incurred
2013–8690-035 BJ, IPT
SLA - Agreement on the use
of the ISIR_CS application
Agreement on cooperation in
connection with the provision
of Client Centre services
Agreement on the provision of
data to DWH
Agreement on the provision
and processing of data
Agreement on the lease of
non-residential premises
Outsourcing agreement
2× Outsourcing agreement
brokerjet České
spořitelny, a. s.
brokerjet České
spořitelny, a. s.
brokerjet České
spořitelny, a. s.
brokerjet České
spořitelny, a. s.
brokerjet České
spořitelny, a. s.
brokerjet České
spořitelny, a. s.
brokerjet České
spořitelny, a. s.
CEE Property Development
Portfolio 2 a.s.
Agreement on the lease of
non-residential premises
CEE Property Development
Portfolio 2 a.s.
2014–8670-003 CPDP, IPT
CEE Property Development
Portfolio B.V.
Agreement on the lease of
non-residential premises
Česká spořitelna - penzijní
společnost, a. s.
Outsourcing agreement
Česká spořitelna - penzijní
společnost, a. s.
2013–8690.031 ČSdD, IT
ČS do domu, a. s.
2012–8690-047 ČSdD, P24
ČS do domu, a. s.
Agreement on a mutual
exchange of information
ČS do domu, a. s.
through special access to
software application
Agreement on the assignment
ČS do domu, a. s.
of a right
Agreement on the right to use
ČS do domu, a. s.
a logo
Agreement on the sub-lease
of non-residential premises
ČS do domu, a. s.
Outsourcing agreement
ČS do domu, a. s.
Purchase of 49 shares of brokerjet
České spořitelny, a. s.
Master agreement on cooperation
and servicing services, including
appendices
Agreement on the provision of IPT
services to Brokerjet
Agreement on the use of the ISIR_CS
application
Agreement on cooperation in
connection with the provision of
services
Agreement on the provision of data to
data warehouse
Agreement on the provision and
processing of data
Agreement on the lease of a real
property, including two rent
modifications
Provision of selected outsourcing
services
Provision of selected outsourcing
services
Agreement on the lease of nonresidential premises including one
amendment to agreement
Agreement on the provision of
telephony and data services to CPDP
Agreement on the lease of nonresidential premises including 1
amendment to agreement and 3 rent
modifications
Provision of selected outsourcing
services
Agreement on the provision of IT and
telephony services to ČSdD including
one amendment to agreement
Agreement on cooperation in the
provision of services, including one
amendment to agreement
Agreement on an exchange of
information
Agreement on the assignment of a right
to use the CS logo
Agreement on the right to use the CS
logo
Agreement on the lease of nonresidential premises, including three
rent modifications
Provision of selected outsourcing
services including 1 amendment to
agreement
2013
2009
2009
2011
2013
2008 – 2013
2014
2014
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
2013
None
incurred
2014
None
incurred
2013
None
incurred
2014
None
incurred
2014
None
incurred
2012 –2013
None
incurred
2009
None
incurred
2009
2009
None
incurred
None
incurred
2013
None
incurred
2014
None
incurred
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Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
Name
Contractual party
Agreement on the provision of
ČS do domu, a. s.
outsourcing services
Master agreement on
cooperation
ČS do domu, a. s.
Outsourcing agreement
Erste Corporate
Finance, a. s.
3× Agreement on the
assignment of rights and
take-over of obligations from
a lease agreement
Erste Corporate
Finance, a. s.
2013–8690-037 ErES, IT
Erste Energy Services, a. s.
2013–8690-015 ErES, WEB
Erste Energy Services, a. s.
Agreement to provide an extra
payment outside of registered Erste Energy Services, a. s.
capital
Agreement No. 2014–2501Erste Energy Services, a. s.
2531
Outsourcing agreement
Erste Energy Services, a. s.
Agreement on the provision
of selected risk management
services
Erste Energy Services, a. s.
Agreement
No. 2012/2310/1409
Outsourcing agreement
Agreement on an internal
audit
Master agreement
Order agreement
3× Agreement for work
Agreement on the use of the
Calypso system
Service Level Agreement
3× Cost cooperation
agreement
Master Agreement for the
Provision of Services
2× Group Capital Markets
Web Portal
ARIS SLA
Trademark License
Agreement
Master agreement on
cooperation in the sphere of
services
Project cooperation
agreement
Outsourcing agreement
Description
Providing outsourcing services for
the processing and payment of
commissions to external partners and
ensuring activity in managing external
partners
Agreement on the provision of services
when offering and brokering the sale
of selected banking and other financial
products
Provision of selected outsourcing
services
Agreements on the assignment of
rights and take-over of obligations
from a car lease agreement with
s Autoleasing, a. s. by Erste Corporate
Finance
Agreement on the provision of IT
services to Erste Energy Services
Agreement on the operation of the
Erste Energy Services website
Provision of an extra payment outside
of registered capital
Implementation agreement on
electricity supply
Provision of selected outsourcing
services including one amendment to
agreement
Agreement on the provision of selected
risk management services
Agreement on the lease of nonErste Grantika Advisory, a. s. residential premises, including two rent
modifications and hand-over protocol
Provision of selected outsourcing
Erste Grantika Advisory, a. s.
services
Agreement on an audit of information
Erste Grantika Advisory, a. s.
systems
Master agreement on the provision of
Erste Grantika Advisory, a. s.
electronic auction operator services
Agreement on cooperation in the field
Erste Grantika Advisory, a. s.
of tender documents
Agreements for work in software
Erste Group Bank AG
development
Agreement on services related to the
Erste Group Bank AG
use of the Calypso system
Sales support in the large corporate
Erste Group Bank AG
segment
Cost sharing agreements for
Erste Group Bank AG
centralised services
Master agreement on the provision of
Erste Group Bank AG
Erste Group Bank services to Ceska
sporitelna
Agreement on the operation of a web
Erste Group Bank AG
portal, including two amendments to
agreements
Process documentation and process
Erste Group Bank AG
performance management, including
two appendices to the agreement
Date
Detriment
2009
None
incurred
2009
None
incurred
2014
None
incurred
2012
None
incurred
2014
2013
None
incurred
None
incurred
2014
None
incurred
2014
None
incurred
2014
None
incurred
2013
None
incurred
2012 – 2013
None
incurred
2014
2014
2013
2014
2014
2010
2014
2014
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
2014
None
incurred
2014
None
incurred
2014
None
incurred
Erste Group Bank AG
Trademark use agreement
2002
None
incurred
Erste Group Bank AG
Agreement on advisory services for
various projects
2003
None
incurred
Project cooperation agreement
2014
Provision of selected outsourcing
services
2014
Erste Group Immorent
ČR, s. r. o.
Erste Group Immorent
ČR, s. r. o.
None
incurred
None
incurred
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Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
Name
Contractual party
2014–8670-013 EG
Immorent, IPT
Agreement
No. 2012/2310/1436
Agreement
No. 2012/2310/760
Agreement on the sub-lease
of non-residential premises
Erste Group Immorent
ČR, s. r. o.
