153. Annual Report 2014 - Liechtensteinische Landesbank

Transcription

153. Annual Report 2014
ar2014.llb.li
To the online annual report
with Roland Matt in a video interview
Information for shareholders
LLB share
Security number
3019524
ISIN
LI0030195247
Listing
SIX Swiss Exchange
Ticker symbols
Bloomberg
LLB SW
Reuters
LLB.S
Telekurs
LLB
Capital structure
Share capital (in CHF thousands)
Total shares issued
31. 12. 2014
31. 12. 2013
154'000
154'000
+ / – %
0.0
30'800'000
30'800'000
0.0
Total shares outstanding, eligible for dividend
28'821'798
28'852'866
– 0.1
Weighted average shares outstanding
28'852'504
28'535'284
1.1
31. 12. 2014
31. 12. 2013
+ / – %
5.00
5.00
0.0
40.00
37.00
8.1
2.45
1.75
40.0
Price / earnings ratio
16.33
21.14
Dividend (in CHF)
* 1.50
1.50
Information per share
Nominal value (in CHF)
Share price (in CHF)
Basic earnings per share (in CHF)
*Proposal of the Board of Directors to the General Meeting of Shareholders on 8 May 2015.
Comparison of LLB share
Indexed from 1 January 2013
160
150
140
130
120
110
100
90
2013
180
160
140
120
100
80
2014
0.0
Key figures
Consolidated income statement
in CHF millions
2014
2013
+ / – %
Income statement
Operating income
342.0
487.0
– 29.8
– 271.0
– 426.0
– 36.4
70.7
49.8
41.9
Cost-Income-Ratio (in percent) */**
78.2
67.7
Return on equity attributable to
the shareholders of LLB (in percent)
4.3
3.0
Operating expenses
Net profit attributable to the shareholders of LLB
Performance figures
*Operating expenses (excluding provisions for legal and litigation risks, allowances for non-current assets held for sale and impairment for
goodwill) in relation to operating income (excluding credit loss expense and adjustments on purchase price obligations from acquisitions).
**Adjusted to consider market effects (interest rate swaps and price gains) the Cost-Income-Ratio for 2014 stood at 70.9 percent ,
and for 2013 at 73.1 percent .
Consolidated balance sheet and capital management
in CHF millions
31. 12. 2014
31. 12. 2013
+ / – %
Balance sheet
Equity attributable to the shareholders of LLB
Total assets
1'652
1'663
– 0.7
20'758
20'901
– 0.7
Capital ratio
Tier 1 ratio (in percent) *
Risk-weighted assets
18.3
18.8
8'388
8'170
2.7
*The Tier 1 ratio was calculated and reported in the same manner as in previous years. The exception permitted by the Liechtenstein Financial
Market Authority (FMA), which continues to allow financial accounting according to the corridor method pursuant to the former IAS 19,
was not utilised. If the LLB were to have applied this exception, the Tier 1 ratio would have stood at 19.3 percent per 31 December 2014,
and 19.4 percent per 31 December 2013.
Additional information
31. 12. 2014
31. 12. 2013
Business volumes (in CHF millions)
60'941
59'344
2.7
Assets under management (in CHF millions)
50'218
49'104
2.3
Loans (in CHF millions)
10'723
10'240
4.7
893
925
– 3.5
Employees (full-time equivalents, in positions)
+ / – %
Purely for ease of reading, the masculine form used in this document is intended to refer to both genders.
The Liechtensteinische Landesbank Aktiengesellschaft is referred to variously in the following as the Liechtensteinische Landesbank AG,
Liechtensteinische Landesbank, LLB AG, LLB as well as LLB parent bank.
Liechtensteinische Landesbank (Österreich) AG is also referred to as LLB (Österreich) AG and LLB Österreich.
Bank Linth LLB AG is also referred to in this report as Bank Linth.
This consolidated interim financial reporting is published in German and English. The German version is authoritative.
We also offer the 2014 consolidated interim financial reporting in an interactive online version:
German: http://gb2014.llb.li
English: http://ar2014.llb.li
Due to rounding, the numbers presented in this report may not add up precisely to the totals provided and percentages may not precisely reflect the
absolute figures.
Contents
Review of operations
INSIDE COVER
INSIDE COVER
3
10
12
15
Information for shareholders
Key figures
Letter to shareholders
Organizational structure of the LLB Group
on 1 January 2015
Interview
Strategy und organization
Segment reporting
20
26
30
34
40
Clients and markets
Retail & Corporate Banking
Private Banking
Institutional Clients
Corporate Center
Stakeholders report
44
47
50
56
60
66
LLB bearer share
Brand and sponsoring
Employees
Regulatory framework and developments
Responsibilities for society and the environment
Corporate governance
Consolidated financial statement of the LLB Group
93
94
97
98
99
100
101
103
Report of the Group auditors
Consolidated management report
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statement
Financial statement of LLB AG, Vaduz
181
182
183
184
185
186
187
Report of the independent auditors
Management report
Balance sheet
Off-balance-sheet transactions
Income statement
Distribution of balance sheet profit
Notes to the financial statement
Roland Matt Hans-Werner Gassner
Chairman of the Board of Directors
LLB Geschäftsbericht
Group CEO
2014
3

Repositioning well on course
Dear shareholders
The consistent implementation of the Focus2015 strategy was the first priority for the LLB
Group in 2014. Our strategy has a clear goal: at a time of fundamental change in the banking
industry, we want to create the essentials for sustainable success in and beyond 2015. Two
thirds of the process to achieve our strategic repositioning has been completed, and we are
well on the way to attaining our objectives. In 2014, we improved our operative performance
once again. Group net profit rose by 35.0 percent to CHF 72.6 million.
Successful repositioning
For the LLB Group, 2014 was marked by the further development of strategic initiatives,
following our success in substantially reducing costs and complexity in 2013. In 2014, we were
again able to increase profitability while also investing in targeted innovations. The digital
revolution is opening up new client service possibilities for us. We are taking advantage of these
opportunities to achieve excellence in distribution. We are also on course with the
development – in line with our strategy – of our international target markets in Central and
Eastern Europe as well as the Middle East.
Added value for our clients
As a universal bank with a strong private banking and institutional business, we consistently
focus on the needs of our clients. On 1 July 2014, the Liechtensteinische Landesbank and Bank
Linth set themselves apart from the rest of the market by introducing an innovative pricing
model, which offers clients services exempt from retrocessions. Our clients want more transparency, a clear fee structure and an attractive price / performance ratio. We fulfil these requirements with our performance promise to them. The combination of an innovative pricing model
with prize-winning investment competence provides the LLB Group, as an investment and
asset management bank, with a strong competitive edge.
Numerous awards received in this and in recent years clearly demonstrate how the LLB Group
with its systematic investment process, expertise and experience creates substantial added
value for its investors. In 2014, for example, at the “24th Lipper Fund Awards” in Switzerland,
the LLB Equities Regio Bodensee (CHF) fund was honoured again – after 2007 and 2008 – for
its absolute performance over three years. The fund received the award in the category “Equity
Switzerland Small and Mid Caps” for the third time. In January 2015, the LLB Strategy Balanced
(CHF) fund was awarded the “German Fund Prize” at the “14th Funds Professional CONGRESS”
in Mannheim, Germany. In the “Mixed Fund Global Multi Asset” category, the fund was awarded
the title “Outstanding”.
Thanks to its modern IT infrastructure, our Corporate Center is a source of innovation. Since
December 2013, we have been offering our clients an attractive and innovative mobile banking
app for iOS, and since June 2014, for Android smartphones and tablets.
LLB Annual Report 2014
4

By offering their “young Liechtenstein” and “young Linth”, “youli” for short, banking services,
our Retail & Corporate Banking Division is enhancing the strong market position of the LLB
and Bank Linth in the youth segment.
In 2014, our Private Banking Division enlarged its team of advisers for the growth markets
in Central and Eastern Europe as well as the Middle East. In addition, we expanded our
market-specific product offer and also provided our clients with access to the stock markets
in Dubai and Abu Dhabi.
The partnerships we enjoy with our intermediary clients are extremely important to us. The
Institutional Clients Market Division provides sound, structured, and contemporary knowledge
in the areas of investment, legal issues and taxation via its innovative “LLB Xpert views” online
platform.
Good operative performance
The business environment continued to be extremely challenging in 2014. The LLB Group again
felt the effects of the persistently low interest rate levels. In spite of rising prices on the stock
markets, many clients continued to exercise investment restraint.
Despite this head wind, the LLB Group again achieved a good operative performance in 2014.
Net profit stood at CHF 72.6 million (2013: CHF 53.8 million) and was therefore 35.0 percent
above the previous year.
Operating income fell by 29.8 percent to CHF 342.0 million. Adjusted to consider the successful sale of the Jura Trust Group, the closure of LLB (Switzerland) Ltd. and one-off effects, operating income decreased in comparison with the previous year (CHF 380.4 million) by 10.1 percent. Although operative performance improved, the lower valuations – caused by falling
interest rates – of interest rate swaps employed for hedging purposes were largely responsible
for this decrease.
On a comparable basis, operating expenses were reduced by 3.2 percent from CHF 280.0 million to CHF 271.0 million. The savings reflect the consistent implementation of our Focus2015
strategy and the continuation of our cost-saving and efficiency improvement programme.
At the end of 2014, the LLB Group posted a business volume of CHF 60.9 billion. As per 31 December 2014, client assets under management rose by 2.3 percent to CHF 50.2 billion (31.12.2013:
CHF 49.1 billion). The positive performance on the financial markets enabled outflows of clients’
assets to be more than compensated for. In the growth markets, the LLB Group achieved solid
net new money inflows amounting to CHF 514 million. As expected, money outflows were recorded in the traditional, cross-border markets. Although isolated, large outflows tarnished the
Group’s acquisition performance in the first six months in the onshore markets, in the second
half of the year a net new money inflow of CHF 301 million was recorded. In total, the LLB Group’s
net new money outflows amounted to CHF 350 million. Loans to clients rose by 4.7 percent to
CHF 10.7 billion (2013: CHF 10.2 billion). Mortgage loans climbed by 4.5 percent to CHF 9.3 billion
(2013: CHF 8.9 billion). This shows that we remain committed to our well-proven lending policy.
In the current market situation, we are growing selectively in a risk-conscious manner.
Strong capital base
For us it is self-evident that we must have an adequate, high-quality capital base. The LLB
Group’s equity capital covers the capital requirements in our target markets. At 31 December
2014, the tier 1 ratio stood at 18.3 percent (31.12. 2013: 18.8 %). With equity capital of CHF 1.8 billion (2013: CHF 1.8 billion), the LLB Group stands for financial stability and security.
Upward trend of LLB-share
In 2014, the LLB share made further gains. It closed on 31 December 2014 at CHF 40.–. Its overall
return amounted to 12 percent, meaning that it significantly exceeded the European banking
sector. The Stoxx Europe 600 Banks Index in CHF lost 1.4 percent up to the end of 2014. In
accordance with our long-term distribution policy, the Board of Directors will propose an
unchanged, stable dividend of CHF 1.50 (2013: CHF 1.50) to the General Meeting of Shareholders
on 8 May 2015.
5

Election of Board of Directors
The Board of Directors of Liechtensteinische Landesbank AG proposes to the General Meeting
on 8 May 2015, that the Chairman, Dr. Hans-Werner Gassner, as well as the members Markus
Büchel, Markus Foser and Roland Oehri be re-elected to the Board of Directors. Furthermore,
the Board of Directors proposes a general amendment of the bank’s statutes with the aim of
specifically strengthening shareholders’ rights and generally modernising the statutes.
Innovatively going forward
At a time of dramatic change in the banking industry, our competitiveness is of vital importance. In 2015, we shall consistently push ahead with our Focus2015 strategy and our repositioning on the market. This includes dealing with taxation issues. The LLB Group supports the
tax compliance strategy of the Liechtenstein financial center, and actively embraces the transformation process.
Liechtenstein was one of the 52 countries, which signed the agreement on the automatic
exchange of information on 29 October 2014. Liechtenstein is regarded as a reliable partner
and its financial center is seen as a service-oriented asset management center dedicated to
providing holistic adivsory services.
In an innovative partnership with Avaloq, the leading provider of integrated solutions for
wealth management, universal and retail banks, as well as swissQuant Group, a company
specialised in risk and earnings analysis, the LLB is developing an innovative investment advisory application. This will enable us to set ourselves apart from our competitors and help us to
create new possibilities of providing advice to clients.
Challenging environment
The banks are still operating in a difficult economic and political environment, characterised
by volatile financial markets, historically low interest rates, fierce competition, mounting pressure on margins and increasing regulation. The situation has been exacerbated by the Swiss
National Bank’s decision to stop supporting the minimum exchange rate of the Swiss Franc to
the Euro, and by the negative market interest situation. The LLB Group will strive to further
improve its operative performance. At the same time, we expect to achieve a lower level of net
profit in the 2015 business year. Against this background, from today’s perspective, we shall
not attain all the defined quantitative goals for the period 2013 to 2015, especially not those in
relation to the Cost-Income-Ratio and the cumulative Group net profit target.
On the whole, the LLB Group is in a strong position. In the last two years, we have achieved
a great deal, and actively met and mastered many challenges. Our strategic focusing is well
advanced and is reflected in our higher profitability. At the same time, we are delivering a solid
business result for our stakeholders. In view of the harsher conditions, we shall implement
further measures to strengthen our earning power and keep costs firmly under control. In
addition we shall continue to invest in the future and actively promote innovation.
The LLB Group has in place all the essentials to strengthen and expand its competitive position: loyal clients, dedicated and competent employees as well as financial soundness.
We would like to express our sincere thanks to you, our shareholders, for the trust you place
in us. What the LLB has achieved was made possible by the loyalty of our shareholders and
clients, as well as our staff, who give their best every day.
Yours sincerely
Roland Matt
Group CEO
Dr. Hans-Werner Gassner
Chairman of the Board of Directors
6
Board of Directors
Board of Directors
From left to right:
Roland Oehri, Markus Foser, Gabriela Nagel-Jungo, Hans-Werner Gassner,
Patrizia Holenstein, Markus Büchel, Urs Leinhäuser
7
Board of Directors
Roland Oehri
Markus Foser
Prof. Dr. Gabriela Nagel-Jungo
Dr. Hans-Werner Gassner
Fiduciary.
Business consultant.
Professor of Financial Management.
Professional career:
1987 – 2006 worked for various
financial institutions in Liechtenstein;
since 2006 Partner and Managing
Director of Sequoia Treuhand Trust
reg.; since 2007 Partner and Managing Director of Sequoia Capital
Management AG. Roland Oehri,
born in 1968, lives in Ruggell / FL.
1997 – 2007 worked for various financial institutions in Liechtenstein;
2008 – 2009 Member of the Executive
Board of Banque Pasche (Liechtenstein) SA; 2009 – 2013 proprietor of
MAFOS Consult Anstalt; since 2012
Strategic Projects & Business Development First Advisory Trust reg.; since
2009 Vice Chairman of the Board of
Directors of LLB. Markus Foser, born
in 1969, lives in Vaduz / FL.
1999−2007 Assistant at the Institute
for Accounting and Controlling at
the University of Zurich (UZH); since
2007 Lecturer and project leader at
Zurich University of Applied Sciences
(ZHAW); since 2010 Head of Center
for Accounting & Controlling at ZHAW;
since 2011 Deputy Head of Department Banking, Finance, Insurance at
ZHAW. Gabriela Nagel-Jungo, born in
1969, lives in Wilen b. Wollerau / CH.
Chairman of the Board of
Directors
Business consultant and certified
public accountant.
Dr. Patrizia Holenstein
Markus Büchel
Urs Leinhäuser
Lawyer.
Human resources manager
(retired).
Business economist.
1985 – 1988 Lawyer at Haymann &
Beglinger, Zurich; 1989 – 1990 Lawyer
at Clifford Chance, London; since
1990 Founder and Managing Partner
at Holenstein Rechtsanwälte AG,
Zurich. Patrizia Holenstein, born in
1957, lives in Oberägeri / CH.
1973 – 1981 Hilti AG; since 1981
ThyssenKrupp Presta AG; 1995 – 2013
Head of Human Resources, Presta
Group. Markus Büchel, born in 1953,
lives in Ruggell / FL.
1984 – 1989 Accountant at Neutra
Treuhand Group; 1990 – 1998 Head
of Internal Audit and 1998 – 2000
Head of Finances at LLB; since 2000
proprietor of Adcom Treuunter
nehmen reg.; since 2005 Member of
the Board and Member of the Exe
cutive Management of MAS Multi
Asset Strategy Management Trust
reg.; since July 2006 Chairman of the
Board of Directors of LLB. HansWerner Gassner, born in 1958, lives
in Balzers / FL.
1983 – 1986 Tax inspector at Schaffhausen Cantonal Tax Office;
1986 – 1988 Deputy Head of Tax
Department at Refidar Moore
Stephens, Zurich; 1988 – 1994 Group
Controller at Cerberus AG, Männedorf; 1995 – 1999 Head of Group Controlling and CFO Piping Systems
Division at Georg Fischer AG, Schaffhausen; 1999 – 2003 CFO and
Member of Group Executive Board
at Mövenpick Holding, Adliswil;
2003 – 2011 CFO & Head of Corporate
Center and Member of Corporate
Management at Rieter Holding AG,
Winterthur; 2011 – 31 March 2014
CFO & Deputy CEO and Member of
Corporate Management at Autoneum Holding AG, Winterthur. Since
1 April 2014 businessman. Urs
Leinhäuser, born in 1959, lives in
Winterthur / CH.
8
Group Board of Management
From left to right:
Urs Müller, Kurt Mäder, Gabriel Brenna, Roland Matt, Heinz Knecht, Christoph Reich
9
Roland Matt
Dr. Kurt Mäder
Christoph Reich
Dr. Heinz Knecht
Group CEO
Group COO
Group CFO
Business Economist FH, Federally
qualified finance and investment
expert.
Physicist ETH.
Business Economist FH,
Exec. MBA HSG.
Economist.
Since 2002 at LLB. Professional
career: 1989 – 2002 various positions,
including Head of Research, Head
of Asset Management Division, Family Office Project Head at VP Bank AG,
Vaduz; 2002 – 2006 Head of Investment Services, LLB; 2007 – 2009 Head
of Domestic Clients Division; since
2009 Member of the Group Executive
Board and the Board of Management;
since 16 January 2012 Group Chief
Executive Officer. Roland Matt, born
in 1970, lives in Schellenberg / FL.
career: 1987 – 1996 research work at
ETH Zurich, in the USA and in France;
1996 – 2004 ELCA Informatik AG,
Zurich; 2005 – 2008 Member of the
Board of Management of Bank
Linth LLB AG; since 2009 Member of
the Group Executive Board and
the Board of Management of LLB;
2009 –June 2012 Head of Corporate
Service Center; since 1 July 2012
Group Chief Operating Officer.
Kurt Mäder, born in 1962, lives in
Rapperswil-Jona / CH.
Dr. Gabriel Brenna
Urs Müller
Private Banking
Vice Group CEO
Since the end of 2010 at LLB. Professional career: 1999–mid-2003 KPMG
Zurich; 2003 – 2006 Asian Development Bank, Manila / Philippines; end
of 2006–October 2010 Partner at
Syndeo AG, Horgen; November 2010 – 15 January 2012 Head of Group Finance
& Risk Department of LLB; since
16 January 2012 Member of the Group
Executive Board and the Board of
Management and Chief Financial
Officer. Since 1 July 2012 Group Chief
Financial Officer. Christoph Reich,
born in 1974, lives in Triesenberg / FL.
Since July 2012 at LLB. Professional
career: 1985 – 2001 UBS Zurich;
September 2005–May 2011 Head of
the Institute of Banking & Finance of
Zurich University of Applied Sciences;
from April 2005–December 2011
Chairman of the Board of Directors of
Bank Linth LLB AG; December 2011 –
June 2012 Chairman of the Board of
Management of Bank Linth LLB AG ad
interim; since 1 July Member of the
Group Executive Board and the Board
of Management of LLB; Head of Retail
& Corporate Banking Division. Heinz
Knecht, born in 1953, lives in Frauenfeld / CH.
Electrical engineer ETH.
Since October 2012 at LLB. Professional career: 1998 – 2004 at various
companies and at ETH Zurich;
2005–September 2012 McKinsey &
Company, various positions in
Zurich and London; most recently, as
Partner and Head of Swiss Private
Banking and Risk Management Practice; since October 2012 Member
of the Group Executive Board and
the Board of Management of LLB
and Head of Private Banking Division.
Gabriel Brenna, born in 1973, lives
in Vaduz / FL.
Lawyer.
career: 2007–April 2011 Head of Institutional Clients Division; since April
2011 Member of the Group Executive
Board and the Board of Management; April 2011–June 2012 Head of
Domestic Market and Institutional
Market Divisions; since 1 July 2012
Head of Institutional Clients Division
and Vice Group Chief Executive
Officer. Urs Müller, born in 1962, lives
in Gamprin / FL.
10
on 1 January 2015
Board
of Directors *
Hans-Werner
Gassner
Group
Internal Audit
Patrick Helg
* Board of Directors
** Group Board of Management
◆◆ Hans-Werner Gassner, Chairman
◆◆ Roland Matt, Group CEO
◆◆ Markus Foser, Vice Chairman
◆◆ Urs Müller, Vice Group CEO
◆◆ Markus Büchel
◆◆ Gabriel Brenna
◆◆ Patrizia Holenstein
◆◆ Heinz Knecht
◆◆ Urs Leinhäuser
◆◆ Kurt Mäder
◆◆ Gabriela Nagel-Jungo
◆◆ Christoph Reich
◆◆ Roland Oehri
Divisions
Group Board of
Management **
Group CEO
Roland Matt
Business Areas
Group Corporate
Communications &
General Secretary
Group
Marketing
Group
Human Resources
Cyrill Sele
Michaela Alt
Bernd Moosmann
Retail &
Corporate Banking
Schweiz
Retail &
Corporate Banking
Liechtenstein
Product Management Retail &
Corporate Banking
David B. Sarasin
Eduard Zorc
a. i. Heinz Knecht
Private Banking
Liechtenstein
Private Banking
Schweiz
Private Banking
Deutschland / Österreich
Private Banking
Österreich
Martin Heutschi
Luc Schuurmans
Boris Wistawel
Robert Löw
Financial
Intermediaries
Fund
Services
Asset & Product
Management
swisspartners
Investment
Network AG
Norman Marxer
Natalie Epp
Markus Wiedemann
Markus Wintsch
Group
Finance
Group
Risk Management
Group
Credit Management
Head
Finance & Risk
LLB AT
Benno Schwitter
a.i. Andre Oehler
a.i. Christoph Reich
Peter Mayer
Group
Corporate
Development
Group
IT
Group
Operations &
Services
Group
Legal &
Compliance
Selim Alantar
Stephan Schmidle
Stephan Schneider
Graziella
Marok-Wachter
Retail &
Corporate Banking
Heinz Knecht
Private
Banking
Gabriel Brenna
Institutional
Clients
Urs Müller
Group
CFO
Christoph Reich
Group
COO
Kurt Mäder
11
Group companies
Group companies
on 1 January 2015
Liechtensteinische Landesbank Bank Linth LLB AG (74.2 %)
Board of Directors
(Österreich) AG (100 %)
Board of Directors
◆◆ Georges Knobel, Chairman
◆◆ Gabriel Brenna, Chairman
◆◆ Urs Müller, Vice Chairman
◆◆ Christoph Reich, Vice Chairman
◆◆ Hans Fäh
◆◆ Kurt Mäder
◆◆ Heinz Knecht
Board of Management
◆◆ Kurt Mäder
◆◆ Peter F. Mayer, Chairman
◆◆ Robert Löw
◆◆ Ralph Peter Siegl
Board of Management
◆◆ David B. Sarasin, Chairman
◆◆ Roland Greber
LLB Asset
◆◆ Urs Isenrich
Management AG (100 %)
◆◆ Luc Schuurmans
Board of Directors
◆◆ Urs Müller, Chairman
◆◆ Gabriel Brenna, Vice Chairman
Board of Management
◆◆ Markus Wiedemann,
Managing Director
◆◆ Christian Zogg
LLB Fund Services AG (100 %)
Board of Directors
◆◆ Urs Müller, Chairman
◆◆ Heinz Knecht, Vice Chairman
◆◆ Martin Alge
Board of Management
◆◆ Natalie Epp,
swisspartners Investment
Managing Director
Network AG (75.7 %)
Board of Directors
◆◆ Martin P. Egli, Chairman
Private Banking
Middle East
Private Banking
Central Eastern
Europe
Private Banking
Special Clients
Product
Management
Private Banking
Georg Hartmann
(since 1.2.2015)
Jean-Marie
Deluermoz
Norman Oehri
(until 31.1.2015)
Ralph Bieri
◆◆ Roland Matt
◆◆ Rainer H. Moser
◆◆ Urs Müller
◆◆ Markus Wiedemann
Board of Management
◆◆ Markus Wintsch, CEO
LLB Verwaltung (Schweiz) AG (100 %)
Board of Directors
◆◆ Kurt Mäder, Chairman
◆◆ Christoph Reich, Vice Chairman
◆◆ Urs Müller
Board of Management
◆◆ José Luis Calvo
◆◆ Kristian Bader
◆◆ Christ Johann Collenberg
Head
Finance & Risk
Bank Linth LLB
Urs Isenrich
COO
LLB AT
COO
Bank Linth LLB
Peter Mayer
Roland Greber
12
Interview
“The dialogue with
our clients, as partners,
is of central importance
to us”
A discussion with
Hans-Werner Gassner
and Roland Matt
The LLB Group has completed two thirds of the process involved
with its strategic repositioning. How satisfied are you?
Hans-Werner Gassner: We are consistently and successfully implementing the measures we planned in our Focus2015 strategy.
We already significantly reduced costs and complexity in the previous year. In 2014, we further increased profitability, while also
making investments in the future and in innovation. Our three
market divisions have sharpened their focus and pay very close
attention to their clients and markets.
The client is at the heart of our activities.
How is this apparent?
Roland Matt: In every single contact. The dialogue with our clients,
as partners, is of central importance to us. They regularly provide
us with impulses for new developments. One example is our innovative pricing model. In Liechtenstein we are the first bank, and in
Switzerland we are one of the first, to relinquish retrocessions in
both asset management and investment counselling. By doing so,
we are fulfilling our clients’ requirement for more transparency,
a clear fee structure and an attractive price / performance ratio.
And is the performance good?
Roland Matt: Absolutely. With our Asset Management we have
outstanding investment competence. At the same time, we make
great efforts to offer excellent advisory services. Numerous awards
clearly demonstrate how the LLB Group with its systematic investment process, expertise and experience creates substantial added
value for its investors. At the “24th Lipper Fund Awards” in Switzerland, the LLB Equities Regio Bodensee (CHF) fund was honoured
again in 2014 – after 2007 and 2008 – for its absolute performance
over three years. The fund received the award in the category
“Equity Switzerland Small and Mid Caps” for the third time. And
just recently, the LLB Strategy Balanced (CHF) fund was awarded
the “German Fund Prize” at the “14th Funds Professional CONGRESS”
in Mannheim, Germany. In the “Mixed Fund Global Multi Asset”
category, the fund was awarded the title “Outstanding”. For our
clients, investment competence is a primary criterion when choosing their bank.
How important are stability and security?
Hans-Werner Gassner: Reliability and security are more important than ever in the financial services industry. Clients attach great
importance to a financially stable bank. A sound equity capital
base offers clients, shareholders and staff an important foundation. With equity capital of CHF 1.8 billion, the LLB Group stands for
stability and security.
13
Interview
What message is the LLB’s new slogan: “Tradition meets
innovation” meant to express?
Roland Matt: We combine values that appear to be in conflict.
With this slogan we focus on a pair of values. To actively shape the
future, we need both values: tradition and innovation. The brand
Liechtensteinische Landesbank stands for both. Our repositioning
stands on a stable foundation: our deep roots going back over
150 years in Liechtenstein. Security and stability are important. For
us they are traditional values. They are complemented by innovative power. In the digital era in a knowledge-based economy this is
decisive for achieving success.
How do you assess the 2014 business year?
Roland Matt: The consistent implementation of the Focus2015
strategy was the first priority for us in 2014. Our focus was on the
market-related strategic initiatives, which all progressed according to plan. At the same time, the LLB Group was affected by the
consequences of the persisting low level of interest rates and the
restraint shown by investors – and this in spite of the good prices
on the stock markets.
Despite this head wind, the LLB Group again achieved a solid operative result. It was able to substantially increase its net profit.
Group net profit reached CHF 72.6 million and was therefore 35 percent above the previous year. Client assets under management
rose by 2 percent to CHF 50.2 billion and loans to clients climbed by
4.7 percent to CHF 10.7 billion.
How realistic are the financial goals that you set with the
Focus2015 strategy?
Roland Matt: One goal we have more than attained: with a tier 1
ratio 18.3 percent, the LLB Group stands for stability and security −
as it has done for many years. At the same time, our high sensitivity to fluctuations in interest rates is an adverse factor. The decision
of the Swiss National Bank in January 2015 to stop supporting the
Euro minimum exchange rate and the negative market interest situation have drastically changed basic business conditions. In spite
of our successful strategic repositioning, from today’s perspective,
we shall probably not attain all the quantitative goals that we set
for the period 2013 to 2015, especially not those in relation to the
Cost-Income-Ratio and the cumulative Group net profit target.
At the end of 2015, Focus2015 will have been implemented,
which strategy comes next?
Hans-Werner Gassner: The development of a follow-up strategy
will be a key topic in 2015. The Focus2015 strategy was the LLB
Group’s response to a changed business environment with volatile
financial markets, historically low interest rates, fierce competition, intensive margin pressure and increasing regulation. The
Swiss National Bank’s decision has exacerbated this situation. The
market and interest rate environment is not likely to improve in
the near future. All these aspects will be taken into consideration
in formulating our strategy after 2015. However, it has to be borne
in mind that we will be building on a position of strength.
What are the LLB Group’s strengths?
Hans-Werner Gassner: Implementing our Focus2015 strategy has
meant that we have acted decisively and adapted ourselves to
the new competitive environment. This encompasses our focus on
clients in selected markets, improved profitability, consistent process optimisation and the realisation of innovative solutions. Our
corporate vision and our mission statement reinforce the bank’s
positioning in genuinely living up to its values. In addition, the
combination of an innovative pricing model with prize-winning
investment competence firmly places the LLB Group in a strong
position. With our solid equity capital base comprising solely hard
core capital, we continue to possess high financial stability and
security. And finally, we must not forget our ownership structure.
Our majority shareholder, the Principality of Liechtenstein, is one
of the fourteen countries in the world with an AAA rating.
Which strategic initiatives have you used to invest in the
future in 2014?
Roland Matt: Let me mention just a few highlights of the many
measures we have taken: with our innovative, retrocession-exempt
pricing model we lead the way on the market. Our online and mobile banking platforms are also a success story. Since December
2013, we have been offering our clients an attractive and innovative mobile banking app for iOS, and since June 2014, also for
Android smartphones and tablets.
For us, customer closeness and financial culture already begin in
the school room. By offering their “young Liechtenstein” and
“young Linth”, “youli” for short, banking services, our Retail & Corporate Banking Division is strengthening the strong market position of the LLB and Bank Linth in the youth segment.
With its investments, the Private Banking Division is also intensifying the LLB Group’s closeness to clients. In 2014, we enlarged
our team of advisers for the growth markets in Central and Eastern
Europe as well as the Middle East. In addition, we expanded our
market-specific product offer and also provided our clients with
access to the stock markets in Dubai and Abu Dhabi.
Moreover, our partnership with intermediary clients is of great
importance to us. Our Institutional Clients Market Division provides sound, structured and up-to-date knowledge in the areas of
investment, legal issues and taxation via the innovative «LLB Xpert
views» online platform.
14
Interview
What key priorities have you specified for 2015?
Roland Matt: The key priorities are projects which offer genuine
added value for our clients. For example, from the end of 2015 they
will benefit from an innovative kind of investment advice. This will
enable us to distinguish ourselves from our competitors while creating a new advisory experience for our clients with the aim of constructing tailor-made portfolios.
At the same time, we are planning to take full advantage of omnichannel banking and in 2015 we shall formulate a strategy to link
up our bank branches with online and mobile banking. At the moment, a new bank branch is being built in Sargans, Switzerland.
Our subsidiary, Bank Linth will set new standards there with its future-oriented customer zone, its inspirational advisory concept
and its self-service for banking and financial transactions.
As a business bank, from the middle of 2015, we shall introduce a
groupwide comprehensive advisory and care concept for small and
medium-sized enterprises. For this purpose, we are developing a
bespoke product structure for corporate clients, whereby we want
to fulfil client requirements via various distribution channels.
Moreover, on the basis of lean management principles, we want to
accelerate and perfect lending approval and account opening
processes.
A key topic in 2015 will be the automatic exchange of
information.
Hans-Werner Gassner: Liechtenstein was one of the 52 countries,
which signed an agreement regarding the automatic exchange of
information on 29 October 2014. This means that in 2017, we are
obliged to exchange data from 2016. Since 2012, the LLB Group has
actively embraced the transformation process and is therefore
leading the way in implementing the tax compliance strategy of
the Principality of Liechtenstein. On 1 October 2012, it adopted a
standard risk-based approach for new clients with tax self-declaration. This was extended to existing clients in 2014.
Furthermore, within the scope of our focus on clients in our target markets, we decided in a first step from 1 August 2014 only to
accept new clients who domiciled in clearly defined countries. We
shall concentrate here on gaining new clients in our onshore markets of Liechtenstein, Switzerland and Austria, on selected markets
in Western Europe, as well as on the growth markets in Central and
Eastern Europe and the Middle East.
How do you see the future development of the Liechtenstein
financial center?
Hans-Werner Gassner: The financial center’s competitive advantages are its tradition in asset management, the quality of advice
and service, as well as the high level of political stability and security. Cross-border private banking will continue to be an important
pillar of business in the future. To be attractive for private clients,
companies and institutional clients, Liechtenstein must assure the
high quality of its financial players, services and product offers.
With the increasing density of the regulatory framework, politicians and officials must strive to support the financial center by
creating stable and reliable basic business conditions. The Liechtenstein financial center and the LLB Group are already far advanced in adapting to the new regulatory environment.
What do you expect in 2015?
Roland Matt: The banks are still operating in a difficult economic
environment, characterised by high volatility and historically low
interest rates. The Swiss National Bank’s decision to withdraw its
support for a minimum exchange rate of the Swiss Franc to the
Euro, and the negative market interest situation, have exacerbated
the situation. On the whole, the LLB Group is in a strong position.
In the last two years, we have achieved a great deal, and actively
met and mastered many challenges. Our strategic focusing process is well advanced and is reflected in our higher profitability. At
the same time, we are delivering a solid business result. In 2015, we
shall strive to achieve a further improvement in our operative performance. We shall consistently push ahead with our Focus2015
strategy and our repositioning in order to again enhance our
strengths.
15
Strategy and organization
T
he LLB Group is a universal bank with a strong focus on the private
banking and institutional banking business. We are creating the
basis for sustained corporate development with the Focus2015 strategy.
A binding value system is at the heart of our actions. In our target
markets − Liechtenstein, Switzerland, Austria, Germany, Central and
Eastern Europe as well as the Middle East – we maintain particularly
close ties with our clients.
Market divisions
Focus2015 strategy
The LLB Group’s business structure is based on the three operative
market divisions: Retail & Corporate Banking, Private Banking and
Institutional Clients. The Retail & Corporate Banking Division comprises the universal banking business in the home markets of Liechtenstein and Switzerland. It offers the full range of services for private and
corporate clients. The savings and the mortgage lending business are
traditionally of great importance. Other areas are private financial
planning, corporate pension provisioning, investment counselling and
asset management. The Private Banking Division encompasses all the
LLB Group’s private banking activities, including investment counselling, asset management, asset structuring and financial planning and
pension provisioning planning. Our focus is on the onshore markets
of Liechtenstein, Switzerland and Austria, our traditional cross-border
markets in Germany, other Western European countries and the
growth markets of Central and Eastern Europe as well as of the Middle
East. The Institutional Clients Division encompasses the intermediary
and investment fund business as well as the LLB Group’s Asset Management. Its clients are professional investors, financial intermediaries,
fiduciaries, asset managers, fund promoters, insurance companies,
pension funds and public institutions. The target markets are Liechtenstein and Switzerland.
Key elements
Our Focus2015 strategy is the LLB Group’s answer to a changing environment with volatile financial markets, historically low interest rates,
strong competition, growing pressure on margins and increasing regulations. The Focus2015 strategy provides the basis for a long-term
and successful development of our company. By the end of 2015, the
main thrust of our business activities will be to consistently focus on
the following:
◆◆ We purposely deploy financial and personnel resources in select
customer segments and markets with very promising market
potential or where the LLB Group has already established a solid
market position. As a result, we are reducing complexity.
◆◆ We implement measures to make the present volume of business
profitable. This includes initiatives to lower costs in the front and
back office, increase productivity through corresponding customer
segmentation as well as initiatives to selectively adapt pricing and
terms of business to market conditions.
A review of the Focus2015 strategy conducted in February 2014 confirmed that our strategic measures align with the key success factors
of the banking environment. Each of our divisions has defined new
strategic initiatives for 2014 and is focused on the consistent implementation of the Focus2015 strategy.
Governance and management structure
The LLB Group has the following management structure: the Board of
Directors is responsible for overall management, supervision and control; it sets the basis for the Group’s strategy, organization and finances. Since 1 July 2012 the organizational structure has consisted of the
operational market divisions Retail & Corporate Banking, Private
Banking, Institutional Clients and, additionally, the Group CEO, the
Group CFO and the Group COO (see Organizational structure, pages
10 – 11, as well as chapter “Corporate governance”, pages 66 – 89). The
Group Executive Board comprises the heads of the six divisions.
16
Our objectives and focus markets as well as the initiatives of our Focus2015 strategy are summarized in the following table:
Private Banking
Objectives
◆M
arket leader in Liechtenstein
and leading provider in eastern
Switzerland
◆ Leading provider in Liechtenstein
and strong position in Switzerland
and Austria
◆ Focused growth and recognized
market position in Central
and Eastern Europe (CEE) as well
as in the Middle East (ME)
◆ Preferential partner for external
asset managers, financial intermediaries, fund promoters and
pension funds in Liechtenstein,
Switzerland as well as in select
European countries
Focus markets
◆P
rivate client business and
corporate client business in
Liechtenstein and eastern
Switzerland
◆ Onshore: Liechtenstein,
Switzerland, Austria
◆ Cross-border: Germany and other
Western European countries
◆ Growth markets:
CEE as well as ME
◆
◆
◆
◆
◆
Key elements
of the Focus2015 strategy
◆A
daptation of customer
segmentation
◆ I nnovative range of services
and pricing model
◆F
orward-looking solution for
investment counselling
◆A
daptation and harmonization
of the conditions
◆F
urther excellence in distribution
◆O
ptimization of the distribution
network and development of
the omni-channel strategy
◆ L aunch of a mobile banking app
◆O
ptimization of specific product
offers for target groups, especially
for corporate clients
◆ Adaptation of customer
segmentation
◆ Innovative offer and pricing
model in investment business
◆ Forward-looking solution for
investment counselling
◆ Optimization of the product range
for the different markets
◆ Further excellence in distribution
◆ Intensification of the market
penetration in the CEE and ME
growth markets
◆ Closure of LLB (Switzerland) Ltd.
and the sale of the Lugano branch
◆ Focus on the support of external
asset managers and financial
intermediaries
◆ Expansion of Fund Services
◆ Development of innovative offer
and pricing model
◆ Further excellence in distribution
◆ Online platform “LLB Xpert views”
◆ Sale of trust company
Jura Trust AG
Fund Services
Asset Management
External asset managers
Financial intermediaries
Public institutions
Strategic initiatives 2014
In 2013, the LLB Group launched its Focus2015 strategy. In the first year
it succeeded in reducing costs and complexity. In 2014, it concentrated
on strategic initiatives promising improved earning potentials:
◆◆ offering an innovative range of services and pricing model in the
field of investments;
◆◆ increasing excellence in sales;
◆◆ strengthening our advisory capacity in the growth markets;
◆◆ restructuring the growing Fund Services Division;
◆◆ further increasing efficiency through process optimizations.
The Liechtensteinische Landesbank and Bank Linth have set themselves apart from the rest of the market in the investment business
since 1 July 2014 with a ground-breaking pricing model. By waiving
distribution remuneration for our own funds and third party funds we
have increased cost transparency. LLB is one of the first banks in Europe to offer a pricing model dependent on performance and interest
levels for select strategy and bond funds (see chapter “Private banking”, page 31).
We have provided our clients with an attractive and innovative mobile
banking app for iOS since December 2013 and one also for android
smartphones and tablets since June 2014 (see chapter “Retail & corporate banking”, pages 26 – 28).