Erste Group Immorent
ČR, s. r. o.
Erste Group Immorent
ČR, s. r. o.
Erste Group Immorent
ČR, s. r. o.
3× Contact for work
SunGard
Master agreement with
appendices
Agreement on the lease of
non-residential premises
Outsourcing agreement
Service Level Agreement
(data line)
Service agreement for
the processing of foreign
payments
Service agreement for the
processing of domestic
payments
2013–8690-020 EGSS, IT
Agreement on the provision of IPT
services
Agreement on the sub-lease of nonresidential premises
Agreement on renting space for
advertising purposes
Agreement on the lease of nonresidential premises
Agreements for work for the supply of
Erste Group IT International,
software, including three appendices to
spol. s r.o.
the agreements
Erste Group IT SK, spol.
Agreement for work in IT
s r.o
Agreement on IT services provided
Erste Group IT SK, spol.
for Ceska sporitelna employees in
s r.o
Bratislava
Agreement on the lease of a real
Erste Group Shared
property, including one rent modification
Services, s. r. o.
and one amendment to the agreement
Erste Group Shared
Provision of selected outsourcing
Services, s. r. o.
services
Erste Group Shared
Agreement on the provision of services
Services, s. r. o.
2014
2012
2012
2013
Detriment
None
incurred
None
incurred
None
incurred
None
incurred
2014
None
incurred
2014
None
incurred
2014
None
incurred
2010 – 2013
None
incurred
2014
2010
None
incurred
None
incurred
Agreement on services in the
processing of foreign payments
2010
None
incurred
Erste Group Shared
Services, s. r. o.
Agreement on services in the
processing of domestic payments
2014
None
incurred
Erste Group Shared
Services, s. r. o.
Agreement on the provision of IT
services to EGSS
Agreement on the provision of software
to Erste leasing
Agreement on the lease of nonresidential premises and furnishings,
including two rent modifications and
hand-over protocol
Lease Agreement – Znojmo
Erste Leasing, a. s.
Agreement on the lease of
non-residential premises and
lease of chattel properties
Erste Leasing, a. s.
Outsourcing agreement
Erste Leasing, a. s.
Agreement to provide an extra
payment outside of registered Erste Leasing, a. s.
capital
Agreement on business
cooperation
Erste Leasing, a. s.
2014–8670-007 Factoring,
IPT
Agreement on the lease of
non-residential premises
Factoring České
spořitelny, a. s.
Factoring České
spořitelny, a. s.
Agreement on the sub-lease
of non-residential premises
Factoring České
spořitelny, a. s.
Outsourcing agreement
Factoring České
spořitelny, a. s.
Agreement to provide an extra
Factoring České
payment outside of registered
spořitelny, a. s.
capital
Agreement on a payment for
the use of a logo and trade
name
Date
Erste Group Shared
Services, s. r. o.
2013–8690-018 Erste leasing,
Erste Leasing, a. s.
CRM
2013–8690-036 ISČS, IT
Description
2013
2013
None
incurred
None
incurred
2013
None
incurred
Agreement on the lease of nonresidential premises and furnishings
2013
None
incurred
Provision of selected outsourcing
services
2014
None
incurred
Provision of extra payment outside of
registered capital
2014
None
incurred
2014
None
incurred
Agreement on cooperation on business
agreements and participation in the
risks arising therefrom
Agreement on the provision of IT
services to Factoring
Agreement on the lease of a real
property, including one rent modification
Agreement on the lease of nonresidential premises, including one rent
modification
Provision of selected outsourcing
services
Provision of extra payment outside of
registered capital
Agreement on the provision of IT
Investiční společnost České
services to ISČS, including two
spořitelny, a. s.
amendments to the agreement
Investiční společnost České Use of Sporitelna’s name in commercial
spořitelny, a. s.
and other activities
2014
2012
None
incurred
None
incurred
2013
None
incurred
2014
None
incurred
2014
None
incurred
2013 – 2014
None
incurred
2001
None
incurred
241
Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
Name
Agreement on the
assignment of the right to
use a logo
Contractual party
Description
Right to use the ISČS logo, which
Investiční společnost České
qualifies as an original copyrighted
spořitelny, a. s.
work
Implementation agreement for Investiční společnost České Use of the CS Client Centre for the
basic cooperation agreement spořitelny, a. s.
provision of information to clients
Agreement on the provision of Investiční společnost České
Provision of back-office activities
back-office activities
spořitelny, a. s.
Agreement on the
administration of employee Investiční společnost České Agreement on the administration of
benefits in the Benefit Plus
spořitelny, a. s.
employee benefits
system
Agreement on the lease of nonAgreement on the lease of
Investiční společnost České residential premises including one
non-residential premises
spořitelny, a. s.
amendment to agreement and one rent
modification
Provision of selected outsourcing
Investiční společnost České
Outsourcing agreement
services including one amendment to
spořitelny, a. s.
agreement
Agreement on risk management valid
Investiční společnost České
Risk management agreement
through to 03/2014, including five
spořitelny, a. s.
amendments to the agreement
Investiční společnost České Agreement on risk management valid
Risk management agreement
spořitelny, a. s.
from 03/2014
Agreement on the sub-lease
General agreement on the sub-lease of
Investičníweb s. r. o.
of non-residential premises
non-residential premises
Subscription of 69,445 shares in the
Share subscription agreement Mopet CZ, a. s.
increase of the registered capital of
Mopet CZ a.s.
Agreement on the protection of
Agreement on the protection
Mopet CZ, a. s.
confidential information, including one
of confidential information
amendment
2014–8670-001 Mopet,
Agreement on IT service arrangement
Mopet CZ, a. s.
Gapps
for Mopet CZ
Agreement on the arrangements of
2014–8670-16 MOPET ULA
Mopet CZ, a. s.
software user licences for Mopet CZ
Provision of selected outsourcing
Outsourcing agreement
Mopet CZ, a. s.
services including one amendment to
agreement
Procurement Services
Agreement on IT services for
2013–8690-029 EGP, IT
CZ, s. r. o.
Procurement Services
Agreement on the lease of nonAgreement
Procurement Services
residential premises, including two rent
No. 2012/2310/1207
CZ, s. r. o.
modifications
Procurement Services
Provision of selected outsourcing
Outsourcing agreement
CZ, s. r. o.
services
Agreement on the provision of Procurement Services
Agreement on the provision of services
services
CZ, s. r. o.
Master cooperation
Master cooperation agreement –
Procurement Services
agreement no. 2007–2510performance on the basis of follow-up
CZ, s. r. o.