In the course of the year under report, the Retail and Corporate
Banking Division developed a concept for product packages that can
be individually combined. At the same time, a fundamental review of
client onboarding and credit processes started with the launch of the
“Front to Back Excellence” project. The focus is on client orientation,
efficiency and cost reduction along the lines of lean management (see
chapter “Corporate center”, page 42).
LLB Fund Services has increased the level of automation, optimized
processes, reduced complexity and made changes to the pricing model. The Division has also invested in tightening its risk management
and established its own risk & reporting department “Fund Risk Management & Reporting” (RIR) since the end of 2014 (see chapter “Institutional clients”, page 35).
17
Strategic initiatives 2015
In 2015, we targeted the implementation of the following strategic
initiatives:
◆◆ a forward-looking solution for investment counselling;
◆◆ the development of the omni-channel banking strategy;
◆◆ a new product structure for corporate clients;
◆◆ excellence in sales;
◆◆ lean process management;
◆◆ the refocusing of international activities on strategic target
markets;
◆◆ the implementation of the tax compliance strategy.
Vision and mission statement
In 2014, the LLB Group redefined its vision and its mission statement:
the vision is encapsulated in the sentence “We set standards for banking with values”. Our vision of banking is based on the idea that we can
excel at managing material values if we have a clearly defined system
of values. The resulting mission statement refers to a binding system
of values comprising “integrity”, “respectfulness”, “excellence” and
“pioneering”. This is what our vision stands for:
◆◆ “Integrity” – we provide clarity and keep our word.
◆◆ “Respectfulness” – we are partners and show appreciation.
◆◆ “Excellence” – we set standards through performance and
commitment.
◆◆ “Pioneering” – we actively and sustainably shape the future.
We are convinced that responsible and forward-looking management
is decisive when it comes to sustaining business success. Our values
convey orientation, project reliability and promote trustworthiness.
We expect the LLB Group’s corporate bodies and all employees to
comply with our professional standards, all legal, regulatory and
internal regulations as well as our professional “Rules of Conduct” and
to act with integrity. The LLB Group aims to consistently fill its vision
and its mission statement with life and wants to be measured by these
efforts. Its objective is to be a trusted and respectful partner of its
clients, creating added value through pioneering innovations and
appreciated for its excellent performance. One of the focuses of 2015
will be: “We live our values”.
Value-oriented corporate management
We focus on client and market requirements while at the same time
both taking into account trends in supervisory regulations and aiming
to earn attractive returns for our shareholders. We take care to ensure
that we remain profitable in the long term. Profit orientation is a
central corporate value within the LLB Group. For this purpose, we
measure the capital appreciation of our company according to the
economic profit model, which encompasses all financial and operative
key performance indicators (KPIs).
The LLB Group has set itself three targets with the Focus2015
strategy:
◆◆ Our Tier 1 ratio is above 16 percent.
◆◆ Our cost-income-ratio is below 60 percent.
◆◆ From 2013 to 2015, the LLB Group will attain a cumulative Group
net profit of more than CHF 300 million.
The LLB Group made clear decisions about its strategic repositioning
and has reached important milestones. In 2014, it was able to further
increase cost efficiency while also investing in innovations and sustained success beyond 2015. It aims to further strengthen its operating
performance in 2015.
From today’s perspective, we expect that we will probably not be
able to reach all the quantitative goals 2013 – 2015, particularly those
regarding the cost-income-ratio and the cumulated Group net profit,
even though our strategic repositioning was successful. This is due to
current negative market interest rates.
Finance and risk management
The Group Chief Financial Officer represents the LLB Group’s Group
Executive Board. He is in charge of:
◆◆ Risk management: it is based on risk policy and encompasses the
systematic identification, assessment, reporting, management and
monitoring of credit risks, market risks, liquidity and operational
risks as well as asset and liability management (ALM).
◆◆ Overall bank management: it ensures transparency at all management levels in order that costs, income and risks can be managed in
line with corporate strategy and in an efficient and timely manner.
This includes medium-term planning, budgeting and the Group
Management Information System (MIS).
◆◆ Financial management: it encompasses the establishment of accounts in accordance with local laws and International Financial
Reporting Standards (IFRS), reporting as well as the treasury.
◆◆ Credit management: it exercises efficient and effective credit processes as well as timely credit decisions according to valid directives
and instructions in a risk-oriented and profit-oriented manner.
Comprehensive risk management
Part of the banking business is to accept risks. It is essential for the
protection of the LLB Group’s financial power and reputation that we
prudently deal with risks within the scope of our strategic priorities.
The LLB Group manages risks according to strategic targets (see chapter “Risk management”, pages 152 – 175). It applies an adequate organizational and methodological framework for risk assessment and risk
management. We ensure that we can always provide adequate liquidity and capital to cover all essential risks with the “Internal Capital
Adequacy Assessment Process” (ICAAP).
18
Risk management is part of our business planning process. Both the
Board of Management and the Board of Directors are strongly involved
in it. Our risk culture entails that all members of Management are
consciously aware of and sensitive to risk factors and risks. The handling
of risk scenarios is anchored in our departments for financial control
and risk control. A holistic and forward-looking perspective sustainably contributes to creating value for the whole enterprise.
Internal control system (ICS)
The LLB Group applies standards that are customary in the banking
industry for the internal control system (ICS), a sub-system of corporate risk management. In 2014, we continued to expand our ICS. It
contributes to increasing risk transparency within the company as an
integral part of our Group-wide risk management by linking the relevant business processes with the concomitant risks and by monitoring
them through effective control processes.
Independent credit management
Within the LLB Group, credit competences are assigned in relation to
the current expertise of key employees and their experience according
to different levels and credit types. The authority to grant credit has
been given to Group Credit Management and the Credit Committees,
with the exception of standard business transactions. This ensures
that credit decisions are made independently of market pressures and
market objectives. In this way, we are able to avoid conflicts of interest
and objectively and independently assess risk in individual cases.
Credit risk policy
The LLB Group supports municipalities, companies, small businesses
and private persons to finance their plans for the future. The majority
of the loans in 2014, i.e. 86.6 percent (2013: 87.3 %), comprised credits
secured by mortgages. Moreover, we granted operating loans and
Lombard loans.
The LLB Group pursues a conservative credit risk policy in all divisions and penetrated markets. Its integral parts include the specialized and individualized assessment of loan applications, the conservative assessment of collateral values, the individual calculation of
affordability as well as compliance with standard market equity
requirements.
Outside of the target markets of Liechtenstein and eastern Switzerland, the LLB Group provides mortgages in cases that involve an important client relationship or in cases in which such a relationship can
be verifiably established within a reasonable period of time. In 2012,
we adopted the new minimum requirements approved by the Swiss
Federal Financial Market Supervisory Authority (FINMA) for mortgage
financing. These were drawn up by the Swiss Bankers Association
(SBVg).
On 28 February 2014, the EU published the “Mortgage Credit Directive” (Directive 2014 / 17 / EU) on credit agreements in the Official Journal of the European Union. The Directive aims to provide better protection for borrowers. The new credit business regulations deal
in-depth with such issues as advertising, pre-contractual information,
counselling, assessment of creditworthiness and early repayment
dates. The EEA member country Liechtenstein transposed the provisions for assessing, evaluating and processing mortgage secured loans
into the Banking Ordinance; they came into force on 1 April 2014.
We developed a Group-wide uniform methodology for ascertaining
the collateral value of our Lombard loans. Among other things, this
particularly takes into account the liquidity, the counterparty risk and
volatility of individual securities and, on top of that, the diversification
of the assets provided as security and pledged by the borrower. There
has been a marked cutback in credits against non-diversified securities
or single asset lending, which may only form an insignificant portion
of a Lombard loan portfolio. Loan securities outside of examined and
approved existing markets are excluded from this.
Equity strategy
A good equity base not only protects reputations, it helps form the
economic policies and financial credibility of a bank. LLB is considered
to be of systemic relevance to the national economy of Liechtenstein.
It is therefore part of our identity to have a sufficiently high-quality
equity base at our disposal. A solid equity base provides clients, shareholders and employees with an important added value.
Our capital base covers the capital needs required for our objectives.
The LLB Group continues to enjoy a high level of financial stability and
security on account of its solid equity base with exclusively “hard” core
capital. As at the end of 2014, it had an equity base of CHF 1.8 billion
(31 December 2013: CHF 1.8 billion) at its disposal, which corresponds
to a Tier 1 ratio of 18.3 percent (31 December 2013: 18.8 %). By the end
of 2014, we had again achieved our goal to raise the Tier 1 ratio to over
16 percent.
The LLB Group’s financial power shall remain unaffected by the capital markets’ fluctuations. We simulate external influences and analyse
how these affect our capital base using scenario analyses and stress
tests and, where necessary, we take measures to minimize risks.
The comprehensive reform package of the Basel Committee on
Banking Supervision (Basel III) has been in effect in the EU since 17 July
2013. It aims to improve the equity base of banks with regard to equipment and quality and to increase the requirements concerning liquidity regulations. The additional introduction of a debt limit ceiling and
of an anti-cyclical buffer aims to ensure better protection for the banking sector against shocks to the financial system (see chapter “Regulatory environment and developments”, pages 58). As of 1 February
2015, the EEA member country Liechtenstein implemented the EU
Capital Requirements Directive (CRD IV) and, with it, the Basel III standard, which will come into effect from 2019.
20
Clients and markets
Clients and markets
O
ur Retail & Corporate Banking, Private Banking and Institutional
Clients Market Divisions base their recipe for success on a strategy
focused on the requirements of clients and markets, tax compliant
client assets and lean processes. The LLB Group responds to the changed
regulatory and economic environment with closeness to clients, safety
and reliability.
Economic environment
International
At the turn of the year 2014 / 2015, the global economic environment
was characterised by a hesitant recovery. Whereas the upswing in the
USA had gained further momentum, in the Eurozone there was still
no sign of any real acceleration in economic activities. The low oil price
and the favourable Euro exchange rate should have a positive effect in
the coming months.
As a result of geopolitical tensions in the Ukraine and the low oil
price, Russia has slid into recession. To date, the Central and Eastern
European regions has proven resistant to adverse influences.
Switzerland
During 2014, the Swiss economy experienced solid development.
For 2015, however, the KOF Economic Research Center of the Swiss
Federal Institute of Technology in Zurich predicts a recession due to
the effects of the so-called “Swiss Franc shock”. On 15 January 2015, the
Swiss National Bank (SNB) ceased its policy of supporting a minimum
Euro exchange rate of CHF 1.20. The KOF assumes that over the next
two years the Swiss Franc will oscillate around parity with the Euro.
Exports – around 60 percent of Swiss exports go to the Eurozone – will
probably fall sharply in 2015.
Liechtenstein
The removal of the Euro minimum exchange rate support and the
slower development of the global economy will probably cause the
Liechtenstein economy to slacken sharply. Around two thirds of Liechtenstein industrial production are exported to the European economic
area. 2014 was a challenging year for Liechtenstein’s financial service
providers. Lower market interest rates lead in some cases to higher
interest rate hedging costs.
Interest rates
In view of the strengthening economic recovery, the Federal Reserve
System (Fed) is expected to raise key interest rates in the US from the
middle of 2015.
On 22 January 2025, the European Central Bank (ECB) decided to buy
government bonds of the Euro states for EUR 60 billion per month
from March until at least the end of September 2016. With this step it
wants to drive down interest rates. It left the key interest rate at a
record low of 0.05 percent.
In step with the removal of support for the Euro minimum exchange rate, the SNB increased negative interest to 0.75 percent for
bank deposits. With this measure, it wants to make Switzerland less
attractive for international investors and reduce the upward pressure
on the Swiss Franc. Several Swiss banks also introduced negative
interest rates for large clients in January 2015.
Financial markets
The slowdown in global growth was the key topic on the financial
markets in 2014. On account of low interest rates, engagements in
low-risk investments are less attractive. Consequently, prices on the
stock markets rose substantially. After the International Monetary
Fund (IMF) revised its forecast for global economic development
downwards at the beginning of October, the stock markets saw major
price corrections.
However, the continuing willingness of the central banks to support
the economy led to a rapid recovery in prices so that in November new
record levels were reached in some cases. The SNB’s withdrawal of
support for the minimum exchange rate of the Swiss Franc relative to
the Euro in mid January 2015 triggered a price collapse of the Swiss
Market Index (SMI) and led to a re-evaluation of Swiss equities.
21
Clients and markets
Tax compliance
Tax issues are extremely important for the competitiveness and integrity of the Liechtenstein financial center. Liechtenstein decided early
on in favour of a strategy for its financial center that counts on tax
compliance. The LLB Group supports this strategy and actively embraces the transformation process (see the chapter “Regulatory framework and developments”, pages 56 – 57).
Private and corporate client business
The Retail & Corporate Banking Division of the LLB Group as a universal
bank encompasses the lending, deposit and payments business with
private clients in Liechtenstein and Switzerland, as well as investment
and asset management business with an amount up to CHF 0.5 million. As a business bank, the LLB Group is also an important partner
for the business community in Liechtenstein and the east of Switzerland (see the chapter “Retail & Corporate Banking”, pages 26 – 29).
Mortgage lending business
In 2014, interest differential business was again a strong revenue generator. During 2014, mortgage loans accounted for 75.1 percent (2013:
76.4 %) of loans granted by LLB AG, corresponding to CHF 4.3 billion
(2013: CHF 4.2 billion). With a market share of around 50 percent,
LLB AG is the market leader in Liechtenstein.
In 2014, growth slowed at a high level. A second tax amnesty in
Liechtenstein, similar to the Swiss model, induced clients to amortise
their mortgages. An amendment to the banking ordinance, which
came into force on 1 April 2014, had an adverse effect on mortgage
business. The amended ordinance stipulates tighter lending regulations for all Liechtenstein banks. Even before the amendment, the
Liechtensteinische Landesbank already pursued a conservative lending policy with respect to collateral values, own capital requirements
and affordability.
Our Bank Linth subsidiary is an important partner in its regions for
real estate financing. Mortgage lending business is its most important
source of income. In 2014, its loans to clients increased by 4.9 percent
to CHF 5.2 billion (2013: CHF 5.0 billion).
Real estate market in Liechtenstein
According to the national statistics office, in de four quarters of 2014
projected construction costs rose by 2.5 percent to CHF 435.5 million
(2013: CHF 425.0 million) in Liechtenstein. At the same time, invest-
Real estate market in Switzerland
In September 2013 and January 2014, the Swiss authorities activated
their anti-cyclical capital buffer (ACB) to slow activity in the mortgage
and real estate market. Since 30 June 2014, banks are obliged to hold
an additional 2 percent of equity capital for the mortgage loans granted
for the financing of residential property in Switzerland.
According to the UBS Swiss Real Estate Bubble Index, in spite of the
levelling off in mortgage growth there is still no sign of a reduction in
the danger of overheating in individual areas of the mortgage and real
estate market.
The LLB Group’s business areas in Switzerland cover very heterogeneous markets. There are varying trends and developments in specific
areas.
Financial planning
The clients of the LLB Group benefit from our holistic advisory concept.
We are able to convince them with a service package that includes, in
particular, retirement, financial and estate planning as well as corporate and private pension provisioning. Private financial planning is a
key activity, a field in which the LLB Group possesses unique, comprehensive and interlinked knowledge.
LLB Liechtenstein Pension Fund Foundation
Over the last ten years, LLB AG has established itself in the Liechtenstein market as a competence center for corporate and private pension
planning and provisioning. Measured in terms of size and market
share, the LLB Liechtenstein Pension Fund Foundation, as the youngest pension fund in the country, ranks as number two among the independent collective foundations in Liechtenstein. It continued its
growth in 2014.
The LLB Pension Fund Foundation benefits from the extensive
investment competence of the LLB Group. The Foundation’s assets
are managed according to the LLB’s asset management concept.
Thanks also to the pleasing development on the stock markets,
the pension fund capital of LLB Liechtenstein Pension Fund Foundation recorded growth of CHF 472 million (2013: CHF 413 million) per
31 December 2014. It provides services to 360 (2013: 345) companies
with 4’275 (2013: 4’082) active insured persons. The LLB Pension Fund
Foundation is one of the few pension funds that offers its members two
investment strategies. The interest rate on the retirement capital with
the “Conservative” strategy stood at 3.0 percent (2013: 2.5 %) in 2014,
and 3.5 percent (2013: 3 .0%) with the “Dynamic” investment strategy).
ments in residential construction fell by 5.0 percent to CHF 277.5 million (2013: CHF 292.2 million). Construction costs in the industry and
services sector increased to CHF 113.1 million. Public procurement expanded by 18.7 percent to CHF 42.7 million (2013: CHF 52.5 million).
22
Clients and markets
In view of the demographic changes, the calculation of pension
duration and pension amount is becoming more and more important.
In 2014, the LLB Liechtenstein Pension Fund Foundation reduced the
technical interest rate to 2.75 percent (2013: 3.0 %), and converted the
old-age credit balance upon retirement at 64 into a pension at a rate
of 6.9 percent (2013: 7.0 %). From 2015, this conversion rate will be
reduced to 6.8 percent. Die LLB Liechtenstein Pension Fund Foundation has a very good structural ratio: for each pensioner there are
31 active insured contributors (2013: 45 insured contributors).
Since 30 October 2008, LLB Professional Pensions AG, a subsidiary
of Liechtensteinische Landesbank, has managed the Swiss ALVOSO
LLB Pension Fund. In 2014, 255 (2013: 249) companies with 1’455 (2013:
1’493) employees were serviced by ALVOSO. The pension fund capital
amounted to CHF 220 million (2013: CHF 200 million). In its annual
comparison of pension funds, the Swiss “SonntagsZeitung” ranked
ALVOSO first in the category for risk and management costs, it placed
second for its service quality.
Private Banking
Markets
The Private Banking Division of the LLB Group is divided into local asset
management business with wealthy clients in the domestic markets
as well as cross-border asset management with foreign clients. The
business focus lies on the onshore markets of Liechtenstein, Switzerland and Austria, the traditional cross-border core markets of Germany
and the rest of Western Europe, and on the growth markets of Central
and Eastern Europe and the Middle East. In 2014, the Private Banking
Division attained operating income of CHF 100.3 million (2013: CHF 108.2 million). Client assets under management rose to CHF 16.6 billion
(2013: CHF 15.8 billion).
In the onshore and growth markets, the Private Banking Division
posted solid inflows of client money totalling CHF 427 million. Our
strategy of more than just compensating for the outflows amounting
to CHF 427 million in the traditional cross-border markets is proving
successful. We are continually expanding our market-specific product
offers. Our wealthy clients in the Gulf states value our local business
presence in Dubai and Abu Dhabi. Our clients in Central and Eastern
Europe are looked after from Vienna in Austria and from Switzerland.
The Swiss banking industry enjoys a high reputation for safety and
reliability.
In order to reduce operational complexity, and to respond to the
ever stricter regulatory framework, above all in the cross-border markets, the LLB has decided to withdraw from its business with clients
in certain markets in 2015. This concentration of resources will bring
improved efficiency and productivity.
Advisory services are a core competence
Private banking clients are frequently well-informed, experienced and
professional investors. They expect close contacts with their bank,
as well as professional and comprehensive advice from specialist,
friendly advisers, which helps them to achieve better investment returns than they could attain by themselves. The LLB Group believes
that the quality of services, the performance of investment products,
the stability of the bank and the confidence of our clients in our many
years of private banking expertise are key success factors.
The Private Banking Division of the LLB Group already offers comprehensive advice, which informs clients about the risks associated
with investments and presents them with individual, tailor-made
solutions. It is therefore in line with issues related to investor protection. Regulatory developments are focused increasingly on client protection, they aim to ensure that clients receive advice appropriate to
their knowledge and competence. Accordingly, our client advisers
place their investment recommendations in the overall context of the
investor.
In recent years, the regulatory and macro-economic environments
have changed radically. Today, the quality of advice and transparent
pricing are more important than ever. At the same time, the digital
revolution is providing new relationship possibilities with our clients.
Consequently, in 2014 the LLB Group made major investments in
the training of its client advisers and in the investment and advisory
processes (see the chapter “Private Banking”, pages 30 – 33).
23
Clients and markets
Intermediary / investment fund business / Asset Management
The Institutional Clients Division encompasses the asset management,
the investment fund business as well as business with financial intermediaries and external asset managers in Liechtenstein and Switzerland. Our Asset Management unit is the largest investment team in
the Liechtenstein financial center. In a European comparison, the LLB
strategy funds managed here consistently attain top rankings – while
also offering an attractive price / performance ratio (see the chapter
“Institutional Clients”, pages 34 – 37).
To enable the requirements of financial intermediaries to be met in
detail, we strive to maintain close partner-like relationships and a
transfer of knowledge. We provide sound knowledge and information
about focus themes on our “LLB Xpert views” online platform and in
doing so create a modern link between personal advice and the virtual
world. At the same time, our LLB Fund Services is one of the market
leaders in Liechtenstein in the provision of fund services. It is not only
well positioned in the Swiss economic area; its EU passport opens up
possibilities of increasing market shares in investment fund business
in Europe.
In 2014, the Institutional Clients Division achieved operating income
of CHF 102.3 million (2013: CHF 173.3 million). Client assets under
management stood at CHF 25.4 billion, whereby LLB Fund Services
is an important pillar of earnings for the LLB Group.
EU passport
Access to the EU market is of central importance for the competitiveness of the financial center and Liechtenstein’s investment fund industry, as well as for the LLB. The incorporation of EU law within the scope
of the EEA agreement means that for many years already Liechtenstein fund companies have been able to manage cross-border investment funds. Investment fund companies benefit substantially from
the EU passport. During 2015, Liechtenstein fund providers should also
really start to benefit from the EU passport as managers of alternative
investment funds (see the chapter “Regulatory framework and developments”, page 59).
“Banking of the future will
be characterized by the trend
towards more transparency,
fairness and service and price
positioning specifically
focused on target groups.”
Dr. Jan Engelke, Simon-Kucher & Partners, Zurich
in the magazine accompanying the Annual Report, page 12
Excellence
We set standards through
performance and passion.
26
T
he LLB Group has a strong market position in Retail & Corporate
Banking in Liechtenstein and eastern Switzerland. In an innovative
approach, it combines modern bank branches with mobile banking and
invests in efficient service and quality. The LLB Group targets its services
to suit the individual requirements of private and corporate clients.
Business profile
Strategic focus
The Retail & Corporate Banking Division of the LLB Group encompasses
the financing and savings business in the domestic markets of Liechtenstein and Switzerland. The Liechtensteinische Landesbank with
headquarters in Vaduz is the largest universal bank in the Principality
of Liechtenstein. It sets innovative standards – and for over 150 years
it has nurtured forward-looking, responsible partnerships with its
clients, shareholders and business partners. Its Bank Linth subsidiary
with headquarters in Uznach is one of the most innovative regional
banks in eastern Switzerland – for over 165 years it has stood for trust
and stability.
The LLB and Bank Linth participate in shaping the future of the
people and the economy in Liechtenstein and eastern Switzerland.
They offer a full range of banking and financial services for private and
corporate clients. Traditionally, savings and mortgage lending business
has always played a very important role. This is supplemented by
financial planning and corporate pension provisioning as well as investment advice and asset management aimed at target clients.
By combining modern, communicative bank branches with mobile
and web-based services, the LLB Group creates added value for its
clients. It has three business locations in Liechtenstein and 19 in the
Swiss cantons of Zurich, St. Gallen, Schwyz and Glarus. Additionally, it
operates 50 ATM locations: 20 in Liechtenstein and 30 in eastern Switzerland. LLB Online Banking provides clients with round the clock
access to their bank accounts and portfolios. Furthermore, throughout
the Group the LLB offers an innovative mobile banking app for iOS and
Android smartphones and tablets.
Holistic approach
Retail & Corporate Banking is a regional and local business. The
Liechtensteinische Landesbank and Bank Linth are distinguished by
their closeness to clients and the market. Our client advisers can
assess the potential of private clients and companies, and they know
the history and individual aspects of the region. The trust of the local
people and businesses is our core capital, which we carefully nurture
and develop – in the clear knowledge that our clients are better
informed and more sophisticated than ever before.
In 2014, we made more good progress in reaching the targets of our
Focus2015 strategy. Our sharper market and target client focus has
enhanced the quality of our client advisory services, which take into
consideration a structured advisory process as well as the requirements, risk tolerance and development perspectives of each individual
client. Our client focus takes a holistic approach, enabling us to convince clients with a service package that offers, in particular, retirement, financial and estate planning as well as corporate and private
pension provisioning. Demand for this overall expertise from one
source remains consistently high. Private financial planning is a key
activity, a field in which the LLB Group possesses unique, comprehensive and interlinked knowledge.
Private clients
To strengthen our position in the fiercely competitive market for individual clients in Liechtenstein and Switzerland, we provide intensive
training for our client advisers. More and more they are taking on the
role of supportive coaches. Our concept ensures that we are there for
our clients at every phase of their lives to provide solutions for every
financial problem. For this purpose we have adopted an uncompromising focus on the needs and expectations of our clients in our business activities.
27
For us, customer closeness and financial themes already begins in the
school room. By offering their “young Liechtenstein” and “young Linth”,
“youli” for short, banking services, the LLB and Bank Linth are successively strengthening their strong market position in the youth segment. In 2014, over 4’000 young people took advantage of our range
of youth accounts.
Customer Service Center
The Customer Service Center in Vaduz (CSE) continued to develop as a
central service hub for around 68’000 retail, online and mobile banking
clients in 2014. Anyone calling the Center can expect sound knowledge
and efficient service. This applies to all questions concerning accounts,
capital investments, stock market orders, EC cards or loans as well as
for issues relating to current legal, data protection and security regulations. By centralising the Infoline, Private Client Support and Online
Banking Departments in one organisational unit, the LLB reduced the
costs of these functions last year by 30 percent and ensured efficient
services from one source.
Business bank
As a business bank, we offer small and medium-sized enterprises
(SMEs) in our home markets of Liechtenstein and eastern Switzerland
professional advice and premium quality service. Especially in the case
of SMEs, private and business assets are often closely interlinked.
Our financial planning specialists take care of clients’ personal and
business concerns. Our experienced corporate client advisers represent a cornerstone of our service offering, which we systematically
expanded in 2014.
We also foresee attractive future opportunities in our business with
corporate clients. For this reason, we are introducing a groupwide
comprehensive advisory and care concept for SMEs in the middle
of 2015 and developing a bespoke product structure for corporate
clients. We want to target and fulfil specific client requirements via
various distribution channels using a transparent and simple model,
that combines standardised basic packages with a so-called flexible
“menu card”.
the first bank in Switzerland to satisfy its clients’ needs for saving time,
clear communication and convenience. Bank Linth carries out regular
client surveys. The survey result in 2014 demonstrated that clients
really appreciate its “simplicity in banking” approach.
The LLB Group’s strategy investment funds, which are among the
best in Europe, are also highly regarded. Thanks to their excellent
performance and outstanding price / performance ratio, the funds
have a key position in investment business with private and retail
clients. Further product innovations are planned in 2015 to enhance
this growth and revenue driver. On 1 July 2014, Liechtensteinische
Landesbank and Bank Linth took a further step in standing out from
the market by introducing an innovative pricing model, in line with
which we forego distribution commissions on LLB funds and auto
matically pass on the retrocessions received from external funds fully
to our clients (see the chapter “Private Banking”, page 31).
Investments and innovative power
Distribution network
The branches of Liechtensteinische Landesbank and Bank Linth are
venues for the provision of high-quality advice, competent services
and the core of distribution activities. The LLB Group is constantly
refining its branch concept. For example, the branch in Eschen (Liechtenstein) is not only an LLB testament to “green IT”, it also fulfils the
new role of a modern, communicative bank branch. At the moment,
a new bank branch is being built in Sargans (Switzerland). Bank Linth
will set new standards there with its future-oriented customer zone,
its inspirational advisory concept and its self-service for banking and
financial transactions.
In 2015, Bank Linth will also introduce its new “Distribution III” concept in the Sargans region. Subsequently, this concept is to be implemented in all the LLB Group’s bank branches. The concept also establishes standards for administration and team care for basic clients, as
well as targeting clients with business potential. At the same time, it
reduces infrastructure costs and reinforces the bank’s position as the
leading regional bank in eastern Switzerland.
Products and services
An individual client approach and product structure as well as the
reduction of service complexity will increasingly be the key to the
business success of the LLB Group. In 2014 the Retail & Corporate
Banking Division took a pioneering role in the Liechtenstein and Swiss
markets by developing a concept which enables individual product
packages to be combined. This was supplemented by the expansion
of digital channels thus enabling our private clients to decide for them-
Omni-channel banking
The LLB Group is constantly adapting to changed client behaviour. For
banking transactions, today’s bank client wants to take advantage of
the many different communication modes offered by modern media.
Consequently, we are planning to take full advantage of omni-channel
banking and in 2015 we shall formulate a strategy to link up our bank
branches with online and mobile banking. The cross-channel coordi-
selves how they want to carry out their banking transactions and
at what service level. Another important element is our fixed price
models.
For many years, Bank Linth has inspired its clients with its innovative culture, providing its private and corporate clients with uncomplicated solutions. Thanks to its “simplicity in banking” concept, it is
nation of processes and information for clients provides them with
new types of banking experiences.
In 2014, the use of smartphones for mobile online banking increased
rapidly at the LLB Group. Our innovative mobile banking app is a
genuine success story. Throughout the Group we registered over
8’000 downloads in the Apple Store. Since the middle of 2014 we
28
have also gained around 1’300 Android users. On average, 300 users
per month are added. Our mobile banking app is easily and intuitively
operated while at the same time fulfilling the strictest security
standards.
Lean management
Lending business is still an important and demanding field of activity
for the LLB Group. Continually increasing lending volumes and the low
interest rate structure mean we do not expect this to change in the
near future. The LLB is the number one address for around 37’000 customers in the Liechtenstein domestic market. For Bank Linth lending
business represents a major earnings stream in its eastern Swiss market region even though it faces severe competitive pressure.
The LLB Group is constantly adapting its credit risk management in
line with the latest regulatory standards. In 2011, trading and back-office processing functions were separated, in 2012 a stricter lending
policy was introduced, and in 2013 credit approval authority was delineated even further. In 2014, we launched the “Front to Back Excellence” project, a concept to completely revise lending processes. Within the scope of lean management, the key points are client focus,
efficiency and cost-savings. In 2015, we shall significantly shorten the
throughput times from the commencement of processing of a loan
application up to the earliest possible disbursement (see the chapter.
“Corporate Center”, page 42).
Business segment result
The business volume of the Retail & Corporate Banking segment
of the LLB Group grew by 2.5 percent to CHF 17.3 billion (31.12. 2013:
CHF 16.9 billion) in 2014. Lending business again posted a very positive
development with loans rising by 3.4 percent to CHF 9.1 billion (2013:
CHF 8.8 billion). Assets under management recorded a gain of 1.7 percent to CHF 8.2 billion (31.12. 2013: CHF 8.1 billion). The segment reported a net new money inflow of CHF 49 million (2013: outflow of CHF
2 million). Headcount stood at 225 full-time positions (31.12. 2013: 235).
Operating income fell by 3.0 percent to CHF 114.7 million (2013:
CHF 118.3 million). The persisting pressure on margins in lending business led to a decline in interest income of 5.7 percent to CHF 79.9 million (2013: CHF 84.7 million). In fixed interest business, margins
showed a gratifying improvement. Fee and commission income and
trading income again exceeded the previous year’s result.
Operating expenses rose by 0.7 percent to CHF 74.9 million (2013:
CHF 74.4 million). Personnel expenses climbed by 10.8 percent to
CHF 32.0 million (2013: CHF 28.9 million). General and administrative
expenses decreased by 37.0 percent to CHF 2.2 million (2013: CHF 3.5 million). This was attributable to the provisions set aside for the
US tax dispute in the previous year.
The segment profit before tax fell by 9.2 percent to CHF 39.8 million
(2013: CHF 43.9 million).
29
Segment reporting
in CHF thousands
2014
2013
+ / – %
Net interest income
79'851
84'669
– 5.7
Credit loss (expense) / recovery
– 1'864
817
Net interest income after credit loss expense
77'987
85'486
Net fee and commission income
26'540
24'301
9.2
9'391
7'748
21.2
Net trading income
Other income
– 8.8
800
744
7.5
Total operating income
114'718
118'279
– 3.0
Personnel expenses
– 32'043
– 28'928
10.8
– 2'195
– 3'485
– 37.0
General and administrative expenses
– 100
– 107
– 6.5
Services (from) / to segments
Depreciation and amortisation
– 40'538
– 41'857
– 3.2
Total operating expenses
– 74'876
– 74'377
0.7
Segment profit before tax
39'842
43'902
– 9.2
2014
2013
Performance figures
Net new money (in CHF millions)
49
– 2
Growth of net new money (in percent)
0.6
0.0
Cost-Income-Ratio (in percent) *
64.2
62.5
Gross margin (in percent) **
68.1
71.4
*Operating expenses (excluding provisions for legal and litigation risks, allowances for non-current assets held for sale and impairment for goodwill) in relation to operating income
(excluding credit loss expense and adjustments on purchase price obligations from acquisitions).
**Operating income excluding credit loss expense relative to average business volumes.
31. 12. 2014
31. 12. 2013
+ / – %
17'347
16'916
2.5
8'223
8'089
1.7
9'124
8'827
3.4
225
235
– 4.3
Employees (full time equivalent, in positions)
30
Private Banking
Private Banking
T
he LLB Group’s Private Banking combines first-class advisory quality,
outstanding investment and asset management with transparent
pricing. By utilising the latest technologies we create opportunities for
wealthy private clients in Liechtenstein, Switzerland, Austria, Central
and Eastern Europe as well as the Middle East.
Business profile
Market regions
The Private Banking Division of the LLB Group pursues the objective
of protecting and increasing wealth over the long term. In this business area we possess extensive and detailed knowledge built up over
many years. Through our brands “Liechtensteinische Landesbank”, and
“Bank Linth”, we support wealthy private clients with dedication,
expertise, outstanding investment competence and a profound understanding of their goals and requirements. With an international
presence we offer local expertise and we are able to react rapidly to
changed client needs or business conditions.
Our focus lies on the onshore markets of Liechtenstein, Switzerland
and Austria, on our traditional, cross-border markets in Germany and
Western Europe, as well as the growth markets in Central and Eastern
Europe and the Middle East. Customised to suit specific client segments, we offer investment advice, asset management, wealth structuring, financing facilities, as well as financial and retirement planning.
This makes us the preferred partner for high net worth individuals.
The LLB Group has booking platforms in Liechtenstein, Switzerland
and Austria. We are located internationally in Vaduz, Zurich-Erlenbach, Geneva, Vienna, Abu Dhabi and Dubai, as well as locally through
the branches of Bank Linth in eastern Switzerland and through the LLB
in Liechtenstein.
In line with the Focus2015 strategy, the Private Banking Division of the
LLB Group places its business focus on selected client segments and
markets, which show development potential and in which it already
has a strong position. In 2014, to exploit growth opportunities, we
carried out a targeted expansion of our client advisory teams in Central and Eastern Europe as well as the Middle East.
Onshore markets of Liechtenstein, Switzerland and Austria
The very good performance of our teams in the onshore markets in
2014 confirmed that Liechtenstein and Switzerland are well positioned
as financial centers. Both possess great potential as safe havens to
attract investors, who seek safety and stability for their investments.
This is supplemented by the unique infrastructure in Liechtenstein and
Switzerland in the banking and financial services industry. Consequently, we experienced very high growth in private banking in Liechtenstein in 2014. Bank Linth enjoyed an excellent business year in 2014,
which was also reflected in private banking business.
A further key business pillar is our bank in Vienna, LLB (Österreich)
AG. After commencing business operations in November 2009 it has
already posted a business volume of over CHF 2 billion, increased its
earnings by 28 percent and reduced its costs by 10 percent. After just
five years of development, in 2014 our bank in Vienna has reached the
break-even point. It has become a firm component of the Austrian
banking center, which according to the International Monetary Fund
(IMF) is one of the 25 most important financial centers in the world.
LLB Austria is successfully attracting new clients both in Austria and
in the growth markets of Central and Eastern Europe.
International growth markets of Central and Eastern Europe
and the Middle East
Wealthy clients expect three qualities from their bank: they attach
great importance to financial stability, first-class advice and banking
services, as well as an excellent return on their investments in competitive comparison. Our private banking advisers, who look after the
target markets of Central and Eastern Europe from Zurich-Erlenbach,
Geneva and Vienna, are firmly part of a sound bank having strong
31
Private Banking
investment competence. At the same time, they are well aware of the
needs, requirements and behaviour of clients in the local target markets. Against this background, we see further good potential for us as
a partner especially for wealthy private clients in the Eastern European
EU states and in the highly competitive Russian market.
The same principles apply to the Middle Eastern market region,
where we care for our clients locally from our representative offices in
Dubai and Abu Dhabi. The booking center for these two offices is in
Liechtenstein. Since 2014, we have provided our clients with access to
the stock markets in Dubai and Abu Dhabi. Business men in the Gulf
states, who have earned their wealth themselves, are well informed
about the local financial markets and they expect partner-like advice,
good service and investment performance. Wealthy clients value our
commitment to the local market as well as the security that the LLB
Group and the Liechtenstein financial center provide.
Traditional core markets of Germany and Western Europe
Consistent client focus is also the decisive criterion for our positioning
in the traditional, cross-border markets of Germany and the rest of
Western Europe. For our asset management Germany remains an important market. Our client advisers not only have to identify and fulfil
constantly changing client requirements, they also have to keep
abreast of increasingly complex international regulatory provisions.
Against this backdrop, in 2014 we made further investments in our
client advisory service and in the quality of our private banking services. We also enhanced our groupwide expertise in the complex issues
associated with cross-border banking.
We are well positioned in the German-speaking region. In the classification published by the “FUCHSBRIEFE” information service for
2015, the LLB was ranked among the best 10 banks and asset managers. In the all-time best ranking, the LLB climbed to 15th place.
Investments in innovation
Forward-looking pricing model
The LLB Group constantly strives to identify developments, changes
and trends in good time, to analyse the consequences of them, and to
formulate appropriate measures and activities. In strengthening investor protection, within the scope of its MiFID II directive, the EU
wants more transparency in relation to commissions in investment
advisory services (see the chapter “Regulatory framework and developments”, page 58). With its new pricing model, the LLB already complies with future regulatory provisions.
The Liechtensteinische Landesbank, as the first bank in Liechtenstein, and Bank Linth, as one of the first banks in Switzerland, introduced an innovative pricing model in investment business on 1 July
2014. In both asset management and investment advisory business,
the LLB and Bank Linth decided to forego distribution payments for
LLB funds, and pay retrocessions for external funds fully to their clients
without being requested to do so. Furthermore, they are among the
first banks in Europe to make the fees for strategy funds dependent
on performance, and for bond funds dependent on the interest rate
level.
In living up to its mission statement, the LLB is fulfilling the need of
its clients for more transparency, a clear fee structure and an attractive
price / performance ratio. The combination of an innovative pricing
model with prize-winning investment competence has created a very
strong competitive position for the LLB Group as an investment and
asset management bank (see the chapter “Institutional Clients”, pages
34 – 35).
Standard-setting investment advice
In 2015 we are continuing to implement the measures developed in
2014 to formulate solutions for our clients. In an innovative partnership with Avaloq, a leading international provider of integrated solutions for wealth management, universal and retail banks, as well as
swissQuant Group, a company specialised in risk and earnings analysis, the LLB is formulating innovative investment advisory solutions.
This enables us to distinguish ourselves from our competitors while
creating new possibilities of providing advice to clients.
For our clients this means a completely new advisory experience
with the aim of constructing an optimal portfolio:
◆◆ All client portfolios will be monitored fully automatically.
◆◆ In the event of deviations to the risk profile the client will be
notified.
◆◆ If required, the client will receive an automatic portfolio restructuring proposal.
With this IT platform for investment advisory services, we are setting
a new standard because it incorporates automatic investor protection
and compliance provisions. This innovative investment advisory system fulfils all the regulatory requirements of the MiFID II directive in
the EU / EEA and the FIDLEG directive in Switzerland. It will be completely integrated in our Avaloq core banking system and therefore
become an integral part of our omni-channel strategy.
By consistently focusing on the needs of our clientele and taking
proactive action, we can to an extent act as a pioneer in the devel
opment of the market and clearly distinguish ourselves from our
competitors.
Tax compliance
At a time of fundamental change in the banking industry, our competitiveness is of particular importance. This includes the question of
taxation. The LLB Group supports the tax compliance strategy of the
Liechtenstein financial center and actively embraces the transformation process. Settling taxation issues as quickly as possible is of primary
importance in successfully shaping the future. The Liechtenstein
financial center and the LLB have already made significant progress in
adapting to the new regulatory framework.
32
Private Banking
On 1 January 2014, a withholding tax agreement between Liechtenstein and Austria to regularise previously untaxed deposits came into
force. At the same time, the existing double taxation agreement was
revised and adapted to conform to international standards. On the
one hand, the taxation agreement set up a mechanism for the subsequent taxation of previously undeclared assets, and on the other, it
established a withholding tax for future capital gains. By the end of
June 2014, the LLB Group had completed the disclosure process for its
Austrian clients.
The LLB Group also decided to implement the stipulations of the
FATCA agreement. These requirements focus on the identification of
clients, a possible withholding tax on US-based payments and a US
taxation reporting system. By signing up to the FATCA agreement of
16 May 2014, which specifies an automatic exchange of information
with the US tax authorities, Liechtenstein has safeguarded access to
the US capital market for its financial service providers.
Moreover, Liechtenstein is one of the 52 countries, which signed
an agreement regarding the automatic exchange of information on
29 October 2014 (see the chapter “Regulatory framework and developments”, page 57).
The business volume of the Private Banking segment of the LLB
Group rose in 2014 to CHF 17.8 billion (31.12. 2013: CHF 16.9 billion). The
net new money inflow stood at CHF 427 million (2013: outflow of
CHF 1.5 billion). Assets under management increased by 5.3 percent
to CHF 16.6 billion (31.12. 2013: CHF 15.8 billion).
The closure of LLB (Switzerland) Ltd. was reflected in income and
expenses. Operating income fell by 7.3 percent to CHF 100.3 million
(2013: CHF 108.2 million). The positive earnings development of Bank
Linth LLB AG, LLB (Österreich) AG, and the parent bank was unable to
compensate for the decrease caused by the closure of LLB (Switzerland) Ltd.
Operating expenses fell sharply by 26.4 percent to CHF 64.8 million
(2013: CHF 88.1 million). The reduction in costs was attributable to the
closure of LLB (Switzerland) Ltd. and provisions for the US taxation
dispute allocated in the previous year. Total headcount rose by 5.6 percent to 131 full-time positions (31.12. 2013: 124).
The segment result before tax rose sharply by 76.4 percent to
CHF 35.5 million (2013: CHF 20.1 million).
33
Private Banking
Segment reporting
in CHF thousands
Net interest income
2014
2013
+ / – %
13'340
18'515
– 28.0
957
– 20'400
14'297
– 1'885
76'968
85'326
8'985
8'892
1.0
31
15'900
– 99.8
Net trading income
Other income
– 9.8
100'281
108'233
– 7.3
Personnel expenses
– 24'955
– 28'980
– 13.9
– 5'318
– 16'273
– 67.3
– 2
– 2'459
– 99.9
– 34'538
– 40'409
– 14.5
– 64'813
– 88'121
– 26.4
35'468
20'112
76.4
Performance figures
2014
2013
427
– 1'474
2.7
– 8.5
64.7
60.3
57.2
71.6
**Operating income excluding credit loss expense relative to average business volumes.
31. 12. 2014
31. 12. 2013
17'833
16'873
5.7
16'603
15'770
5.3
1'230
1'103
11.5
131
124
5.6
+ / – %
34
I
n caring for institutional clients, individual relationships as partners,
and premium quality are the decisive factors. The LLB Group’s Asset
Management has excellent investment competence, and its Fund Services
possess comprehensive expertise. Closeness to clients and continuity
are the key qualities for financial intermediaries and external asset
managers in Liechtenstein and Switzerland.
Business profile
Asset Management
The Institutional Clients Division encompasses the intermediary and
fund business, as well as the asset management operations of the LLB
Group. We concentrate on professional investors and financial inter
mediaries. One of our most important guidelines is the partner-like
dialogue, which we maintain with fiduciaries, asset managers, fund
promoters, insurance companies, pension funds and public institutions.
Our focus lies on the markets of Liechtenstein and Switzerland.
In delivering our comprehensive services in line with the one-stopshop concept, we can call on the broad expertise available within our
corporate group. This applies for financial and legal issues, as well as
questions relating to asset management. We are one of the three
largest investment fund service providers in Liechtenstein. Another
one of our strengths is the prize-winning investment competence of
our asset management team. And exemplary continuity is one of the
key characteristics of our team of specialists, who look after the financial intermediaries and external asset managers.
Both the transfer of knowledge and the exchange of information
with external partners are of great importance to the LLB Group. The
Institutional Clients Market Division provides sound knowledge in the
form of its innovative “LLB Xpert views” online platform and in exclusive round-table discussions. Institutional investors therefore receive
a comprehensive overview of the latest developments in the areas of
investment, legal issues and taxation.
Asset Management takes a central position within the LLB Group. Our
team has broad investment competence in all important asset classes.
The LLB’s strategy funds have achieved top rankings in long-term competition comparison for many years. Various awards received in 2014
again prove that with its systematic investment processes the LLB
generates clear added value for its investors.
Awards
At the “24th Lipper Fund Awards” 2014 in Switzerland, the LLB Equities
Regio Bodensee (CHF) fund was honoured for the third time – after
2007 and 2008 − for its absolute performance. The fund received
the award in the “Equity Switzerland Small and Mid Caps” category.
“GELD”, the Austrian journal for financial professionals, selected the
LLB Strategy Yield (EUR) and the LLB Strategy Balanced (EUR) funds
for an umbrella award each in November 2014. In the three- and fiveyears assessment the Strategy Yield fund attained second place, and
the Strategy Balanced fund was placed third. Our Asset Management
also received top rankings for these two funds in 2013 and 2014 from
the “FUCHS Performance Project”, a test for asset managers.
On 28 January 2015, the LLB Strategy Balanced (CHF) fund was
awarded the “German Fund Prize” at the “14th Funds Professional Congress” in Mannheim, Germany. In the Mixed Fund Global Multi Asset
category, the fund was awarded the title “Outstanding”.
LLB investment funds
The LLB Asset Management possesses outstanding investment expertise, and is constantly enhancing and expanding its knowledge. In 2014
we further refined and improved our range of funds, our risk management and analysis based on quantitative value models. Two new strategy funds in USD were launched for investors in the LLB growth markets
of the Middle East and Eastern Europe. With the exception of five funds
for institutional large investors, all our funds are EU-compatible.
35
And all LLB funds are actively managed by our experienced fund managers – at low cost. Our asset management costs are just 39 percent in
comparison with Swiss competitors, and 41 percent in comparison with
competitors in Western Europe.
With the ground-breaking introduction of its new pricing model on
1 July 2014, the LLB Group fulfilled its clients’ requirement for more
transparency, a clear fee structure and an attractive price / performance ratio.
In both asset management and investment advisory business, the
Liechtensteinische Landesbank and Bank Linth forego distribution
payments for LLB funds, and pay retrocessions for external funds fully
to their clients without being requested to do so. Furthermore, they
are among the first banks in Europe to make the fees for strategy funds
dependent on performance, and for bond funds dependent on the
interest rate level.
Innovation projects
In 2015, the LLB Group is making targeted investments in the future.
Asset Management is continuing to develop its equities quant-value
model and expand its range of funds focusing on clients and markets.
In an innovative partnership with Avaloq, a leading international provider of integrated solutions for wealth management, universal and
retail banks, as well as swissQuant Group, a company specialised in
risk and earnings analysis, our Investment Center is developing an
innovative IT-based platform for investment advisory solutions. From
autumn 2015, all clients of the LLB Group will benefit from an advisory
concept enabling excellent client care and portfolio monitoring, as
well as automated processes which ensure compliance with regula
tory provisions and safeguard risk management (see the chapters
“Private Banking”, page 31, and “Corporate Center”, page 42).
Fund Services
Our LLB Fund Services AG is one of the leading fund service providers
in Liechtenstein and is an important growth-driver for the LLB Group.
It provides a broad spectrum of comprehensive services including
made-to-measure funds, both in-house and for independent asset
managers and other fund promoters, which it structures and administers, as well as providing state-of-the-art risk management.
LLB as custodian bank
At the end of 2014, the Liechtensteinische Landesbank was serving as
a custodian bank for more than 230 investment funds with a fund
volume of around CHF 10 billion. Measured against the number of
Private labelling
LLB Fund Services AG puts in place made-to-measure investment solutions for independent asset managers and other fund promoters such
as family offices. It has made a name for itself as a specialist particularly in the field of private labelling. Fund Services takes care of the
setting up and the legal engineering of the fund, as well as the administration and organisation of the custodian bank function.
Private label fund solutions are very individual. Many of our client
advisers call on their decades of experience to find solutions for the
special requirements of each client. Fund Services offers innovative
high-quality, highly flexible solutions for the most varied of investor
needs.
Focused organisational structure
In 2014, a time of consolidation in the European fund market, we established a solid foundation for sustained success. This business area
commenced 2015 with a new organisational structure. By merging the
previously two parallel companies, LLB Fondsleitung AG and LLB Fund
Services AG, the Liechtensteinische Landesbank has bundled expertise
and experience in fund business with professional investors. LLB Fund
Services AG now manages assets of over CHF 6 billion and employs
22 staff. This concentration of core competences corresponds to the
Focus2015 strategy of the LLB Group.
Risk management
To further enhance its competitiveness, in 2014 LLB Fund Services increased its level of automation, improved processes, reduced complexity and revised its pricing model. Furthermore, the company invested
in a new risk management system, and since the end of 2014 now has
its own Fund Risk Management & Reporting Department. This move
reflects our view that risk management is becoming an ever more important integral part of fund management. In leading the way in
Liechtenstein fund business, LLB Fund Services will further develop its
risk management in 2015.
Regulation in the EU in the form of the UCITS IV directive (Undertakings for Collective Investment Securities Directive) and the EU
directive concerning alternative investment fund managers (AIFMD)
is leading to more strict standards for the management of investment
funds in the EU – and therefore in Liechtenstein as an EEA state.
Switzerland has begun to harmonise its local legislation to counter
the isolation of the Swiss fund industry. With the partially revised
collective investment law and the ordinance concerning collective
investments of 1 March 2013 the general stipulations for the organisation and operational structure of investment funds and the duties of
risk management were more clearly defined.
mandates, the LLB is the market leader in Liechtenstein. As a custodian bank for external funds, the LLB has acknowledged expertise in the
management and administration of complex fund mandates having
various strategies and investment markets.
36
Financial intermediaries and
external asset managers
Closeness to clients and focus on clients’ needs distinguishes the LLB
Group. This applies in particular to our team of experts who take care
of fiduciaries, lawyers and external asset managers in Liechtenstein
and Switzerland. In the last three years, it has been shown that financial intermediaries and asset managers prefer medium-size financial
institutions, which offer their clients individual solutions and have
short decision-making channels.
Genuine continuity
Financial intermediaries and asset managers expect a high level of
service quality and knowledge in the provision of investment advice,
prompt information on regulatory and investment issues, open and
continuous communication and a direct, personal contact partner. In
2014 we continued the intensive advanced training of our experienced
client advisers.
Knowledge transfer
The transfer of knowledge and a dense network of external partners
are important for intermediaries. Through our “LLB Xpert views” online
platform we can make available expert knowledge from the fields of
investment, law and taxation to this client group. This information is
supplemented by a comprehensive overview of the latest regulatory
developments. Our institutional clients make intensive use of transparent, person-to-person dialogue in our round-table discussions and
at personal meetings.
Another important issue is the automatic exchange of tax information. As an EEA state, Liechtenstein is among the group of early adopters. On 1 January 2014, a withholding tax treaty came into force
between Liechtenstein and Austria which regularises previously undeclared assets. Moreover, the US Foreign Account Tax Compliance
Act (FATCA) obligates financial institutions throughout the world to
identify their US clients as well as disclosing their assets and earnings
to the US authorities (see the chapter “Regulatory framework and
developments”, page 57).
At the same time, from 2017 the EU Markets in Financial Instruments Directive II (MiFID II) and the planned Swiss financial services
law (FIDLEG) will establish the legal framework on how banks and
financial intermediaries are to provide cross-border investment
services.
With the aim of enhancing our competitiveness and increasing
efficiency, we are focusing on preferred partners and their networks.
In 2014, in close cooperation with our Group Legal & Compliance
epartment, we optimised the quality of our client profiles and refined
D
our professional client care as part of our risk management
processes.
In the Institutional Clients segment of the LLB Group assets under
management posted a performance-related increase of 0.6 percent to
CHF 25.4 billion (31.12. 2013: CHF 25.2 billion). The net new money outflow stood at CHF 643 million (2013: minus CHF 688 million). In the first
half year of 2014, isolated large outflows were recorded particularly
with custodian bank funds and public institutions.
The sale of the Jura Trust Group and the closure of LLB (Switzerland)
Ltd. in the previous year had a marked impact on the segment result.
This was amplified by one-off effects, which were recognised in other
income and general and administrative expenses. Operating income
in 2014 decreased by 40.9 percent to CHF 102.3 million (2013: CHF 173.3 million). Operating expenses fell by 59.9 percent to CHF 83.8 million (2013: CHF 208.9 million).
This resulted a significant rise in segment profit before tax of
CHF 54.2 million to CHF 18.6 million (2013: minus CHF 35.6 million).
37
Segment reporting
in CHF thousands
2014
2013
+ / – %
7'418
10'469
– 29.1
– 911
– 5'400
– 83.1
6'507
5'069
28.4
86'970
101'816
– 14.6
0.3
Net interest income
Net trading income
9'166
9'136
Other income
– 297
57'283
102'346
173'304
Personnel expenses
– 38'170
– 39'384
– 3.1
– 6'321
– 116'212
– 94.6
– 66.1
– 40.9
– 3'342
– 9'853
– 35'928
– 43'467
– 17.3
– 83'761
– 208'916
– 59.9
18'585
– 35'612
Performance figures
2014
2013
– 643
– 688
– 2.5
– 2.8
80.5
85.6
40.3
48.4
**Operating income excluding credit loss expense relative and excluding adjustments on purchase price obligations from acquisitions to average business volumes.
31. 12. 2014
31. 12. 2013
25'740
25'567
+ / – %
0.7
25'382
25'228
0.6
358
339
5.6
160
166
– 3.6
“We pick up new market and
technological trends on
our radar long before they
happen and we are responsive
to our customers’ needs.”
Alex Vogt, CEO of Optics Balzers
Innovation
We play an active role in
creating a sustainable future.
40
Corporate Center
Corporate Center
T
he Corporate Center of the LLB Group steers, coordinates and monitors
groupwide business activities, processes and risks. It safeguards
Group development including information technology as well as improving
the efficiency and quality of the LLB Group’s services. By using the most
modern IT, the Corporate Center fulfils the challenge of being a partner
for innovation.
Business profile
Strategic focus
The Corporate Center encompasses the Group COO, Group CFO and
Group CEO Divisions. It bundles central functions within the LLB
Group and supports the market-oriented Retail & Corporate Banking,
Private Banking and Institutional Clients Divisions in conducting their
activities and implementing their strategies. The focus lies on functions in the areas of communication, marketing and human resources,
finances, risk and credit management, IT, trading, securities administration and payment services, corporate development and purchasing
management, as well as legal and compliance services.
Starting from 2015, the LLB Group will focus its activities on its mission of “We are setting standards for banking with values”. The concept
is based on the idea of managing material values with a clearly defined
value system. This includes the consistent implementation of regulatory provisions, seeking dialogue with clients, politicians and the public, as well as optimally exploiting the possibilities offered by new
technologies and developing innovative solutions. The divisions of the
Corporate Center ensure the Group’s corporate development and the
implementation of its values. At the same time, they drive ahead the
automation of banking transactions and they are a guarantee for innovation. The LLB Group believes in an interlocking concept of mobile,
web-based and stationary services. Innovative infrastructure generates significant added value.
Process optimisation
On 1 July 2014, the LLB Group introduced an innovative, new pricing
system. This means that the Liechtensteinische Landesbank and Bank
Linth are among the first banks in Liechtenstein and Switzerland to
provide retrocession-free asset management and investment advisory
services. This is a part of the Group’s new strategic focus in line with
the Focus2015 strategy. The Corporate Center made a decisive contribution to the realisation of this pricing system. For this purpose, the
Group IT Division programmed 2’500 fee rules in the Avaloq banking
system and tested around 5’000 pricing combinations.
Since the groupwide introduction of the Avaloq banking software
package in 2011, we have been able to consistently improve our processing quality and productivity. By carrying out defined analyses and
increasing automation, the Group IT Division helps to design more
flexible work processes and implement more efficient distribution
processes.
In 2014, the Group COO Division made great progress in improving
efficiency, refining IT systems and simplifying structures. It also made
cost savings of 11 percent compared with the previous year. Expenditure for IT projects amounted to CHF 17.5 million in 2014; 60 percent,
or CHF 10.1 million, of our IT investments went to business projects,
CHF 5.6 million was invested in our infrastructure and CHF 1.8 million
represented the expenditure for current regulatory issues (see the
chapter “Regulatory framework and developments”, pages 56 – 59).
Mobile banking app
By using the most modern IT infrastructure, the Corporate Center of
the LLB Group, as a partner for innovation, also helps the Group exploit
new business potentials. Since December 2013, we have offered our
clients an attractive and innovative mobile banking app for iOS, and
also since June 2014 for Android smartphones and tablets (see the
chapter “Retail & Corporate Banking”, pages 26 – 28).
41
Corporate Center
Omni-channel banking
In order to create new, intelligent solutions, the concerted interaction
of IT and marketing plays a central role. Bank clients are increasingly
active in social media networks, they select virtual channels to contact
the bank, and the internet is evolving into a sales and interaction
channel. Accordingly, we are planning to take full advantage of omni-channel banking, and in 2015 we shall formulate a strategy to connect bank branches with online banking and mobile banking. Today,
for example, 65 percent of payment transfers throughout the Group
are made via online banking or mobile banking. Technologies for mobile business and the integration of communication channels will play
an increasingly important role for the LLB Group in the future.
Shared service centers
As the backbone of the LLB Group, the COO Division made a significant
contribution in 2014 to adapting the LLB to face fiercer competition.
The measures that began in 2012 with the amalgamation of the payment services, trading and securities administration of the LLB and
Bank Linth in a shared service center at the headquarters in Vaduz
were continued in 2014. In a new step, the payment systems of LLB
(Österreich) AG in Vienna are also channelled through Vaduz.
On 1 January 2014, the electronic archives of the LLB and Bank Linth
were merged in another shared service center. This ensures faster access as well as saving space and costs. Cost savings amounted to over
50 percent. The internal bundling of services within the Group is continually being monitored. Every year, our shared service centers participate in benchmarking projects to continually improve cost efficiency and quality of services.
Data protection
The issue of the confidentiality of client data has been in the spotlight
over the last few years. The Swiss Financial Market Authority (FINMA)
has reacted by revising its circular letter “Operational risks for banks
2008 / 21”, which came into effect on 1 January 2015. Dealing with the
risks associated with electronic client data has now been reformulated
in appendix 3 of the circular.
The LLB Group will apply the new standards. These criteria include
the documentation and classification of client identifying data (CID),
the inventory of the data storage location and data access, structured
risk control processes and the training of personnel who have access
to client identifying data. The LLB Group has undertaken to continually
adapt its security standards to suit market practice.
The amount of data that banks receive, analyse and store is increasing exponentially. On the one hand this includes client data such as the
documentation requirements stipulated by the EU directive concerning
Since the summer of 2013, the data center of the LLB Group has been
located in Eschen, Liechtenstein. Here the Group’s highly sensitive
business data are securely protected. Data security is of cardinal importance to us. Information processing systems, which guarantee
confidentiality, availability and integrity, also protect against threats
and dangers, and help to prevent damage and minimise risks. However, our data center not only enjoys one of the highest security standards in eastern Switzerland, it is also a commitment to “green IT”. It
was built in accordance with the tier III standard defined by the US
Uptime Institute (see the chapter “Responsibilities for society and the
environment”, page 62).
Compliance
Integrity is a major attribute in gaining the trust of our clients, shareholders, employees and the general public. Accordingly, the LLB Group
attaches great importance to the legal and compliance function.
During 2014, it again expanded human resources in this unit. This independent organisational unit supports responsible, business-oriented activities and ensures that compliance risks are reduced or avoided,
for example damage to the Group’s reputation or infringements of
legal provisions.
Ensuring good compliance is a challenging management task. In
2014, the regular flow of information to the Group Executive Board was
intensified. To improve compliance management, a “Compliance Best
Practice” project was initiated. Via our learning management system,
the Legal & Compliance Department organised e-tutor training courses
on due diligence obligations and advanced training on our rules of conduct, which were defined in 2013. Moreover, a Group Regulatory Committee has been established to deal with the implementation of
regulations.
In accordance with regulatory provisions, since the beginning of 2014,
banks in the EU, and therefore in Austria, are obligated to set up an internal reporting point for employees, to which infringements of legal
banking regulations in the broadest sense can be anonymously reported. The LLB Group has standardised the process to prevent infringement
of legal banking regulations and has set up a confidential entity to receive anonymous reports.
In 2015, the Group Legal & Compliance Department will continue
fine-tuning its measures to prevent money laundering and the financing of terrorism in accordance with know your customer (KYC) and
know your transactions» (KYT) principles. In addition, the organisational unit is intensively involved in various innovative projects.
the markets for financial instruments (MiFID II). On the other, digitalised data is received from business transactions with clients, as well as
data generated by the expansion of communication via online channels
and social media. Furthermore, more data is processed because of the
stricter risk management systems for the overall bank as well as by the
legally stipulated stress tests.
42
Corporate Center
Investments and innovation
Front to back excellence
The LLB Group consistently focuses on the particular life situation of
its clients, which means that contacts are to be kept as brief and pleasant as possible. For this purpose, we have accelerated and improved
client onboarding and lending approval processes. In a project designated “Front to back excellence”, on the basis of lean management, we
aim to accelerate the lending approval and client onboarding process
at the LLB and Bank Linth by intensifying standardisation and improving automation. This should enhance efficiency and enable faster
decision-making.
In a pilot phase between March and August 2015, we want to fine
tune the new lending approval process. From the middle of 2015, the
client advisers of all three market divisions will have available an intranet application to enable a fast, competent and binding client onboarding procedure, and to ensure that the necessary information is
delivered in full and in good quality.
The LLB Group reports the structural contribution, the results of its
own financial investments, and the income from interest rate hedge
accounting under the Corporate Center.
From the perspective of the reporting date, a valuation loss of
CHF 55.9 million was incurred with interest rate swaps in 2014. This
meant that net trading income declined from CHF 32.9 million in the
previous year to minus CHF 50.9 million. At the same time, income
from financial investments increased by 131.7 percent to CHF 36.3 million (2013: CHF 15.6 million). Operating income fell by 71.7 percent to
CHF 24.7 million (2013: CHF 87.2 million).
Operating expenses were reduced by 13.0 percent to CHF 47.5 million (2013: CHF 54.6 million). The lower total headcount is largely attributable to fewer employees in the Corporate Center. Cost savings
with occupancy and IT expenses drove down general and administrative expenses. At the same time, in 2014 higher provisions were set
aside for legal and process risks. Depreciation was reduced sharply,
mainly in connection with one-off write offs in relation to the closure
of LLB (Switzerland) Ltd. in the previous year.
In total, the segment profit before tax fell to minus CHF 22.8 million
(2013: 32.5 million).
Innovative investment advice
Our understanding for the requirements of clients and our ability to
provide holistic advice are reflected in the development of an innovative client advisory IT platform. The LLB Group plans to introduce a
platform which combines and automates the functions of investment
advice with investor protection and compliance. We shall combine
portfolio construction, risk analysis and portfolio optimisation to enhance efficiency and reduce complexity in the provision of advice. The
system will fulfil the regulatory requirements for cross-border investor
services such as envisaged in the EU’s MiFID II and the Swiss FIDLEG
directives, and it will ensure an extremely efficient level of investor
protection.
To develop this innovative service, the LLB Group is cooperating
with Avaloq, a leading international provider of integrated solutions
for wealth management, universal and retail banks, as well as
swissQuant Group, a company specialised in risk and earnings analysis. Together we are creating an application which will enable investment advisers to offer their clients excellent service in a unique manner. The new application should not only contribute to dealing more
easily with regulatory requirements, but also make the launching of
new products and services much simpler, even across national
borders.
43
Corporate Center
Segment reporting
in CHF thousands
Net interest income
Net trading income
Net income from finacial investments at fair value through profit and loss
Share of net income of associates
Other income
2014
2013
+ / – %
36'002
32'066
12.3
0
0
36'002
32'066
131
– 1'027
12.3
– 50'932
32'857
36'257
15'645
131.7
19
5
280.0
3'213
7'607
– 57.8
24'690
87'153
– 71.7
– 9.5
Personnel expenses
– 68'699
– 75'884
– 60'943
– 58'171
4.8
– 28'885
– 46'307
– 37.6
111'005
125'733
– 11.7
– 47'522
– 54'629
– 13.0
– 22'832
32'524
31. 12. 2014
31. 12. 2013
+ / – %
378
400
– 5.5
44
The LLB share
The LLB share
T
he share of the Liechtensteinische Landesbank is listed on SIX Swiss
Exchange. In 2014, LLB investors were able to profit from the positive
share price development and an attractive dividend yield.
Market capitalization
Share performance
The LLB share has been listed on SIX Swiss Exchange in the segment
“Main Standard” under the symbol LLB (security number 3019524) since
1993. 1’927’838 LLB shares (2013: 2’306’779) were traded there in 2014,
which corresponds to 6.3 percent (2013: 7.5 %) of all shares issued. As
at 31 December 2014, the market capitalization of Liechtensteinische
Landesbank AG stood at CHF 1’232 million (2013: CHF 1’139.6 million),
with a total of 30.8 million shares.
The Swiss Performance Index (SPI) increased by 13 percent on the previous year. The price of the LLB share rose by 8.1 percent to CHF 40.– as
at 31 December 2014. The LLB share clearly outperformed the banking
sector in Europe: the STOXX Europe 600 Banks Index in CHF had decreased by 1.4 percent by the end of 2014.
Total return of the LLB share
Shareholder structure
In 2014, the Principality of Liechtenstein maintained its 17.7 million LLB
shares (57.5 percent of the share capital) unchanged. On 22 November
2011, the Liechtenstein Government, as representative of the majority
shareholder, adopted the ownership strategy it had been pursuing in
regards to the Principality’s equity stake in Liechtensteinische Landesbank AG. The Government explicitly supports LLB as a listed company
and is committed to keeping its majority equity stake of at least
51 percent.
At the end of the report year, LLB held 6.4 percent (2013: 6.3 %) of its
own shares, 3.7 percent (2013: 3.7 %) were held by Thornburg Investment Management Inc. 10.0 million shares were in free float as at
31 December 2014, whereby none of the other shareholders held more
than 3.0 percent of the share capital.
2010 – 2014, in percent
The total return of the LLB share stood at 12 percent (including reinvested dividends). The LLB share finished on 31 December 2014 at an
exchange rate of CHF 40.–.
45
The LLB share
Dividend policy
Communication with the capital market
The Liechtensteinische Landesbank pursues an attractive long-term
dividend policy for its shareholders. Furthermore, the LLB Group is
committed to safeguarding its financial security and stability and intends to keep risk-bearing capital at a Tier 1 ratio of over 16 percent in
accordance with Basel III (end of 2014: 18.3 %). Against this backdrop,
the payout ratio for shareholders is expected to range between 40 and
60 percent of the Group net profit.
The Board of Directors will propose an unchanged dividend per
share of CHF 1.50 (2013: CHF 1.50) to the 23rd Ordinary General Meeting of Shareholders on 8 May 2015. This corresponds to a dividend yield
of 3.8 percent based on the share price as of the end of 2014. The dividends amount to CHF 43.2 million (2013: CHF 43.3 million). This corresponds to a payout ratio of 59.5 percent (2013: 80.5 %) for 2014.
The LLB Group aims to provide an up-to-date picture of the opportunities and risks relating to our business activities by engaging in an
open and ongoing dialogue with investors, analysts and representatives of the media. As a listed company, we are obliged to publish
share-price relevant information, including ad hoc information about
events that may affect the share price, by means of media communiqués to all stakeholders. We simultaneously, comprehensively and
regularly inform shareholders, clients, employees and the public about
our business performance, value drivers as well as our strategy and
provide them with an overview of our financial and operational key
figures. The aim is to ensure that the price of the LLB share fairly reflects the value of the company.
The LLB Group publishes annual and interim financial reports, comprising media and analyst conferences as well as conference calls for
analysts, investors and the media. At the General Meetings of Shareholders, the Board of Directors and the Board of Management provide
transparent reporting on business performance. Moreover, in the
course of the year, we have regular discussions with investors, inform
the public within the scope of roadshows and participate in specialist
conferences for financial analysts and investors.
All publicly accessible information about the LLB Group can be accessed on our web site at www.llb.li. The public is welcome to register
for electronically provided share-price relevant information about the
LLB Group at www.llb.li/registration. Additionally, we publish our
information via social media channels (Facebook, Twitter). The annual
and interim financial reports are published by us in printed form and
have also been available in a comprehensive online version with numerous additional functions since 2005. The 2014 Annual Report can
be accessed online at: gb2014.llb.li (German); ar2014.llb.li (English).
Dividend per share
2010 – 2014, in CHF
Analysts’ assessments
The Zürcher Kantonalbank (ZKB) analyst Andreas Brun monitored the
LLB share in 2014 and regularly published studies and assessments of
the LLB Group. Upon publication of the 2014 interim financial report,
ZKB adjusted its rating of the LLB share to “overweight”, with reference
to the strategic repositioning that was progressing according to plan.
After the Swiss National Bank (SNB) had abandoned the minimum
exchange rate of the Swiss franc to the Euro ZKB corrected its rating
to “market weight” on 20 January 2015 and kept its rating even after
advance information on 5 February 2015 concerning the Group net
profit for 2014.
The Swiss branch of the Frankfurt MainFirst Bank reassumed covering LLB on 1 October 2014. The successful repositioning, the strong
equity basis and the greatly improved profitability convinced the financial analyst Tomasz Grzelak in the Zurich financial centre to first
rate the LLB share as “overweight”. He subsequently downgraded it to
“neutral” after advance information that LLB was expecting a lower
Group net profit in the wake of the Swiss National Bank’s decisions.
46
The LLB share
LLB share: facts and figures
in CHF thousands
Number of shares eligible for dividend
Free float (number of shares)
31. 12. 2014
31. 12. 2013
28'821'798
28'852'866
9'971'798
10'002'866
Year’s high (17 February 2014 / 7 May 2013)
43.90
42.15
Year’s low (27 June 2014 / 3 January 2013)
36.15
27.90
Year-end price
40.00
37.00
Performance LLB share (in percent)
12.0
32.2
Performance SPI (in percent)
13.0
24.6
Performance Stoxx Europe 600 Banks in CHF (in percent)
– 1.4
25.6
7'742
9'278
Average trading volume (number of shares)
Market capitalization (in CHF billions)
1.20
1.10
Earnings per LLB share (in CHF)
2.45
1.75
Dividend per LLB share (in CHF)
* 1.50
1.50
Payout ratio (in percent)
59.5
80.5
Dividend yield at year-end price (in percent)
* 3.8
4.1
47
T
he world is changing. Our values stand for tradition and innovation,
for dynamism and stability. The Liechtensteinische Landesbank
brand means reliability for our clients, motivation for our employees and
a long-term strategy for our stakeholders. As sponsors, we are commit
ted to supporting sports, culture and society.
Brand strategy
Strategic repositioning
The brand Liechtensteinische Landesbank connects us with our clients
and within our Group of companies. As a universal bank, we are a partner of the Principality of Liechtenstein and its people. Simultaneously,
with our subsidiary Bank Linth, we are also partners of the economy
and society in the region of eastern Switzerland. On the one hand, we
stand for the region and its culture. Moreover, with our focus on private banking, we are growing in Switzerland and in Austria, and expanding into the growth markets of Central and Eastern Europe as
well as the Middle East. On the other hand, we are an international
partner. As partners, we are performance oriented. We consider ourselves responsible for each and every client and for the way we deal
with resources and risks. We listen, find solutions and show options.
We provide security and facilitate progress. We are a strong partner
for our shareholders, clients and employees.
In a time of fundamental change in the banking sector, the LLB Group’s
Focus2015 strategy has the clearly defined goal of creating a solid basis
for sustainable success beyond 2015. The strategic repositioning is also
reflected in both the LLB and Bank Linth LLB brands. In 2014, the LLB
Group analysed the competitive environment, formulated the LLB
Group’s vision and mission statement as well as a new market positioning for the LLB Group. It presented the results in January 2015.
Brand components
The design of our brand is classic and modern. The clear geometry of
the brand logo stands for security and stability. The angles projecting
beyond the basic shape symbolize our openness. The colour green signals our origin, and the red square core stands for our focus on what
is essential and on our partners. The harmony and equality with which
the elements form a unity represent connection and partnership.
Vision
The LLB Group’s vision is: “We set standards for banking with values”.
Our vision of banking is based on the idea that we can excel at managing material values if we have a clearly defined system of values.
Mission statement
The LLB Group’s mission statement, which is derived from this vision,
expresses four binding values that shape our corporate culture: “integrity”, “respectfulness”, “excellence”, “pioneering”. This is what our vision
stands for:
◆◆ Integrity – we provide clarity and keep our word.
◆◆ Respectfulness – we are partners and show appreciation.
◆◆ Excellence – we set standards through performance and
commitment.
◆◆ Pioneering – we actively and sustainably shape the future.
48
Positioning
Both brands of the LLB Group, LLB and Bank Linth, are clearly positioned.
The respective differentiation of each brand from competing brands
provides an important basis for successful brand management.
LLB
The Liechtensteinische Landesbank is the oldest and longest-standing
financial institution in Liechtenstein. It is committed to a concept of
banking that is geared towards security and stability, while still being
target oriented. LLB creates added value by synthesizing competing
values. This leads to new and pioneering solutions. LLB’s journey from
tradition into the future is best expressed by the statement: “Tradition
Meets Innovation”.
Bank Linth
As the first financial institution in Switzerland, Bank Linth has been
consistently meeting clients’ needs for years now by practicing its motto of being “Truly simple”. The idea behind this is to provide the individual client with time-savings, clarity and convenience in an ever more
hectic and complex world. Excellent service quality, clearly and comprehensibly communicated, transforms clients into equal partners.
youli
Strong client ties and financial culture already begin for LLB and Bank
Linth in the classroom. In April 2014, the LLB Group launched a platform for Liechtenstein aimed at young adults. It is called “youli”. The
platform is active in Liechtenstein and eastern Switzerland and stands
for “young Liechtenstein” and “young Linth”.
Implementation of the brand content
In 2014, the LLB Group focused on the further development of strategic
initiatives. Since 1 July 2014 the Liechtensteinische Landesbank and
Bank Linth have set themselves apart from the market with a retrocession-free and innovative pricing model. This was the topic of the
image campaign “What we work for”. The pricing model is also paired
with a high level of investment competence. LLB’s strategy funds
feature among the market leaders in a long-term competition comparison. Both were the focus of the competence campaign “Price-performance winner”, which reached a climax at the 20th LIHGA, Liechtenstein’s regional trade fair.
On 18 January 2015, we started the image campaign “We make traditional banking dynamic”, with which we will carry the new market
positioning of LLB forward. Four new image-subjects communicating
our brand image are featured in all the important Liechtenstein and
Swiss financial newspapers and business journals. These image-subjects are also on display at both the headquarters in Vaduz and the
bank branches in Eschen und Balzers.
In 2014, Bank Linth continued its image campaign under the heading
of “Truly simple”. In addition, the whole of the Internet presence of
Bank Linth was revamped and its most important pages were made
mobile-capable in 2014.
The youli platform aimed at young adults had a big impact. It generated a lot of interest from young people in Liechtenstein and eastern
Switzerland. Lots of original and interesting ideas were, for example,
submitted to the youli competition, which challenged young people
to “Win your dream”.
Sponsoring
Our sponsoring policies stipulate that the projects and activities we
support should sustainably increase our brand’s value and image. Our
sponsorships must suit, complement or strengthen the character of
our brand. And they must also have a communicative impact. We
therefore only focus on a few, effective long-term sponsorships that
have a clear connection to a specific market area.
As a universal bank, we take our responsibility very seriously and
sponsor public events. In this way, we are partners of clubs, events and
institutions in the areas of sports, culture, community service, ecology
and education. The LLB Group remains politically neutral in all of its
sponsoring activities and does not make financial or any other types
of contributions to politicians or political parties.
Young adults and families
LLB is committed to its clients and the Principality of Liechtenstein. In
2014, it placed young adults and families at the centre of is activities.
The response has been resounding and very positive.
We are the main sponsor of FC Vaduz (FCV), who play in the Super
League, the highest Swiss football league. This is their second season
following their promotion in the 2013 / 14 season. LLB renewed its
sponsorship for a further two years in 2014. It has been supporting FCV
for eleven years now, not only because the team provides important
impulses for professional sport in Liechtenstein, but because it does
valuable work for amateur sport too.
Our support also positions the LLB brand in an emotional and dynamic environment in Liechtenstein and Switzerland. Among the numerous campaign events were the FCV team presentation in the
courtyard of LLB in Vaduz, a youli game during the break, signing sessions as well as raffles. Free admission for families to FCV home games
was also part of the campaign “LLB Advent Magic” in December 2014.
LLB combined this big event with free admission to the “Vaduz on Ice”
skating rink and a free ride on the “Märlizögli” train.
In July 2014, LLB invited bands and artists into the inner courtyard
of LLB in Vaduz for the open-air “Summer in the Courtyard” series of
concerts, which is already in its eighteenth year. What began with a
concert by the Big Band Liechtenstein has developed into a distinctive
feature of the musical summer programme in Liechtenstein.
49
In May 2014, about 17'000 people from Liechtenstein and the region
got on their bikes for the “slowUp” Werdenberg-Liechtenstein. LLB
acted as a regional partner for the first time. It was the only sponsor
from Liechtenstein to support the car-free action day. The family programme also included a goal-shooting contest with FCV players.
Funding
By foregrounding project sponsorship as support the LLB Group underscores the principle that each project retains its content and organizational independence. In 2014, the Liechtensteinische Landesbank
invested CHF 665’000.– (2013: CHF 600’000.–) in projects in Liechtenstein, and Bank Linth invested CHF 403’000.– (2013: CHF 540’000.–)
in projects in Switzerland. This is quite apart from our Group’s long
tradition of making donations. In this way, LLB has supported
non-profit and social organizations for more than 30 years (also see
chapter “Responsibilities for society and the environment”, pages
61 – 62).
Sponsoring activities
Social projects, ecology and education
Sports
Culture
LLB
◆◆ Helpmail / Association NetzWerk
www.helpmail.li
◆◆ “aha – tips and information for
young people”
www.aha.li
◆◆ “Riding your bike for your health”
◆◆ Balzers Operatic Society
◆◆ FC Vaduz
www.operette-balzers.li
www.fcv.li
◆◆ “Schlösslekeller” Theatre
◆◆ Städtlelauf Vaduz
www.schloesslekeller.li
www.lcv.li
◆◆ Filmfest Vaduz
◆◆ slowUp
www.filmfest.li
www.slowup.ch
◆◆ Our events: “Sommer im Hof”
Verkehrs-Club Liechtenstein
www.llb.li
www.vcl.li
◆◆ Adult Education at Stein Egerta
www.steinegerta.li
Bank Linth
◆◆ Flumserberg Mountain Railways
◆◆ Kulturtreff Rotfarb, Uznach
www.flumserberg.ch
www.rotfarb.ch
◆◆ Pfadi Winterthur, hand-ball
◆◆ Lachfestival, Lachen
www.pfadi-winterthur.ch
◆◆ Massiv Bank Linth Skatepark
Glarnerland
www.begaegnig.ch
◆◆ Volksmusikfestival Rapperswil
www.volksmusik-rapperswil.ch
www.massivskatepark.blogspot.com ◆◆ Radio Zürisee Partytour
www.radio.ch
LLB Österreich
◆◆ Austrian Childhood Cancer
Organization
www.kinderkrebshilfe.at
◆◆ Kinder haben Zukunft
www.kinder-haben-zukunft.at
◆◆ SOS Kinderdorf
www.sos-Kinderdorf.at
◆◆ Licht für die Welt
www.lichtfuerdiewelt.at
50
Employees
Employees
P
eople are the LLB Group’s most important capital. It is crucial that
we continue to recruit, retain and promote committed employees
and executives as copartners if we are to deliver on our performance
promise. The LLB Group aims to strengthen its position as “Employer of
Choice” and to be a socially responsible employer for its 1’033 staff.
Group Human Resources
Objectives and operating environment
2014 was marked by the LLB Group’s actions to clearly position itself
according to the Focus2015 strategy. The willingness of staff to change
and their specialist knowledge contribute significantly to the implementation of the LLB Group’s vision and mission statement as well as
corporate strategy objectives.
The organizational unit Group Human Resources (GHR) is responsible for implementing uniform personnel and social policies within
the LLB Group. It supports the Group Executive Board and the Board
of Directors in matters of personnel policy. GHR recruits employees
and executives, it conducts management development as well as succession planning and is responsible for all professional training and
further education programmes. GHR plans future quantitative and
qualitative personnel requirements, determines the focus of staff professional development and promotes a management culture characterized by performance orientation and mutual appreciation.
Group Human Resources has increased the automation and efficiency of HR processes since 2012. In 2014, SAP HCM (Human Capital
Management) was introduced for LLB, Bank Linth and LLB Österreich.
It allows decentralized administrators to centrally administer all staff
and Group companies. Data and analyses are available at the touch of
a button.