282
implementation agreements
Master agreement on
Agreement on advisory, consulting, and
Realitní společnost České
advisory, consulting, and
processing services in the sale of real
spořitelny, a. s.
brokerage services
properties and related chattel properties
Master sales representation
Realitní společnost České
Agreement on cooperation in the sale
agreement
spořitelny, a. s.
of products
Agreement on access to the
Realitní společnost České
Agreement on the access of RSČS
CS Intranet
spořitelny, a. s.
employees to the CS Intranet
Agreement on the
Realitní společnost České
Agreement on the assignment of the
assignment of the right to
spořitelny, a. s.
right to use the company’s logo
use the company’s logo
Agreement on the conditions
Agreement on the conditions for
Realitní společnost České
for using an internal
using an internal risk-management
spořitelny, a. s.
application service
application service
Agreement on the lease of
Realitní společnost České
Agreement on the lease of nonnon-residential premises
spořitelny, a. s.
residential premises
Provision of selected outsourcing
Realitní společnost České
Outsourcing agreement
services, including two amendments to
spořitelny, a. s.
the agreement
Date
Detriment
2001
None
incurred
2001
None
incurred
2009
None
incurred
2013
None
incurred
2008 – 2013
None
incurred
2014
None
incurred
2006 – 2013
None
incurred
2014
2013
None
incurred
None
incurred
2014
None
incurred
2011
None
incurred
2014
2014
None
incurred
None
incurred
2014
None
incurred
2013
None
incurred
2012
None
incurred
2014
2013
None
incurred
None
incurred
2007
None
incurred
2010
None
incurred
2013
None
incurred
2003
None
incurred
2004
None
incurred
2012
None
incurred
2008
None
incurred
2014
None
incurred
242
Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
Name
Contractual party
Description
Agreement
No. 2012/2310/796
Reico investiční společnost
České spořitelny, a. s.
Agreement on the
management of risks arising
from financial instruments
Reico investiční společnost
České spořitelny, a. s.
Agreement on the distribution
of unit certificates and related
activities
Reico investiční společnost
České spořitelny, a. s.
Agreement on the lease of a real
property, including one rent modification
Agreement on the management of
risks arising from financial instruments,
including two amendments to the
agreement
Agreement on the distribution of unit
certificates and related activities,
including one amendment
Provision of selected outsourcing
services
Agreements on the provision of
licences and IT services
Agreement on the lease of a real
property, including three rent
modifications and hand-over protocol
2× Outsourcing agreement
Reico investiční společnost
České spořitelny, a. s.
Agreement on the provision of
s Autoleasing, a. s.
IT services
Agreement
No. 2012/2310/1033
2× Agreement on the sublease of non-residential
premises
2× Agreement on sales
cooperation
General mandate agreement
pertaining to the portfolio of
receivables
General mandate agreement
pertaining to the portfolio of
receivables
Agreement on the lease of
premises used for business
Agreement to provide an extra
payment outside of registered
capital
s Autoleasing, a. s.
None
incurred
2007 – 2009
None
incurred
2014
2013 – 2014
None
incurred
None
incurred
2012 – 2013
None
incurred
s Autoleasing, a. s.
Agreements on cooperation (in risk
management)
2014
None
incurred
s Autoleasing, a. s.
Agreement on the administration of the
portfolio of receivables
2014
None
incurred
s Autoleasing, a. s.
Agreement on the administration of the
portfolio of receivables
2014
None
incurred
s Autoleasing, a. s.
Agreement on the lease of a real
property for business
2014
None
incurred
s Autoleasing, a. s.
Provision of extra payment outside of
registered capital
2014
None
incurred
2008
None
incurred
2008
None
incurred
2012
None
incurred
2014
None
incurred
Master operative leasing
agreement
s Autoleasing, a. s.
Outsourcing agreement
s Autoleasing, a. s.
s IT Solutions AT Spardat
GmbH
s IT Solutions AT Spardat
GmbH
s IT Solutions AT Spardat
GmbH
Master Agreement for the
s IT Solutions CZ, s. r. o.
provision of IT services for ČS
Agreement on the sub-lease
of non-residential premises
Agreement on the lease of
non-residential premises
2007 – 2010
None
incurred
s Autoleasing, a. s.
Master Agreement on the
lease of non-residential
premises and on lease of
chattel properties
None
incurred
2013
Service agreement
RRC Agreement
2012
Agreements on the lease of a real
property, including one rent modification
s Autoleasing, a. s.
13× Service agreement
Detriment
s Autoleasing, a. s.
Master fleet management
agreement
29× Agreement for work
Date
s IT Solutions CZ, s. r. o.
s IT Solutions CZ, s. r. o.
s IT Solutions CZ, s. r. o.
Power of attorney granted by
CSAS – for negotiations with
third parties
s IT Solutions CZ, s. r. o.
Agreement on the protection
of confidential information
s IT Solutions CZ, s. r. o.
Master fleet management agreement –
administrative, servicing, and
assistance services
Service agreement to the Master
fleet management agreement –
administrative, servicing, and
assistance services
Master car lease agreement
Provision of selected outsourcing
services, including two amendments to
the agreement
Agreements for work in IT, including two
amendments
Agreements on IT services, including 1
amendment
Agreement on risk management
services
Master Agreement on the provision
of IT services to Ceska sporitelna,
including one amendment to agreement
Master Agreement on the lease of nonresidential premises and on the lease
of chattel properties, including 33 rent
modifications and two amendments to
the agreement
Agreement on the sub-lease of nonresidential premises
Agreement on the lease of nonresidential premises
Power of attorney received, arising from
agreements of CS with third parties,
concerning support, maintenance,
repair, and similar services
Agreement on the protection of
confidential information
2014
2013 – 2014
2014
None
incurred
None
incurred
None
incurred
2011 – 2013
None
incurred
2012 – 2013
None
incurred
2012
2012
None
incurred
None
incurred
2010
None
incurred
2013
None
incurred
243
Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
Name
Contractual party
Description
Date
Detriment
Agreement on the lease of
non-residential premises and
on lease of chattel properties
s IT Solutions CZ, s. r. o.
Agreement on the lease of nonresidential premises and furnishings
2013
None
incurred
Outsourcing agreement
s IT Solutions CZ, s. r. o.
Provision of selected outsourcing
services
2014
s IT Solutions HR d.o.o.
Agreement on IT services
2014
s IT Solutions SK, s. r. o.
Master cooperation agreement
2012
Slovenská sporiteľňa, a. s.
General agreement on non-residential
premises
2014
Slovenská sporiteľňa, a. s.
Agreement on cooperation in the field
of credit management
2014
None
incurred
2010 – 2013
None
incurred
2014
None
incurred
2013
None
incurred
2013
None
incurred
PDS – Performance and
Development System
2012–8690-043
MASTER AGREEMENT
Agreement
No. 2014/2310_02/1550
Agreement on cooperation in
the management of secured
loans to private individuals
and to manage the mortgage
business regions and external
sales after the running out of
credit
7× Cooperation agreement
Stavební spořitelna České
spořitelny, a. s.
Outsourcing agreement
Stavební spořitelna České
spořitelny, a. s.
Agreement on the provision of Stavební spořitelna České
services
spořitelny, a. s.
Agreement on cooperation
in the termination of building
savings agreements
Stavební spořitelna České
spořitelny, a. s.