Employee satisfaction
The LLB Group conducted its second Group-wide employee survey in
late summer 2013 to evaluate our employees’ attitudes and perceptions.
The excellent participation rate of 76 percent was proof of employee
involvement and the survey provided important information. Staff identify themselves with the Focus2015 company strategy.
Just as in 2010, employees as a whole were satisfied with the LLB
Group as an employer in 2013 too. We have definitely strengthened
client ties. Our employees clearly welcome the annual agreement on
work objectives and performance assessment. The LLB Group teams
are a huge asset. In 2014, the individual units used the results of the
survey as a basis to identify interrelationships and constellations of
problems and to take improvement measures. They identified the factors that most influence crucial performance data and established an
intensive improvement process. The next employee survey is planned
for August 2015.
Staff development
In the 2014 business year, the LLB Group invested CHF 1.25 million in
professional training and further education. In order to promote the
targeted development of managers, talent and competences it has
kept funding at almost the same level as in 2013 despite a reduction in
the number of staff.
70-20-10 model
The LLB Group ensures that all staff are challenged and supported.
Staff development is a collaborative process and is conducted according to the 70-20-10 model. Employees acquire seventy percent of their
professional knowledge through practical experience in everyday job
situations; 20 percent results from talking with colleagues or managers or activities in networks; and 10 percent of their skills are gained
through training as well as by applying what they have learned.
Our employees may choose from a wide range of learning options
as well as in-house programmes and training sessions. Moreover, employees throughout the whole Group use our electronic tutor, the LLB
Group’s learning management system. It allows us to specifically manage learning processes, efficiently administer internal training and,
most of all, to promptly inform employees at their workplaces of the
numerous regulatory changes.
Further development
In 2012, the LLB Group installed two uniform processes – the Performance Management Process (PMP) and the People Development Process (PDP) – to support the systematic further development of its staff
as skilled employees, executives and individuals.
51
Employees
PMP is used to link corporate goals with individual staff objectives.
This central and very comprehensive process starts at the beginning
of the year with the conclusion of the “target agreement” between
employee and executive and culminates in an assessment of individual
staff performance and skills.
The main focus of PDP is on the competences that LLB needs to
achieve the objectives set in the Focus2015 strategy. PDP is unique in
the fact that employees are not only evaluated by their immediate
supervisor. Such evaluations have to be confirmed by a group of execu
tives. This ensures objectivity beyond departmental boundaries.
In 2014, GHR created five “Potential Pools” with the operative units
and allocated about ten percent of staff to these pools, for whom a
development plan is being drawn up. The goal is to systematically develop employees’ talents while maintaining good rates of performance
and excellent conduct.
Succession planning
PDP allows the LLB Group to discover, harness and promote the existing potential of its employees. In doing so, we place particular emphasis on both forward-looking succession planning and, as a result, career guidance for the purpose of strategically filling key positions. This
also includes identifying potential successors as well as targeted staff
development.
Strategic succession planning is decisive if we are to secure the sustainable performance of top executives for the LLB Group in the future
too. At the same time, the level of expertise and competences in the
company will increase over the long-term too. And, not least, development opportunities are the prerequisites for enthusiasm, motivation and good client ties and team relations.
Training
Our experts regularly participate in continuing education events, for
example, at the University of Liechtenstein. In 2014, the focus was on
business and bank-specific diploma courses. In addition, a series of
in-house training courses on special topics took place: the LLB Group’s
new pricing model or regulatory developments. We provided courses
on the sales process for our client advisors and on performance management processes for our executives.
New employees attending the introductory training course “Welcome at LLB” are introduced, among other things, to such topics as
vision, mission statement, compliance, data protection and security.
Training programmes for future leaders are planned for 2015. In addition, training courses will be developed for all executives and client
advisors, including certification for client advisors.
Compensation system
We place emphasis on fair compensation that explicitly rewards skills
and performance. We also endeavour to pay competitive compensation so that we retain and recruit qualified employees for our Group.
Our compensation structure is aligned with customary market values
in the banking sector. Women and men in the same position and at
the same performance level are in the same pay scale and wage model.
Salaries within the LLB Group amounted to a total of CHF 128.1 million
in 2014 (2013: CHF 137.2 million).
The LLB Group’s modern variable compensation system, which was
introduced in 2013, is exemplary for the banking sector. Since 2014 the
amount of the variable compensation has been based on our employees’ performance and is calculated according to the pay scale of the
individual wage models. Compensation therefore consists of the fixed
salary and the variable target compensation with bonus provisions.
Clearly defined target compensation ensures that employees know
the amount of both their fixed and variable compensation, both in
those cases where they achieve 100 percent of the annual targets
agreed upon and also in cases of increased performance or failure to
achieve the annual targets. The LLB Group’s transparent variable compensation system is attractive to employees who are high achievers.
Concomitantly, the bonus / malus provisions add to an increase in
quality through more self-management and more self-responsibility.
Besides individual performance, group performance is also crucial
for determining a manager’s variable compensation. Management key
performance figures are assessed in relation to those of a peer group
of comparable banks using the “Market Adjusted Performance Indicator” (MAPI). Once a year, the target compensation is reviewed. Our
employment contracts are individually negotiated in meetings between employees and their supervisors and are not based on collective
pay negotiations.
Headcount
In our Focus2015 strategy, we agreed to reduce the LLB Group’s fulltime staff to 840 by the end of 2015 (excluding swisspartners Investment Network AG). As at the end of December 2014, the LLB Group
had 893 full-time employees (2013: 925). The sale of the subsidiary
company swisspartners Investment Network will allow us to reach
our target by the end of 2015. The employee turnover rate decreased
to 11.5 percent in 2014 (2013: 21.8 %). LLB has 552 full-time positions
(2013: 554) at its headquarters in Vaduz, making it one of the largest
employers in Liechtenstein.
52
Employees
Representation of employees
One of our aims is to be a responsible and fair employer. Since 1999 an
in-house employees’ association (ANV: Arbeitnehmervertretung) at
our parent bank has actively fostered dialogue with female and male
colleagues, on the one hand, and with corporate management, on the
other. The employees’ association has a mediating function, which will
become increasingly important in the future.
The association board mediates between the employees and the
Group Executive Board as well as between staff and supervisors and
promotes cooperation. The Group Executive Board informs the association of all matters that are relevant to employees. The association
has a say, for example, in issues relating to staff pension plans, rationa
lization projects, matters involving reductions in staff and employee
surveys. The association supported the social plan that became necessary as a result of Focus2015 and is involved in the employee surveys
that are conducted every two years.
Education
Professional training
Both the Liechtensteinische Landesbank and Bank Linth traditionally
train a number of their junior employees themselves and live up to
their responsibility as one of the largest providers of education in
Liechtenstein. In 2014, 47 learners benefited from the excellent dual
education in theory and practice. We believe that the provision of a
broad education is a key task, especially since it offers young adults in
the vocational education and training sector the option of later attending a university of applied sciences or a university.
This was also true for four new employees who joined the LLB Group
after secondary school or the final school leaving examinations. They
will complete their training with the BEM certificate of the Swiss
Bankers Association. These young talented people acquire their basic
knowledge at the Center for Young Professionals in Banking (CYP) in
Zurich, the competence and training centre for Swiss banks, and at the
Bankenberatungszentrum St. Gallen.
and English. Furthermore, we value applicants with strong personalities who are able to develop themselves and others.
In future, we plan to annually admit at least three university gradu
ates to our trainee programme.
Diversity
The LLB Group employs people from 34 nations. Our success is based
on this diversity. Tolerance, appreciation, respectfulness, open-mindedness and diversity are fundamental values of our corporate culture.
Even if we do not have a specific programme in place to promote diversity, people of different nationalities working together have been
commonplace at our Group for many years. Thirty-two percent of our
employees are Liechtenstein nationals, 45 percent Swiss and 12 percent are Austrian nationals.
Every day, numerous professionals commute from eastern Switzerland (182) and the Austrian state of Vorarlberg (65) to their work at LLB
in Vaduz. We aim to create an environment of appreciation for all employees, regardless of their nationality, age, gender, educational background, etc. The different skills, cultures and viewpoints of individual
employees make the LLB Group an innovative company. In 2015, we
plan to further optimize the development and integration of the
teams for our growth markets Central and Eastern Europe as well as
the Middle East.
At 45 percent, the proportion of women working for LLB is relatively
high, although women are still underrepresented in leadership positions. However, such factors as demographic change and the growing
number of well-educated women are bound to affect change in this
area in the next few years. The principle of equal opportunities is a
cornerstone of our corporate culture.
The Board of Directors of LLB, which is exchange listed, is characterized by an above-average proportion of women, representing about
30 percent of the total number of directors.
Staff pension plan
Trainee programme
In 2014, LLB intensified its focus on university graduates and its contact with universities of applied sciences and universities. Since August 2014 two talented young adults have been getting to know our
company in-depth from the inside as part of an 18-month “on-the-job”
training programme covering three areas of work. The trainees are in
contact with top management, have been involved in day-to-day busi-
All 578 employees of our corporate Group who work in Liechtenstein
are covered by the retirement, life and disability insurance plans of the
independent Personnel Pension Fund Foundation of LLB AG. Our pension fund and its defined-contribution scheme offer all insured persons
an attractive savings plan that goes beyond the requirements of the
law (BPVG). In addition, LLB as an employer makes contributions of
two thirds to the financing of the fund. The Personnel Pension Fund
ness from their very first day of work and profit from the comprehensive spectrum of a universal bank. Trainees who meet their goals in all
three areas of work are given a permanent position.
An above-average master’s degree is a requirement for job applicants. Applicants are also expected to have done internships in the
financial services sector and have a very good command of German
takes its responsibility seriously of securing and increasing pension
plan assets in the long-term and has chosen a secure and balanced
investment strategy.
53
Employees
As at the end of December 2014, the liquidity ratio stood at 110.8 per
cent (2013: 107 %) and had consequently improved by 3.8 percent on
the previous year. The value fluctuation reserve stood at CHF 27 million, which is about 68 percent of our target goal. This is mainly due to
a good return on investment of 6.5 percent. The pension plan assets
amounted to over CHF 275 million. There was a ratio of four actively
insured persons to one retired person. In 2014, the technical interest
rate remained unchanged at 2.5 percent. The pension conversion rate,
which converts retirement assets upon retirement at the age of 64 into
a pension, amounted to 5.6 percent. The accumulated capital bore
interest at 2.75 percent.
The Personnel Pension Fund Foundation of LLB AG was able to
strengthen its liquidity ratio and now has a high risk capacity with
which it can very easily manage fluctuations in assets.
The main challenge is to ensure financial stability against the backdrop of low-level interest rates and volatile investment markets. Pressure to further decrease the technical interest rate and, as a result, the
conversion rate will continue to grow along with increases in life
expectancy.
The Board of Trustees of the Personnel Pension Fund Foundation of
LLB AG decided to make various changes to the pension plan as per
2014. The insured annual salary now comprises the agreed total remuneration, that is, the fixed annual income plus a target bonus. LLB is
consequently able to ensure the continued existence of a financially
sound and attractive pension scheme for all employees.
Employer of choice
In 2014, the LLB Group redefined its vision and its mission statement:
the vision is encapsulated in the sentence “We set standards for banking with values”. The resulting mission statement refers to a binding
system of values comprising “integrity”, “respectfulness”, “excellence”,
“pioneering”. These form the basis of our corporate culture. Our value
system comprises the most appropriate performance benchmarks
with which to recruit, retain and promote the most suitable employees for us.
The LLB Group is continuously striving to strengthen its position as
an attractive employer. Personal interviews across all levels of the hierarchy and all business divisions have shown that LLB has three
strengths that clearly distinguish it from its competitors: a corporate
culture based on partnership, excellent development opportunities
and job content with plenty of scope for growth. As “Employer of
Choice”, it is our goal to choose the right employees today for the challenges of tomorrow.
At the same time, we will implement our vision and our mission
statement throughout our corporation. The key are our employees
and executives, who support their Group through their competence,
motivation and commitment. They are decisive when it comes to acting with integrity and respectfulness and simultaneously maintaining
excellence. They are decisive when it comes to setting standards and
pioneering a sustainable future.
LLB Group headcount statistics
2014
2013
2012
2011
2010
1'087
Employees
Number of employees (full-time equivalents)
893
925
1'090
1'123
Full-time employees
789
784
909
923
906
Part-time employees
244
279
336
367
347
52
Apprentices
47
50
52
50
BEM interns
4
4
4
4
6
Trainees
2
0
0
3
1
11.5
21.8
15.4
13.1
12.5
9.7
8.2
7.6
8.9
8
40.2
39.8
39.4
39.6
39.3
Key figures
Staff turnover rate in percent
Average length of service in years
Average age in years
Diversity and equal opportunities
Number of nations
34
29
30
30
26
Share of women in percent
45
45
47
47
48
1'191
1'291
1'452
2'042
Training and professional education
Training costs in CHF thousands
“We consider respect as the most
important value in all dealings
between the financial market
authority and financial service
providers.”
Dr. Urs Philipp Roth-Cuony,
Chairman of the Board of Directors of the FMA Liechtenstein
Respect
We believe in partnership
and hold both clients and
colleagues in high esteem.
56
Regulatory framework and developments
Regulatory framework
and developments
T
he Liechtenstein financial centre stands for access to financial
markets and for legal security. Following the implementation of the
EU Capital Requirements Directive (CRD IV), the Basel III standards
came into force. Liechtenstein has committed itself to the automatic
exchange of information (AEOI) 2017. The Principality is also imple
menting the U.S.-American “Foreign Account Tax Compliance Act” by
passing the FATCA Law.
Fiscal conformity
Tax compliance strategy
Liechtenstein pursues a financial centre strategy that is based on client tax compliance. The Government Declaration of 14 November 2013
signalled Liechtenstein’s strong commitment towards its tax compliance strategy heralded by the Liechtenstein Declaration of 12 March
2009. Liechtenstein thereby confirms its endorsement regarding the
applicable standards on information exchange on tax matters of the
Organisation for Economic Co-operation and Development (OECD).
Tax compliance
The Liechtenstein banks and Bankers Association expressly and actively support the financial centre’s tax compliance strategy. On 1 September 2013, they passed guidelines setting minimum standards. In 2015,
Liechtenstein’s banks are preparing themselves and their clients for
the automatic exchange of information (AEOI). To this end, they have
extended their tax compliance guidelines and have committed the
Liechtenstein banking centre to a standard of practice by means of
self-regulation. In order to ensure tax compliance the banks have been
applying a risk-based approach since February 2015 to clarify the tax
status of existing clients, whom they assist, if necessary, in meeting
tax compliance.
The LLB Group plays a pioneering role in this process and has taken
measures to achieve the strategic goal of a tax compliant financial
centre. As early as 1 October 2012, it declared a risk-based approach
with voluntary tax disclosure as the standard in the acquisition of new
clients and has been implementing comprehensive measures for its
clients to meet tax conformity since 1 February 2014.
Double taxation agreements and
tax information exchange agreements
Bilateral, long-term cooperation agreements form the basis of Liechtenstein’s financial policy. By the end of 2014, tax information exchange agreements (TIEA) or double-taxation agreements (DTA) for
cross-border administrative assistance in accordance with OECD
regulations were concluded with 26 countries. As at 1 January 2015, a
series of these agreements was in force, including the DTAs with Great
Britain and Austria.
Liechtenstein / Switzerland
On 2 February 2015, Liechtenstein and Switzerland concluded their
negotiations in Berne on a new double-taxation agreement (DTA). It
is planned that the agreement will come into force on 1 January 2017.
The DTA is a comprehensive agreement to avoid the double taxation
of income and capital based upon the recommendations of the OECD
Model Tax Convention on Income and on Capital. It replaces the previous agreement of 22 June 1995 between Switzerland and Liechtenstein on various tax issues, which solely regulates the taxation of particular incomes.
The DTA now also includes the taxation of AHV pensions. These can
be taxed solely in the state of residence. The respective country of domicile will continue to retain the right of taxation in the case of
cross-border commuters. Benefits from occupational pensions are
subject to taxation in the recipient’s country of domicile. The taxation
of dividends, interest and royalty payments is now also governed by
this new agreement.
Liechtenstein / Austria
On 29 January 2013, Liechtenstein and Austria signed a withholding tax
agreement to regulate previously untaxed assets. At the same time,
the existing DTA was amended and aligned with the international standard. Both agreements came into force on 1 January 2014. The withholding tax agreement goes further than that between Switzerland
and Austria, which has been in force since 1 January 2013 and served
as a model. Accordingly, Austrian clients of Liechtenstein banks were
given the possibility to regularize their assets without any limitation
on the amount. The tax agreement provides for the subsequent taxation of previously untaxed assets, on the one hand, and a withholding
tax on future capital gains, on the other hand. The LLB Group concluded the disclosure process at the end of June 2014.
57
Regulatory frameworkand developments
Liechtenstein / Great Britain
The topic of untaxed offshore assets had already been treated in an
exemplary fashion with the United Kingdom of Great Britain and
Northern Ireland (UK) as early as 11 August 2009. This agreement also
includes a bilateral disclosure programme that only applies to the
Liechtenstein financial centre. The “Liechtenstein Disclosure Facility”
(LDF) has been in force since 1 September 2009 and offers persons with
undeclared assets who are liable to taxation in the United Kingdom
the opportunity to regularize their tax affairs in relation to the UK
quickly and on favourable terms. Liechtenstein and Great Britain also
signed a double taxation agreement on 11 June 2012, which came into
force on 1 January 2013. Furthermore, the agreement to legalize the
financial assets of British citizens in Liechtenstein was extended in
London to 5 April 2016.
Automatic Exchange of Information (AEOI)
On 21 November 2013, Liechtenstein signed the Joint Council of Europe / OECD Convention on Mutual Administrative Assistance in Tax
Matters at the Global Forum on Transparency and Exchange of Information for Tax Purposes in Jakarta, Indonesia. Liechtenstein also
counts amongst those 52 countries that entered the Agreement on
the Automatic Exchange of Information (AEOI) on 29 October 2014.
The members of the G20 (group of the twenty most important economies and emerging economies), the OECD and further important
financial centres committed themselves to applying the AEOI. It is
planned that as early as 2017 they will commence transmitting detailed bank data of foreign clients for the 2016 fiscal year to states with
which – in a second step – they are now concluding bilateral agreements. On 19 November 2014, Switzerland approved a declaration on
its joining the multilateral Agreement on the Automatic Exchange of
Information in tax matters. Switzerland will exchange data for the first
time in 2018.
FATCA
On 16 May 2014, Liechtenstein signed an agreement on the implementation of the “Foreign Account Tax Compliance Act” (FATCA) according
to model 1. Model 1 (EU5 model) – information exchange between two
states – provides for a treaty and automatic exchange of information
between tax authorities. For this purpose, FATCA has to be adopted
into national law by each of the partner countries of the U.S.A. The
Landtag of the Principality of Liechtenstein (Parliament) passed the
FATCA Law on 4 December 2014, which ensures that Liechtenstein’s
financial institutions will continue to be able to operate in the U.S.
capital market.
The U.S. “Foreign Account Tax Compliance Act” (FATCA) obliges fi-
Government entities, central banks and international organizations
as well as particular pension fund accounts and pension fund products
are treated as exempt. Banks with a mostly local client base are considered to be FATCA compliant under certain conditions and are only
required to register. Bank Linth does not come into this category since
it belongs to the LLB Group. The same applies to LLB (Österreich) AG.
Cross-border banking
The international orientation of the Liechtenstein financial centre entails a complexity of cross-border private banking regulations. Institutes providing cross-border financial services that are supervised by
the Liechtenstein Financial Market Authority (FMA) are obliged to
meet the FMA’s requirements and to act in accordance with the regulatory provisions of the country in which the client is domiciled. In
2014, the LLB Group further optimized its measures to limit the risks
related to civil law, tax law and banking supervisory law resulting from
cross-border business activities.
The LLB Group’s internal rulings ensure that employees comply
with the regulations of the respective target country when engaging
in cross-border activities. As part of the implementation of the
Focus2015 strategy, the LLB Group decided to increasingly focus its
international activities on its target markets and to only take on new
clients domiciled in certain countries as of 1 August 2014. We are thereby concentrating our efforts on acquiring new clients in our onshore
markets Liechtenstein, Switzerland and Austria, the traditional markets in the EEA and the EU as well as in the growth markets Central
Europe, Eastern Europe and the Middle East.
We are simplifying our client service in international business by
focusing on acquiring new clients in certain strategically and economically important countries. Furthermore, we are optimizing on how
we professionally deal with legal and compliance issues: the expenses
for meeting the legal and regulatory requirements of a country should
be in reasonable proportion to the potential earnings from client relationships and to the legal risks in a particular domicile. This may also
result in discretionary judgments and require further clarifications.
nancial institutions worldwide to identify their U.S. clients and to
disclose their assets and revenues to the Internal Revenue Service
(IRS) of the United States. The information goes beyond the applicable
provisions of the “Qualified Intermediary Regime” (QI).
58
Regulatory environment
Protection against money laundering
One of the central tasks of Group Legal & Compliance is to fulfil legal
and supervisory anti-money laundering requirements. The fight
against money laundering and terrorist financing has been a top priority of Liechtenstein for years, which has a zero-tolerance policy towards such matters. As a member of the EEA, Liechtenstein has completely implemented the EU’s third anti-money laundering directive
(2005 / 60 / EC) as well as the Commission directive (2006 / 70 / EC)
concerning both the definition of the term “politically exposed person”
and the determination of the technical criteria for simplified due diligence obligations.
Furthermore, Liechtenstein has taken the measures required to implement Regulation (EC) No. 1781 / 2006 on information on the payer
accompanying transfers of funds. In particular, the corresponding implementation regulations are included in the law on professional due
diligence to combat money laundering, organized crime and terrorist
financing (“Gesetz über berufliche Sorgfaltspflichten zur Bekämpfung
von Geldwäscherei, organisierter Kriminalität und Terrorismus
finanzierung” / SPG) of 11 December 2008. In February 2013, a revised
version of this law with a corresponding directive came into force.
Early in 2012, the Financial Action Task Force (FATF) reformulated
some of its recommendations on combating money laundering and
terrorist financing (40 recommendations plus 9 special recommendations). This means: serious tax offences are now considered predicate
offences to money laundering. Furthermore, the FATF has established
the risk-based approach as the most efficient instrument for combating financial crime. The EU is also obliged to adapt the regulatory
framework following the update to the FATF recommendations. On
18 June 2014, the Council of the European Union published its General
Approach to the EU’s fourth Anti-Money Laundering Directive (AMLD).
It is intended to strengthen the provisions of the EU’s third Anti-Money
Laundering Directive and due diligence obligations. Its implementation is planned for 2016.
Basel III
After the financial crisis in 2008 the most important industrialized
nations and emerging economies agreed on reforms to increase the
stability of the financial system. At the end of 2010, the leading economic powers (G20), including the U.S.A., committed themselves to
applying the comprehensive reform package of the Basel Committee
on Banking Supervision (Basel III) as of 2013. The regulations, which
are expected to be progressively introduced by 2019, commit banks
to larger capital buffers. The reforms aim to improve the regulation,
supervision and the risk management of banks and, as a result, to increase the resilience of both individual banks and the banking system
as a whole.
In mid-January 2014, the Central Bank Governors and Heads of
Supervision who comprise the governing body of the Basel Committee
on Banking Supervision adopted a worldwide unified definition of the
maximum leverage ratio. Banks must hold capital of at least 3 percent
of their total on-balance sheet assets and off-balance sheet commitments from 2018 onwards.
Minimum standards for the liquidity coverage ratio (LCR) for banks
and for the net stable funding ratio (NSFR) were agreed upon for the
first time as part of Basel III. The objective is to ensure that banks retain sufficient high-quality liquid assets and are able to finance themselves in an appropriate manner over the long term in order to survive
stress situations.
The comprehensive reform package of the Basel Committee on
Banking Supervision (Basel III) has been in force in the EU since 1 January 2014. The package consists of the Capital Requirements Regulation (CRR) and the implementation of the new Capital Requirements
Directive (CRD IV). CRR introduces the first EU-wide supervisory regu
lations for all banks in the member states. It aims to ensure that international standards for bank capital are complied with in all EU member states. CRD IV gives EU countries more flexibility, such as the right
to oblige domestic banks to retain more capital than required in order
to protect them, for example, from the negative consequences of real
estate bubbles.
By making changes to the Banking Law and the Banking Ordinance,
the EEA member state Liechtenstein adopted the EU’s Capital Requirements Directive CRD IV (Directive EU 2013 / 36 / EU) and the Basel III
standards, which are valid from 2019, into national law, effective as of
1 February 2015.
MiFID II
The legal situation in Liechtenstein conforms to the EU’s regulatory
requirements, which aim to improve the integrity and transparency
of the financial system as well as investor protection in the European
financial market. The Liechtenstein financial centre implemented the
“Markets in Financial Instruments Directive” (MiFID) on 1 November
2007. MiFID simplifies cross-border financial services and allows securities firms, banks and stock markets to also offer their services in other EU and EEA member states. Besides, they are required to conduct
precise client and product analyses as well as disclose information on
compensations and commissions.
The amendment (MiFID II) now provides for further regulation of
financial markets and investment services. MiFID II modernizes the
current MiFID, a cornerstone of the EU financial market regulation. It
aims to provide uniform regulations for the securities and capital markets in Europe as well as to create more market transparency and to
mitigate the effects of stock market turbulence for clients.
High-frequency trade will be made more transparent and subject
to stricter supervisory controls, position limits on commodity trading
will be stricter and investor protection will be improved. In future,
throughout the EU, minutes must be taken of the information given
to individual clients at bank branches and a more comprehensive
59
recording made of telephone consultations. The minutes and recordings must document why a financial product was recommended and
how it matches the client’s risk profile.
In mid-January 2014, the EU bodies reached a fundamental agreement on the legislative MiFID II package. The package will come into
force in 2017.
FFSA
Switzerland decided to conceptually reshape the guiding principles of
its financial centre in order to transpose the large EU initiatives and,
specifically, the EU directive on the Market Infrastructure Regulation
(EMIR) and MiFID II into national law. This is to be done by transferring
the core elements of EMIR through the Financial Market Infrastructure Act (FMIA) and the MiFID principles through a Federal Financial
Services Act (FFSA), which still has to be drawn up too. Additionally,
the licensing requirements and further organizational requirements
for financial institutions in Switzerland will have to be revised across
all sectors through the passage of a new Financial Institutions Act
(FINIA). The FFSA is planned to enter into force on 1 January 2017.
UCITS and AIFM
Access to the EU market is central to the competitiveness of both the
Liechtenstein financial and investment fund centre. Liechtenstein investment companies have been legally entitled to administer and sell
funds across national borders for several years as a result of the adoption of EU law in the EEA Agreement.
On 23 July 2014, the Council of the European Union passed the Directive on Undertakings for Collective Investment in Transferable Securities (UCITS). It greatly increases investor protection after UCITS IV
had eliminated existing market barriers in Europe and simplified the
cross-border administration of investment funds. On 20 January 2015,
the Liechtenstein Government adopted a consultation report on the
adaptation of the law on Undertakings for Collective Investment in
Transferable Securities (UCITSG).
Furthermore, the EU passport for managers of alternative investment funds (Alternative Investment Fund Managers, AIFM) should
come into effect in the course of 2015. In October 2014, Liechtenstein,
Iceland, Norway as well as the EU agreed upon a solution for the adoption of legislative acts governing the three supervisory authorities EBA
(The European Banking Authority), ESMA (The European Securities
and Markets Authority) and EIOPA (The European Insurance and Occupational Pensions Authority) in the EEA Agreement. Liechtenstein
was one of the first jurisdictions that was able to offer its clients a
functioning, efficient and AIFM compliant structure and, as a result,
legal protection. A number of providers of alternative investment
funds have since been issued with a corresponding permit by the Fi-
Liechtenstein offers a legal basis that is focused on clients and investor
protection: the Investment Undertakings Act (IUG, 2005), the Act on
Certain Undertakings for Collective Investment in Transferable Securities (UCITSG, 2011), the forthcoming transposition of the EU Directive
UCITS V and the law on Alternative Investment Fund Managers
(AIFMG, 2013).
The Liechtenstein Government is now planning to draw up a new
investment fund law for 2015 that most notably contains rules on the
fund business model for qualified investors that was specially set up
in Liechtenstein. This law is meant to provide a third legal pillar covering funds in addition to the UCITSG and the AIFMG. The goal is for this
law to enter into force at the same time as the decision to transpose
the AIFM Directive into the EEA Agreement becomes law, thereby putting the current Investment Undertakings Act (IUG) out of force.
Compliance monitoring
The LLB Group has to confront numerous issues in view of the regulatory environment, which is undergoing far-reaching changes. The diversity of regulations and their increasing complexity require constant
further development. As a result, the LLB Group optimized the definition of the compliance function in 2014. The independent organizational unit Group Legal & Compliance supports responsible and business-oriented actions.
According to the regulations governing the conduct of business of
Liechtensteinische Landesbank AG of 1 January 2013, compliance is the
observance of legal, regulatory and internal regulations as well as of
common market standards and codes of conduct. A compliance risk involves the risk of violations against legal and regulatory regulations as
well as against standards and codes of conduct. Group Legal & Compli
ance supports and advises the Group Executive Board regarding the
assessment and monitoring of compliance risks. This organizational unit
is involved in all the LLB Group’s regulatory measures and projects.
nancial Market Authority (FMA).
60
Responsibilities for society and the environment
Responsibilities for society
and the environment
T
he LLB Group aims to act responsibly and create value. It is
partner of the LIFE Climate Foundation Liechtenstein and the
Swiss Climate Foundation. We are committed to leaving future
generations with stable social conditions and an environment that
is as intact as possible by sustainably managing resources.
At the end of 2014, the LLB Group established a set of about 25 sustainability topics together with experts from the sustainability consultancy Sustainserv. These will be used in the course of 2015 to review, evaluate and refocus the LLB Group’s development on strategic priorities.
The analysis and interpretation of these data according to Global Reporting Initiative G4 Sustainability Reporting Guidelines should make
sustainability more tangible and allow the company’s development to
be measured and evaluated.
The organizational unit Group Corporate Communications works
together with line and support units to coordinate the implementation and development of objectives and priorities.
This Annual Report 2014 contains the integrated “Stakeholders report” with its proactive focus on sustainability. The LLB Group is not
only an attractive and socially responsible employer; it is also active in
different areas of culture and ecology as well as society.
Entrepreneurial actions
Sustainable business management is part of the Liechtensteinische
Landesbank’s principles governing corporate strategy, making us a
reliable partner for people and the economy. At the same time, social
commitment has always been an essential part of our corporate identity. Our activities are in line with our statutory mandate: according
to Art. 3 of the Law on the Liechtensteinische Landesbank (LLBG) of
21 October 1992 and according to the investment strategy of the Government of the Principality of Liechtenstein of 22 November 2011, LLB
is mandated with the social responsibility of promoting Liechtenstein’s economic development while at the same time still taking ethical and ecological factors into account (see chapter “Corporate governance”, page 66). The economic contribution – dividends and direct
taxes and the compensation payment for the state guarantee – of
the LLB Group, which is listed on SIX Swiss Exchange, amounted to
CHF 34.7 million in 2014 (2013: CHF 31.1 million).
Transparent corporate governance
Integrity, performance and trustworthiness form the basis of responsible and transparent corporate governance, whereby effective risk
management also plays a decisive role. By specifying a future-oriented
risk strategy, the Board of Directors establishes the guidelines for dealing with risks. Moreover, the Board continues to develop the already
high standards of corporate governance. Compliance with applicable
laws and regulations, market norms, supervisory and internal regulations forms an essential base. Group Legal & Compliance advises the
business divisions, identifies and analyses compliance risks (see chapter “Regulatory framework and developments”, page 59).
Additionally, the LLB Group’s Group Operational Risk / ICS Department further expanded the central and standardized operation of the
internal control system (ICS) in 2014. As an integral part of our Groupwide risk management it contributes to increasing risk transparency
within the company. Its objectives include effective and efficient management, compliance with laws, regulations and contractual obligations as well as with internal rules and regulations, directives and instructions, the prevention, avoidance and disclosure of mistakes and
irregularities, the guarantee of effective and efficient processes as well
as the assurance of reliable accounting and timely reporting.
Ecological responsibility
Membership in the Swiss Climate Foundation / the LIFE
Climate Foundation Liechtenstein
We are convinced that actions driven by sustainability and responsibility increase our corporate value. This is reflected in the way we promote small and medium-sized enterprises (SMEs) contributing to
climate protection. LLB is partner of the independent non-profit Swiss
Climate Foundation and the LIFE Climate Foundation Liechtenstein.
More than CHF 350’000 have already been awarded to more than
30 SMEs in Liechtenstein since the start of the cooperation in 2012.
That is why LLB belongs to a group of 24 partner firms that pool their
resources to promote SMEs in Switzerland and Liechtenstein. The
companies do this in an uncomplicated and efficient manner and,
61
Responsibilities for societyand the environment
through their activities, they help to protect the climate. Company
refunds of CO2 contributions made to the Climate Foundation are used
to support new products and technological developments as well as
energy saving projects. Additionally, businesses in Liechtenstein have
access to the system for SMEs run by the Swiss energy agency Energie-Agentur der Wirtschaft (EnAW), which assists clients in implementing economically profitable energy saving measures. LLB’s private and corporate clients simultaneously benefit from our awareness
to ecological questions as well as our commitment in the Climate
Foundation.
Commitment for rating foundation
The LLB Group pursues the principle that the economy, society and the
public sector have to be jointly committed to financing the transformation of energy systems and making them sustainable. As a member
of the Liechtenstein Bankers Association (LBA), LLB also supports the
“CARLO Foundation”, which was founded at the beginning of July 2012.
It was the first independent, sustainable and international rating
foundation. This non-profit foundation aims to develop an independent rating system for financial products in order to promote a sustainable financial market and corresponding business models as well.
The foundation’s mission is to create a new type of transparency and
to better integrate the concept of sustainability into corporate decision-making processes. Since April 2013 the foundation has established a sustainability rating for financial products that is founded on
a broadly based stakeholders survey.
Support for an online database
The number of market participants as well as of socially responsible
investment (SRI) products and services is increasing globally. That is
why the LLB Group is committed to being one of the main sponsors of
“yourSRI.com”. This platform is one of the leading global online databases for all issues concerning sustainable investment. It supports
investment managers, client advisors, investors and researchers in
finding the information they need in the SRI universe. In addition to
yield, tradability and security, socially responsible investments (SRI)
consider environmental, social and governance criteria. In 2013,
“yourSRI.com” was able to further expand its strategic co-operations
and range of services. It contributes to generating knowledge for
sustainable economic management and investments at more than
20 universities in approximately nine countries through its European
Education Initiative for Sustainable Finance.
towards opportunities and risks afforded by financial instruments and
investment strategies. At the same time, we accept responsibility for
future generations in our home markets in Liechtenstein and Switzerland by offering sustainable products in the areas of financial planning
and estate planning.
From a European perspective, the real estate industry is facing major challenges. Costs for conventional energy sources have resulted in
the increasing importance of energy and ecological considerations for
new buildings and building refurbishment. Public debate on environmental policies is growing, and the people living in Liechtenstein and
eastern Switzerland are becoming more ecologically aware. The LLB
Group supports investments in new buildings that comply with “Minergie-P®”, passive house or other comparable standards for alternative
energy by offering eco-mortgages and renovation mortgages that
promote the sustainable use of resources. In recent years, the focus
on real estate ownership as a safe investment has increased due to
highly volatile financial markets. Investments in energy-efficient measures or in the use of renewable energies have had a positive impact
on long-term sustainability.
The non-profit Future Foundation
Object of the foundation
The “Zukunftsstiftung der Liechtensteinischen Landesbank AG” (the
Future Foundation of Liechtensteinische Landesbank AG), which was
founded in 2011 as part of our 150th anniversary celebrations, supports
commitment to ecological sustainability in everyday life. Besides environmental projects, we also back non-profit projects that improve
living and working conditions and promote self-responsibility. We focus on innovations in the areas of knowledge transfer as well as the
integration and implementation of social entrepreneurship.
Trust, responsibility and reliability are important to the LLB Group.
The company is closely connected with the people and the economy
of Liechtenstein and the adjacent regions. In addition to project-specific investments, the Future Foundation contributed to society by
donating a total of CHF 73’500 to social organizations in 2014.
Product responsibility
Projects in 2014
In 2014, we supported 6 projects and 20 institutions. After its initial
support, the Future Foundation continued to fund the “Freiwillige Soziale Jahr Liechtenstein” (voluntary year of community service) in 2014.
This project offers young people the opportunity to complete a supervised and professionally organized voluntary social service year in a
social institution. Five people were able to successfully complete the
Banks can make a substantial contribution to a forward-looking
approach to social development through their products and services.
One of the tasks facing banks is to build trust. Dealing fairly with our
clients, borrowers and partners is just one aspect of our product
responsibility. Another aspect is a transparent information policy
social year and, as a result, further develop their future perspectives.
At the Bank Linth head office in Uznach, the Future Foundation
sponsors a donation point for “Tischlein deck dich”, an organization
that provides food aid for people in need. The Future Foundation also
offered start-up assistance for the innovative project “Co-Working
Space Vaduz”. This endeavour allows for new forms of workspace
62
culture by providing premises for creative collaboration. The goal is to
create a permanent platform for interested people in the areas of social entrepreneurship and to generate sustainable development.
The Future Foundation also financially supported the Liechtenstein
based International Commission for the Protection of the Alps (CIPRA)
and its project “Ein grünes Band für das Alpenrheintal” (A green belt
for the Alpine Rhine Valley) as well as the Verein Kinderoase association in Vaduz in creating an apprenticeship position in childcare. The
Future Foundation also makes contributions to the “Stiftung Zukunft
Liechtenstein” foundation, which promotes the sustainable social and
economic development of Liechtenstein.
The Future Foundation is a member of the association of non-profit
foundations in Liechtenstein (Vereinigung liechtensteinischer gemein
nütziger Stiftungen), which aims to promote the idea of entrepreneurial philanthropy.
Energy-efficient infrastructure
“Green IT” data processing centre
The branch office of the Liechtensteinische Landesbank in Eschen (FL)
has set standards for the Rhine Valley region since December 2012. The
LLB data processing centre, which was built according to the US-American Uptime Institute’s Tier III Certification of Design, is an extremely
safe data centre. This means that highly sensitive business data are
perfectly protected and can be accessed at all times. Our data processing centre, however, not only has one of the highest safety standards
of eastern Switzerland, it also reflects a clear commitment to “Green
IT”. All building elements – from the construction, to the insulation
and the architectural design of the building – were carefully matched
to each other in order to increase energy efficiency.
Ecology and technology
Sustainable construction is based on the interaction between ecology
and technology and is becoming the standard. The building that houses the Eschen bank branch complies with the Minergie-P®» standard,
the LLB has a provisional certificate until 2015.
The construction of the data processing centre, which complies
with this standard, permits the specific use of only single modules. The
server and the cooling elements are positioned in such a way that
only the computer is cooled and not the entire room. The power consumption of the cooling devices plays an essential part in terms of
power usage effectiveness (PUE). We aim to achieve a value of below
1.5 PUE, which would be half the original energy usage. In 2013, we
were already able to achieve a PUE of 1.54, and in 2014 we achieved
a PUE of 1.46.
The well insulated building shell and the use of waste heat from the
adjoining Data Center to heat the branch office should lead to savings
in natural gas consumption. Since mid-2013 we have been able to substantially lower power consumption and, consequently, clearly reduce
CO2 emissions too.
As th Bank Linth branch show, the LLB attaches great importance
throoughout the Group to the interplay of ecology and technology.
Consequently, the Bank Linth branches in Pfäffikon (SZ), Kaltbrunn
(SG) and Schmerikon (SG) were therefore built in accordance with
“Minergie-P®” standard.
Mobility management
The LLB Group is committed to continuously reducing its carbon footprint. We therefore encourage our staff to do their part, if possible, by
not driving to work, by forming car pools or switching to more environmentally friendly as well as cost saving alternatives. Road traffic in
Liechtenstein is increasing at an annual rate of more than three percent. Densely built-up areas mean that carriage-ways and parking
spaces cannot be expanded in many cases. We introduced car park
management at our headquarters in Vaduz as early as 1997. This
exemplary project has since gone on to set new standards in
Liechtenstein.
Since 2010 our comprehensive mobility management has consisted
of various elements, such as a graduated fee system for employee
parking spaces. Consequently, more employees did without a parking
space than in previous years. Furthermore, LLB bears part of the costs
of an annual travel pass with LIEmobil, the Liechtenstein bus com
pany. Every second staff member has since switched to public transport. Employees commuting to their workplace from outside the area
served by LIEmobil buses receive financial support for using regional
public transport. We encourage our staff to take the bus or ride our
company bicycles to meetings and events in Liechtenstein.
More than half of the distances travelled by car in Liechtenstein are
shorter than five kilometres, as are the distances between the single
LLB buildings in Vaduz. Our employees have had the possibility to use
company bicycles for more than ten years; we now have fifty such bicycles. In addition to campaigns aimed at employees, the LLB Group
was also the main sponsor of projects for the whole of Liechtenstein
in 2014, such as, for example, the bicycle promotion competition of
the Liechtenstein Chamber of Industry and Commerce (LIHK) “Mit dem
Rad zur Arbeit” (Cycling to work) and the competition run by the
Verkehrs-Club Liechtenstein (VCL) “Radfahren für Ihre Gesundheit”
(Cycling for your health).
In 2013, our Mobility Commission honed its mobility management
in Liechtenstein. It considerably increased the costs for parking spaces
and now provides even greater rewards to those employees who use
public transport. Since our ecology and the economy are inseparably
linked, our aim of promoting energy efficiency also applies to the number of kilometres travelled on business trips. We were able to further
reduce this amount by promoting the use of technical alternatives,
such as telephone conferencing and video-conferencing. Moreover,
our employees use public transport as often as possible when on business trips.
63
Sustainable procurement
Operational ecology
Purchasing management
The LLB Group is committed to ensuring that human rights and ecological standards are observed in the supply chain. That is why we
drew up a Group-wide directive in 2013 that sets minimum standards
our suppliers are obliged to accept. These include compliance with
laws, minimization of the environmental impact, staff health protection as well as the avoidance of both child labour and forced labour.
Fairness, transparency, data protection, human rights as well as ecological and ethical behaviour are essential criteria for our purchasing
management.
We increasingly raise our employees’ awareness to consider sustainability when choosing office supplies, office equipment and suppliers.
Our purchasing management is continuously being developed. This
will support our mission to integrate the factor of sustainability, ana
lyse savings potential and reduce costs. Whenever possible, we try to
work with suppliers from Liechtenstein and eastern Switzerland.
Energy consumption
The LLB Group intends to constantly increase its contribution to
the careful use of resources. In 2014, the Vaduz headquarters of the
Liechtensteinische Landesbank consumed 1’014’239 kilowatt-hours
of heating energy, compared with 1’033’439 kilowatt-hours in 2013. The
new branch office in Eschen is built to be energy efficient and therefore
has a major impact on our energy consumption. In 2014, the LLB business locations in Liechtenstein used 3’686’305 kilowatt-hours of electricity (2013: 4’318’945 kWh), 14.6 percent lower than in the previous
year. Our main buildings are responsible for the bulk of energy consumption. Since three of our business premises (headquarters, Haus
Wuhr Ost, Haus Engel) are equipped with photovoltaic systems, we
generate part of our electric power in an environmentally friendly
manner. In 2014, the PV systems produced 12’699 kilowatt-hours (2013:
12’509 kWh).
Data protection
Data protection plays an essential role in banking practice. Our requirements to protect customer data are accordingly high. Increasingly stringent legal requirements set clear safeguards. The responsible
handling of information is an integral part of LLB’s corporate culture.
All our employees in the LLB Group companies are trained how to handle client data and information. The principles and rules for this are
laid down in directives that are valid Group-wide. The LLB Group applies technical and organizational measures to protect client data.
Paper consumption
Paper consumption in industrialized societies is increasing despite the
use of digital media. At the same time, the necessary raw materials
are chiefly produced in developing countries with, partly, considerable
ecological and social consequences. We make a sustained effort to
continuously reduce paper consumption within the LLB Group. The
automatic duplex function, installed in our printers and copying machines, means that everything is printed double-sided. Moreover, we
inform our clients that numerous brochures and documents can be
accessed as PDF files on our web site.
More and more clients are using our LLB online banking system and
our mobile banking app. Two thirds of payments and one fifth of stock
exchange orders are executed using mobile or online banking. All bank
statements are available online via the electronic mailbox. It is not
only the quantity of paper a company uses that counts but also the
quality of that paper. This is why the LLB Group exclusively uses paper
from sustainable forestry with the globally recognized FSC label when
printing brochures that are produced in large numbers at monthly or
quarterly intervals.
Waste
Waste management within the LLB Group means avoiding, recycling
and properly disposing of waste. There are central collection points in
all buildings for the separation of waste and the disposal of paper, glass
and PET bottles as well as for waste requiring special disposal. The
amount of waste increased to 99.4 tonnes in 2014 (2013: 92.6 tonnes).
“We’re honest with each other.
I try to motivate the players,
boost their confidence and
build team spirit.”
Giorgio Contini, Head Coach of FC Vaduz
Integrity
We create clarity and
stand by our word.
66
C
orporate governance is an essential part of the LLB Group’s corporate
policy. It ensures responsibilities, control and transparency. The
fundamental basis for the Group’s corporate governance are the SIX Swiss
Exchange “Directive Corporate Governance” (DCG), the Liechtenstein
law concerning the control and supervision of public companies (ÖUSG),
the Law on the Liechtensteinische Landesbank (LLBG) as well as the
statutes and rules of procedure.
Basis
Our responsibly minded management, which is focused on long-term
added value, is characterized by efficient cooperation between the
Group Executive Board and the Board of Directors, by transparent accounting and reporting as well as by good shareholder relations.
The principles and directives defining corporate governance are laid
down in two laws: “the law concerning the control and supervision of
public companies” (ÖUSG) of 19 November 2009 and the Law on the
Liechtensteinische Landesbank (LLBG) of 21 October 1992. In addition,
they are laid down in the statutes and rules of procedure of LLB, which
are regularly reviewed and, if necessary, adapted. These documents
are based on the directives and recommendations of the “Swiss Code
of Best Practice for Corporate Governance” issued by the Swiss Business Federation (economiesuisse).
On 22 November 2011, the Liechtenstein Government as the representative of the principal shareholder, the Principality of Liechtenstein, adopted – with reference to the ÖUSG Law – what is known as
a participation strategy for Liechtensteinische Landesbank AG. This
strategy also provides minority shareholders with certainty in planning by defining how the Principality intends to use its majority equity
stake in the medium and long term.
The Government commits itself to the stock exchange listing of LLB
and a majority participation of at least 51 percent. The Government
represents the shareholder interests of the Principality at the General
Meeting of Shareholders pursuant to the rights afforded to it by stock
corporation law. The Government observes corporate autonomy as
well as the rights and obligations resulting from the stock exchange
listing. At the same time, the Government as a shareholder also respects the decision-making authority of the Board of Directors regarding corporate strategy and corporate policy. Having regard to Art. 16
of the ÖUSG Law, the participation strategy was adopted after consultation with LLB’s Board of Directors. Further information can be
found at www.llb.li/participation-strategy.
The Board of Directors of the LLB Group has held the “Best Board Practice®” label of the Swiss Association for Quality and Management Systems (SQS) and the Liechtensteinische Gesellschaft für Qualitätssicherungs-Zertifikate (LQS; the Liechtenstein Association for Quality
Assurance Certificates) since December 2010. The business activities
and organization of the Board of Directors exhibit a high level of quality. In December 2013, both SQS and LQS reconfirmed their evaluation
of the good quality and transparency of the Bank’s corporate governance. The Board of Directors was once again awarded the “Best Board
Practice®” label for a further three years.
The following corporate governance report complies with the requirements of the “Directive Corporate Governance” (DCG), valid since
1 July 2002, by SIX Swiss Exchange as well as its updated commentary
of 20 September 2007. If information required by the Directive is disclosed in the Notes to the financial statement, a corresponding reference is shown.
The Ordinance against Excessive Compensation by Listed Companies (OaEC) has been in force in Switzerland since 1 January 2014. It
applies to Swiss public companies whose shares are listed on an exchange in Switzerland or abroad. Liechtensteinische Landesbank AG
is accordingly not affected by the Ordinance. In the Regulatory Board
Communiqué No. 2 / 2014 of 1 September 2014 concerning the Revision
of the Directive on Information relating to Corporate Governance
(RDCG), the Regulatory Board notes that all companies listed on SIX
Swiss Exchange should, in principle, have to disclose the same information on corporate governance. This is to avoid that issuers that are
required to make certain disclosures under the current Directive Corporate Governance (DCG) will no longer have to make them in the
future because they are not subject to the scope of the OaEC. As a
result, the DCG now contains in some areas special provisions for issuers subject to the OaEC and provisions for those that are not subject
to the OaEC.
67
1 Group structure and shareholders
1.1.2 Listed companies included in the scope of consolidation
1.1 Group structure
1.1.1 Description of the operative Group structure
The Liechtensteinische Landesbank is a public company (“Aktiengesellschaft”) according to Liechtenstein law. It is the parent company of
the LLB Group, which is based on a parent company structure.
The LLB Group has an organizational structure based on market
divisions which is geared towards client and market needs. Besides
the three market divisions “Retail & Corporate Banking”, “Private Banking” and “Institutional Clients”, the management structure encompasses the functions of Group Chief Executive Officer (Group CEO),
Group Chief Financial Officer (Group CFO) and Group Chief Operating
Officer (Group COO).
The rules of procedure adopted by the Board of Directors and, in particular, the “Funktionendiagramm” (functions diagram) in the Appendix ensure the proper conduct of business, the appropriate organization as well as the uniform management of the LLB Group. In accordance with the functions diagram, the Board of Directors, the Chairman of the Board of Directors, the Committees of the Board of
Directors, the Group CEO and the Group Executive Board are decision-making authorities.
The functions of the Board of Directors and the Group Executive
Board of the LLB Group are combined with those of the Board of Directors and Board of Management of the LLB parent company. Within the
scope of the duties and powers defined by the rules of procedure and
the functions diagram, the aforementioned authorities can make decisions and issue rulings that are binding for both the parent company
and the LLB Group companies – but taking into consideration the
provisions of current local law applicable to the individual Group
companies.
The members of the Group Executive Board are represented on the
Boards of Directors of the consolidated companies. Either the Group
CEO or a member of the Group Executive Board serves as the Chairman of the Board of Directors of a subsidiary company. The following
companies are exceptions to this rule: Bank Linth LLB AG and swiss
partners Investment Network AG. At Bank Linth LLB AG, a member
of the Group Executive Board serves as the Vice Chairman.
The organizational structure of the LLB Group as at 1 January 2015
is shown on pages 10 to 11. The detailed segment reports are shown
on pages 26 to 43 and 111 to 113.
The Liechtensteinische Landesbank, with its headquarters in Vaduz,
is listed on SIX Swiss Exchange. As at 31 December 2014, market capitalization stood at CHF 1’232.0 million (30’800’000 bearer shares at
a nominal value of CHF 5.00 at a year-end price of CHF 40.00).
Bank Linth LLB AG, with its headquarters in Uznach, in which
the Liechtensteinische Landesbank holds a majority equity stake of
74.2 percent, is also listed on SIX Swiss Exchange. As at 31 December
2014, market capitalization stood at CHF 409.1 million (805’403 registered shares with a nominal value of CHF 20.00 at a year-end price of
CHF 508.00).
1.1.3 Unlisted companies included in the scope of consolidation
Details of the unlisted companies included in the scope of consolidation (company, registered office, activities, share capital and equity
interest) can be found in the Notes to the consolidated financial statement of the LLB Group in the table “Scope of consolidation” on pages
150 to 151.
1.2 Major shareholders
The Principality of Liechtenstein is the majority shareholder of the
Liechtensteinische Landesbank. The Law on the Liechtensteinische
Landesbank states that – in terms of capital and voting rights – the
Principality of Liechtenstein must hold at least 51 percent of the
shares. These may not be sold.
At the end of 2014, the Principality’s equity stake in the shares of the
Liechtensteinische Landesbank remained unchanged at 57.5 percent.
Detailed information about the development of this equity stake can
be found at: www.llb.li/capital+structure. As at 31 December 2014,
Thornburg Investment Management Inc. held a total of 1’150’000 LLB
shares, which corresponded to an equity stake of 3.7 percent. Less than
0.1 percent of the shares were held by members of the Board of Directors and the Group Executive Board, while the LLB Group held 6.4 percent of its own shares. This share proportion served to secure the
convertible bonds of CHF 270 million that were due in April 2011.
The remaining bearer shares were in free float, whereby none of the
other shareholders held more than three percent of the share capital.
There are no binding shareholder agreements.
Market capitalization
(in CHF thousands)
Company
Reg. Office Listed on
Liechtensteinische Landesbank AG
Vaduz
SIX Swiss Exchange 1'232'000
Bank Linth LLB AG
Uznach
SIX Swiss Exchange 409'145
Stake (in %)
74.2
Segment
Security
number
ISIN number
Main Standard
3019524
LI0030195247
Mid- / Small-Cap
Shares
130775
CH0001307757
68
1.3 Cross participations
There are no cross participations between the Liechtensteinische
Landesbank and its subsidiaries or third parties.
2 Capital structure
2.1 Capital
As at 31 December 2014, the share capital of the Liechtensteinische
Landesbank stood at CHF 154.0 million (30’800’000 fully paid bearer
shares with a nominal value of CHF 5.00).
2.2 Conditional and approved capital
On the balance sheet date, the Liechtensteinische Landesbank had no
conditional capital and no approved capital.
2.3 Changes to capital
Details regarding changes to capital during the last three report years
are shown in the table “Consolidated statement of changes in equity”
on page 100.
2.4 Shares and participation certificates
As at 31 December 2014, the share capital amounted to 30’800’000
fully paid bearer shares with a nominal value of CHF 5.00. With the
exception of the LLB shares held by the Liechtensteinische Landesbank
and its subsidiaries (1’978’202 shares), all the shares are eligible for dividend. As at 31 December 2014, share capital eligible for dividend
therefore amounted to CHF 144.1 million. In principle, all LLB shares
are eligible for voting according to the principle of “one share, one
vote”. However, on account of the regulations concerning the purchase
of own shares (Art. 306a ff. PGR / Liechtenstein Person and Company
Law), the shares held by the Liechtensteinische Landesbank and its
subsidiaries are not eligible for voting. There are no priority rights or
similar entitlements. Shareholders have a subscription right with the
issue of new shares, which entitles them to subscribe to new shares
in proportion to the number of shares they already hold.
The Liechtensteinische Landesbank has not issued participation
certificates.
2.5 Profit-sharing certificates
The Liechtensteinische Landesbank has not issued profit-sharing
certificates.
2.6 Transfer limitations and nominee registrations
The Liechtensteinische Landesbank exclusively issued bearer shares;
these are fully transferable.
2.7 Convertible bonds and options
As at 31 December 2014, the Liechtensteinische Landesbank had no
convertible bonds or options on its own shares outstanding.
3 Board of Directors
3.1 Members
a) Name, nationality, education and professional career
Name
Year of birth
Profession
Nationality
Hans-Werner Gassner *
1958
Business consultant and certified public accountant
FL
Markus Foser **
1969
Business consultant
FL
Markus Büchel
1953
Human resources manager (retired)
FL
Patrizia Holenstein
1957
Lawyer
CH
Urs Leinhäuser
1959
Business economist
CH
Gabriela Nagel-Jungo
1969
Professor of financial Management
CH
Roland Oehri
1968
Fiduciary
FL
*Chairman
**Vice Chairman
The General Meeting of Shareholders on 9 May 2014 elected Gabriela
Nagel-Jungo and Urs Leinhäuser as new members of the Board of Directors for a term of office of three years. They replace Ingrid HasslerGerner and Peter Fanconi. Ingrid Hassler-Gerner stepped down from
the Board of Directors as at 9 May 2014 because of term limits. Peter
Fanconi stepped down from the Board as at 15 November 2013 because
the Government of the Canton of Graubünden elected him as the
Chairman of the Graubündner Kantonalbank.
69
Hans-Werner Gassner
Markus Büchel
Education:
Licentiate in economics, University of St. Gallen (HSG), 1983
Swiss federal diploma in accountancy, 1988
Dr. oec., University of St. Gallen (HSG), 1989
Swiss Banking School, 1996
Education:
◆◆ Apprenticeship as a mechanical draughtsman, 1969 – 1973
◆◆ Commercial college Buchs, 1973 – 1974
◆◆ Mechanical engineer (Dipl. Ing. FH), Abendtechnikum Vaduz,
1974 – 1978
◆◆ A
ccountant, Neutra Treuhand Group, 1984 – 1989
◆◆ Head of Internal Audit, Liechtensteinische Landesbank,
1990 – 1998
◆◆ Head of Finances, Liechtensteinische Landesbank, 1998 – 2000
◆◆ Proprietor, Adcom Treuunternehmen reg., Balzers, since
April 2000
◆◆ Member of the Board and Member of Management of
MAS Multi Asset Strategy Management Trust reg., Balzers,
since 2005
◆◆ Hilti AG, Schaan, (various technical functions), 1973 – 1981
◆◆ ThyssenKrupp Presta AG, Eschen, development / engineering
(various functions), 1981 – 1991
◆◆ ThyssenKrupp Presta AG, Eschen, Head of Technical Services,
1991 – 1995
◆◆ ThyssenKrupp Presta AG, Eschen, Head of Human Resources
of the Presta Group, 1995 – 2013 (retirement)
◆◆
◆◆
◆◆
◆◆
Patrizia Holenstein
Markus Foser
Education:
◆◆ Licentiate in economics, major in business IT,
University of Zurich (UZH), 1996
◆◆ Swiss federal diploma in financial analysis and
asset management CEFA, 2000
◆◆ Equity research and fund management, Liechtensteinische
Landesbank, 1997 – 2002
◆◆ Advisor to mainly institutional clients with derivative and
structured products, Bank Vontobel (Liechtenstein) AG, Vaduz,
2002 – 2003
◆◆ Head of Fund & Investment Services (Asset Management),
swissfirst Bank (Liechtenstein) AG, Vaduz, 2004 – 2007
◆◆ Member of the Executive Board, Banque Pasche (Liechtenstein)
SA, Vaduz, responsible for Fund & Investment Services
(Asset Management), 2008 – 2009
◆◆ Proprietor, MAFOS Consult Anstalt, Vaduz, 2009 – 2013
◆◆ First Advisory Trust reg., Strategic Projects & Business
Development, since 2012
◆◆
◆◆
◆◆
◆◆
Education:
Licentiate in law, University of Zurich (UZH), 1980
Dr. iur. University of Zurich (UZH), 1981
Admitted to the Zurich bar, 1985
LLM, London School of Economics, 1989
◆◆ Lecturer at the University of Zurich (UZH), 1981 – 1984
◆◆ Clerk, District Court of Zurich and Supreme Court of the
Canton of Zurich, 1981 – 1985
◆◆ Lawyer, Haymann & Beglinger, Zurich, 1985 – 1988
◆◆ Lawyer, Clifford Chance London (Banking Department), London,
1989 – 1990
◆◆ Holenstein Rechtsanwälte AG, Zurich, Founder and Managing
Partner, since 1990
Urs Leinhäuser
Education:
◆◆ Business economist (Dipl. Betriebsökonom HWV), 1983
◆◆ IMD Lausanne, SSE 1998
◆◆ Tax inspector (legal entities), Schaffhausen Cantonal Tax Office,
1983 – 1986
◆◆ Deputy Head of Tax Department, Refidar Moore Stephens, Zurich,
1986 – 1988
◆◆ Group Controller and Managing Director Cerberus Denmark (1992)
at Cerberus AG, Männedorf, 1988 – 1994
70
◆◆ Head of Group Controlling and CFO of Piping Systems Division,
Georg Fischer AG, Schaffhausen, 1995 – 1999
◆◆ CFO and Member of Group Executive Board, Mövenpick Holding
AG, Adliswil, 1999 – 2003
◆◆ CFO & Head of Corporate Center and Member of Corporate
Management, Rieter Holding AG, Winterthur, 2003 – 2011
◆◆ CFO & Deputy CEO and Member of Corporate Management,
Autoneum Holding AG, Winterthur, 2011 – 31 March 2014
◆◆ Businessman, since 1 April 2014
◆◆
◆◆
◆◆
◆◆
Education:
Licentiate in economics, University of Zurich (UZH), 2001
Teaching diploma in business subjects, 2004
Dr. oec. publ., University of Zurich (UZH), 2007
Professorship of Financial Management, awarded by ZFH, 2011
◆◆ Semester assistant at the Chair for Business Administration,
Swiss Federal Institute of Technology (ETH) Zurich, 1998 – 1999
◆◆ Head of Financial Accounting and Payroll, netto-netto AG,
Wetzikon, 2002 – 2005
◆◆ Assistant at the Institute for Accounting and Controlling
(Prof. Dr. C. Meyer), University of Zurich (UZH), 1999 – 2007
◆◆ Lecturer and project leader, Zurich University of Applied Sciences
(ZHAW), since 2007
◆◆ Head of the Centre for Accounting & Controlling, Zurich University
of Applied Sciences (ZHAW), since 2010 ◆◆ Deputy Head of the Department of Banking, Finance, Insurance,
Zurich University of Applied Sciences (ZHAW), since 2011
Roland Oehri
Education:
◆◆ Commercial apprenticeship, 1987
◆◆ Federally qualified business economist FH, 1993
◆◆ Liechtenstein trustee and fiduciary examinations, 1998
◆◆ Investment advisor, Foreign Private Clients Department,
VP Bank AG, Vaduz, 1993 – 1999
◆◆ Head of Foreign Private Clients Department,
VP Bank AG, Vaduz, 1999
◆◆ Client advisor, Private Trust Banking, VP Bank AG, Vaduz, 2000
◆◆ Client advisor and Head of Intermediaries Department,
Bank Wegelin (Liechtenstein) AG, Vaduz, later also of
swissfirst Bank (Liechtenstein) AG, Vaduz, 2000 – 2003
◆◆ V
ice President of LOPAG Louis Oehri & Partner Trust reg., Ruggell,
2004 – 2009
◆◆ Partner and Managing Director, Sequoia Treuhand Trust reg.,
Ruggell, since 2006
◆◆ Partner and Managing Director, Sequoia Capital Management AG,
Ruggell, since 2007
b) Executive / non-executive members
All members of the Board of Directors of the Liechtensteinische
Landesbank are non-executive members. Pursuant to Art. 22 of the
Liechtenstein banking law in connection with Art. 10 of the Law on the
Liechtensteinische Landesbank, various special bodies must be constituted for the direction, supervision and control of a bank, on the one
hand, and for the Board of Management or Group Executive Board, on
the other hand. No member of the Board of Directors is allowed to be
a member of the Board of Management or Group Executive Board.
c) Independence
All members of the Board of Directors are independent within the context of the SIX Swiss Exchange “Directive Corporate Governance” (DCG)
concerning corporate governance information. In 2014, as well as in
the previous three business years, no member of the Board of Directors was a member of the Group Executive Board or the Board of Management of the Liechtensteinische Landesbank or a Group company.
No member of the Board of Directors had significant business relationships with the Liechtensteinische Landesbank or with another Group
company. In accordance with Art. 12 of the Liechtenstein law concerning the control and supervision of public companies, all contracts with
members of the Board of Directors must be in writing and they must
be approved by the Board of Directors. The same conditions apply as
to contracts concluded with third parties.
3.2 Other activities and commitments
Hans-Werner Gassner is the Managing Director of the Liechtenstein
Association of Independent Asset Managers.
Markus Foser is a Member of the Board of Directors of Ameliora
Wealth Management AG.
Markus Büchel is a Member of the Board of Directors of Verwo AG.
Patrizia Holenstein is a Member of the Board of Directors of
Argos Holding AG, State Street Global Advisor and EPiC Property
Investment AG.
Urs Leinhäuser is a Member of the Board of Directors and Chairman
of the Audit Committee of Burckhardt Compression Holding AG and
Member of the Board of Directors of Ammann Group Holding AG.
Gabriela Nagel-Jungo is a Member of the Board of Directors of
Ruetschi Technology AG.
Roland Oehri is a Member of the Board of Directors of RFinanz
(Liechtenstein) AG.
Otherwise, the members of the Board of Directors are not involved
in the management or supervisory boards of important Liechtenstein,
Swiss or foreign private or public law corporations, establishments or
71
foundations, nor do they exercise any permanent management or
consultancy functions for important Liechtenstein, Swiss or foreign
interest groups, nor do they perform official functions or hold political
office.
3.3 The number of permitted activities
Liechtensteinische Landesbank AG is not subject to the Swiss ordinance against excessive compensation in listed public limited companies (OaEC). Liechtensteinische Landesbank AG has not issued any
regulations on the number of permitted activities.
3.4 Election and term of office
3.4.1 Principles governing the election procedure
The Board of Directors of the Liechtensteinische Landesbank is – in
accordance with the law and the company statutes – composed of five
to seven members, who are elected individually by the General Meeting of Shareholders for a term of office of three years. Thereby, a year
corresponds to the period from one General Meeting of Shareholders
to the next. Members can be re-elected for a further two terms. After
three terms of office, the Chairman of the Board of Directors can – in
justified cases – be re-elected for an extraordinary term of office of at
most two years.
The 12th Ordinary General Meeting of Shareholders on 7 May 2004
passed an amendment to the statutes that allowed for the staggered
renewal of the Board of Directors in order to preclude a complete renewal of the Board. Furthermore, the “Regulation concerning the
Group Nomination & Compensation Committee” of the LLB Group (see
point No. 3.5.2 “Composition of all Board of Directors’ committees,
their duties and individual competencies”) stipulates that the Board
of Directors aims at continuity through the orderly renewal of the
Board, succession planning as well as through the appropriate staggering of the terms of office (no complete renewal) pursuant to current corporate governance provisions.
The Chairman of the Board of Directors is elected by the General
Meeting of Shareholders. The Vice Chairman is elected from among
the members of the Board of Directors by its members. New members
of the Board of Directors elected as substitutes shall be elected for a
full term of office of three years. The General Meeting of Shareholders
can dismiss members of the Board of Directors on important grounds.
The age limit is 70 years for members of the Board of Directors.
Decisions about exceptions are made by the General Meeting of Shareholders on an individual basis.
Hans-Werner Gassner has been Chairman of the Board of Directors
since 2006. Markus Foser has been Vice Chairman since 2009. Cyrill
Sele has been Secretary (recorder of the minutes) since April 2013.
3.4.2 First-time election and remaining term of office
First-time
appointment
Elected
until
Hans-Werner Gassner
2006
2015
Markus Foser
2009
2015
Markus Büchel
2009
2015
Patrizia Holenstein
2013
2016
Urs Leinhäuser
2014
2017
2014
2017
Roland Oehri
2009
2015
Name
3.5 Internal organization
3.5.1 Separation of tasks of the Board of Directors
Name
Function
Committee memberships
Hans-Werner Gassner
Chairman
Group Nomination & Compensation Committee * Strategy Committee *
Markus Foser
Vice Chairman
Group Nomination & Compensation Committee
Strategy Committee
Markus Büchel
Member
Patrizia Holenstein
Member
Group Audit & Risk Committee
Urs Leinhäuser
Member
Member
Strategy Committee
Roland Oehri
Member
Group Audit & Risk Committee *
*Chairman
72
3.5.2 Composition of all Board of Directors’ committees,
their tasks and terms of reference
The Board of Directors may delegate a portion of its duties to committees. To support the Board of Directors in performing its tasks, the
Board implemented two standing committees: the Group Audit & Risk
Committee as well as the Group Nomination & Compensation Committee. In addition, there is a Strategy Committee formed on an ad
hoc basis. The Board of Directors elects the committee members from
among its members and appoints the chairmen. The Chairman of the
Board of Directors cannot be elected to the Group Audit & Risk Committee. Each committee is composed of at least three members. As
preparatory bodies, these committees deal in detail with the tasks
assigned to them, submit the results of their work to the Board of
Directors and make proposals if decisions are required. The Board of
Directors is entitled to transfer decision-making authority to the committees. To date, it has, however, not made use of that right. The
Board of Directors is entirely responsible for the tasks assigned to the
committees.
The committee members must possess the expertise for the tasks
and duties they have taken on. All committee members must be
independent.
Terms of office on committees correspond to the length of terms of
office on the Board of Directors. Committee membership also ends
when members step down from the Board of Directors.
The Board of Directors issued separate regulations for the two
standing committees, which stipulate their duties and individual
competencies.
The committees can invite outside persons as experts and entrust
LLB staff, in particular, with administrative duties.
The Group Audit & Risk Committee supports the Board of Directors in
fulfilling the duties and responsibilities vested in it by banking law. It:
◆◆ evaluates the financial reporting, the effectiveness of the internal
control system and risk management as well as the provisions to
ensure compliance with legal and internal regulations;
◆◆ ensures the quality of Group Internal Audit and external auditors as
well as their cooperation;
◆◆ monitors the rectification of weak points and deficiencies identified
by Group Internal Audit and external auditors.
The “Regulation concerning the Group Audit & Risk Committee of the
LLB Group” lays down the organization and workings as well as the
competencies and responsibilities of the Group Audit & Risk Committee, in so far as these are not prescribed by law, the statutes or the
rules of procedure. The following persons were members until 9 May
2014: Roland Oehri (Chairman), Markus Foser (Member), Ingrid Hass
ler-Gerner (Member) and Patrizia Holenstein (Member). The Group
Audit & Risk Committee has been composed of the following members
since Ingrid Hassler-Gerner stepped down from the Board of Directors
and Urs Leinhäuser was elected to the Board of Directors: Roland
Oehri (Chairman), Patrizia Holenstein (Member) and Urs Leinhäuser
(Member).
Name
Function
Roland Oehri
Chairman
Markus Foser
Member (until 9 May 2014)
Ingrid Hassler-Gerner
Patrizia Holenstein
Member
Urs Leinhäuser
Member (since 9 May 2014)
The Group Audit & Risk Committee has the following tasks. In particular, it:
◆◆ critically analyses the LLB Group’s Consolidated Interim Report and
the Annual Report as well as the financial statement of the parent
bank;
◆◆ petitions the Board of Directors about whether the LLB Group’s Consolidated Annual Report and the financial statement of the parent
bank can be presented to the General Meeting of Shareholders and
published and whether the Consolidated Interim Financial Report
can be published;
◆◆ monitors and assesses the suitability and effectiveness of both the
internal control system in the area of financial reporting and the internal control and assessment measures extending beyond the internal control system in the area of financial reporting and whether
these are suitably adapted to the size, complexity, structure and the
risk profile of the LLB Group.
◆◆ takes note of and discusses the risk analysis made by the external
auditors, the auditing strategy derived from it and the respective
risk-oriented auditing plan;
◆◆ critically analyses the audit reports submitted by the external audit
and Group Internal Audit to the Board of Directors;
◆◆ discusses major problems identified during the auditing process
with the external auditors;
◆◆ monitors and implements recommendations put forward by the
external auditors and Group Internal Audit and eliminates weak
points and deficiencies identified by them;
◆◆ assesses the quality of the internal and external audit functions (external and internal auditors according to banking law and person
and company law) as well as their cooperation;
◆◆ discusses the annual activity report and the annual audit plan of
Group Internal Audit as well as the approval of proposals to the
Group Board of Directors;
◆◆ assesses the qualification, independence, objectivity and performance of the external auditors and of Group Internal Audit;
◆◆ examines the compatibility of the external auditors’ auditing activities with possible consulting mandates as well as assesses and discusses their professional fees;
◆◆ submits a proposal to the Board of Directors for the attention of the
General Meeting regarding the appointment or dismissal of the external auditors (appointed according to banking law and person and
company law);
73
◆◆ monitors the integrity and suitability of the risk management in the
LLB Group, which is based on risk policy, in particular, in regard to
market, credit, liquidity as well as operational risks;
◆◆ assesses the integrity and suitability of the internal control system
in regard to the identification, measurement, limitation and monitoring of risks;
◆◆ supports the Board of Directors to formulate and implement the
risk-relevant Group rulings and directives issued by the Board (overall risk policy, amongst others) as well as the relevant guidelines and
processes that are set down in these rulings and directives;
◆◆ assesses, at least on an annual basis, the Group-wide policy on risks
after consulting the decision making authorities in question and
considering the suggestions and proposals of the Group Executive
Board. It makes a proposal to the Group Board of Directors as the
approving authority. Further risk-relevant Group rulings and directives that have to be approved by the Group Board of Directors are
to be treated in the same manner;
◆◆ assesses the proposed global and individual limits for market, credit
and liquidity risks for submission to the Board of Directors;
◆◆ assesses the overall risk situation and supervises adherence to the
limits set by the Board of Directors;
◆◆ discusses, on a quarterly basis, the status reports of the chairmen
of the Group Risk Committees (including the interim overall risk
reporting);
◆◆ supervises the measures taken by the Group Risk Management
Committee to deal with exceptional situations.
The Group Nomination & Compensation Committee supports the
Board of Directors in fulfilling the duties and responsibilities vested in
it by banking law. It:
◆◆ formulates the guidelines for succession planning as well as the
nomination of members of the Board of Directors and members of
the Group Executive Board;
◆◆ formulates the compensation standards for the parent bank and
the LLB Group;
◆◆ establishes the compensation of members of the Board of Directors
and members of the Group Executive Board as well as of other
employees, in so far as their compensation – in accordance with
compensation standards – has to be determined by the Board of
Directors;
◆◆ establishes the guidelines for the human resource strategy.
The “Regulation concerning the Group Nomination and Compensation
Committee” of the LLB Group lays down the organization and workings as well as the competencies and responsibilities of the Nomination & Compensation Committee, in so far as these are not prescribed
by law, the statutes or the rules of procedure. The members of the
Committee are:
Name
Function
Hans-Werner Gassner
Chairman
Markus Büchel
Member
Markus Foser
Member
The Group Nomination & Compensation Committee has the following
functions. In particular, it:
◆◆ develops criteria for the selection, election and re-election of candidates for the Board of Directors;
◆◆ develops criteria for the selection and nomination of candidates
for the Group Executive Board for submission to the Board of
Directors;
◆◆ selects and evaluates candidates for the Board of Directors as well
as submits election proposals to the Board of Directors for submission to the General Meeting of Shareholders in accordance with the
developed criteria;
◆◆ selects and evaluates candidates for the Group Executive Board as
well as submits proposals to the Group Board of Directors for submission to the Board of Directors in accordance with the developed
criteria;
◆◆ develops and applies criteria for the performance review of the
Board of Directors as well as for candidates up for re-election and
for the performance review of the Group Executive Board in corpore
as well as of individual members;
◆◆ develops succession plans and periodically reviews them both in
case of the end of a term of office and in case of the early stepping
down of members from the Board of Directors and also in case of
the age-related and ad hoc stepping down of individual members
of the Board of Directors and the Group Executive Board;
◆◆ ensures the further education of individual members of the Board
of Directors and the Group Executive Board;
◆◆ plans the introductory phase for new members of the Board of
Directors;
◆◆ reviews work practice in regard to age-related limits and term limits
for members of the Board of Directors and the Group Executive
Board;
◆◆ supports the Board of Directors to nominate and assess the performance of the Head of Group Internal Audit;
◆◆ nominates delegates to the Board of Directors committees of the
LLB Group companies and investment companies;
◆◆ formulates recommendations for the stipulation of principles and
the establishment of principles and regulations for the compensation policy concerning the members of the Board of Directors, the
74
◆◆
◆◆
◆◆
◆◆
◆◆
◆◆
members of the Group Executive Board and the other employees of
the Liechtensteinische Landesbank for submission to the Board of
Directors;
formulates proposals for the compensation of members of the
Board of Directors, the members of the Group Executive Board and
the Head of the Group Internal Audit for submission to the Board of
Directors in accordance with existing principles and regulations;
reviews the Group regulation “Compensation Standards”, the LLB
AG regulation of the same name as well as the Group regulation “Fit
& Proper – Assessment of members of the Board of Directors, the
Board of Management, the Head of Group Internal Audit and of key
function holders” for submission to the Group Board of Directors;
annually reviews the compensation of members of the Group Board
of Directors and the members of the Group Executive Board, the
Head of Group Internal Audit and senior executives in risk management and compliance pursuant to the Group regulation “Compensation Standards” and the LLB AG regulation of the same name for
submission to the Group Board of Directors in accordance with existing principles and regulations;
annually takes note of the compensation of all other LLB AG staff
who are covered by the Group regulation “Compensation Standards”
and by the LLB AG regulation of the same name;
determines and periodically reviews the principles of the human
resource strategy;
reviews the processes for the systematic professional development
of employees and executives.
Strategy Committee
It is the task of the Board of Directors to formulate and periodically
evaluate the LLB Group’s strategy. It is supported by the Strategy
Committee.
The members of the Committee are:
Name
Function
Hans-Werner Gassner
Chairman
Markus Foser
Member
Markus Büchel
Member (since 9 May 2014)
Representation in foundations
Hans-Werner Gassner is a Member of the Board of the “Future Foundation of Liechtensteinische Landesbank AG”.
Markus Büchel and Markus Foser are Members of the Board of
Trustees of the Personnel Pension Fund Foundation of Liechtensteinische Landesbank AG as employer representatives.
3.5.3 Working methods of the Board of Directors
and its committees
As a rule, the Board of Directors of Liechtensteinische Landesbank AG
holds an ordinary meeting once a month. During the 2014 business
year, the Board held a total of ten ordinary meetings. The meetings
lasted between 2.25 and 9.25 hours; the closed meeting lasted two
days. The closed meeting was conducted by the Board of Directors in
cooperation with the Group Executive Board following the ordinary
meeting in June 2014. The current status of the Group projects and
selected business area strategies were discussed, as were the midterm planning and the ICAAP, and the intermediate results of the work
on the restructuring plan for system-relevant banks required by the
FMA was presented.
The Board of Directors is convened by invitation of its Chairman and
is presided over by him. Together with the written invitation, the
members of the Board of Directors also receive the agenda for the
meeting, the minutes of the last meeting and other important documentation required for the meeting at least five business days prior to
the date set for the meeting. Meetings of the Board of Directors can
also be called with a shorter period of notice if there is a pressing matter. It is within the discretion of the Chairman to determine the urgency of that matter. If two members of the Board of Directors, the
Group CEO or at least two members of the Group Executive Board
submit a written request to the Chairman, he is required to convene
an extraordinary meeting forthwith.
A quorum of the Board of Directors is constituted when at least half
of its members are present. The Board of Directors passes its resolutions by a simple majority of the votes present. In the event of a tie,
the Chairman has the casting vote. In urgent cases, resolutions may
be passed by circular. Unanimity is required for resolutions to be dealt
with by circular. Resolutions shall be passed by a simple majority of
votes. In the case of a tie, the Chairman shall have the casting vote. If,
after a meeting of the Board of Directors has been convened, urgent
matters arise, these can be discussed at the meeting and decisions on
them taken, provided that the votes subsequently cast by members
of the Board who are properly excused are considered as if they had
been present at the meeting.
The members of the Board of Directors are obliged to inform the
Chairman in cases of real or potential conflicts of interest. This is regardless of whether the real or potential conflicts of interest are of
a general nature or related to a matter to be discussed at a meeting.
The Board of Directors shall decide whether there are grounds for the
member concerned to abstain from voting. In such a case, that member may neither participate in the discussion of the matter in question
nor vote on it. He has the right to express his opinion before leaving
the Committee.
The Board of Directors periodically evaluates its own performance
and also that of the committees. This evaluation serves to determine
whether the Board of Directors and the committees are functioning
appropriately. The results of the self-evaluation are put down in writing. In November 2014, the Board of Directors evaluated its own performance as part of a self-assessment process, which also included the
work of the Group Audit & Risk Committee and the Group Nomination
& Compensation Committee. The results of the self-evaluation
demonstrated the high quality of work done by the Board of Directors
and its committees.
75
Date
Meeting
Attendance
30 January 2014
ordinary
all, with the exception of Markus Foser
27 February 2014
ordinary
All
3.75
14 March 2014
ordinary
All
4.50
8 April 2014
ordinary
All
2.25
13 May 2014
ordinary
All
4.50
24 / 25 June 2014
closed meeting
All
14.75
21 August 2014
ordinary
All
9.25
23 September 2014
ordinary
All
5.50
20 October 2014
ordinary
All
3.50
18 November 2014
ordinary
All
4.50
16 December 2014
ordinary
all, with the exception of Patrizia Holenstein
5.00
The members of the Group Audit & Risk Committee meet at least
four times a year. These ordinary meetings are convened by the
Chairman. An agenda is compiled prior to each meeting, which is sent
together with the necessary information to the meeting’s participants. The members of the Group Audit & Risk Committee, the external auditors, the Head of Group Internal Audit and the Chairmen of
the Group Risk Committees can request the Chairman of the Group
Audit & Risk Committee to convene extraordinary meetings. During
the 2014 business year, six ordinary meetings were held that lasted
between 4.50 and 8.00 hours. Patrizia Holenstein was unable to
attend one meeting. Otherwise, all of the other Committee members
were present. To deal with specific issues, the Group Audit & Risk Committee can also invite other persons, such as members of the Group
Executive Board, the Chairmen of the Group Risk Committees, other
staff of the LLB Group companies, representatives of the external auditors or external consultants. The Group CEO, the Group CFO and the
Head of Group Internal Audit usually participate in the meetings in an
advisory capacity. No external experts were called in during the 2014
business year.
The Group Audit & Risk Committee has to periodically evaluate its
own organization and mode of operation, particularly in regard to
its independence, professional knowledge and its activities or have
a third party conduct the evaluation. The Committee last conducted
a self-evaluation in May 2014.