Agreement on the processing
of data
Stavební spořitelna České
spořitelny, a. s.
Stavební spořitelna České
spořitelny, a. s.
Stavební spořitelna České
spořitelny, a. s.
Stavební spořitelna České
spořitelny, a. s.
Stavební spořitelna České
spořitelny, a. s.
Stavební spořitelna České
spořitelny, a. s.
Sales representation
agreement
Stavební spořitelna České
spořitelny, a. s.
Cooperation agreement –
client checks
Stavební spořitelna České
spořitelny, a. s.
Agreement on cooperation in
the operation of a service
Agreement on an internal
audit
Agreement on an internal
audit
Agreement on the assignment
of the right to use a logo
Cooperation agreement
Agreement on the provision
of services for product
documentation file and
shredding service
Agreement on the protection
of confidential information
Agreement on a uniform risk
management system
Agreement on the conditions
for using the Klient application
service
Stavební spořitelna České
spořitelny, a. s.
Agreement on the provision of services
for product documentation file and
shredding service
Stavební spořitelna České
spořitelny, a. s.
Stavební spořitelna České
spořitelny, a. s.
Agreement on the protection of
confidential information
Agreement on a uniform risk
management system
Stavební spořitelna České
spořitelny, a. s.
Agreement on setting the conditions for
using a software application service
Stavební spořitelna České
spořitelny, a. s.
Agreement on the provision of Stavební spořitelna České
data to DWH
spořitelny, a. s.
Service Level Agreement
Agreements on cooperation in services
and software applications
Provision of selected outsourcing
services, including two amendments to
the agreement
Agreement on the provision of
methodological support for internal
audit
Agreement on the cooperation of Ceska
sporitelna and Stavební spořitelna
České spořitelny in the termination of
building savings agreements, including
one amendment
Agreement on cooperation in the
operation of internet banking
Agreement on an audit of the credit risk
management system
Agreement on an audit of security
policies and data protection
Assignment of the right to use a logo
and trade name
Agreement on the provision of client
centre services
Agreement on the processing of data
and forms
Agreement on activities in the
conclusion of the building savings
product
Agreement on checking clients in the
internal database in searching for
sanctioned persons
Agreement on the provision of
certification services
Agreement on the provision of data to
data warehouse
2010
2014
2014
2001
2010
2005
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
2007
None
incurred
2007
None
incurred
2008
None
incurred
2003
2003
2008
2009
2007
None
incurred
None
incurred
None
incurred
None
incurred
None
incurred
244
Statement of Financial Position | Report on Relations between Related Parties | Česká spořitelna Financial Group
Name
Contractual party
Power of attorney
Stavební spořitelna České
spořitelny, a. s.
Agreement on access to the
Intranet
Agreement on conditions of
access
Stavební spořitelna České
spořitelny, a. s.
Stavební spořitelna České
spořitelny, a. s.
Gift agreement
Stavební spořitelna České
spořitelny, a. s.
Agreement on an internal
audit
Stavební spořitelna České
spořitelny, a. s.
Master agreement on the
development of the IBOD
programme
Věrnostní program
IBOD, a. s.
Lease agreement
Věrnostní program
IBOD, a. s.
Agreement on participation in
the IBOD loyalty programme
Věrnostní program
IBOD, a. s.
Description
Power of attorney to enter into an
“Agreement on the processing of tasks
related to building savings through
SERVIS 24 direct banking services"
Employees’ access to the Ceska
sporitelna Intranet
Regulation of the conditions of access
to customer files
Gift agreement for the provision of
services and the operation of the debt
advisory centre
Provision of methodological support
to internal audit of Stavební spořitelna
České spořitelny, a.s
Master agreement on the development
of the IBOD programme – development
of SW IBOD
Date
Detriment
2006
None
incurred
2006
2003
None
incurred
None
incurred
2014
None
incurred
2014
None
incurred
2013
None
incurred
Agreement on the payment of costs
2013
Implementation agreement on
participation in the IBOD loyalty
programme
None
incurred
2013
None
incurred
G. Overview Of Actions Performed At
The Initiative Of The Controlling Party
During the accounting period, the author of this report did not
engage in any act at the direct initiative of its controlling party
pertaining to assets in excess of 10% of its registered capital, within
the meaning of Section 82 (2) (d) of Act No. 90/2012 Coll., on
Business Corporations. The dividend payment referred to in Section
E may be considered to constitute an action undertaken at the direct
initiative of the controlling party (by means of exercising its shareholder’s rights at the general meeting). The ratio of the dividend
paid to Ceska sporitelna’s capital as at 31 December 2014 is 8.74%.
H. Other Legal Acts
technology, risk management, and service activity. Ceska sporitelna
incurred no detriment as a result of its involvement in the foregoing
group projects.
J. Conclusion
It is clear from our review of the legal relationships between Ceska
sporitelna and its related parties, including the controlling party,
that Ceska sporitelna incurred no detriment as a result of contracts,
other legal acts or other measures executed, effected or adopted by
Ceska sporitelna during the accounting period from 1 January 2014
to 31 December 2014 to the benefit or at the initiative of individual
related parties, including the controlling party.
Prague, 3 March 2015
During the accounting period, the author of this report neither
adopted nor enacted any other legal acts to the benefit or at the
initiative of related parties.
I. Other De Facto Measures
Within Erste Group Bank, Ceska sporitelna takes part in group
projects whose common aim is to fully exploit the business potential
of Central European markets in all segments as well as economies
of scale and cost synergies, the concentration of support activities within the group and performance measurement transparency
and comparability. These projects cover, for example, information
Pavel Kysilka
Chairman of the Board
of Directors
Wolfgang Schopf
Vice-Chairman of the Board
of Directors
245
Report on Relations between Related Parties | Česká spořitelna Financial Group | Independent Auditor’s Report
Česká spořitelna Financial Group
Overview of key members of the Česká spořitelna Financial Group, figures are
unaudited and in accordance with International Financial Reporting Standards
(“IFRS”), unless otherwise indicated
Stavební spořitelna České spořitelny, a. s.
Stavební spořitelna České spořitelny, a.s., with its registered office
at Vinohradská 180, Prague 3, was incorporated on 22 June 1994. Its
principal business is the provision of financial services pursuant to
Act No. 96/1993 Coll. Stavební spořitelna ČS offers its clients construction savings with state support and a statutory entitlement to
construction savings loans. In December 2014, there was a change
in the shareholder structure. In addition to its 95% stake, Česká
spořitelna acquired the remaining 5% from Bausparkasse der österreichischen Sparkassen AG, and thus became the sole shareholder.
Stavební spořitelna České Spořitelny recorded more than 151 thousand loan accounts at the 2014 year end, having lent its clients
nearly CZK 36.4 billion for better housing and having administered more than 790 thousand construction savings accounts with
a target amount of nearly CZK 193.0 billion and savings totalling
CZK 81.3 billion.
Stavební spořitelna České spořitelny, a. s.