Date
Attendance
25 February 2014
all
Duration in h
8.00
6 May 2014
all
4.50
17 June 2014
all (Urs Leinhäuser participated
for the first time)
4.50
19 August 2014
all
6.50
4 November 2014
all, with the exception of
Patrizia Holenstein
5.00
9 December 2014
all
5.00
Duration in h
3.50
The Group Nomination & Compensation Committee convenes as often as business requires, but at least twice a year. The meetings are
convened by the Chairman. He compiles an agenda prior to each meeting, which is sent together with the necessary information to the
meeting’s participants as early as possible. In 2014, five meetings were
held that lasted between 0.5 and 9.75 hours. Markus Foser was unable
to attend all of one meeting due to illness. Otherwise, all of the other
Committee members were present. The following subjects were
discussed:
◆◆ interviews with the candidates for the Board of Directors;
◆◆ selection of candidates for the Board of Directors for submission to
the Board of Directors (or the Group Board of Directors) on the basis
of a documented aptitude test;
◆◆ evaluation of the achievement of objectives 2013 by the members
of the Group Executive Board and the Head of Group Internal
Audit;
◆◆ establishment of the fixed and variable compensation of members
of the Group Executive Board and the Head of Group Internal Audit
in accordance with existing principles and regulations for submission to the Board of Directors;
◆◆ establishment of the fixed compensation of the Board of Directors;
◆◆ establishment of the goals 2014 for the members of the Group Executive Board and the Head of Group Internal Audit;
◆◆ review of the compensation of senior executives in risk management and compliance as well as of other persons affected by the
compensation standards regulation;
◆◆ review of compliance with the Group-wide regulation and the compensation standards regulation;
◆◆ review of the need to adapt the Group-wide regulation and the
compensation standards regulation;
◆◆ discussion of the compensation comparison by Towers Watson;
◆◆ review of the human resource strategy;
◆◆ succession planning for the Board of Directors and the Group Executive Board;
◆◆ review of the need to adapt the “Regulation concerning the Group
Nomination & Compensation Committee”.
76
To deal with specific issues, the Group Nomination & Compensation
Committee can also invite other persons, such as the Head of Group
Human Resources, representatives of the external auditors or external
consultants. The Group CEO usually participates in the meetings of
the Group Nomination & Compensation Committee in an advisory
capacity; except when topics are discussed that particularly concern
the Board of Directors itself, the business area Group Internal Audit or
the performance assessment of the Group CEO and the establishment
of his compensation. In the 2014 business year, the Group CEO and the
Head Group Human Resources partially attended five meetings. An
external expert (Witena AG) was called in for the search for new members of the Board of Directors.
Date
Attendance
4 February 2014
all, Markus Foser present temporarily
Duration in h
9.75
18 March 2014
all
0.50
4 September 2014
all
2.00
23 September 2014 all
0.75
14 October 2014
1.00
all
The Strategy Committee did not convene in 2014. The annual strategy
assessment was conducted as part of the Board of Directors’ meeting
of 14 March 2014, which was attended by the full Board of Directors
and the Group Executive Board (see chapter “Strategy and organization”, page 15).
Resolutions at the meetings are passed with an absolute majority
of the members present. The attendance of more than half of the
members is required for a quorum. In the case of a tie, the Chairman
has the casting vote. The subjects dealt with and resolutions passed
are recorded in the corresponding minutes. The minutes are circulated
to the meeting’s participants and the members of the Board of Directors. The Chairmen of the committees inform the full Board of Directors about the agenda dealt with at the last committee meeting and
submit proposals for those points requiring resolutions. Furthermore,
they submit an annual activity report on the work of the committees
to the full Board of Directors.
3.6 Definition of areas of responsibility
The Board of Directors is responsible for the direction, supervision and
control of the LLB Group. It is ultimately responsible for the success of
the LLB Group as well as for attaining sustained value for both shareholders and employees. It makes decisions in consultation with the
Group CEO concerning the LLB Group’s corporate strategy and assumes final responsibility for monitoring the conduct of business.
Furthermore, the Board of Directors monitors compliance with applicable legal provisions and regulations. At the request of the Group
CEO, the Board of Directors determines the financial and human resources required to implement the corporate strategy.
The Board of Directors is responsible for all duties and competences
and is vested with all powers not reserved to other corporate bodies
by law, statutes or other internal regulations. It is responsible for determining the company’s organization and for prescribing the required
regulations as well as for issuing the necessary guidelines. In specific
cases and subject to legal provisions, the Board of Directors can transfer any part of its powers to one or more of its members or to one or
more third parties (non-members).
The Board of Directors has the following duties and responsibilities, in
particular:
◆◆ the definition of management policies;
◆◆ the definition of the LLB Group’s management strategy, including
its periodic monitoring;
◆◆ the passing of resolutions regarding all proposals to the General
Meeting of Shareholders;
◆◆ the discussion of the reports submitted by Group Internal Audit and
external auditors;
◆◆ approval of the reports concerning measures implemented on the
basis of audit reports and their monitoring;
◆◆ decisions regarding the LLB Group’s expansion into important new
business operations as well as its withdrawal from existing important business operations;
◆◆ decisions regarding the acquisition or sale of participations in other
companies as well as the establishment or liquidation of LLB Group
companies and the nomination of their Group Executive Boards;
◆◆ decisions regarding the setting-up and closure of bank offices,
branches and representative offices;
◆◆ the stipulation of credit competences and the regulation of transactions for the account of corporate bodies and employees as well
as resolutions regarding large commitments (including cluster risks);
◆◆ decisions regarding the initiation of legal actions involving claims
of over CHF 10 million as well as judicial and extrajudicial settlements involving amounts of over CHF 10 million;
◆◆ the approval of all business matters and decisions that exceed the
authority of the powers delegated by the Board of Directors;
◆◆ decisions regarding the exercise of external mandates and activities
by members of the Group Executive Board and Group Internal Audit
staff.
Concerning the organization of business activities and the required
concomitant issuing of rulings and directives, the Board of Directors
is, in particular, responsible for:
◆◆ the regular monitoring of corporate governance principles and management structures laid down in the rules of procedure;
◆◆ the issuing of rulings and directives that are binding Group-wide,
subject to respective applicable local law;
◆◆ the regularization and monitoring of internal control systems;
77
◆◆ the appointment and dismissal of the Group CEO, the Vice Group
CEO, all the other members of the Group Executive Board and
the Head of Group Internal Audit as well as the provisions for deputies and the review of their performance, including succession
planning;
◆◆ the supervision of the Group CEO, the Vice Group CEO and the other
members of the Group Executive Board regarding compliance with
legal provisions, statutes and rulings and directives as well as the
LLB Group’s economic development;
◆◆ the appointment of the committee members from among its
members;
◆◆ the regularization of the compensation principles within the LLB
Group.
Concerning the ultimate liability for the organization of accounting,
financial control and financial planning, the Board of Directors is, in
particular, responsible for:
◆◆ the approval of the applicable accounting standards;
◆◆ the approval of medium-term planning and budgeting;
◆◆ the preparation of the Annual Report and the Consolidated Annual
Report;
◆◆ the approval of the Consolidated Interim Report;
◆◆ the ensuring of regular reporting on the course of business and
extraordinary occurrences; this includes annotated reporting, on
a quarterly basis, as regards the development of business, the earnings situation, balance sheet development, liquidity and equity
requirements;
◆◆ the stipulation of the competence to authorize expenditure.
Concerning the ultimate responsibility as regards risk management,
the Board of Directors is, in particular, responsible for:
◆◆ the issuing of regulations concerning the fundamentals of risk management, determination of risk appetite, risk control as well as accountability and the processes for the approval of risk-related transactions, whereby interest, credit, liquidity and market price risks
and operational risks as well as legal and reputational risks, in particular, are to be identified, controlled, reduced and monitored;
◆◆ the evaluation of the effectiveness of the internal control system;
◆◆ the stipulation of overall and individual limits at least once a year;
◆◆ the approval of quarterly reports, including comments on the risk
situation;
◆◆ the ensuring of prompt information in the event of imminent risk
threats and losses of considerable importance.
The Group CEO is the highest authority within the LLB Group management and is liable to account. He is, in particular, entirely responsible
for the development of the corporate strategy of the LLB Group and the
divisions as approved by the Board of Directors and – in coordination
with the Group Executive Board – for the implementation of this strategy. The Group CEO represents the Group Executive Board vis-à-vis the
Board of Directors.
The Group CEO
◆◆ ensures coherent management and development of the LLB Group
as well as the implementation of the strategy that is stipulated and
periodically monitored by the Board of Directors;
◆◆ sets objectives for business activities and the course of business;
◆◆ ensures high-quality and timely decision-making;
◆◆ ensures that the objectives set by the members of the Group Executive Board comply with management objectives;
◆◆ submits recommendations to the Board of Directors concerning
compensation principles within the LLB Group;
◆◆ monitors the implementation of any decisions that are made;
◆◆ monitors the implementation of the resolutions made by the Board
of Directors and its committees;
◆◆ is responsible – in coordination with the Chairman of the Board of
Directors – for concrete succession planning within the Group Executive Board;
◆◆ represents the LLB Group in external communication.
The Group Executive Board, in cooperation with the Group CEO, is
responsible for the management of the LLB Group.
In addition to the principles set forth in the statutes, the Group Executive Board is responsible, in particular, for:
◆◆ implementing the resolutions made by the Board of Directors and
its committees;
◆◆ submitting suggestions concerning the organization of business
activities in general and proposals for specific business matters to
the Board of Directors and the responsible committees, provided
these matters exceed the scope of authority of the Group Executive
Board, in particular, with respect to:
◆◆ the definition and periodic review of the LLB Group’s corporate
strategy as well as the allocation of resources to implement the
strategy and attain corporate objectives;
◆◆ participations, Group companies, business offices, branches and
representative offices;
◆◆ medium-term planning;
◆◆ annual expenditure and income budget;
◆◆ financial reporting and the Annual Report.
◆◆ implementing efficient processes and procedures as well as an effective internal control system to avoid and reduce risks of all kinds;
◆◆ appointing persons (excluding staff of Group Internal Audit) to sign
on behalf of the Liechtensteinische Landesbank as authorized
signatories;
◆◆ regularly reporting to the Board of Directors, its committees and,
in particular, to the Chairman regarding the course of business and
any extraordinary occurrences;
◆◆ issuing the rulings and directives necessary for the management of
the LLB Group;
◆◆ coordinating the LLB Group’s range of products as well as specifying
the pricing policy and the terms and conditions for the products
and services offered;
78
◆◆ deciding on the conclusion of cooperation and partnership agreements as well as the membership of professional associations;
◆◆ authorizing investments for personnel expenses and general and
administrative expenses of up to CHF 1 million in specific cases and
investments of up to CHF 3 million (with prior notification of the
Chairman of the Board of Directors) which are not included in the
budget adopted by the Board of Directors. In such a case, the Chairman decides about any matters to be presented to the Board of
Directors;
◆◆ continuously monitoring the developments within the Divisions
and business operations as well as initiating problem solving
measures;
◆◆ continuously monitoring financial reporting;
◆◆ implementing risk management principles and control principles as
well as the key rulings and directives concerning risk management;
◆◆ establishing compliance functions and implementing appropriate
internal systems and processes for safeguarding compliance within
the LLB Group;
◆◆ setting objectives for business activities and the course of business
as it executes the strategy approved by the Board of Directors;
thereby ensuring that decision-making is timely and of a high quality as well as monitoring the implementation of the decisions
made;
◆◆ ensuring that their objectives comply with general business targets
and with the LLB Group’s course of business.
3.7 Information and control instruments
vis-à-vis the Group Executive Board
The Chairman of the Board of Directors is informed about the agenda
of Group Executive Board meetings and receives the minutes. He participates in its meetings in an advisory capacity as required. The purpose of this is for both parties to update each other on important
topics and form their opinions.
Principally, the Board of Directors is kept informed about the activities of the Group Executive Board by the Chairman of the Group Ex
ecutive Board. He ensures that the Chairman of the Board of Directors
and the Board of Directors are informed in a timely and appropriate
manner. The Group CEO regularly reports to the Board of Directors
about current business developments and important business issues,
including all matters that fall within the remit of the Board of
Directors.
The Group CEO generally attends the meetings of the Board of Directors in an advisory capacity, informs it about the development of
business as well as extraordinary occurrences and provides additional
information on request. The Group CFO regularly informs the Board
of Directors about finances and risk management as well as about the
proper implementation of the Bank’s risk policy. The other members
of the Group Executive Board attend meetings when matters involving
them are dealt with. The Group CEO and the Group CFO usually participate in the meetings of the Group Audit & Risk Committee in an
advisory capacity.
During meetings, each member of the Board of Directors can request
information about all matters relating to the LLB Group. Outside of
meetings, each member of the Board of Directors can also request
information about the course of business from members of the Group
Executive Board and, with the approval of the Chairman of the Board
of Directors, also about individual business transactions.
Internal supervision and control
The LLB Group has standardized bank management systems that generate quantitative and qualitative data for the Group Executive Board
and in a summarized form for the Board of Directors. This enables the
Board of Directors to inform itself about significant business developments, such as the course of business, earnings situation, budget utilization, balance sheet development, liquidity, risk situation and the
fulfilment of equity requirements. The Board of Directors discusses
and approves the annotated reports on finances and risk management
on a quarterly basis.
In exercising its supervision and control functions, the Board of Directors is also assisted by Group Internal Audit, which is subordinate
directly to the Board. The Group Internal Audit assumes the function
of the internal auditor for all Group companies that are required to
prepare a consolidated statement of accounts and submits the reasons for its decision to the Board of Directors or the respective Board
of Directors of the Group company as to whether there exists an effective internal control system and whether risks are being adequately
monitored. Group Internal Audit provides independent, objective and
systematic reporting services regarding:
◆◆ processes for defining the strategy and risk appetite as well as the
general compliance with the approved strategy;
◆◆ the effectiveness of governance processes;
◆◆ the effectiveness of the risk management, including the evaluation
of whether risk identification and management are adequate;
◆◆ the effectiveness of internal controls, in particular, whether these
are adequate in relation to the risks taken;
◆◆ if necessary, the effectiveness and sustainability of measures for
reducing and minimizing risks;
◆◆ the reliability and completeness of financial and operational information (that is, whether activities are correctly and fully documented) as well as the quality of the underlying data and models;
◆◆ compliance with legal and regulatory requirements as well as with
internal rulings and directives and agreements.
The powers and duties of Group Internal Audit are stipulated in a special set of regulations. The planning of annual auditing is carried out
on the basis of the evaluation of risks and controls and is guided by
a long-term auditing plan.
To avoid duplication of work and to optimize controls, the auditing
plans are coordinated with the statutory auditors. The short-term auditing plan and the personnel requirement plan are reviewed by the
Group Audit & Risk Committee and submitted to the Board of Directors
for approval. In addition, Group Internal Audit regularly monitors the
79
rectification of any deficiencies found and the implementation of its
recommendations; it submits reports about this procedure to the
Group Audit & Risk Committee.
The results of every examination are recorded in a written audit report. The audit reports of the parent bank and all Group companies are
sent to the Chairman of the Board of Directors, the members of the
Group Audit & Risk Committee, the Group Executive Board, the Head
of Group Risk Management as well as the external auditor. The Head
of Group Internal Audit compiles a report on a quarterly basis for
submission to the Group Audit & Risk Committee and the Group Executive Board as well as a written activity report annually for submission to the Board of Directors. Particular findings that need to be tackled immediately are communicated to the Chairman of the Group
Board of Directors without delay by the Head of Group Internal Audit.
In addition, Group Internal Audit regularly monitors the rectification
of any deficiencies found and the implementation of its recommendations; it submits reports about this procedure to the Group Audit &
Risk Committee.
Compliance
All employees of the LLB Group are obliged to comply with all legal,
regulatory and internal regulations as well as to observe common
market standards and professional codes of conduct. The compliance
functions within the LLB Group annually report in writing to the Board
of Directors about their activities, findings and measures taken (see
chapter “Regulatory framework and developments”, page 59).
Risk management
The proactive approach towards risks is an integral part of the LLB
Group’s corporate strategy and ensures the Group’s risk-bearing capacity. The LLB Group attaches great importance to proactive and comprehensive opportunity / risk management. As part of the risk policy,
the Board of Directors issues guidelines and regulations concerning
the principles of risk management. In this way, the Board of Directors
sets qualitative and quantitative standards for risk responsibility, risk
management, risk reduction and risk control.
The LLB Group manages risks according to strategic objectives. It
evaluates and manages risks through the application of detailed, qualitative and quantitative standards for risk responsibility, risk management and risk control. The “Internal Capital Adequacy Assessment
Process” (ICAAP) ensures that we always have adequate capital to
cover all essential risks.
The risk management specialists strive to create and maintain
a Group-wide uniform risk culture and risk approach. This establishes
the fundamentals for an appropriate risk / return profile and an optimum allocation of capital. The Group Audit & Risk Committee invites
the Chairmen of the Group Risk Committees to a quarterly discussion
of the risk status. Their reports are summarized every six months in
an overall risk report of the LLB Group, which is discussed by the Board
of Directors. Further details concerning risk management can be
found in the Notes to the consolidated financial statement of the LLB
Group on pages 152 to 175.
80
4 Group Executive Board
4.1 Members
Name
Year of birth
Nationality
Function / Area of responsibility
Member of the Group
Executive Board since
Roland Matt
1970
FL
Group Chief Executive Officer
2009
2011
Urs Müller
1962
FL / CH
Head of Institutional Clients Division
Vice Group Chief Executive Officer
Gabriel Brenna
1973
CH / I
Head of Private Banking Division
2012
Heinz Knecht
1953
CH
Head of Retail & Corporate Banking Division
2012
Kurt Mäder
1962
CH
Group Chief Operating Officer
2009
Christoph Reich
1974
CH
Group Chief Financial Officer
2012
The LLB Group’s organizational structure is consistently geared towards client and market needs. That is why the market divisions Retail
& Corporate Banking (Heinz Knecht), Private Banking (Gabriel Brenna)
as well as Institutional Clients (Urs Müller) are on the Group Executive
Management level. The Group Chief Financial Officer (Christoph Reich) as well as the Group Chief Operating Officer (Kurt Mäder) are also
Members of the Group Executive Management. The Group Executive
Board consists of six members including the Group Chief Executive
Officer (Roland Matt).
Roland Matt
Education:
◆◆ Business economist FH, 1995
◆◆ Federally qualified financial analyst and asset manager, 1999
◆◆ Federally qualified finance and investment expert, 2002
◆◆ Head of Research, VP Bank AG, Vaduz, 1999
◆◆ Head of Asset Management Division, VP Bank AG, Vaduz,
2000 – 2001
◆◆ Family Office Project Head, VP Bank AG, Vaduz, 2002
Liechtensteinische Landesbank:
◆◆ Head of Investment Services, 2002 – 2006
◆◆ Head of Domestic Clients Division, 2007 – 2008
◆◆ Member of the Group Executive Board and the
Board of Management, since 2009
◆◆ Head of Domestic Market and Institutional Market Divisions,
2009 until March 2011
◆◆ Head of International Market Division, April 2011
until 15 January 2012
◆◆ Vice Chairman of the Group Executive Board and the
Board of Management, April 2011 until 15 January 2012
◆◆ Group Chief Executive Officer, since 16 January 2012
oard of Directors’ mandate in Liechtensteinische Landesbank
B
Group companies:
◆◆ swisspartners Investment Network AG (Member)
Other functions:
◆◆ Member of the Board of the Liechtenstein Chamber
of Commerce and Industry
◆◆ Member of the Board of the Liechtenstein Bankers Association
◆◆ Member of the Board of Trustees of the Personnel Pension Fund
Foundation of Liechtensteinische Landesbank AG,
◆◆ since 1 January 2014
◆◆ Chairman of the Board of Trustees of the “Future Foundation
of Liechtensteinische Landesbank AG”
Urs Müller
Education:
◆◆ Licentiate in law, University of St. Gallen (HSG), 1993
◆◆ Auditor, Unterrheintal District Court; Associate Court Clerk,
Oberrheintal District Court, 1993 – 1995
Legal counsel, 1995 – 1998
Head of Legal & Compliance, 1998 – 2006
Head of Institutional Clients Division, 2007 until April 2011
Member of the Group Executive Board and the
Board of Management, since April 2011
◆◆ Head of Domestic Market and Institutional Market Divisions,
April 2011 until June 2012
◆◆ Head of Institutional Clients Division, since 1 July 2012
◆◆ Vice Group Chief Executive Officer, since 1 July 2012
◆◆
◆◆
◆◆
◆◆
81
◆◆
◆◆
◆◆
◆◆
◆◆
◆◆
oard of Directors’ mandates in Liechtensteinische Landesbank
B
Group companies:
Bank Linth LLB AG (Member)
LLB Asset Management AG (Chairman)
LLB Fund Services AG (Chairman)
LLB Fondsleitung AG (Chairman)
LLB Verwaltung (Schweiz) AG (Member)
swisspartners Investment Network AG (Member)
Other functions:
◆◆ Member of the Board of Trustees of the “Future Foundation
Gabriel Brenna
Education:
◆◆ M.Sc., Electrical Engineering, École polytechnique fédérale de
Lausanne (EPFL), 1993 – 1998
◆◆ Ph.D., Electrical Engineering, Semiconductors, Swiss Federal
Institute of Technology (ETH) Zurich, 2000 – 2004
◆◆ Project Leader, Philips Semiconductors, Zurich, 1998 – 1999
◆◆ Research and instruction, ETH Zurich, 2000 – 2004
◆◆ Senior Project Leader, Advanced Circuit Pursuit, Zollikon,
2002 – 2004
◆◆ McKinsey & Company, Zurich and London; most recently,
Partner and Head of Swiss Private Banking and Risk Management
Practice, 2005 until September 2012
Heinz Knecht
Education:
◆◆ lic. oec. publ., University of Zurich (UZH), 1978
◆◆ Dr. oec. publ., University of Zurich, 1982
◆◆ Responsible for training, Swiss National Bank, 1982 – 1984
◆◆ Various positions at UBS, Zurich, including Chief of Staff to the
Chairperson of the Board of Managers Switzerland, Head of
Controlling Switzerland, Head of Training Switzerland, 1985 – 2001
◆◆ President of the University of Applied Sciences Commission of the
Federal Authorities of the Swiss Confederation, 2001 – 2002
◆◆ Rector of the University of Applied Sciences in Business Administration Zurich, 2003 – 2004
◆◆ Head of the Institute of Banking & Finance at Zurich University
of Applied Sciences, Winterthur (ZHAW), September 2005 until
May 2011
◆◆ Member of the Board of Directors of Bank Linth, Uznach,
April 2002 until November 2011; Chairman of the
Board of Directors, April 2005 until November 2011
◆◆ Chairman of the Board of Management of Bank Linth ad interim,
December 2011 until June 2012
Board of Management, since 1 July 2012
◆◆ Head of Retail & Corporate Banking Division, since 1 July 2012
B
Group companies:
Bank Linth LLB AG (Vice Chairman)
LLB Fund Services AG (Vice Chairman)
LLB Fondsleitung AG (Vice Chairman)
LLB Berufliche Vorsorge AG, Lachen (Chairman)
Board of Management, since 1 October 2012
◆◆ Head of Private Banking Division, since 1 October 2012
◆◆
◆◆
◆◆
◆◆
B
Group companies:
◆◆ Liechtensteinische Landesbank (Österreich) AG
(Head of the Supervisory Board)
◆◆ LLB Asset Management AG (Vice Chairman)
◆◆ LLB Services (Schweiz) AG (Chairman)
Other functions:
Other functions:
Kurt Mäder
Education:
◆◆ Federally qualified physicist, Swiss Federal Institute of Technology
(ETH) Zurich, 1987
◆◆ Dr. sc. nat., ETH Zurich, 1992
◆◆ Scientist, National Renewable Energy Laboratory, Golden,
Colorado, 1992 – 1994
82
◆◆ Senior scientist, Centre Européen de Calcul Atomique
et Moléculaire, Lyon, 1994 – 1996
◆◆ Head of Operations, ELCA Informatik AG, Zurich, 1996 – 2004
◆◆ Member of the Board of Management, Bank Linth LLB AG,
Uznach, 2005 – 2008
Board of Management, since 2009
◆◆ Head of Corporate Service Center, 2009 until June 2012
◆◆ Group Chief Operating Officer, since 1 July 2012
◆◆
◆◆
◆◆
◆◆
◆◆
B
Group companies:
Liechtensteinische Landesbank (Österreich) AG (Member)
LLB Beteiligungen AG (Vice Chairman)
LLB Verwaltung (Schweiz) AG (Chairman)
Data Info Services AG (Chairman)
Other functions:
◆◆
◆◆
◆◆
◆◆
◆◆
B
Group companies:
Liechtensteinische Landesbank (Österreich) AG (Vice Chairman)
LLB Asset Management AG (Member)
LLB Beteiligungen AG (Chairman)
LLB Verwaltung (Schweiz) AG (Vice Chairman)
Other functions:
4.2 Other activities and commitments
Apart from the mandates specified in No. 4.1, the members of the
Group Executive Board are not involved in the management or supervisory boards of important Liechtenstein, Swiss or foreign private or
public law corporations, establishments or foundations, nor do they
exercise any permanent management or consultancy functions for
important Liechtenstein, Swiss or foreign interest groups, nor do they
perform official functions or hold political office.
Christoph Reich
4.3 Number of permitted activities
Liechtensteinische Landesbank AG is not subject to the Swiss ordinance against excessive compensation in listed public limited companies (OaEC). Liechtensteinische Landesbank AG has not issued any
regulations on the number of permitted activities.
Education:
◆◆ Federally qualified licentiate in economics, FHS St. Gallen, 1999
◆◆ Executive MBA, University of St. Gallen (HSG), 2009
4.4 Management contracts
The Liechtensteinische Landesbank has not concluded any management contracts.
◆◆ Commercial apprenticeship, St. Galler Kantonalbank, Buchs (SG),
1990 – 1993
◆◆ Investment advisor for private clients, St. Galler Kantonalbank,
Wil (SG), 1994 – 1996
◆◆ Senior consultant, KPMG Consulting (from October 2002, Bearing
Point), Zurich, 1999 until mid-2003
◆◆ Team manager Budget and Management Services, Asian
Development Bank, Manila / Philippines, 2003 – 2006
◆◆ Partner at Syndeo AG, Head of Accounting and Controlling
for Banks, Horgen / ZH, end of 2006 until October 2010
◆◆ Head of Group Finance & Risk Department, November 2010 until
15 January 2012
Board of Management, since 16 January 2012
◆◆ Chief Financial Officer, 16 January 2012 until 30 June 2012
◆◆ Group Chief Financial Officer, since 1 July 2012
5 Compensation, participations and loans
5.1 Content and stipulation procedure of compensation
and the participations programmes 5.1.1 Responsibility and stipulation procedure
The Group Nomination & Compensation Committee (see point No.
3.5.2 “Composition of all Board of Directors’ committees, their tasks
and terms of reference”, pages 72 to 74), which is composed solely of
independent members of the Board of Directors, proposes the principles and regulations governing the compensation for the members of
the Board of Directors, on the one hand, and the Group Executive
Board, on the other hand, as well as the amount of the compensation
for the members of the Board of Directors and the Group Executive
Board. The Board of Directors “in corpore” approves the principles and
regulations governing compensation and specifies the amount of the
compensation for the members of the Board of Directors and the
Group Executive Board.
83
In 2013, the consultancy group FehrAdvice & Partners AG was called in
for the formulation of the Group Executive’s compensation model. In
addition, Towers Watson was commissioned in 2014 to compare compensation in relation to the functions of the Group Executive Board.
This comparison comprised between six and eleven banks and between twelve and eighteen positions per function represented in the
Group Executive Board.
The decision regarding the amount of the compensation of the
members of the Board of Directors and the Group Executive Board is
made at the discretion of the Board of Directors. The members of the
Group Executive Board are not present at the discussion and the decision concerning the amount of their compensation. In accordance
with Art. 12, para. 2 of the Law on the Liechtensteinische Landesbank,
the Board of Directors must inform the Government about the compensation ruling specified for the Board. The Liechtensteinische
Landesbank does not submit the entire compensation of the Board of
Directors or the Group Executive Board to the General Meeting of
Shareholders for approval and also waives conducting an advisory vote
on compensation.
5.2 Statutory regulations on compensation,
participation and loans
On 20 November 2013, the Federal Council adopted the Ordinance
against Excessive Compensation in Listed Companies (OaEC), which
came into force on 1 January 2014. It applies to Swiss public companies
whose shares are listed on an exchange in Switzerland or abroad. It
does not apply to foreign companies listed in Switzerland.
The Liechtensteinische Landesbank is not subject to the OaEC and
has not issued any regulations on compensation, participation and
loans.
5.3 Details in the same manner as Art. 14 to 16 OaEC
According to the Regulatory Board Communiqué No. 2 / 2014 of
1 September 2014, No. II, all companies listed on SIX Swiss Exchange
should have to disclose the same information on corporate governance. Issuers that are not subject to the regulations of the OaEC have
to therefore publish details about the compensation of the members
of the Board of Directors and the Board of Management in the same
manner as Art. 14 to 16 of the OaEC.
5.3.1 Fundamentals
The European Union set down compensation standards in the EU directive 2010 / 76 / EU. As a member of the EEA, Liechtenstein is committed to incorporating this directive into national law. As at 1 January
2012, Liechtenstein fulfilled the necessary requirements through the
implementation of Appendix 4.4 to the ordinance on banks and securities firms (Banking Ordinance).
On 18 August 2011, the Board of Directors of LLB approved Group
“Compensation Standards” for Liechtensteinische Landesbank AG and
its Group companies based on Appendix 4.4 of the Banking Ordinance;
it came into force on 1 January 2012. It regulates the framework for the
Group-wide compensation policy, in particular, in regard to its alignment to risk management. It stipulates the basis, values and objectives
and sets out the minimum requirements for the design of the compensation systems. In addition, it regulates Group-internal and Group-
external reporting as well as related responsibilities. In order to implement the Group “Compensation Standards” for Liechtensteinische
Landesbank AG the Board of Directors also passed “Compensation Standards” that came into force on 1 April 2012.
The Group regulation applies to the Board of Directors, the Group
Executive Board, senior managers exercising control functions, risk
takers as well as to employees who receive an overall compensation
comparable to that of the Group Executive Board and whose decisions
have a significant influence on the risk profile.
The compensation for employee work performance complies with
the business strategy as well as with the goals and values of the LLB
Group and is based on the following principles:
◆◆ Sustainability and risk adjustment: Compensation practices have to
contribute to long-term corporate development. They must support
risk management and the pursuit of both continuous increases in
the company’s value and long-term client and employee retention.
Compensation policy has to offer incentives in a manner that allows
for adequate risk behaviour by individual persons in order to counteract any conflicts of interest between the optimization of one’s
own compensation through risk taking, on the one hand, and the
interests of the bank in regard to risk optimization, on the other.
◆◆ Performance and success orientation: Compensation practices also
have to reward both individual performance and company related
performance. Focus on the Group’s success promotes and is in line
with the LLB Group’s long-term business interests. Acknowledging
individual performance serves performance motivation, the management of individual performance contributions towards achieving company goals as well as the retention of top performers.
◆◆ Foundation of trust: The design of the compensation regulations
and processes is based on a mutual foundation of trust between
employees and employers.
◆◆ Simplicity, clarity and comprehensibility: The compensation regulations and models are to be kept simple, clear and comprehensible.
Employees as well as third parties should be able to easily understand the basic concepts.
◆◆ Fair remuneration in accordance with responsibilities and management levels: Compensation assessment also has to consider the
workload as well as the degree of responsibility and reflect the different management level requirements in a clear and fair manner.
◆◆ Group orientation: Compensation also has to promote Group orientation. It aims to further commitment towards Group success and
increased identification with the Group through employee participation in the long-term development of values and in shared ownership by means of an appropriate share option scheme.
The principles and regulations governing the compensation of the
members of the Board of Directors and the Group Executive Board are
84
reviewed annually. The amount of the compensation for the members
of the Board of Directors and the Group Executive Board is determined
each year.
5.3.2 Compensation model
Board of Directors
The Board of Directors stipulates the amount of compensation of its
members in accordance with their duties and responsibilities. The
members of the Group Executive Board receive a fixed compensation,
which is paid in cash as well as in the form of an entitlement to acquire
LLB shares. The number of LLB shares is calculated on the basis of the
average share price in the last quarter of the financial year. The entitlement to acquire LLB shares is subject to a blocked period of three
years. The members of the Board of Directors do not receive any variable compensation. Members of the Board of Directors do not profit
from the additional benefits for staff (fringe benefits) or from their
preferential conditions on bank products. Business relations with
them are subject to the same conditions that apply to comparable
transactions with third parties.
On account of legal provisions, no severance payment may be made
in the event of the termination of a mandate (Art. 21, para. 2 of the law
concerning the control and supervision of public companies).
Group Executive Board
The compensation model of the LLB Group is geared towards rewarding performance. This means that above-average performance has
a positive effect on and underaverage performance has a negative
effect on the amount of compensation. Furthermore, the compensation model places the focus on sustainable and long-term oriented
actions.
The total target compensation for each member of the Group Ex
ecutive Board is fixed. It consists of a fixed compensation (67 %) and
a variable target compensation (33 %). The total target compensation
for the members of the Group Executive Board was determined on the
basis of a compensation comparison carried out by the Towers Watson
company. The total target compensation corresponds to the compensation due to a member of the Group Executive Board if the total
shareholder return of the LLB share corresponds to the total shareholder return of the peer group. Besides the fixed compensation, the
variable compensation is also insured in the staff pension scheme
(age, death, invalidity). The new compensation model also contains
a bonus-malus provision. The members of the Group Executive Board
receive more or less than their total target compensation depending
on whether the total shareholder return of the LLB share exceeds or
falls below the total shareholder return of the peer group. The maximum bonus possible is 200 percent of the variable total target compensation and the maximum malus possible is 0 percent of the variable target compensation. This means that the variable compensation
is limited to the total amount of the fixed compensation.
The fixed compensation is paid in cash. The amount of the variable
compensation is determined by the Group performance. The Board of
Directors can adjust this for individual performance by + / – 10 percent
of the variable total target compensation within the framework of the
Management by Objectives (MbO) process. The Group performance
Compensation model: Group Executive Board
compensation:
200% achievement
of targets
amount of
variable compensation
e
lin
on
ati
s
n
pe
com
compensation:
0% achievement
of targets
compensation:
100% achievement
of targets
33%
bonus provisions
variable
target
compensation
( 100% MAPI
malus provisions
achievement
of targets
±10% through MbO)
fixed
compensation
67%
-40%
0%
MAPI
+40%
85
is measured using the relative Total Shareholder Return (TSR), that is,
the “Market Adjusted Performance Indicator” (MAPI). This is done by
comparing the TSR of the LLB share in relation to the TSR of a peer
group. The peer group is broadly diversified, comprising a group of 29
banks. Its composition is discussed and evaluated annually by the
Group Nomination & Compensation Committee.
Switzerland
business year
1
12
Austria
3
Germany
1
France
4
Italy
4
Great Britain
1
UAE
3
The relative Total Shareholder Return (MAPI) compares management
performance with the performance of a group of banks. Market effects
can be eliminated from the performance indicator by comparing performance with a peer group. The MAPI is therefore free of external
market effects. It is calculated by FehrAdvice & Partners AG.
If the MAPI is zero percent, which means that the Total Shareholder
Return of the LLB share corresponds to the Total Shareholder Return
of the peer group, the members of the Group Executive Board receive
their variable total target compensation. The variable compensation
is linearly dependent on the MAPI. No variable compensation is paid
if the MAPI is minus 40 percent or less. If the MAPI is 40 percent or
more, the maximum variable compensation is paid, which is capped
at 200 percent of the variable target compensation. The variable compensation comprises a short-term incentive (STI) and a long-term incentive (LTI). The STI is paid in cash in the first quarter of the following
year. The LTI is paid in the form of an entitlement to acquire LLB shares.
The distribution between the STI (50 %) and the LTI (50 %) is internally
regulated. The number of LLB shares for the LTI is calculated on the
basis of the average share price in the last quarter of the financial year.
The LTI is subject to a blocked period of three years. The three-year
period remains in force even after termination of employment. After
three years, the entitlement to acquire shares is transformed into
a right to the transfer of the corresponding LLB shares. The share entitlement can be withdrawn or reduced if – during the three-year period – there are significant changes in the assessment of performances and / or risk behaviour of the member of the Group Executive Board.
Furthermore, the entitlement to acquire shares in a particular year
lapses if the average Group result of the previous three years is negative. At the end of the three-year period, the Group Nomination &
Compensation Committee examines whether the prerequisites for the
entitlement have been met. The Committee submits its decision to
the Board of Directors for a final decision.
1st subsequent year
2nd subsequent year
STI payout
variable
compensation
Geographic distribution
of the 29 banks in the peer group:
Liechtenstein
LTI with claw-back mechanism
50%
LTI
50%
STI
3rd subsequent year
4th subsequent year
LTI payout
LTI
STI
fixed
compensation
The employment relationship of the members of the Group Executive
Board is stipulated in individual employment contracts. The period of
notice is four months. The contracts of employment do not contain
any special clauses, such as, for example, severance compensation
following the termination of employment or even in the event of
a change in control.
The Liechtensteinische Landesbank extends the preferential conditions on bank products customary in the banking industry to all its
employees (including the Group Executive Board). This mainly takes
the form of limited preferential interest rates on mortgage loans and
credit balances. Standard market conditions apply to all transactions
made by the Board of Directors with the Bank.
5.3.3 Elements
For the 2014 business year, the members of the Board of Directors received a fixed compensation of CHF thousands 714. Contributions to
pension schemes and other welfare schemes amounted to CHF thousands 103. The fixed compensation was paid in cash as well as in the
form of an entitlement to acquire LLB shares. The entitlement to acquire LLB shares is subject to a blocked period of three years.
For the 2014 business year, the members of the Group Executive
Board received a fixed compensation of CHF thousands 3’067 and
a variable compensation of CHF thousands 909. Contributions to pension schemes and other welfare schemes amounted to CHF thousands
989. The fixed compensation was paid in cash. The variable compensation was paid in cash (50 %) as well as in the form of an entitlement
to acquire LLB shares (50 %), which is subject to a blocked period of
three years. The number of shares for the share-based compensation
corresponds to the average share price of the last quarter of 2014
(CHF 39.27). The variable compensation for the members of the Group
Executive Board was, on average, approximately 29.6 percent of the
fixed compensation, that is, 15.5 percent of the entire compensation.
86
In comparison with the previous year, the entire compensation of the
members of the Board of Directors increased by CHF thousands 32,
that is, by 3.4 percent. This increase in the compensation of the members of the Board of Directors is particularly due to the fact that the
Board of Directors has had seven members again since 9 May 2014. In
2014, the compensation of the members of the Board of Directors increased by CHF thousands 600, that is, 11.4 percent, which is mainly
due to variable compensation. The MAPI was 12.95 percent, which
corresponds to an achievement of targets of 132.4 percent. The variable
compensation therefore corresponds to 132.4 percent of the variable
compensation targets.
The entire compensation of the members of the Board of Directors
and the members of the Group Executive Board in the 2014 business
year is reported on an accrual basis. The variable compensation was
booked to the 2014 income statement. Payment of the STI to the
Group Executive Board will be made in the first quarter of 2015. The
entitlement to acquire LLB shares by the Board of Directors and
the Group Executive Board (LTI) is subject to a blocked period of three
years.
Details of the compensation and participations of members of the
Board of Directors and the Group Executive Board as well as loans to
them can be found in the Notes to the consolidated financial statement of the LLB Group in “Related party transactions” on pages 145
to 149.
6 Shareholders’ participation rights
6.1 Voting right limitation and representation
The Liechtensteinische Landesbank has issued bearer shares. At the
Liechtensteinische Landesbank’s General Meeting of Shareholders,
each share carries one vote. In accordance with Art. 306a ff. of person
and company law, the LLB shares held by the Liechtensteinische
Landesbank itself and its subsidiaries (1’978’202 shares as at 31 December 2014) are not eligible to vote.
At the General Meeting of Shareholders, each shareholder can vote
their own shares or authorize a third party to vote them by proxy.
6.2 Statutory quorum
At the General Meeting of Shareholders, a quorum is present if half of
the share capital is represented. If a quorum is not constituted, a further General Meeting of Shareholders has to be convened within two
weeks that makes decisions irrespective of the represented shares,
unless otherwise prescribed by mandatory laws and statutes.
Provided that legal provisions do not stipulate to the contrary, the
General Meeting passes its resolutions and decides its elections by
an absolute majority of the votes cast.
6.3 Convening of the General Meeting of Shareholders
The Board of Directors convenes an ordinary General Meeting of
Shareholders with a three-week period of notice. The meeting must
be held within six months following the end of a business year. The
invitation to the General Meeting is to be publicized in the official gazettes. The invitation must list the agenda to be dealt with at the
meeting, the proposals of the Board of Directors and, in the event of
elections, the names of the proposed candidates.