Share capital(CZK million)
Total assets(CZK billion)
Loans and advances to clients (CZK billion)
Client deposits(CZK billion)
Net profit (CZK million)
Number of client accounts (million)
Average headcount
Correspondence address: Vinohradská 180, 130 11 Praha 3
Free info-line: 800 207 207
Telephone: 224 309 111
Once again in 2014, the company’s 20th anniversary on the market,
Stavební spořitelna ČS fulfilled its mission “We Finance Better
Housing for All”. And not only by providing loans to savings
participants, but also by financing larger investment undertakings
of housing cooperatives and apartment owner associations. The
innovative product Hypoúvěr od Buřinky [Buřinka mortgage loan]
placed third in the prestigious Zlatá koruna [Golden Crown] 2014
competition.
In 2014, Stavební spořitelna ČS carried on its longstanding cooperation with the civil association Portus Praha and was once again the
general sponsor of the well-known Action with Bricks campaign.
This activity in the field of social responsibility is just one more
way in which Stavební spořitelna ČS supports better housing, in
this case for the handicapped.
2014
2013
2012
2011
2010
750
87.3
36,4
81.4
622
0.9
208
750
99.3
37,6
94.8
535
1.1
210
750
103.5
39,5
97.9
649
1.2
205
750
103.7
41,7
98.0
1,028
1.1
200
750
103.0
45,1
97.5
1,267
1.2
212
Internet: www.burinka.cz
e-mail: [email protected]
Česká spořitelna – penzijní společnost, a. s.
Česká spořitelna – penzijní společnost, a. s. was created as a result
of the transformation of Penzijní fond České spořitelny, a.s.
(“PFČS”) on 1 January 2013. PFČS was founded as a joint stock
company in 1994 pursuant to a Memorandum of Association. The
registered office of the pension company is Poláčkova 1976/2,
140 21 Prague 4. Česká spořitelna is its sole shareholder. The
company’s principal business until 31 December 2012 was the
provision of supplementary pension insurance schemes pursuant
to Act No. 42/1994 Coll. on supplementary state-contributory
pension insurance as amended by Act No. 170/1999 Coll. and
Act No. 36/2004 Coll. As of 1 January 2013, Česká spořitelna –
penzijní společnost offers a new product portfolio of supplementary
pension savings pursuant to Act No. 427/2011 Coll. and retirement
savings pursuant to Act No. 426/2011 Coll.
246
Report on Relations between Related Parties | Česká spořitelna Financial Group | Independent Auditor’s Report
funds, to amass in each one an amount of no less than CZK 50 million. The valorisation of client funds for ČSPS is one of the best
on the market; for the ČSPS Transformed Fund, it will be around
one percentage point above the annual inflation rate.
In November 2014, the Czech Government opted to put an end to
pension savings (2nd pillar). ČS Penzijní společnost decided as
a result not to expose clients to short-term investment risks. Money
in all pension funds is not, and will not be, invested based on longterm investment strategies, but will remain on the money market.
Česká spořitelna – penzijní společnost is a leader on the SPS market. In 2014, more than 50 thousand clients opted for retirement
savings with ČSPS, bringing the total number of SPS clients to
67 thousand. For QI-Q3 2014, the SPS market share of ČSPS was
nearly 31% in number of clients and 37% in participation funds.
At 31 December 2014, administered assets in participation funds
totalled 1.686 billion.
In 2014, all administered funds grew. The compulsory Conservative
Participation Fund is the largest supplementary pension savings (SPS) product on the market. With regard to the Balanced
Participation Fund and the Dynamic Participation Fund, ČSPS was
the first pension company to fulfil its statutory obligation (and did
so in advance), i.e. within 2 years of acquiring a license to operate
Česká spořitelna – penzijní společnost, a. s.
Share capital (CZK million)
Total assets (CZK billion)
Assets in individual funds (CZK million)
Transformed Fund
Conservative Participation Fund
Balanced Participation Fund
Dynamic Participation Fund
Conservative Retirement Fund
Balanced Retirement Fund
Dynamic Retirement Fund
Government Bond Retirement Fund
Net (loss)/profit (CZK million)
Number of unique participants (thousand)
Average headcount
2014
2013
2012
2011
2010
350
1.6
350
1.6
350
45.4
350
40.1
350
37.6
55,757
1,314
231
142
106
136
58
5
49
982
65
50,152
414
18
8
21
27
12
1
(40)
1,023
63
42,482
–
–
–
–
–
–
–
757
1,059
58
38,083
–
–
–
–
–
–
–
874
938
54
32,351
–
–
–
–
–
–
–
807
908
57
Data for years 2010 to 2012 are for Penzijní fond České spořitelny, a.s.
Correspondence address: Poláčkova 1976/2, 140 21 Praha 4
Telephone: 956 777 444
Internet: www.ceskapenzijni.cz
e-mail: [email protected]
s Autoleasing, a. s.
The leasing company s Autoleasing, a. s., founded on
6 October 2003, is a wholly-owned subsidiary of Česká spořitelna.
Its registered office is located at Budějovická 1518/13B in Prague 4
and its share capital totals CZK 500 million. Its principal business
is providing finance leases for a wide range of passenger and utility
vehicles and providing consumer loans for vehicles up to 3.5 tons
to individuals – non-entrepreneurs, individuals – entrepreneurs
and corporate entities.
In 2014, s Autoleasing reported profit of CZK 104 million.
In the course of the year, the company completed financing
transactions at an aggregate initial debt value of CZK 3.5 billion. The company creates provisions to cover all known risks
arising from its lease and loan contract portfolio. Material
facts that may favourably impact s Autoleasing meeting its
future business targets include closer cooperation with the
parent bank. In 2014, s Autoleasing strengthened its market
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Report on Relations between Related Parties | Česká spořitelna Financial Group | Independent Auditor’s Report
position. The company also continued to support its subsidiary s Autoleasing SK, s.r.o., which launched operations
in Slovakia in 2013, and provides loans for new and used
s Autoleasing, a. s.
Share capital (CZK million)
Total assets (CZK billion)
New transactions volume (CZK billion)
Net profit (CZK million)
Number of new contracts
Number of own points of sale
Average headcount
vehicles up to 3.5 tons to individuals – non-entrepreneurs,
individuals – entrepreneurs and corporate entities and is
gradually strengthening its Slovak market position.
2014
2013
2012
2011
2010
500
8.2
3.5
104
12,553
1
112
500
8.0
3.4
97
12,398
1
109
500
8.1
3.4
74
12,765
1
106
500
8.0
2.9
50
13,067
1
109
500
8.7
2.6
19
13,833
1
108
Correspondence address: Budějovická 1518/13B, 140 00
Praha 4
Telephone: 956 785 111
Internet: www.sautoleasing.cz
Erste Leasing, a.s. (S Morava Leasing, a. s. until 1 September 2013)
S Morava leasing a.s. has operated under the new name Erste
Leasing, a. s. since 1 September 2013. Since 1991, Erste Leasing
has offered financing to small and medium-sized enterprises in the
Czech Republic. In 2011, Erste Leasing became a 100% subsidiary of Česká spořitelna. Thanks to its extensive network of sales
points and close cooperation with Česká spořitelna’s regional corporate centres, the company’s operations span the entire country.