An extraordinary General Meeting may be convened by the Board of
Directors if this is in the urgent interest of the Liechtensteinische
Landesbank or at the request of one or more shareholders representing ten percent of the share capital.
6.4 Agenda
The Board of Directors specifies the agenda for the General Meeting
of Shareholders in accordance with the Liechtensteinische Landesbank’s statutes. The statutes may be viewed at www.llb.li/statutes.
Shareholders who represent at least 10 percent of the votes may have
signed and detailed items placed on the agenda for discussion and
resolution.
6.5 Registration in the company’s share register
The Liechtensteinische Landesbank exclusively issued bearer shares.
7 Change of control and defensive measures
The Liechtensteinische Landesbank is a banking institute licensed under Liechtenstein law with its registered office in the Principality of
Liechtenstein. As a Liechtenstein bank listed on SIX Swiss Exchange,
Liechtensteinische Landesbank AG must in addition to complying with
Liechtenstein law also comply with various Swiss regulatory requirements. The obligation to disclose significant shareholders under Article 20 of the revised Stock Exchange Act (SESTA) applies also in regard
to Liechtensteinische Landesbank AG (LLB) since the revised Stock
Exchange Act (SESTA) and the revised Stock Exchange Ordinance (SESTO) came into effect on May 2013. Shareholders attaining, falling below or exceeding the threshold percentages of 3, 5, 10, 15, 20, 25, 33.33,
50 or 66.66 of voting rights must notify SIX (Exchange Regulation) and
the LLB.
The Liechtensteinische Landesbank’s statutes contain no regulations comparable with the Swiss provisions regarding opting out or
opting up. Likewise, there are no change of control clauses in favour
of the members of the Board of Directors and / or the members of the
Group Executive Board or other senior executives.
Pursuant to the Law on the Liechtensteinische Landesbank, the
Principality of Liechtenstein holds at least 51 percent of the capital
and votes.
87
8 Independent auditors
8.1 Duration of mandate and term of office of the
auditor in charge
8.1.1 Date of acceptance of existing auditing mandate
PricewaterhouseCoopers AG, St. Gallen, has served as the independent auditors of the Liechtensteinische Landesbank according to company and banking law since 1998. The auditing mandate was taken
over from Revisuisse Price Waterhouse AG, St. Gallen, and its predecessor Revisa Treuhand AG, St. Gallen. Pursuant to person and company law and banking law, the independent auditors were elected by
the General Meeting of Shareholders on 9 May 2014 at the proposal of
the Board of Directors for a period of one year.
8.1.2 Term of office of the auditor in charge of the current
auditing mandate
Claudio Tettamanti has been the responsible auditor in charge since
2014. He assumed the function from Roman Berlinger, who had exercised this function from 2011 to 2014 (PwC – internal personnel change
abroad).
The auditor in charge changes every seven years.
8.2 Audit fees
In the 2014 business year, PricewaterhouseCoopers AG invoiced the
companies of the LLB Group for CHF thousands 2’268 (2013: CHF thousands 2’296) in respect of audit fees. These fees include the work
carried out by the auditors as required by the respective regulatory
authorities. The Group Audit & Risk Committee oversees the fees paid
to PricewaterhouseCoopers AG for their services.
8.3 Additional fees
For other services, PricewaterhouseCoopers AG invoiced the LLB Group
companies in 2014 for CHF thousands 560 (2013: CHF thousands 933).
8.4 Information instruments of the external auditors
The Group Audit & Risk Committee fulfils a supervisory, control and
monitoring function, which also extends to the external auditors. It is
responsible, among other tasks, for:
◆◆ taking note of and discussing the risk analysis made by the external
auditors, the auditing strategy derived from it and the respective
risk-oriented auditing plan;
◆◆ the critical analysis of the audit reports submitted by the external
audit and Group Internal Audit to the Board of Directors;
◆◆ the discussion of major problems identified during the auditing process with the external auditors;
◆◆ the monitoring and implementation of recommendations put forward by the external auditors and Group Internal Audit to eliminate
weak points and deficiencies;
◆◆ the assessment of the quality of the external and internal audit
functions (external and internal auditors according to banking law
and person and company law) as well as their cooperation;
◆◆ the discussion of the annual activity report and the annual audit
plan of Group Internal Audit, including the evaluation of whether
this function has adequate resources and competences, as well as
the approval of proposals to the Board of Directors;
◆◆ the assessment of the qualification, independence, objectivity and
performance of the external auditors and Group Internal Audit;
◆◆ the examination of the compatibility of external auditors’ auditing
activities with possible consulting mandates as well as the evalu
ation and discussion of their professional fees;
◆◆ the submission of a proposal to the Board of Directors for the attention of the General Meeting regarding the appointment or dismissal of the external auditors (appointed according to banking law and
person and company law). The Group Audit & Risk Committee is
responsible for defining the procedure to appoint new external
auditors.
Audit fees and additional fees
in CHF thousands
Audit fees
Additional fees
Corporate Finance
International accounting
Taxation advice
Regulatory issues and questions
2014
2013
2'268
2'296
560
933
83
71
8
25
198
413
9
48
Closing down of LLB Verwaltung (Switzerland)
AG; formerly Liechtensteinische Landesbank
(Switzerland) Ltd.
119
307
Legal and other advice
143
69
88
The external auditors perform their work in accordance with the legal
provisions, and according to the principles of the profession in the respective country of domicile of the Group company, as well as according to the “International Standards on Auditing”. The independent
auditors regularly report to the Board of Directors, the Group Audit &
Risk Committee and the Group Executive Board about their findings
and submit suggestions for improvements to them. The most important report is the audit report on the LLB Group required by banking
law. This summarized report is submitted in writing to the Board of
Directors once a year. In addition, the responsible auditor in charge of
the external auditors presents a report at one meeting of the Group
Audit & Risk Committee. All reports from the internal and external
auditors concerning all Group companies are submitted to the Group
Audit & Risk Committee.
Important findings in the reports of the internal and external auditors since the last meeting and all reports concerning the Group companies are addressed at the next meeting of the Group Audit & Risk
Committee. The Head of Group Internal Audit is responsible for providing the relevant information and reports directly to the Group Audit
& Risk Committee. He is appointed by the Board of Directors and is
subordinate to the Board’s Chairman.
Representatives of the external auditors participated in two meetings of the Group Audit & Risk Committee but did not attend any
meetings of the Board of Directors during the report period. The Head
of Group Internal Audit attended all of the meetings of the Group
Audit & Risk Committee and all the meetings of the Board of Directors.
The external auditors submit periodic reports dealing with the audit
planning based on risk analysis, the current audit reporting, the annual activity report as well as on a comparison of actual with budgeted
fees.
The Group Audit & Risk Committee annually evaluates the performance of the external and internal auditors in their absence. The following criteria are applied in assessing the performance of the external auditors and their professional fees (auditing and additional fees):
comparison of fees and budgeted fees as well as the previous year’s
fees, feedback from the departments audited, quality of the auditors’
findings, structured assessment of the auditors’ expertise. The independence of the external auditors is evaluated on the basis of the information concerning independence provided in the annual report of
PricewaterhouseCoopers AG and an assessment of their conduct. The
cost planning and its observance are also reviewed and discussed annually. Furthermore, the Group Audit & Risk Committee periodically
reviews alternatives and submits a proposal to the full Board of Directors for the attention of the General Meeting regarding the appointment of the external Group auditors.
Additional orders are placed on the basis of offers from competitors
taking into consideration the level of expertise. The Group Audit & Risk
Committee bases its assessment of the placing of orders for additional
services on the periodic reports it receives from Group Internal Audit
regarding reliability, scope and relation to audit fees.
The Group Audit & Risk Committee reports to the full Board of Directors once a year concerning the activities of the external auditors and
the assessment of their performance.
The external auditors have direct access to the Board of Directors at
all times. They hold regular discussions with the Chairman of the
Board of Directors and the Chairman of the Group Audit & Risk Committee. Topics in 2014 included the:
◆◆ analysis and evaluation of risks;
◆◆ auditing strategy and auditing plan;
◆◆ implementation level of auditing recommendations;
◆◆ discussion of important audit findings;
◆◆ areas of judgement in the annual financial statement;
◆◆ developments in accounting;
◆◆ determination of the auditing fee;
◆◆ evaluation of the work of the independent auditors;
◆◆ cooperation between the internal and external audit;
◆◆ change of the auditor in charge of the auditing mandate.
9Information policy
The Liechtensteinische Landesbank simultaneously, comprehensively
and regularly provides its shareholders, clients, employees and the
general public with information. This ensures that all stakeholder
groups are treated equally. Equality of opportunity and transparency
are ensured through institutionalizing and nurturing these ties as well
as establishing and preserving relationships that are based on trust
with the financial community, on the one hand, and with the media
and all other interested recipients of information, on the other.
The most important information media of the Liechtensteinische
Landesbank are its web site (www.llb.li) as well as its annual and interim reports, media communiqués, its financial result presentation
and the conference call for media and analysts, and its General Meeting of Shareholders.
As a listed company, the Liechtensteinische Landesbank is
obliged to publish share price-relevant information (ad hoc publicity,
Art. 72 of the exchange listing regulations). To receive ad hoc announcements in accordance with the directives for ad hoc publicity
automatically, an interested party can register at www.llb.li/
registration. Ad hoc announcements are published under the link
www.llb.li/mediacommuniques.
89
Agenda
Date
Time
Event
10 March 2015
7.00 a. m.
Publishing of 2014 business result at www.llb.li;
release of online Annual Report 2014 at ar2014.llb.li
10.30 a. m.
11 March 2015
15 April 2015
8 May 2015
Financial reporting and analyst media conference
2014 business result advertisement in the “Liechtensteiner Vaterland”
and the “Liechtensteiner Volksblatt”
Publication of printed Annual Report 2014
6.00 p. m.
General Meeting of Shareholders
12 May 2015
Ex-dividend date
13 May 2015
Dividend record date
15 May 2015
27 August 2015
Dividend payment date
7.00 a. m.
Publishing of interim financial statement 2015; publication of
printed interim financial statement 2015 and release of online interim
financial statement 2015 at www.llb.li
10.30 a. m.
Conference Call
28 August 2015
2015 interim financial result advertisement in the
“Liechtensteiner Vaterland” and the “Liechtensteiner Volksblatt”
If you have any questions, please contact the following person who is
responsible for investor relations:
10 Important changes since the
balance sheet date
Dr. Cyrill Sele
Head Group Corporate Communications & General Secretary
Phone +423 236 82 09
Fax +423 236 87 71
E-mail [email protected]
At the 23rd General Meeting of Shareholders on 8 May 2015, the Board
of Directors will propose the re-election of the Chairman Dr. Hans-
Werner Gassner for a term of office of two years as well as the Members Markus Büchel, Markus Foser and Roland Oehri for a term of
office of three years. Hans-Werner Gassner was first elected Chairman
in 2006 and reconfirmed in office in 2009 as well as in 2012. Markus
Büchel, Markus Foser and Roland Oehri have been Members since
2009 and were reconfirmed in office in 2012.
The Board of Directors proposes a general amendment of the statutes to the General Meeting of Shareholders on 8 May 2015. The proposed amended statutes can be seen from 27 March 2015 in German
at www.llb.li/statuten and in English at www.llb.li/statutes.
Consolidated financial statement in
the online annual report with Excel files
for your own statistics
Consolidated
financial
statement of
the LLB Group
93
94
97
98
99
100
101
Notes to the consolidated financial statement
103
111
114
118
139
140
145
150
152
176
Accounting principles
Segment reporting
Notes to the consolidated income statement
Notes to the consolidated balance sheet
Notes to the consolidated off-balance-sheet transactions
Pension plans and other long-term benefits
Related party transactions
Scope of consolidation
Risk management
Assets under management
93
As auditors of the Group, we have audited the consolidated financial statements (income statement, statement of comprehensive income, balance sheet, statement of changes in equity,
statement of cash flows and notes; pages 97 to 177) and the consolidated management report
(pages 94 and 96) of Liechtensteinische Landesbank Aktiengesellschaft for the year ended
31 December 2014.
These consolidated financial statements and the consolidated management report are the
responsibility of the Board of Directors. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.
Our audit was conducted in accordance with auditing standards promulgated by the profession in Liechtenstein and with the International Standards on Auditing, which require that
an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements and the consolidated management report are free from material
misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view of the financial
position, the results of operations and the cash flows in accordance with the International
Financial Reporting Standards (IFRS) and comply with Liechtenstein law.
The consolidated management report is in accordance with the consolidated financial
statements.
We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers AG
Thomas Romer
Claudio Tettamanti
(Auditor in charge)
St. Gallen, 26 February 2015
94
LLB Group financial statement
The consolidated financial statement is prepared in accordance with
the International Financial Reporting Standards (IFRS).
In the 2014 business year, the LLB Group earned a net profit of
CHF 72.6 million (2013: CHF 53.8 million). Net profit in 2014 therefore
rose significantly by 35.0 percent or CHF 18.8 million compared with
the previous year.
In the previous year, the LLB Group had to recognise one-off effects
in connection with the Group’s new strategic focus and the US taxation dispute totalling CHF 58.6 million (see the 2013 annual report in
this respect). Furthermore, the 2013 financial statement also contained the operating income and operating expenses of the Jura Trust
Group, which were sold in the second half of 2013, and of LLB (Switzerland) Ltd., which ceased its banking activities at the end of 2013. The
previous year’s figures, adjusted to consider the one-off effects and the
sold and discontinued Group companies, are provided as a comparison
basis for the previous year.
In spite of significantly lower interest rates, income from interest
business increased slightly on a comparable basis relative to the previous year. We posted a stable result with net fee and commission
income on a comparable basis relative to the previous year. Regarded
from the perspective of the reporting date, lower medium and longterm market interest rates prompted higher costs for interest rate
hedges. These interest rate hedging costs were primarily responsible
for the reduction in operating income relative to the comparable basis
for the previous year. Operating expenses were again reduced relative
to the comparable basis for the previous year, reflecting the consistent
implementation of our Focus2015 strategy. The net profit attributable
to the shareholders of LLB amounted to CHF 70.7 million (2013:
CHF 49.8 million). Earnings per share stood at CHF 2.45 (2013: CHF 1.75).
Assets under management stood at CHF 50.2 billion at 31 December
2014 (31.12.2013: CHF 49.1 billion). We attained a performance-related
increase in client assets of 2.3 percent. Assets in own-managed funds
rose by 7.7 percent to CHF 4.5 billion (31.12.2013: CHF 4.2 billion). Assets
with discretionary mandates amounted to CHF 8.6 billion (31.12.2013:
CHF 8.3 billion). Other client assets under management climbed
slightly to CHF 37.1 billion (31.12.2013: CHF 36.6 billion).
Net new money inflows of CHF 514 million were booked in the
growth markets. As expected, money outflows were registered in the
traditional cross-border markets. In the onshore markets, isolated
large outflows in the first half year from custodian bank funds and
public institutions tarnished the Group’s good acquisition performance. In total, the LLB Group’s net new money outflows amounted
to CHF 350 million (2013: minus CHF 2’167 million, which was principally attributable to the closure of LLB Switzerland).
Assets in own-managed funds
Assets with discretionary mandates
Other assets under management
95
Income statement
Operating income fell by 29.8 percent to CHF 342.0 million (2013:
CHF 487.0 million). On a comparable basis with the previous year, operating income would have been 10.1 percent lower than in the previous year. Drastically lower medium and long-term interest rates in the
2014 business year were almost exclusively responsible for this reduction. Regarded from the perspective of the reporting date, the lower
medium and long-term interest rates led to valuation losses and
therefore to interest rate hedging costs of CHF 55.9 million (2013: plus
CHF 30.3 million).
Interest income before credit loss expense was down in the 2014
business year by 6.2 percent to CHF 136.6 million (2013: CHF 145.7 million). On a comparable basis with the previous year, interest income
increased by a total of 0.5 percent.
On a comparable basis with the previous year, interest business
with clients increased by 4.5 percent. This was largely attributable to
the lower interest paid to clients. As expected, interest income due
from banks again declined due to historically low interest rates and
the lack of alternative investments on the interbank market. In the
2014 business year, net credit risk recovery of CHF 1.8 million were
charged to the income statement. This is a reflection of the measures
implemented to strengthen the Group’s credit. In the previous year a
charge of CHF 25.0 million was made to the income statement.
Net fee and commission income decreased by 9.4 percent to
CHF 190.6 million (2013: CHF 210.4 million). On a comparable basis
with the previous year, net fee and commission income in 2014 would
have remained unchanged. Brokerage earnings declined on account
of the marked restraint in investment activity by clients.
Net trading income fell substantially to minus CHF 23.4 million
(2013: plus CHF 58.6 million). Whereas in the previous year income
from interest rate swaps of CHF 30.3 million was posted, in the 2014
business year interest rate hedging costs of CHF 55.9 million were incurred. This was due to the drastic fall in medium and long-term interest rates, which led to a valuation loss on interest rate hedging instruments on the reporting date. Client trading with foreign exchange,
foreign notes and precious metals rose by 14.4 percent to CHF 32.1 mil
lion compared with the previous year.
Net income from financial investments at fair value through profit
and loss amounted to CHF 36.3 million (2013: CHF 15.6 million). As a
result of the fall in medium and long-term interest rates, unrealised
price gains were attained with interest-bearing investments. In addition, price gains were recorded on the back of the positive price development on the stock markets. In total, price gains amounted to
CHF 20.6 million compared with CHF 3.3 million in the previous year.
Income from interest and dividend payments at CHF 15.7 million exceeded the previous year’s figure by 26.9 percent.
Other income totalled CHF 3.7 million (2013: CHF 81.5 million). In the
previous year a value adjustment of CHF 55.4 million from a purchase
price obligation was recorded in other income.
Operating income 2014
Net trading income
Net income from financial investments
Other income
Operating expenses stood at CHF 271.0 million and were therefore
36.4 percent or CHF 155.1 million below the previous year’s figure of
CHF 426.0 million. On a comparable basis with the previous year, operating expenses in the 2013 business year would have totalled
CHF 280.0 million. The figure for 2014 therefore corresponds to a
reduction of CHF 9.0 million or 3.2 percent. These savings are a firm
reflection of the consistent implementation of our Focus2015 strategy
and continuing effectiveness of our cost-cutting and efficiency improvement programme.
At CHF 163.9 million, personnel expenses were 5.4 percent lower
than in the previous year (2013: CHF 173.2 million). On a comparable
basis with the previous year, personnel expenses would have risen by
6.2 percent. The increase is attributable to the positive price development of the LLB share and the variable remuneration component calculated on the basis of the share’s performance. At 31 December 2014,
the LLB Group had 893 full-time equivalent positions (31.12.2013: 925).
General and administrative expenses of the LLB Group in the 2014
business year stood at CHF 74.8 million (2013: CHF 194.1 million) and
were therefore CHF 119.4 million lower than in the previous year. This
was due to the one-off effects in the previous year. On a comparable
basis with the previous year, general and administrative expenses in
2014 were reduced substantially by 10.9 percent or CHF 9.1 million.
96
Depreciation and amortisation decreased compared with the previous
year by CHF 26.4 million to CHF 32.3 million (2013: CHF 58.7 million).
One-off effects influenced this position in the previous year. On a comparable basis with the previous year, depreciation and amortisation
fell by 22.7 percent.
The Cost-Income-Ratio for 2014 stood at 78.2 percent (2013: 67.7 %).
The increase was largely attributable to the higher interest rate hedging costs caused by the drastic fall in medium and long-term market
interest rates.
Balance sheet
In comparison with 31 December 2013, the consolidated balance sheet
total fell by CHF 0.1 billion, or 0.7 percent, to CHF 20.8 billion (31.12.2013:
CHF 20.9 billion). Loans to customers granted by the LLB Group increased by 4.7 percent to CHF 10.7 billion in comparison with 31 December 2013. Mortgage loans rose by 4.5 percent to CHF 9.3 billion
Equity attributable to the shareholders of LLB stood at CHF 1.7 billion at 31 December 2014. The total is practically unchanged in comparison with 31 December 2013. The tier 1 ratio amounted to 18.3 percent (31.12.2013: 18.8 %). The return on equity attributable to the
shareholders of LLB stood at 4.1 percent (2013: 3.0 %).
Outlook
In the 2015 business year, the LLB Group will strive to further improve
its operative performance. At the same time, the LLB Group sees risks
and uncertainties as a consequence of the Swiss National Bank’s decisions regarding the introduction of negative interest rates and in withdrawing its support of the minimum exchange rate of the Swiss Franc
to the Euro. The fall in medium and long-term interest rates had an
adverse effect on the LLB Group’s 2014 business result. Accordingly, the
development of market interest rates remains a factor of uncertainty
in 2015, which could have a major effect on the business result. The LLB
Group sees further latent risks in the development of the stock markets, which has a substantial influence on the valuation of financial
investments and client assets under management. In spite of the
Group’s successful strategic repositioning, from the present perspective regarding the current negative market interest rate situation,
probably not all the quantitative 2013 – 2015 targets can be achieved.
The LLB Group is continuing to consistently implement its Focus2015
strategy. On account of its focus on selected client segments and
markets, the LLB Group expects a net new money outflow in the tradi
tional cross-border and non-strategy-conforming markets, which
probably cannot be fully compensated for by the expected growth in
net new money in the onshore and strategic target markets.
97
in CHF thousands
Note
2014
2013
Interest income
1
197'804
217'366
– 9.0
Interest expenses
1
– 61'192
– 71'647
– 14.6
Net interest income
1
136'612
145'719
– 6.2
13
– 1'818
– 24'983
– 92.7
134'793
120'736
11.6
2
220'846
250'624
– 11.9
Fee and commission income
+ / – %
Fee and commission expenses
2
– 30'237
– 40'207
– 24.8
2
190'609
210'417
– 9.4
Net trading income
3
– 23'391
58'633
4
36'257
15'645
131.8
17
19
5
308.9
Net income from financial investments at fair value through profit and loss
Other income
5
3'748
81'534
– 95.4
342'036
486'969
– 29.8
Personnel expenses
6
– 163'868
– 173'176
– 5.4
7
– 74'777
– 194'142
– 61.5
8
Operating profit before tax
Tax expenses
9
Net profit
– 32'329
– 58'726
– 44.9
– 270'973
– 426'044
– 36.4
71'063
60'925
16.6
1'542
– 7'153
72'604
53'773
70'684
49'821
41.9
1'920
3'951
– 51.4
35.0
Of which attributable to:
Shareholders of LLB
Non-controlling interests
35
Earnings per share attributable to the shareholders of LLB
10
2.45
1.75
40.3
Diluted earnings per share (in CHF)
10
2.45
1.75
40.3
98
Consolidated statement of
comprehensive income
in CHF thousands
Note
Net profit
2014
2013
+ / – %
72'604
53'773
35.0
Other comprehensive income (net of tax)
Other comprehensive income (net of tax),
which can be reclassified to the income statement
– 1'054
222
Value changes to financial investments at fair value
Foreign currency translation
34
– 3'018
0
Total other comprehensive income (net of tax),
which can be reclassified to the income statement
– 4'072
222
Other comprehensive income (net of tax),
which can not be reclassified to the income statement
Actuarial gains and losses according to IAS 19
41
– 40'368
40'433
Tax effects
27
4'646
– 4'351
Total other comprehensive income (net of tax),
which can not be reclassified to the income statement
– 35'722
36'082
32'810
90'076
– 63.6
Shareholders of LLB
34'918
86'050
– 59.4
– 2'108
4'027
Comprehensive income for the period
Of which attributable to:
99
in CHF thousands
Note
31. 12. 2014
31. 12. 2013
+ / – %
Assets
Cash and balances with central banks
11
1'362'755
2'075'560
– 34.3
Due from banks
12
5'773'872
6'082'003
– 5.1
Loans
13
10'723'355
10'240'089
4.7
Trading portfolio assets
14
561
5'062
– 88.9
Derivative financial instruments
15
87'781
86'950
1.0
Financial investments at fair value
16
2'397'076
1'969'238
21.7
Investment in joint venture
17
61
41
46.3
Property and equipment
18
131'550
150'438
– 12.6
Investment property
18
16'385
21'383
– 23.4
Goodwill and other intangible assets
19
153'724
167'402
– 8.2
Deferred tax assets
27
23'565
22'456
4.9
33'505
32'970
1.6
Accrued income and prepaid expenses
Other assets
20
Total assets
53'472
47'332
13.0
20'757'663
20'900'923
– 0.7
– 50.6
Liabilities
Due to banks
22
484'599
981'065
Due to customers
23
15'657'835
15'599'995
0.4
Liabilities from insurance contracts
24
75'650
266'151
– 71.6
Financial liabilities at fair value
25
1'193'397
811'778
47.0
15
165'809
108'929
52.2
Debt issued
26
1'152'960
1'127'597
2.2
9'828
6'491
51.4
– 39.7
Current tax liabilities
Deferred tax liabilities
27
Accrued expenses and deferred income
Provisions
28
Other liabilities
29
Total liabilities
25'029
41'519
23'453
26'039
– 9.9
33'330
37'950
– 12.2
181'352
126'208
43.7
19'003'241
19'133'721
– 0.7
Equity
Share capital
30
154'000
154'000
0.0
Share premium
31
25'785
26'298
– 2.0
Treasury shares
32
– 168'584
– 167'816
0.5
Retained earnings
33
1'672'539
1'649'358
1.4
Other reserves
34
Total equity attributable to shareholders of LLB
Total equity
Total liabilities and equity
35
– 31'665
1'083
1'652'075
1'662'923
– 0.7
102'346
104'278
– 1.9
1'754'421
1'767'201
– 0.7
20'757'663
20'900'923
– 0.7
100
attributable to shareholders of
in CHF thousands
Note
As at 01 January 2012
Share
capital
Share
premium
Treasury
shares
Retained
earnings
Other
reserves
Total
154'000
49'458
– 206'179
1'594'895
– 51'666
1'540'508
9'410
9'410
154'000
49'458
– 206'179
1'594'895
– 42'256
1'549'918
Adjustment due to IAS 19
(revised) *
As at 1 January 2012, adjusted
Net profit
91'401
Other comprehensive income
Net movements in treasury shares
7'112
31 / 32
Dividend 2011, paid 2012
33
Dividend to non-controlling
interests 2011, paid 2012
35
1'131
– 8'526
Noncontrolling
interests
Total
equity
101'156 1'641'664
409
9'819
101'565 1'651'483
91'401
3'658
95'059
7'112
– 49
7'063
1'131
1'131
– 8'526
– 8'526
0
– 2'359
0
– 1'999
– 2'359
Increase / (reduction)
in non-controlling interests
35
Coupon tax on old reserves
33
– 32'603
– 32'603
– 32'603
Changes from own interests
in fully consolidated companies
33
1'486
1'486
1'486
Deconsolidation
and other changes
33
As at 31 December 2012, adjusted
– 1'424
154'000
49'458
– 205'048
Net profit
1'645'229
– 1'424
– 1'424
– 35'144
1'608'495
100'817 1'709'312
49'821
3'951
53'773
36'227
36'227
75
36'303
49'821
31 / 32
– 23'160
37'232
33
– 1'999
– 42'679
14'072
14'072
– 42'679
– 42'679
33 / 35
0
– 1'572
– 1'572
35
0
1'007
1'007
33
Deconsolidation
and other changes
33
As at 31 December 2013
– 557
– 2'456
154'000
26'299
– 167'816
1'649'357
Net profit
70'684
– 3'018
– 557
31 / 32
– 513
– 2'456
– 2'456
1'083
1'662'923
104'278 1'767'202
70'684
1'920
72'604
– 32'748
– 35'766
– 4'028
– 39'794
– 768
33
– 557
– 43'315
– 1'281
– 1'281
– 43'315
– 43'315
33 / 35
0
– 1'595
– 1'595
35
0
1'771
1'771
33
Deconsolidation
and other changes
33
– 485
– 685
154'000
– 485
25'785
– 168'584
1'672'539
– 31'665
– 485
– 685
– 685
1'652'075
102'346 1'754'421
101
in CHF thousands
2014
2013
210'599
231'267
13'317
10'031
Cash flow from / (used in) operating activities
Interest received (excluding financial investments)
Interest received from financial investments
Dividends received from financial investments
Interest paid
667
920
– 62'543
– 73'937
Fees and commission received
221'396
249'058
Fees and commission paid
– 28'927
– 44'128
32'348
27'954
Trading income
Other income
4'109
20'683
– 235'145
– 373'168
Other expenses
– 37'424
– 90'386
Income tax paid
– 7'692
– 5'369
110'706
– 47'075
Net due from / to banks
– 620'413
118'435
Net due from insurance contracts
– 155'182
176'085
Payments for personnel, general and administrative expenses
Cash flow from operating activities before changes in operating assets and liabilities
Trading portfolio and net replacement values
Loans / due to customers
Other assets
Financial liabilities
Other liabilities
4'865
803
– 453'288
71'846
– 6'147
– 14'276
– 190'501
249'432
381'619
– 376'173
5'426
254
– 1'033'621
226'405
– 922'916
179'329
Purchase of property and equipment
– 13'694
– 35'570
Disposal of property and equipment
11'471
54'861
Purchase of investment property
– 2'993
– 6'089
Changes in operating assets and liabilities
Net cash flow from / (used in) operating activities
Cash flow from / (used in) investing activities
Disposal of investment property
6'383
4'481
– 3'708
– 2'542
Purchase of financial investments
– 571'909
– 316'187
Disposal of financial investments
297'649
260'533
Purchase of other intangible assets
Purchase of associates
Net cash flow from / (used in) investing activities
19
5
– 276'781
– 40'508
102
in CHF thousands
2014
2013
Purchase of treasury shares
– 2'851
– 1'071
Disposal of treasury shares
1'570
15'143
– 43'315
– 42'679
Cash flow from / (used in) financing activities
Dividends paid
Increase in shares of Group companies
Issuance of medium-term debt
Repayment of medium-term debt
Net cash flow from / (used in) financing activities
Effects of foreign currency translation
Net increase / (decrease) in cash and cash equivalents
176
– 565
– 4'188
– 7'508
204'570
177'972
– 179'207
– 296'589
– 23'245
– 155'297
30'373
1'017
– 1'192'569
– 15'460
Cash and cash equivalents at beginning of the period
3'333'192
3'348'652
Cash and cash equivalents at end of the period
2'140'624
3'333'192
1'362'755
2'075'560
Cash and cash equivalents comprise:
Due from banks (due daily)
Total cash and cash equivalents
777'868
1'257'632
2'140'624
3'333'192
103
1 Basic information
◆◆ IAS 19 “Employee Benefits” – In November 2014, the IASB published
the amendment concerning risk sharing, which came into force on
The LLB Group offers a broad spectrum of financial services. Of particu
lar importance are asset management and investment counselling for
private and institutional clients, as well as retail and corporate client
business.
The Liechtensteinische Landesbank Aktiengesellschaft, founded
and with its registered office located in Vaduz, is the parent company
of the LLB Group. It is listed on the SIX Swiss Exchange.
The Board of Directors reviewed this consolidated annual statement
at its meeting on 26 February 2015 and approved it for publication.
In addition, the consolidated financial statement must be approved
by the General Meeting on 8 May 2015.
1 July 2014. The amendment contains a clarification regarding the
recognition of contributions by employees, which are specified in
the formal terms of a defined benefit plan. If contributions from
employees are linked to service, those contributions reduce the service cost if the amount of the contributions is independent of the
number of years of service. Than the entity is permitted to recognise such contributions as a reduction of the service cost in the period in which the related service is rendered. The implementation of
the amendment has no major influence on the LLB Group’s financial
statement.
◆◆ IAS 32 “Financial Instruments: Presentation” – In December 2011, the
IASB published the amendments to IAS 32 regarding the classification of financial instruments into financial assets and financial liabilities, which came into effect for the first time on 1 January 2014.
The amendments limit the presentation in the financial statement
to those agreements where there is a legally enforceable right to
set off financial assets with financial liabilities (netting). These
guidelines regulate the classification possibilities in normal business transactions as well as in the event of default, insolvency
or bankruptcy of the counterparty. The implementation of the
amendments has no major influence on the LLB Group’s financial
statement.
◆◆ IAS 36 “Impairment of Assets” – The IASB amended this standard in
May 2013 to clarify the definition of the recoverable amount for
non-financial assets, which came into effect for the first time on
1 January 2014. Additional fair value details are required for non-financial assets or cash-generating units of the recoverable amount
minus the costs of sale for which impairment was made or reversed, only if the recoverable amount was determined on the basis
of fair value minus the costs of sale. The amendment has no major
influence on the LLB Group’s financial statement.
◆◆ IAS 39 “Financial Instruments: Recognition and Measurement” – In
June 2013, the IASB published the amendments to IAS 39 regarding
the novation of derivatives and the continuation of hedging transactions in the financial statement. These came into effect on 1 January 2014. Under certain circumstances, the amendment provides
for a simplification in reporting hedge accounting and the continuation of their reporting in the financial statement. This is possible if
the novation occurs with a central counterparty because of legal or
regulatory requirements. The implementation of the amendments
has no major influence on the LLB Group’s financial statement.
2 Summary of significant accounting policies
The significant accounting and valuation methods employed in the
preparation of this consolidated financial statement are described in
the following. The described methods have been consistently employed for the reporting periods shown provided no statement to the
contrary is specified.
2.1 Basis for financial accounting
The consolidated financial statement has been prepared in accordance
with International Financial Reporting Standards (IFRS).
The Group financial statements were compiled on the basis of historical deemed costs with the exception of revaluation of some financial assets and liabilities.
Following the settlement of the US taxation dispute, the discussions and negotiations concerning the sale of swisspartners Investment Network AG recommenced. Within the scope of its strategic
refocusing on its core business, the LLB Group still intends to sell swiss
partners Investment Network AG. The criteria to be able to classify the
assets and liabilities of the company as non-current assets held for sale
in accordance with IFRS 5 were not completely fulfilled as per 31 December 2014.
Numerous new IFRS standards, amendments and interpretations
of existing IFRS standards were published which were to become effective for financial years starting on 1 January 2014 or later. The following new or revised IFRS standards or interpretations are of importance to the LLB Group:
104
◆◆ IFRIC Interpretation 21 “Levies” – The IASB published the IFRIC interpretation 21 in May 2013. It came into effect on 1 January 2014. The
IFRIC provides criteria for the recognition of a liability when it is the
result of a levy imposed by governments. The interpretation applies
both to levies for which the date and the amount are known, as
well as for those which are not an integral component of IAS 12 “Income Taxes”. The implementation of the amendments has no major
influence on the LLB Group’s financial statement.
◆◆ IFRS 9 “Financial Instruments” – IFRS 9 is divided into three phases:
Classification and Measurement, Impairment and Hedge Accounting. The classification and measurement of financial instruments
are made on the basis of the business model of the bank for the
management of financial assets and the contractual cash flow
characteristics of the financial assets. The financial instruments are
classified in the “hold” business model and measured at amortised
cost, if the purpose of the financial instrument is to generate interest earnings and payment of the principal upon maturity. If the
financial instruments are held for liquidity management reasons,
i.e. for the purpose of holding and sale, then the instruments are to
be recognised at fair value through other comprehensive income.
Gains and losses from this business model are booked to the statement of comprehensive income and equity. On the basis of IFRS 9,
impairments are to be recognised at an early stage (expected loss
model). The amount of the impairment is determined on the basis
of the classification of the financial instrument in three stages.
In stage 1 there is no significant deterioration in credit quality and
impairments amounting to the cash value of a 12-month expected
credit loss are to be recognised. If there is no objective indication of
an impairment, but a significant increase in credit risk has occurred,
the impairment is to be recognised in the expected life-time credit
loss (stage 2). In stage 3, there must be an objective indication of an
impairment and a single allowance (life-time expected loss) is to be
made for this financial instrument. These three stages are to be
reviewed on every balance date. In addition, IFRS 9 regulates hedge
accounting, whereby it seeks to standardise risk managements
and accounting. Hedges are to be better reflected in the financial
accounts. The new standard comes into effect on 1 January 2018.
The previous year does not have to be adjusted. The first-time adjustments will be made via the opening equity capital per 1 January
2018. The effects of these changes on the LLB Group’s financial reporting are currently being analysed.
◆◆ IFRS 15 “Revenue from Contracts with Customers” – In May 2014,
the IASB together with the FASB published new regulations for recognising revenue that apply to all contracts with customers. These
new regulations completely replace the existing US-GAAP and IFRS
standards. The new regulations specify a recognition of revenue
based on the principle that a company should recognise revenue to
depict the transfer of promised goods or services to the customer
in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods and services.
IFRS 15 contains a five-step model to determine the revenue,
whereby the type of transaction or the industry in which the company operates are irrelevant. The standard specifies additional disclosures and its binding first date of effectiveness will be for financial years starting on or after 1 January 2017. The effects of these
changes on the LLB Group’s financial reporting are currently being
analysed.
Within the scope of its annual improvement measures, in December
2013, the IASB issued further improvements to nine IFRS standards,
which basically all came into effect on 1 January 2015. The LLB
is currently investigating their influence on the Group financial
statement.
Use of estimates in the preparation of financial statements
In preparing the financial statements in conformity with IFRS, management is required to make estimates and assumptions that affect
reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Use of information available to the LLB on
the balance sheet date and application of judgement are inherent in
the formation of estimates. Actual results in the future could differ
from such estimates, and the differences could be material to the
financial statements.
The IFRS contains guidelines, which require the LLB Group to make
estimates and assumptions when preparing the consolidated financial
statement. Goodwill, intangible assets, pension plans, and fair value
measurements for financial instruments are all areas which leave large
scope for estimate judgments. Assumptions and estimates made with
them could be material to the financial statement. Explanations regarding this point are shown under note 19, note 36 and note 41.
2.2 Consolidation policies
The consolidated financial statement adopts a business perspective
and follows a financial format. The consolidation period corresponds
to the calendar year. The financial year is identical to the calendar year
for all consolidated companies. Solely LLB Invest AGmvK has a different
financial year; however this company is negligible for the preparation
of the consolidated financial statement. The Swiss Franc (CHF), the
currency of the country in which LLB AG has its registered office, serves
as the reporting currency of the LLB Group.
105
Subsidiaries
The consolidated financial statement incorporates the financial accounts of Liechtensteinische Landesbank AG and its subsidiaries. LLB
Group companies, in which Liechtensteinische Landesbank AG holds,
directly or indirectly, the majority of the voting rights or otherwise
exercises control, are fully consolidated. Subsidiaries acquired are consolidated from the date control is transferred to Liechtensteinische
Landesbank AG, and are no longer consolidated from the date this
control ends.
The consolidation is carried out according to the purchase method.
The effects of intra-group transactions and balances are eliminated in
preparing the financial statements. Transactions with minorities are
booked to equity.
Equity attributable to minority interests is presented in the consoli
dated balance sheet in equity, separately from equity attributable to
LLB shareholders. Net profit attributable to minority interests is
shown separately in the income statement.
Participations in joint ventures
Joint ventures, companies in which the LLB has a 50 percent participation, are recognised according to the equity method.
Changes to the scope of consolidation
Terrenia Anstalt with registered office in Vaduz, Liechtenstein, and
Liechtensteinische Landesbank (Österreich) Holding GmbH with registered office in Vienna, Austria, both wholly-owned subsidiaries of
Liechtensteinische Landesbank AG with registered office in Vaduz,
Liechtenstein, were liquidated and removed from the scope of consolidation with effect from 31 December 2014.
2.3 General principles
Recording of business
Sales and purchases from trading assets, derivative financial instruments and financial investments are booked on the transaction date.
Loans, including those to clients, are recorded in that period of time in
which the funds flow to the borrower.
Income accrual
Income from services is recorded at the time the service was rendered.
Asset management fees, safe custody fees and similar types of income
are recorded on a pro rata basis over the period the specific service is
provided. Interest income is recorded using the effective interest
method. Dividends are recorded at the time point a legal claim comes
into existence.
2.4 Foreign currency translation
Functional currency and reporting currency
The items contained in the financial accounts of each Group company
are valued in the currency which is used in the primary business environment in which the company operates (functional currency).
The LLB Group’s financial statement is reported in Swiss Francs,
which represents the LLB Group’s reporting currency.
Group companies
Group companies, which report their financial accounts in a functional
currency other than the Group’s accounting currency are translated as
follows: all assets and liabilities are converted at the relevant exchange
rate valid on the balance sheet date. All individual items in the income
statement and statement of cash flows are converted at the average
exchange rate for the accounting period. All resulting exchange differences are booked individually to equity or other comprehensive
income.
Transactions and balances
Foreign currency transactions are converted into the functional currency at the exchange rates prevailing at the time of the transaction
Foreign currency assets and liabilities are translated at the exchange
rates prevailing on the balance sheet date. Exchange gains and losses
arising from the valuation are booked to the income statement.