It offers clients leasing and loan financing to purchase machinery
and equipment, primarily for agriculture, private sector services
and machine engineering.
In 2014, Erste Leasing achieved record profit of CZK 46 million.
During 2014, the company financed transactions in an aggregate
amount of CZK 2.7 billion, meaning there was no change year on
year. The company executed a total of 1,968 new leasing and loan
contracts. The number of new contracts thus fell by 8%, though
this also means the average financed value per contract rose. At
CZK 1.75 billion, agriculture – machinery, equipment and agricultural land purchases – was the most financed sector. Agricultural
financing thus comprises 66% of total new transactions in 2014.
Erste Leasing, a. s.
2014
2013
2012
2011
Share capital (CZK million)
Total assets (CZK billion)
Volume of new transactions (CZK billion)
Number of new contracts
Net profit (CZK million)
Number of own points of sale
Average headcount
200
5.7
2.7
1,968
46
13
62
200
5.4
2.7
2,137
35
13
62
200
4.9
2.2
1,868
18
13
59
200
4.8
2.1
1,768
15
13
59
Correspondence address: Horní náměstí 264/18, 669 02
Znojmo
Telephone: 515 200 511
Internet: www.ersteleasing.cz
Factoring České spořitelny, a.s.
Factoring České spořitelny, a. s., established in November 1995, has
been a wholly-owned subsidiary of Česká spořitelna since 2001.
The company’s registered office is at Budějovická 1518/13B,
Prague 4. The company increased its share capital to CZK 1.1 billion in 2014.
Factoring ČS has been the leading factoring company on the Czech
market since 2004. In 2014, it increased its market share to nearly
39%, reporting total business turnover of CZK 64 billion from
assigned and managed receivables. The company posted its best
business result ever with a net profit of CZK 64 million.
The company’s focus is on domestic, export and import factoring,
comprehensive management and debt management for a broad
range of corporate clientele operating in industry, trade and services.
In 2014, the company continued to implement a proactive business
policy while strictly adhering to risk management rules and other
measures designed to ensure effective management of the receivable portfolio of factoring clients.
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Factoring České spořitelny, a. s.
2014
2013
2012
2011
2010
Share capital (CZK million)
Equity (CZK million)
Total assets (CZK billion)
Net profit/(loss) (CZK million)
Contracted amounts (CZK billion)
Average headcount
114
1,142
5.9
64
63.9
43
114
289
5.8
62
53.5
43
114
248
5.3
58
49.2
40
114
189
3.7
34
41.7
39
114
155
3.1
(2)
31.2
39
Correspondence address: Budějovická 1518/3B, 140 00
Praha 4
Telephone: 956 770 711
Internet: www.factoringcs.cz
brokerjet České spořitelny, a. s.
Brokerjet České spořitelny, a. s. was established on
17 September 2003. In 2014, Česká spořitelna became a sole owner
of Brokerjet České spořitelny, a. s. acquiring share from Brokerjet
Bank AG. The shareholder structure provides Brokerjet ČS with
a strong foundation and extensive sales network as a member of
Česká spořitelna Financial Group which resulted in the integration
of internet banking SERVIS 24 and 3% annual increase in the
number of clients. The company’s registered office is at Evropská
2690/17, Prague 6.
Financial market developments in 2014 offered little incentive for
clients to enter into margin positions. Despite the trend of declining
interest income from clients’ margin positions, the company managed 6% growth year on year in net interest income due especially
to the increase in interest income from client funds deposited at
Brokerjet Bank AG. Due to increasing financial markets volatility,
in particular in the second half of 2014, the company also recorded
improvements in other selected key business and financial parameters. In 2014, completed transactions grew by 37%, which was fully
reflected in year-to-year net fee income growth. The total number
of clients grew to 21.7 thousand. The company continued in 2014
to carry out its policy of strict cost management, thanks to which
administrative costs were kept at 2013 levels despite a 3% yearto-year increase in payroll costs. Indeed, the company succeeded
in achieving a net profit for the year due to the above described
slight recovery in its business and the ongoing pressure to step up
efficiency.
Given the continued lack of public interest in investing, brokerjet
ČS is planning to commercially exploit the potential arising from
key long-time trends in client behaviour. The first of these, due to
falling volumes on the Prague Stock Exchange, is the ever greater
client shift toward trading in foreign equities, in particular on the
US and German markets, which brokerjet ČS offers its clients.
The second trend is increasing demand for information, investment recommendations and trading ideas, e.g. what is known as
investment oriented content. The priority for 2015 is to expand
available services primarily for internet clients. Planned development activities are focused on increasing active client numbers
and company income.
brokerjet České spořitelny, a. s.
2014
2013
2012
2011
2010
Share capital (CZK million)
Subordinated debt (CZK million)
Total assets (CZK billion)
Volume of managed assets (CZK million)
Net (loss)/profit (CZK million)
Average headcount
120
0
3.0
9,573
1
24
160
0
2.6
8,950
(11)
24
160
0
2.4
6,692
(2)
23
160
0
2.2
7,734
10
20
160
60
2.6
9,47
18
18
Correspondence address: Evropská 2690/17, 160 00 Praha 6
Telephone: 224 995 777
Internet: www.brokerjet.cz
e-mail: [email protected]
REICO investiční společnost České spořitelny, a. s.
Reico investiční společnost České spořitelny, a. s., established on
13 June 2006, has always been a wholly owned subsidiary of Česká
spořitelna. The company’s registered office is located at Antala
Staška 2027/79, Prague 4.
Reico investiční společnost České spořitelny manages the special
real estate investment fund ČS nemovitostní fond. In 2014, share
capital increased year on year by CZK 0.7 billion to CZK 3.8 billion,
primarily as a result of higher investment by retail investors. Reico
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Report on Relations between Related Parties | Česká spořitelna Financial Group | Independent Auditor’s Report
While the real estate market remained stable in 2014, it also saw
a significant year-on-year increase in investor demand, especially
for industrial and commercial properties. Most investment in commercial real estate came from abroad, mainly the United States.
Domestic investors accounted for only 17% of total investment.
to this acquisition, more than 80% of the value of the real estate
portfolio comprises properties of the highest investment grade. ČS
nemovitostní fond reported 3.6% performance in 2014. The main
reasons for this valorisation were rental income, the increased market value of real estate and, for European real estate, the long-term
strengthening of the euro against the Czech crown. From a financial
perspective, the ČS nemovitostní fond portfolio is healthy; most
rental properties are at 90% or more occupancy, assuring stable
rental income. The current values of buildings in the portfolio are
stable with significant potential for long-term growth.
The Czech market saw a number of significant investment transactions in 2014, including a new acquisition by ČS nemovitostní fond
– the multi-use Qubix Building in Prague 4. This brought the total
number of the fund’s real estate holdings to 9 commercial buildings, 8 of them in the Czech Republic and 1 in Slovakia. Thanks
The financial indicators of Reico investiční společnost for 2014
reflect favourable real estate market development and growing
investor interest in ČS nemovitostní fond. As a result, the company
managed a higher volume of funds than in previous years and
reported CZK 26 million in profit for 2014.
investiční společnost České spořitelny also managed the closed-end
investment fund V.I.G. ND, uzavřený investiční fond, a. s., which
held CZK 2.7 billion at the 2014 year end. The fund ceased to be
an investment fund as of 1 January 2015.
REICO investiční společnost České
spořitelny, a. s.
2014
2013
2012
2011
2010
Share capital (CZK million)
Equity (CZK million)
Total assets (CZK million)
Net profit/(loss) (CZK million)
Volume of managed assets (CZK billion)
Average headcount
25
72
80
26
6.5
7
25
46
59
27
6.0
10
90
19
29
(5)
4.9
9
90
24
38
(11)
3.0
9
90
34
45
(18)
1.7
9
Correspondence address: Antala Staška 2027/79, 140 00,
Praha 4
Telephone: 221 516 500
Internet: www.reico.cz
e-mail: [email protected]
Erste Grantika Advisory, a. s.
Erste Grantika Advisory, a. s. (EGA) was founded in 2000. Česká
spořitelna became its majority owner in 2007 and sole owner in
2008. The company underwent restructuring culminating in a name
change to Grantika České spořitelny in 2009. Grantika moved office
to the Česká spořitelna Jánská branch in Brno, completing its ČS
Financial Group integration. In 2014, the company was renamed
Erste Grantika Advisory, a. s.
EGA offers a comprehensive service pertaining to European Union
subsidy policy, in particular advice on grants and tenders. To mitigate non-payment risk, the company offers the service Subsidy
Management to manage client’s subsidy projects. M&A advisory
is also offered and covers the purchase, sale and valuation of enterprises. Finally, EGA offers financial and investment analysis.
additionally offers its services in Slovakia through the subsidiary
EuroDotácie, a. s. Grantika operates pursuant to ISO 9001:2001
and ISO 10006:2004 standards.
EGA reported operating profit of CZK 5.0 million in 2014 and
successfully increased operating income while reducing operating
costs owing to increased fees and commissions (success fee), the
high degree of success in obtaining European Union grants and the
increasing ratio of income per employee. In 2014, the company saw
record growth in income from ancillary services such as tenders
and grant management.
Erste Grantika Advisory completed a total of 189 projects helping clients with EU Structural Fund grants, tenders and grant
management.
The company has built a network of branches with locations in
Prague, Zlín, Plzeň, Hradec Králové and Ostrava. The company
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Report on Relations between Related Parties | Česká spořitelna Financial Group | Independent Auditor’s Report
Erste Grantika Advisory, a. s.
Share capital (CZK million)
Net profit/(loss) (CZK million)
Income from principal activities
(CZK million)
Added value (CZK million)
Average headcount
Correspondence address: Jánská 10, 602 00 Brno
Telephone: 542 210 148
2014
2013
2012
2011
2010
7
4
44
44
34
38
7
5
43
43
33
37
7
(1)
37
37
26
38
7
(1)
42
42
29
38
7
0
47
47
32
39
Internet: www.grantikacs.com
e-mail: [email protected]
ČS do domu, a. s.
ČS do domu, a. s. (which operated under the name Partner České
spořitelny, a.s. until January 2013) has its registered office at
Poláčkova 1976/2, Prague 4. The company commenced operations on 1 July 2009 and is a wholly-owned subsidiary of Česká
spořitelna. ČS do domu primarily engages in the management of
external sales of products and services of the Česká spořitelna
Financial Group via a network of exclusive external financial
intermediaries.
ČS do domu increases the number of Česká spořitelna distribution channels, thus contributing to the greater overall comfort
of client services. It also attracts new clients to the ČS Financial
Group and reaches out to inactive clients through marketing
campaigns.
In 2014, ČS do domu completed the major transformation it began
in 2012, turning itself into a truly unique platform on the financial
advisory market for its external partners and offering them services
not offered by the competition. Its primary goals are to ensure future
ČS do domu, a. s.
Share capital (CZK million)
Total assets (CZK million)
Net (loss)/profit (CZK million)
Sales (CZK million)
Average headcount
Correspondence address: Budějovická 1518/13 b, 140 00
Praha 4
Telephone: 800 207 207
business growth and significantly increase business performance
while fulfilling the business plans of the ČS Financial Group. These
goals will be furthered by the strategy of collaborating with the
best external financial advisors, supporting and developing parent
company synergies and working under a new model for mutual
cooperation with Česká spořitelna and its subsidiaries to acquire
new active clients and regain the interest of inactive clients. At
the 2014 year end, electricity sales were added to the company’s
peerless portfolio of services.
From the business perspective, 2014 was characterized by the
absence of new legislation or commercial stimulus, which would
have resulted in the extraordinary sale of any financial product,
as was the case in previous years with pension reform products in
2012 or construction savings contributions in 2013. This fact meant
a drop in gross commission volumes. In contrast, the company
achieved operating and personnel cost savings together with a lower
rate of investment compared to the previous transformative years,
which kept ČS do domu in the black.
2014
2013
2012
2011
2010
4
31
9
96
20
4
26
(9)
116
20
4
27
1
92
18
4
32
1
90
12
2
19
(15)
91
16
Internet: www.csdodomu.cz
e-mail: [email protected]
Erste Energy Services, a. s.
Erste Energy Services a.s., with its registered office at Evropská
2690/17, Prague 6, commenced its activity on 7 August 2012. The
company is a wholly-owned subsidiary of Česká spořitelna. Its
principal business is electricity trading.
After the company’s founding in 2012, its first years of existence
were characterized by increased purchase volumes of electricity
from renewable sources, and then by the start-up of electricity and
gas sales to end users in the corporate customer segment.
In 2014, the company executed 156 contracts at a value of roughly
CZK 740 million for the purchase of 800 GWh of electricity from
renewable sources. With a roster of 125 clients and a nearly 40%
market share in the purchase of electricity from biogas stations,
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Report on Relations between Related Parties | Česká spořitelna Financial Group | Independent Auditor’s Report
ErES enjoys a second place position among traders. In 2014, the
company turned more of its attention to other renewable sources
and will continue to do so in the coming years.
Company growth is even more in evidence in supplies of electricity and gas to end users, where the energy industry operates
as follows: the amount contractually agreed and ensured in the
current year is actually supplied (or purchased) the following
year. After a zero year 2013, corporate customers were supplied
with 250 GWh of electricity (approx. CZK 250 CZK) in 2014,
and this will rise to more than 500 GWh of electricity and gas in
2015. And that is not by far the final figure because the supply
of electricity to households is a key component of the Zdravé
finance [Healthy Finances] project on which the ČS Financial
Group has been at work since 2014.
In IT, implementation of the business accounting system
Saldokonto [Ledger] was completed. The module is linked to the
main SAP accounting system. In 2014, the IT department began
developing the front office business system Contract Manager.
The IT plan for 2015 is to complete the Contract Manager system while working on a project to build a CRM (Customer
Relationship Management) system for corporate customers and
the introduction of a client web portal.
In 2015, the company will continue to develop its activities, in
particular in the household segment, which is key for the entire
ČS Financial Group.
Erste Energy Services, a. s.
2014
2013
2012
Share capital (CZK million)
Total assets (CZK million)
Electricity and gas sales (CZK million)
Net profit/loss (CZK million)
Number of offtake points
Total supply (GWh)
Average headcount
2
271
869
(22)
1 348
172
14
2
110
298
(42)
163
2
7
2
40
2
16
26
0
6
Correspondence address: Evropská 2690/17, Praha 6
Telephone: 224 995 470, 224 995 369
Internet: www.eres.cz
e-mail: [email protected]
Věrnostní program iBod, a. s.
Věrnostní program iBod, a. s. was entered in the Commercial
Register on 24 June 2013 with basic capital of CZK 2 million.
Česká spořitelna, a. s. is the sole shareholder and owner. The company is headquartered at Olbrachtova 1929/62, Prague 4. Its main
business line is the operation and strategic management of the
iBod coalition loyalty programme. While the company handles
the programme’s strategic management, the actual running of the
programme is outsourced.
After its launch in 2013, Věrnostní program iBod focussed on
attaining the critical number of clients required for effective programme operation in the partner network. This goal was met in
2014. By year end, nearly 1 million clients had signed up for the
programme. This laid the foundation for further development in
2015, when the main goal will be to expand the partner network to
include large partners that will make the programme more attractive
to the customer base.
Correspondence address: P. O. BOX 19, 101 00 Praha 10
Telephone: 800 606 800
Internet: www.ibod.cz
e-mail: [email protected]
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Report on Relations between Related Parties | Česká spořitelna Financial Group | Independent Auditor’s Report
MOPET CZ, a. s.
MOPET CZ was established 3 October 2010 and operates as
an electronic money institution under license by the Czech
National Bank. The shareholder structure underwent a major
change in autumn 2013 when Česká spořitelna became the
company’s majority shareholder. At 31 December 2014, its
share was 93.9% (the only other shareholder is UniCredit
Bank Czech Republic and Slovakia, a. s.). The company,
headquartered at Hvězdova 1716/2b in Prague 4, has share
capital of CZK 76.8 million. The company issues electronic money,
provides payment services pertaining to electronic money and operates a payment system (with the exception of a payment system
with settlement finality).
Correspondence address: Bubenská 1477/1, Praha 7
Telephone: 222 999 838
The company offers the service Mobito, which enables customers
to make payments and send money by mobile phone via a simple
connection to a bank account. The company also launched a new
service called Blesk peněženka [Lightning wallet] in collaboration
with the Czech News Center, SAZKA and MasterCard. It is the
first prepaid rechargeable debit card for universal use that allows
payments at all vendors at home and abroad with a payment termi-
nal or online at all vendors displaying the MasterCard logo.
The company is also developing a prepaid card concept and
preparing other projects.
Internet: www.mopetcz.cz
253
Independent Auditor’s Report
To the Shareholders of Česká spořitelna, a. s.:
I.We have audited the consolidated financial statements of Česká spořitelna, a. s. („the Company“) as at 31 December 2014 presented in
the annual report of the Company on pages 77–155, on which we have issued an audit report, dated 3 March 2015, which is presented
on page 78. We have also audited the separate financial statements of Ceske sporitelna, a.s. („the Company“) as at 31 December 2014
presented in the annual report of the Company on pages 156–232, on which we have issued an audit report, dated 3 March 2015, which
is presented on page 157 (together referred to further as the „financial statements“).
II.We have also audited the consistency of the annual report with the financial statements described above. The management of ČeskÁ
spořitelna, a. s. is responsible for the accuracy of the annual report. Our responsibility is to express, based on our audit, an opinion on
the consistency of the annual report with the financial statements.
We conducted our audit in accordance with International Standards on Auditing and the related implementation guidance issued by the
Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the audit to obtain reasonable assurance
as to whether the information presented in the annual report that describes the facts reflected in the financial statements is consistent,
in all material respects, with the financial statements. We have checked that the accounting information presented in the annual report
is consistent with that contained in the audited financial statements as at 31 December 2014. Our work as auditors was confined to
checking the annual report with the aforementioned scope and did not include a review of any information other than that drawn from
the audited accounting records of the Company. We believe that our audit provides a reasonable basis for our opinion.
Based on our audit, the accounting information presented in the annual report is consistent, in all material respects, with the financial
statements described above.
Ernst & Young Audit, s.r.o.
License No. 401
Roman Hauptfleisch, Auditor
License No. 2009
24 April 2015
Prague, Czech Republic
A member firm of Ernst & Young Global Limited,
Ernst & Young Audit, s. r. o. with its registred office at Na Florenci 2116/15, 110 00 Prague 1 – Nové Město,
has been incorporated in the Commercial Register administered by the Municipal Court in Prague,
Section C, entry No. 88504, under Identification No. 26704153.
254
Česká spořitelna Financial Group | Independent Auditor’s Report | Conclusions of the Ordinary General Meeting
Conclusions of the Ordinary General
Meeting
of 24 April 2015
At the Česká spořitelna Ordinary General Meeting held
on 24 April 2015 in Prague, the shareholders approved,
inter alia, the Board of Directors Report on the Bank’s
Performance and Financial Position in 2014. The attending shareholders were also presented with the reports of
the Supervisory Board and the Audit Committee for 2014
and approved the standalone annual financial statements,
consolidated financial statements and profit allocation proposal. Funds to be distributed totalled CZK 82.9 billion;
CZK 11.4 billion was allocated for the payment of dividends
amounting to CZK 75 per share. The balance of retained
earnings from previous years thus totals CZK 71.5 billion.
The General Meeting appointed the company Ernst & Young
Audit, s. r. o. to perform the audit of the standalone and consolidated financial statements of Česká spořitelna for 2015.
255
Česká spořitelna, a. s.
Olbrachtova 1929/62, 140 00 Prague 4, Czech Republic
IČ: 45244782
Telephone: +420 956 711 111
Telex: 121010 SPDB C,
121624 SPDB C,
121605 SPDB C
Swift: GIBA CZ PX
Information line: 800 207 207
E - mail: csas @ csas.cz
Internet: ­www.‌‌csas.cz
Annual Report 2014
Published on internet:
http://www.csas.cz/static_internet/en/Obecne_informace/FSCS/
CS/Prilohy/vz_2014.pdf
Pro­duction
Omega Design, s. r. o.
Material for the Public
256
­www.‌‌csas.cz
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