The following exchange rates were employed for foreign currency
conversion:
Reporting date rate
31. 12. 2014
31. 12. 2013
1 USD
0.9914
0.8908
1 EUR
1.2024
1.2270
1 GBP
1.5427
1.4738
2014
2013
1 USD
Average rate
0.9173
0.9237
1 EUR
1.2136
1.2273
1 GBP
1.5084
1.4499
2.5 Cash and balances with central banks
Cash and balances with central banks consist of cash in hand, postal
cheque balances, giro and sight deposits at the Swiss National Bank
and foreign central banks, as well as clearing credit balances at recognised central savings and clearing banks, claims from money market instruments with an original maturity period of less than three
months as well as loans due from banks (due daily).
Inland versus abroad
Switzerland is included under the designation “FL / CH”.
106
2.6 Balances due from banks and from customers
Balances due from banks and from customers are initially recorded at
actual cost, corresponding to the fair value of the specific loan at the
time it was granted. Subsequent valuation reflects the amortised cost
under application of the effective interest rate method.
Interest on balances due from banks and from customers is recog
nised on an accrual basis and is reported according to the effective interest method included under the item interest income.
Allowances and provisions for credit risks
Basically, the LLB Group extends loans only on a collateralised basis,
and only to counter parties having very high credit worthiness.
Loans are regarded as being impaired if it is likely that the entire
amount owed according to the loan agreement is not recoverable.
Loan impairments are caused by country or counterparty specific criteria. Indications for the impairment of financial assets are:
◆◆ the financial difficulty of the borrower;
◆◆ a breach of contract, such as a default or delinquency in interest
or principal payments;
◆◆ the increased probability that the borrower will enter bankruptcy
or financial reorganization;
◆◆ national or local economic conditions that correlate with defaults
on the assets of the Group.
The amount of the impairment is measured as the difference between
the carrying value of the claim and the estimated future cash flow,
discounted by the loan’s original effective interest rate. Allowances for
credit risks is reported as a reduction of the carrying value of a claim
on the balance sheet, whereas for an off-balancesheet item such as a
commitment a provision for credit loss is reported under provisions.
Impairments are recognised in the income statement.
2.7 Claims and liabilities from insurance contracts
Swisspartners Group offers fund-linked life insurance products. These
insurance products consist largely of fund-linked life insurance policies
with mortality cover against one-time investments and fund-linked
annuities. The insurance products contain no discretionary participation features. To determine the provisions for insurance benefits from
segregated portfolio contracts, a mortality risk amounting to the net
sum at risk is applied. The net sum at risk is the difference between the
insurance benefit in the event of death and the fair value of the cover
for the segregated portfolio. The provision for mortality is calculated on
the basis of the mortality risk as well as the criteria of the external actuary after consideration of the net amount for all life insurance policies. The provisions are reviewed on every balance sheet date. New
provisions to be allocated are immediately
recognised in the financial accounts.
The claims and liabilities from insurance contracts are recognised at
fair value. The balances due are reported on the assets side of the respective balance sheet items, or mainly under “financial investments”.
The liabilities are recognised in the positions “Liabilities from insurance
contracts” and “Financial liabilities” on the liabilities side of the balance
sheet. Changes to fair values and premium revenues as well as actuarial provisions are reported under “Net fee and commission income”
in the position “Insurance-related fees and commissions”.
Financial liabilities are recognised at fair value because the corresponding assets are also valued at fair value, and thus an accounting
mismatch is avoided.
2.8 Trading portfolio assets
Trading portfolio assets comprise equities, bonds and structured financial products. Financial assets held for trading purposes are recorded at fair value. Short positions in securities are reported as trading
portfolio liabilities at fair value. Realised and unrealised gains and losses
as well as interest and dividends are recorded in net trading income.
Fair value is based on current market prices in the case of an active
market. In the absence of an active market, fair value is calculated on
the basis of valuation models (see 2.10 “Financial investments”).
2.9 Derivative financial instruments
All derivative financial instruments are valued as positive or negative
replacement values corresponding to fair value and are reported in the
balance sheet. Fair value is calculated on the basis of exchange listings; in the absence of these, valuation models are employed. Realised
and unrealised gains and losses are recorded in net trading income.
Hedging transactions
The LLB Group may utilise hedge accounting if the conditions in accordance with IAS 39 for the permitted booking as criteria for treatment
as a hedging transaction are fulfilled.
Certain derivative transactions do indeed represent hedging transactions, and they do correspond to the risk management principles of
the LLB Group. However, due to the strict, specific nature of IFRS
guidelines, they do not meet the criteria to be treated as hedging
transactions in the financial accounts. Changes in value are recorded
for the corresponding period in net trading income.
107
2.10 Financial investments
According to IFRS, financial investments can be divided into various
categories. The classification depends on the purpose for which the
individual financial investments were made. The management of the
LLB Group determines the classification of financial investments upon
initial recognition. In the 2014 business year and in the 2013 business
year, financial investments were classified in the category “Financial
investments at fair value through profit and loss”. In this category value changes are recognised in the income statement. One financial
investment was classified in the category “Available-for-sale financial
assets”. In this category, all value changes are reported in other comprehensive income.
This designation is in line with the LLB’s investment strategy. The
securities are managed on a fair value basis and their performance is
evaluated accordingly. Members of the Group Executive Management
receive the corresponding information.
Financial assets at fair value through profit and loss
Financial assets are recorded on the balance sheet at fair value.
Non-realised gains and losses are reflected in the income statement
at fair value under income from financial instruments. The fair value
of listed shares is based on current market prices. If an active market
is not available for financial assets, or if the assets are not listed, the
fair value is determined by way of suitable valuation models. These
encompass references to recent transactions between independent
business partners, the application of the current market prices of other assets which are essentially similar to the assets being valued, discounted cash flows and external pricing models which take into account the special circumstances of the issuer. See also note 36.
Interest and dividend income from financial investments is recorded
at fair value as income from financial instruments. Interest income is
recognised on an accrual basis.
Available-for-sale financial assets
Financial assets which are available for sale are recognised at fair
value. Value changes, such as unrealised gains or losses, are reported
in other comprehensive income. The fair value of these financial assets
is measured on the basis of listed shares. If no active market exists, or
the assets are not listed on an exchange, the fair value is determined,
similar to financial assets at fair value through profit and loss, by
means of suitable valuation models. See also note 36.
Interest and dividend earnings are recognised in the income statement. Interest is reported on an accrual basis.
2.11 Property, investment property and other equipment
Property is reported in the balance sheet at acquisition cost less any
depreciation necessary for operational reasons. Bank buildings are
buildings held by the LLB Group for use in the delivery of services or for
administration purposes, whereas investment property is held to earn
rentals and / or for capital appreciation. If a property is partially used
as investment property, the classification is based on whether or not
the two portions can be sold separately. Investment property is periodically valued by external experts. Changes in fair value are recog
nised in the income statement as other income in the current period.
If the portions of the property can be sold separately, each portion is
booked separately. If the portions cannot be sold separately, the whole
property is classified as a bank building unless the portion used by the
bank is minor.
Equipment includes fixtures, furnishings, machinery and IT equipment. These items are entered in the financial accounts and depreciated over the estimated useful life of the asset.
Depreciation is conducted on a straight-line basis over the estimated
useful life as follows:
Real property
33 years
Investment property
no depreciation
Undeveloped land
no depreciation
Building supplementary costs
10 years
Fixtures, furnishings, machinery
5 years
IT equipment
3 years
Small value purchases are charged directly to general and administrative expense. In general, maintenance and renovation expenditures
are booked to general and administrative expense. If the related cost
is substantial and results in a significant increase in value, such expenditures are capitalized and depreciated over their useful life. Profits
from the sale of fixed assets are reported as other income. Losses result in additional write-downs on fixed assets.
Property and equipment is regularly reviewed for impairment, but
always when, on account of occurrences or changed circumstances,
an over-valuation of the carrying value appears to be possible. If, as a
result of the review, a reduction in value or modified useful life is determined, the residual carrying value is depreciated over the adjusted
useful life, or an unplanned write-down is made.
108
2.12 Non-current assets held for sale
Long-term assets (or a disposal group) are classified as held for sale, if
their carrying amount will be recovered primarily through a sale transaction rather than through continuing use. For this to be the case, the
asset (or the disposal group) must be available for immediate sale in its
present condition subject only to the terms that are usual and customary for sales of such assets (or disposal groups) and such a sale must be
highly probable. Long-term assets held for sale and disposal groups are
measured at the lower of carrying amount and fair value less costs to
sell, unless the items shown in the disposal group are not classified in
the valuation rules of IFRS 5 “Non-current assets held for sale and discontinued operations”.
As at 31 December 2014, no company of the LLB Group fulfils the
conditions for the classification of assets and liabilities as noncurrent
assets held for sale in accordance with IFRS 5.
2.13 Goodwill and other intangible assets
Goodwill is defined as the difference between the purchase price paid
for and the determined fair value at date of acquisition of identified
net assets in a company purchased by the LLB Group. Other intangible
assets contain separately, identifiable intangible values resulting from
acquisitions and certain purchased brands / trademarks and similar
items. Goodwill and other intangible assets are recognised on the balance sheet at cost determined on the date of acquisition, and are amortised using the straight-line method over the useful life of ten to
fifteen years. On each balance sheet date, goodwill and other intangible assets are reviewed for indications of impairment or changes in
future benefits. If such indications exist, an analysis is performed to
assess whether the carrying value of goodwill or other intangible
assets is fully recoverable. An amortisation is made if the carrying
amount exceeds the recoverable amount. For impairment testing
purposes, goodwill is distributed into cash generating units. A cash
generating unit is the smallest group of assets that independently
generates cash flow and whose cash flow is largely independent of the
cash flows generated by other assets. Cash flows generated from independent groups of assets are largely determined on the basis of how
management steers and manages business activity. The management
of the LLB Group manages and steers business activity in divisions so
that the divisions and segments are designated as the cash generating
units of the Group. Software development costs are capitalized when
they meet certain criteria relating to identifiability, it is possible that
economic benefits will flow to the company, and the cost can be measured reliably. Internally developed software meeting these criteria
and purchased software are capitalized and subsequently amortised
over three to ten years. See also note 19.
2.14 Current and deferred taxes
Current income tax is calculated on the basis of the tax law applicable
in the individual country and recorded as expense for the accounting
period in which the related income was earned. The relevant amounts
are recorded on the balance sheet as provisions for taxes. The tax impact from time differentials due to different valuations arising from
the values of assets and liabilities reported according to IFRS shown
on the Group balance sheet and their taxable value are recorded on
the balance sheet as accrued tax assets or, as the case may be, deferred
tax liabilities. Accrued tax assets attributable to time differentials or
accountable loss carry-forwards are capitalized if there is the probability that sufficient taxable profits will become available to offset such
differentials or loss carry-forwards. Accrued / deferred tax assets / liabilities are calculated at the tax rates that are likely to be applicable
for the accounting period in which the tax assets are realised or the
tax liabilities paid.
Current and deferred taxes are credited or charged directly to equity
or other comprehensive income if the related tax pertains to items
that have been credited or charged directly to equity in the same or
some other accounting period.
2.15 Debt issued
Medium-term notes are recorded at issuance value and subsequently
valued at ongoing cost of acquisition. Debt instruments, which contain an embedded option for conversion of the debt into shares of the
LLB AG, are separated into a liability and an equity component. The
difference between the proceeds of the issue price and the fair value
of the instrument on the issue date is booked directly to equity. The
fair value of the liability component on the issue date is determined
on the basis of the market interest rate for comparable instruments
without conversion rights. Thereafter, it is recognised at ongoing cost
according to the effective interest method. Differences between the
proceeds and the repayment amount are reported in profit and loss
over the term of the debt instrument concerned. The LLB Group does
not report changes in the value of the equity component in the following reporting periods.
109
2.16 Employee benefits
Retirement benefit plans
The LLB Group has pension plans for its employees in Liechtenstein
and abroad, which are defined according to IFRS as defined benefit
plans. In addition there are long-term service awards which qualify as
other long-term employee benefits.
For benefit-oriented plans, the period costs are determined by opinions obtained from external experts. The benefits provided by these
plans are generally based on the number of insured years, the employee’s age, covered salary and partly on the amount of capital saved.
For benefit-oriented plans with segregated assets, the relevant
funded status (surplus or deficit of the cash value of the claims in comparison to the related assets valued at current market value) is recorded on the balance sheet as an asset or liability in accordance with the
“Projected Unit Credit Method”. An asset position is calculated according to the criteria of IFRIC 14.
For plans without segregated assets, the relevant funded status
recorded on the balance sheet corresponds to the cash value of the
claims plus or minus subsequent amounts to be offset from plan
changes.
The cash value of the claims is calculated using the “Projected Unit
Credit Method”, whereby the number of insured years accrued up to
the valuation date are taken into consideration.
Retroactive improvements to benefits resulting from plan changes
are reported as expenses. If entitlements to pensions are vested immediately, the corresponding expense is recognised immediately.
Variable salary component and share-based remuneration
Regulations exist governing the payment of variable salary components. The valuation procedure with the variable salary component
is based on the degree of individual target achievement. Executives
receive a portion of their profit-related bonus in the form of LLB bearer shares. However, no exercising conditions are attached to this
procedure.
The LLB Group enters a provision as a liability in those cases where
a contractual obligation exists or a de facto obligation arises as a result
of past business practice. The expense is recognised under personnel
expenses. Obligations to be paid in cash are entered under other liabilities. The portion to be compensated with LLB bearer shares is
entered in equity. The number of shares for the share-based compensation corresponds to the average share price of the last quarter of the
year under report.
2.17 Provisions and contingent liabilities
The current business environment in which the LLB Group operates
exposes it to significant legal and regulatory risks. As a result, the LLB
is involved in various legal proceedings whose financial influence on
the LLB Group – depending on the stage of the proceeding – is difficult
to assess and which are subject to many uncertainties. The LLB Group
makes provisions for ongoing and threatened proceedings when, in
the opinion of management after taking legal advice, it is probable
that a liability exists, and the amount of the liability or payment can
be reasonably estimated.
For certain proceedings in cases where the facts are not specifically
known, the claimant has not quantified the alleged damages, the proceedings are at an early stage, or where sound and substantial information is lacking, the LLB Group is not in a position to estimate reliably
the approximate financial implication. In many legal cases a combination of these facts makes it impossible to estimate the financial effect
of contingent liabilities for the LLB Group. If, indeed, such assumptions
or estimates were made or disclosed, this could seriously prejudice the
position of the LLB Group in such legal cases.
In cases where only a possible liability is involved, but management
does not believe there is a probability of an outflow of resources, this
leads to a contingent liability for the LLB Group, but not to the formation of a provision. The amount
2.18 Allowances for credit risks
Allowances for credit risks is made at the LLB provided there are objective criteria indicating that the entire amount owed according to the
loan agreement may not be recoverable. At the LLB, a credit amount
is understood to be loan, a claim or a fixed commitment such as a
documentary credit, a guarantee, or a similar credit product. Objective
criteria are serious financial difficulties experienced by the borrower,
default of delinquency in interest or capital payments, or the probability that the borrower cannot repay the loan. Allowances for credit
risks is reported as a reduction of the carrying value of a claim on the
balance sheet. Allowances are reported in the income statement under credit loss (expense) / recovery. For further information, see Risk
management, 3. Credit risk.
2.19 Treasury shares
Shares of Liechtensteinische Landesbank AG held by the LLB Group are
valued at cost of acquisition and reported as a reduction in equity. The
difference between the sale proceeds and the corresponding cost of
acquisition of treasury shares is recorded under capital reserves.
110
2.20 Securities lending and borrowing transactions
Securities lending and borrowing transactions are generally entered
into on a collateralised basis, with securities mainly being advanced
or received as collateral.
Treasury shares lent out remain in the trading portfolio or in the
financial investments portfolio as long as the risks and rewards of
ownership of the shares are not transferred. Securities that are borrowed are not recognised in the balance sheet as long as the risks and
rewards of ownership of the securities remain with the lender.
Fees and interest received or paid are recognised on an accrual basis
and recorded under net fee and commission income.
3 Events after the balance sheet date
There have been no material effects after the balance sheet date,
which would require an adjustment of the consolidated financial
statement for 2014.
On 15 January 2015, the Swiss National Bank (SNB) decided to discontinue the minimum targeted exchange rate for the Euro. The LLB
Group sees risks and uncertainties in relation to the discontinuation
of the minimum targeted exchange rate for the Euro and the introduction of negative interests by the SNB. Even before the balance sheet
date, lower medium and long-term market interest rates had had an
adverse impact on the 2014 Group business result. The development
of market interest rates in 2015 will continue to be a factor of uncertainty, which could have a significant influence on the business result.
In spite of the Group’s successful strategic repositioning, from the
present perspective – regarding the current negative market interest
situation – probably not all the quantitative 2013 – 2015 targets can be
achieved.
111
Segment reporting
Segment reporting
The business activities of the LLB Group are divided into the following
three business areas. These form the basis for the segment reporting:
◆◆ Retail & Corporate Banking Segment encompasses the universal
banking business in the home markets of Liechtenstein and
Switzerland.
◆◆ Private Banking Segment encompasses all the private banking
activities of the LLB Group.
◆◆ Institutional Clients Segment encompasses the financial
intermediary and investment fund business, as well as the asset
management and wealth structuring activities of the LLB Group
The segments receive comprehensive support from the Corporate
Center. It comprises the following functions: financial and risk management, legal and compliance matters, trading and securities administration, payment services, human resources management, communication and branding, corporate development, as well as logistics and
IT services.
Following the management approach of IFRS 8, operating segments are reported in accordance with the internal reporting provided
to the Group Executive Management (chief operating decision maker),
which is responsible for allocating resources to the reportable segments and assesses their performance. All operating segments used
by the LLB Group meet the definition of a reportable segment under
IFRS 8.
In accordance with the principle of responsibility, and based on the
organizational structure, income and expenditure are allocated to the
business divisions. Indirect costs resulting from services provided internally are accounted for according to the principle of causation and
are recorded as a revenue increase for the service provider and as a cost
increase for the service beneficiary. The remaining income and expenditure for overriding services which cannot be assigned to the segments are shown under Corporate Center. Furthermore, consolidation
adjustments are reported under Corporate Center.
Transactions between the segments were executed at standard
market conditions.
112
Segment reporting
Business year 2014
in CHF thousands
Retail &
Corporate
Banking
Private
Banking
Institutional
Clients
Corporate
Center
Total
Group
136'612
Net interest income
79'851
13'340
7'418
36'002
– 1'864
957
– 911
0
– 1'818
77'987
14'297
6'507
36'002
134'793
26'540
76'968
86'970
131
190'609
9'391
8'985
9'166
– 50'932
– 23'391
36'257
Net trading income
0
0
0
36'257
0
0
0
19
19
800
31
– 297
3'213
3'748
Other income
Total operating income *
114'718
100'281
102'346
24'690
342'036
Personnel expenses
– 32'043
– 24'955
– 38'170
– 68'699
– 163'868
– 2'195
– 5'318
– 6'321
– 60'943
– 74'777
– 100
– 2
– 3'342
– 28'885
– 32'329
– 40'538
– 34'538
– 35'928
111'005
0
– 74'876
– 64'813
– 83'761
– 47'522
– 270'973
39'842
35'468
18'585
– 22'832
71'063
Tax expenses
1'542
Net profit
72'604
*There were no substantial earnings generated between the segments so that income between the segments was not material.
Business year 2013
in CHF thousands
Net interest income
Retail &
Corporate
Banking
Private
Banking
Institutional
Clients
Corporate
Center
Total
Group
84'669
18'515
10'469
32'066
145'719
817
– 20'400
– 5'400
0
– 24'983
85'486
– 1'885
5'069
32'066
120'736
24'301
85'326
101'816
– 1'027
210'416
7'748
8'892
9'136
32'857
58'633
0
0
0
15'645
15'645
Net trading income
Other income
0
0
0
5
5
744
15'900
57'283
7'607
81'534
Total operating income *
118'279
108'233
173'304
87'153
486'969
Personnel expenses
– 28'928
– 28'980
– 39'384
– 75'884
– 173'176
– 3'485
– 16'273
– 116'212
– 58'171
– 194'141
– 107
– 2'459
– 9'853
– 46'307
– 58'726
– 41'857
– 40'409
– 43'467
125'733
0
– 74'377
– 88'121
– 208'916
– 54'629
– 426'043
43'902
20'112
– 35'612
32'524
60'926
Tax expenses
– 7'153
Net profit
53'773
*There were no substantial earnings generated between the segments so that income between the segments was not material.
There were no revenues deriving from transactions with a single external customer that amounted to ten percent or more of the Group’s
revenues.
113
Segment reporting
Segment reporting by geographic location
The geographic analysis of operating income and assets is based on
the location of the company, in which the transactions and assets are
recorded. The LLB Group does not manage the segments or the
individual companies according to geographic distribution. The geo
graphic analysis is prepared and disclosed in order to comply with
IFRS.
Business year 2014
Liechtenstein
Switzerland
in %
Operating income (in CHF thousands)
Total Assets (in CHF millions)
Other countries
in %
Total Group
in %
in %
187'056
54.7
142'455
41.6
12'525
3.7
342'036
100.0
13'366
64.4
6'740
32.5
650
3.1
20'756
100.0
Business year 2013
Liechtenstein
Switzerland
in %
Operating income (in CHF thousands)
Total Assets (in CHF millions)
Other countries
in %
Total Group
in %
in %
311'224
63.9
166'461
34.2
9'284
1.9
486'969
100.0
13'197
63.1
7'398
35.4
306
1.5
20'901
100.0
114
Notes to the consolidated income statement
Notes to the consolidated
income statement
1 Net interest income
in CHF thousands
2014
2013
+ / – %
Interest income from banks
17'200
22'491
– 23.5
Interest income from loans
176'726
190'605
– 7.3
3'877
4'271
– 9.2
197'804
217'366
– 9.0
Loan commissions with the character of interest
Total interest income
Interest expenses on amounts due to banks
– 19'132
– 18'581
3.0
Interest expenses on amounts due to customers
– 41'325
– 51'506
– 19.8
Other interest expenses
– 736
– 1'560
– 52.9
Total interest expenses
– 61'192
– 71'647
– 14.6
Total net interest income
136'612
145'719
– 6.2
2 Net fee and commission income
in CHF thousands
Brokerage fees
2014
2013
+ / – %
54'005
70'666
– 23.6
Custody fees
31'788
31'612
0.6
Advisory and management fees
66'481
70'108
– 5.2
Investment fund fees
– 18.5
27'428
33'646
Credit-related fees and commissions
1'148
1'105
3.9
Insurance-related fees and commissions *
7'277
5'438
33.8
Commission income from other services
Total fee and commission income
Brokerage fees paid
32'719
38'049
– 14.0
220'846
250'624
– 11.9
– 37.2
– 9'685
– 15'428
Other fee and commission expenses
– 20'553
– 24'779
– 17.1
Total fee and commission expenses
– 30'237
– 40'207
– 24.8
Total net fee and commission income
190'609
210'417
– 9.4
*Insurance-related fees and commissions contain premiums and commissions received as well as net value changes of the investments, commitments and provisions
from insurance business.
115
Notes to the consolidatedincome statement
3 Net trading income
in CHF thousands
2014
2013
Securities
334
221
51.2
29'937
25'965
15.3
1'228
1'240
– 1.0
967
879
10.0
Interest rate instruments *
– 55'857
30'328
Total net trading income
– 23'391
58'633
Foreign exchange trading
Foreign note trading
Precious metals trading
+ / – %
*The LLB Group uses interest rate swaps for trading and hedging purposes. If the interest rate swaps do not fulfil the approval criteria according to IAS 39 in order to be booked
as hedging transactions, they are treated as interest rate swaps for trading purposes.
4 Net income from financial investments at fair value through profit and loss
in CHF thousands
2014
2013
Interest income
15'015
11'441
31.2
667
920
– 27.4
Dividend income
+ / – %
Price gains *
20'575
3'284
526.6
Total net income from financial investments at fair value through profit and loss **
36'257
15'645
131.8
*The realised price gains for 2013 amounted to CHF thousands 1'016 (previous year: minus CHF thousands 320).
**Only gains from financial assets which belong to the LLB Group’s own holdings are shown. The gains from financial assets through insurance contracts are shown in the position
“Insurance-related fees and commissions” (note 2). The distribution of financial assets can be seen in note 16.
5 Other income
in CHF thousands
2014
2013
+ / – %
1'655
1'121
47.6
– 66
55'362
Non-period-related and non-operating income *
885
17'494
Realised profits from sales of participations
– 27
0
Net income from properties
Adjustments on purchase price obligations from acquisitions
0
6'101
Realised profits from sales of tangible assets
Realised profits from sales of properties **
– 300
282
– 94.9
– 100.0
Income from various services
2'259
2'115
6.8
Other ordinary income
– 659
– 941
– 30.0
Total other income
3'748
81'534
– 95.4
*Contains in 2013 the gains realised from client assets from the sale of the Lugano bank branch and the Jura Trust Group.
**Contains in 2013 the gains realised from the sale of the business real estate of LLB (Switzerland) Ltd.
116
6 Personnel expenses
in CHF thousands
2014
2013
+ / – %
– 128'052
– 137'172
– 6.6
Pension and other post-employment benefit plans *
– 18'561
– 18'428
0.7
Other social contributions
– 12'011
– 12'544
– 4.2
– 7.8
Salaries
Training costs
– 1'191
– 1'291
Other personnel expenses
– 4'053
– 3'741
8.4
Total personnel expenses
– 163'868
– 173'176
– 5.4
*See note 41 for details.
The average headcount of LLB Group, adjusted to consider part-time
staff, amounted to 899 in 2014 and 1’019 in 2013.
7 General and administrative expenses
in CHF thousands
Occupancy
2014
2013
+ / – %
– 9'119
– 10'530
– 13.4
Expenses for IT, machinery and other equipment
– 21'496
– 22'293
– 3.6
Information and communication expenses
– 13'427
– 13'786
– 2.6
Marketing and public relations
– 9'885
– 10'402
– 5.0
Consulting and audit fees
– 7'603
– 9'683
– 21.5
Impairment of goodwill *
0
– 81'742
– 100.0
Capital tax and other tax
– 870
– 916
– 5.0
– 2'027
– 35'381
– 94.3
– 27.3
Provisions for legal and litigation risks
Material costs
– 1'143
– 1'572
Legal and representation costs
– 1'370
– 1'107
23.7
Supervision fees
– 1'208
– 779
55.2
Other general and administrative expenses
Total general and administrative expenses
– 6'628
– 5'952
11.4
– 74'777
– 194'142
– 61.5
8 Depreciation and amortisation
in CHF thousands
Depreciation of property *
Depreciation of equipment
2014
2013
+ / – %
– 6'535
– 15'898
– 58.9
– 8'408
– 14'312
– 41.3
Amortisation of intangible assets **
– 17'385
– 28'515
– 39.0
Total depreciation and amortisation
– 32'329
– 58'726
– 44.9
*Contains in 2013 impairments of CHF 9.6 million on business real estate of LLB (Switzerland) Ltd. in connection with the closure of LLB (Switzerland) Ltd.
**Contains in 2013 impairments on intangible assets of CHF 9.0 million.
117
9 Tax expenses
in CHF thousands
Current taxes
Deferred taxes *
Total tax expenses
2014
2013
+ / – %
– 11'205
– 6'989
60.3
12'746
– 164
1'542
– 7'153
The actual net payments made by the LLB Group for domestic and
foreign corporate profit taxes amounted to CHF 7.9 million for the full
year 2014 and of CHF 5.3 million for the full year 2013.
The tax on pre-tax Group profit deviates from the theoretical amount,
calculated on the basis of the weighted average Group tax rate on
profit before tax, as follows:
in CHF thousands
2014
2013
71'063
60'925
+ / – %
16.6
Assumed average income tax rate of 11.5 % (2013: 11.5 %)
– 8'172
– 7'006
16.6
Use of tax losses carried forward
– 29
– 509
– 94.3
Use of non-capitalised losses carried forward
151
0
Increase / (decrease) resulting from
Non-tax-deductible expenses / (tax-exempt earnings)
8'286
192
Other differences
1'306
170
Total tax expenses
1'542
– 7'153
668.2
The assumed average tax burden is based on the average applicable
tax rates for the individual companies or the individual tax jurisdictions weighted according to the total contributions of the individual
companies.
10 Earnings per share
Net profit attributable to the shareholders of LLB (in CHF thousands)
2014
2013
+ / – %
70'684
49'821
41.9
28'852'504
28'535'284
1.1
2.45
1.75
40.3
Net profit attributable to the shareholders of LLB (in CHF thousands)
70'684
49'821
41.9
Net profit for diluted earnings per share attributable to the shareholders of LLB (in CHF thousands)
70'684
49'821
41.9
28'852'504
28'535'284
1.1
Weighted average shares outstanding for diluted earnings per share
28'852'504
28'535'284
1.1
2.45
1.75
40.3
Diluted earnings per share (in CHF)
118
11 Cash and balances with central banks
in CHF thousands
31. 12. 2014
31. 12. 2013
62'354
54'359
14.7
Demand deposits with central banks
1'300'401
2'021'201
– 35.7
Total cash and balances with central banks
1'362'755
2'075'560
– 34.3
Cash
+ / – %
12 Due from banks
in CHF thousands
On demand
At maturity or callable
Allowance for credit losses
31. 12. 2014
31. 12. 2013
+ / – %
777'868
1'257'631
– 38.1
4'921'299
4'733'003
4.0
0
– 47'686
– 100.0
Due from insurance contracts (according to IFRS 4)
11'496
14'914
– 22.9
Due from insurance contracts (financial instruments according to IAS 39)
63'209
124'141
– 49.1
5'773'872
6'082'003
– 5.1
+ / – %
Total due from banks
13 Loans
in CHF thousands
31. 12. 2014
31. 12. 2013
Mortgages
9'340'177
8'937'975
4.5
79'880
63'830
25.1
1'303'218
1'372'271
– 5.0
27'814
0
Public institutions
Other loans and advances
Due from insurance contracts (according to IFRS 4)
Due from insurance contracts (financial instruments according to IAS 39)
Allowances for credit loss
Total due from customers
81'955
11'212
631.0
– 109'688
– 145'201
– 24.5
10'723'355
10'240'089
4.7
119
By type of collateral
in CHF thousands
31. 12. 2014
31. 12. 2013
Secured by properties
9'283'152
8'993'258
3.2
835'423
693'255
20.5
Other collateral
Unsecured
Total
+ / – %
604'780
553'575
9.2
10'723'355
10'240'089
4.7
Mortgage
loans
Other loans
Total
29'597
115'604
145'201
– 44'491
Allowances and provisions for credit losses
in CHF thousands
Write-offs
0
– 44'491
923
9'184
10'107
6'336
14'135
20'471
– 5'509
– 13'145
– 18'654
0
– 2'946
– 2'946
31'347
78'341
109'688
28'975
186'377
215'352
0
– 97'185
– 97'185
Recoveries and doubtful interest income
Increase in credit loss allowances and provisions recognised in the income statement
Decrease in credit loss allowances and provisions recognised in the income statement
Foreign currency translation and other adjustments
Write-offs
Recoveries and doubtful interest income
15
1'434
1'449
5'703
34'258
39'961
– 5'096
– 9'932
– 15'028
0
652
652
29'597
115'604
145'201
31. 12. 2014
31. 12. 2013
+ / – %
553
5'042
– 89.0
0
0
553
5'042
– 89.0
listed
8
19
– 58.5
unlisted
0
0
61.8
8
19
– 57.2
561
5'062
– 88.9
Increase in credit loss allowances and provisions recognised in the income statement
Decrease in credit loss allowances and provisions recognised in the income statement
Foreign currency translation and other adjustments
14 Trading portfolio assets
in CHF thousands
Debt instruments
listed
unlisted
Total debt instruments
Equity instruments
Total equity instruments
Total trading portfolio assets
120
15 Derivative financial instruments
Within the scope of balance sheet management, interest rate swaps
are concluded to hedge interest rate fluctuation risks. These instruments are fair value hedges. Furthermore, derivative financial instruments are employed primarily within the context of transactions for
clients. Both standardized and OTC derivatives are traded for the
Term to maturity
within 3 months
in CHF thousands
account of clients. Swiss banks having a high credit worthiness act as
counterparties. The bank does not assume a market-maker function.
Derivative financial instruments are used to a limited extent in the
management of the bank’s own securities portfolio.
Term to maturity
3 to 12 months
Term to maturity
1 to 5 years
Term to maturity
after 5 years
Total
PRV
NRV
PRV
NRV
PRV
NRV
PRV
NRV
PRV
NRV
Total
contract
volume
31. 12. 2014
Interest rate contracts
Fair value hedge
Forward contracts
0
0
0
288
2'245
29'927
0
53'549
2'245
1'936
0
0
0
0
0
0
0
1'936
83'764 1'352'885
0
83'272
57'706
55'946
17'439
17'685
284
247
3
0
75'432
73'878
7'136'574
0
0
6'711
6'711
0
0
0
0
6'711
6'711
80'567
60
59
0
0
0
0
0
0
60
59
377
5
5
3
3
0
0
0
0
8
8
549
206
206
0
0
0
0
0
0
206
206
136'240
1'183
29'840
Foreign exchange contracts
Forward contracts
Over the counter (OTC) contracts
Precious metals contracts
Forward contracts
Equity / index contracts
Commodities
Forward contract
Total derivative financial instruments
1'183
1'183
0
0
0
0
0
0
1'183
61'096
57'399
24'153
24'687
2'529
30'174
3
53'549
87'781
165'809 8'820'304
38'403 1'263'871
31. 12. 2013
Interest rate contracts
Fair value hedge
385
0
0
1'601
3'434
24'131
9'642
12'671
13'461
Forward contracts
417
571
0
0
0
0
0
0
417
Forward contracts
32'194
30'663
25'753
24'150
299
316
0
0
58'246
55'129 7'640'690
12'562
12'563
820
820
0
0
0
0
13'382
13'383
145'385
41
40
0
0
0
0
0
0
41
40
973
0
0
0
0
0
0
0
0
0
0
0
226
226
0
0
0
0
0
0
226
571
106'072
Precious metals contracts
Forward contracts
Equity / index contracts
226 1'130'972
Commodities
Forward contract
Total derivative financial instruments
0
0
1'177
1'177
0
0
0
0
1'177
45'825
44'063
27'750
27'748
3'733
24'447
9'642
12'671
86'950
PRV: Positive replacement value; NRV: Negative replacement value LLB Annual Report 2014
1'177
192'066
108'929 10'480'029
121
16 Financial investments at fair value
in CHF thousands
31. 12. 2014
31. 12. 2013
+ / – %
951'480
633'181
50.3
0
57'110
– 100.0
951'480
690'292
37.8
– 71.0
Debt instruments
listed
unlisted
Total debt instruments
Equity instruments
listed
unlisted
Total equity instruments
250
861
367'304
355'225
3.4
367'554
356'086
3.2
– 31.4
Financial investments from insurance contracts
Insurance contracts (according to IFRS 4)
172'462
251'237
Insurance contracts (financial instruments according to IAS 39)
905'580
671'623
34.8
Total financial investments from insurance contracts
1'078'042
922'860
16.8
Total financial investments at fair value
2'397'076
1'969'238
21.7
2014
2013
+ / – %
41
37
12.0
0
0
17 Investment in joint venture
in CHF thousands
As at 1 January
Additions / (Disposals)
Share in profit / (loss)
19
4
333.0
As at 31 December
61
41
46.3
Details of investment in joint venture
Ownership interest in %
Name
Registered office
Business activity
2014
2013
Data Info Services AG
Vaduz
Service company
50.0
50.0
in CHF thousands
2014
2013
Assets
959
1'071
Liabilities
838
988
Operating profit
897
960
38
9
Net profit
Investments in joint ventures are recognised in the balance sheet
according to the equity method and are not substantial for the LLB
Group. Losses are fully recognised in the balance sheet.
122
18 Property and other equipment as well as investment property
in CHF thousands
Property
Other
equipment
Total
property
and other
equipment
Investment
property
Cost
Accumulated depreciation
Net book amount
282'708
89'272
371'980
25'396
– 112'564
– 68'598
– 181'162
– 5'621
170'144
20'674
190'818
19'775
19'775
Year ended December 2013
170'144
20'674
190'818
Additions
Opening net book amount
2'413
20'159
22'572
4'400
Disposals
– 52'882
– 17'535
– 70'417
– 3'452
Amortisation
– 15'898
– 14'312
– 30'210
0
0
2'073
2'073
0
Reclassification from non-current assets held for sale
(Disposals) / Additions from accumulated depreciation
Closing net book amount
18'555
17'047
35'602
660
122'332
28'106
150'438
21'383
Cost
Net book amount
232'239
93'969
326'208
26'344
– 109'907
– 65'863
– 175'770
– 4'961
122'332
28'106
150'438
21'383
21'383
122'332
28'106
150'438
Additions
3'518
5'249
8'767
1'385
Disposals
– 12'878
– 645
– 13'523
– 6'383
– 6'535
– 8'408
– 14'943
0
625
187
812
0
107'061
24'489
131'550
16'385
Amortisation
Cost
Net book amount
222'879
98'573
321'452
21'346
– 115'818
– 74'084
– 189'902
– 4'961
107'061
24'489
131'550
16'385
123
in CHF thousands
Fire insurance value of property
Fire insurance value of investment property
31. 12. 2014
31. 12. 2013
272'295
278'319
+ / – %
– 2.2
1'900
8'050
– 76.4
Fire insurance value of other equipment
69'743
74'306
– 6.1
Fair value of investment property
16'385
21'383
– 23.4
+ / – %
There are no financing leases for premises or equipment.
Future net commitments for operating leases
in CHF thousands
31. 12. 2014
31. 12. 2013
Due 2015 to 2019
3'763
3'314
13.5
Due 2016 to 2020
10'741
13'959
– 23.1
Due 2021 and thereafter
Total future net commitments for operating leases
8'711
6'946
25.4
23'215
24'219
– 4.1
Operating expenses for 2014 include CHF thousands 5’128 and for
2013 CHF thousands 5’734 from operating leases. At year’s end, LLB
Group was obligated under a number of non-cancellable operating
leases for premises and equipment used mainly for banking purposes.
The significant premises leases include renewal options and escalation
clauses.
Future net receivables from operating leases
in CHF thousands
31. 12. 2014
31. 12. 2013
+ / – %
Due 2015 to 2019
1'594
1'602
– 0.5
Due 2016 to 2020
3'609
3'453
4.5
Due 2021 and thereafter
5'604
5'556
0.9
10'807
10'611
1.8
Total future net receivables from operating leases
Other income for 2014 includes CHF thousands 1’870 and for 2013
CHF thousands 1’588 from operating leases.
124
19 Goodwill and other intangible assets
in CHF thousands
Goodwill
Other
intangible
assets
Software
Total
Cost
Accumulated amortisation
Net book amount
93'524
71'050
123'171
287'745
– 26'261
– 35'663
– 41'881
– 103'805
67'263
35'387
81'290
183'940
183'940
67'263
35'387
81'290
Additions
0
0
3'092
3'092
Disposals
0
– 3'323
– 22'645
– 25'968
Amortisation
0
– 7'675
– 16'643
– 24'318
0
18'566
6'853
25'419
70'099
8'403
12'675
91'177
– 81'742
– 4'198
0
– 85'940
55'620
47'160
64'622
167'402
Reclassification from non-current assets held for sale
Impairment
Cost
Net book amount
163'623
76'130
116'293
356'046
– 108'003
– 28'970
– 51'671
– 188'644
55'620
47'160
64'622
167'402
55'620
47'160
64'622
167'402
Additions
0
0
3'707
3'707
Disposals
0
0
0
0
Amortisation
0
– 6'406
– 10'979
– 17'385
0
0
0
0
Impairment
0
0
0
0
55'620
40'754
57'350
153'724
Cost
Net book amount
163'623
76'130
120'000
359'753
– 108'003
– 35'376
– 62'650
– 206'029
55'620
40'754
57'350
153'724
Goodwill
At 31 December 2014, the LLB Group carried goodwill for the following segment:
in CHF thousands
31. 12. 2014
31. 12. 2013
55'620
55'620
Total
55'620
55'620
125
Goodwill impairment testing
Goodwill is tested twice a year for impairment – in the first quarter as
a basis for the interim financial reporting at 30 June, and in the third
quarter as a basis for the annual financial reporting at 31 December. In
order to determine a possible value impairment, the recoverable
amount of each cash generating unit, which carries goodwill, is compared with its balance sheet value. According to the calculations
made, the recoverable amount of a cash generating unit always corresponds to the value in use. The balance sheet value or carrying value
comprises equity before goodwill and intangible assets, as well as
goodwill and intangible assets from the underlying purchase price
allocation of this cash generating unit.
On the basis of the impairment testing carried out, management
reached the conclusion that for the business year ended on 31 December 2014, the total goodwill of CHF 55.6 million allocated to the cash
generating unit remains recoverable, and no impairment needs to be
recognised because the recoverable amount exceeds the balance sheet
value.
Recoverable amount
For determining the value in use, which corresponds to the recoverable amount of the respective cash generating units, the LLB Group
employs a discounted cash flow (DCF) valuation model. The DCF model used by the LLB Group takes into consideration the special features
of the banking business and financial service sector, as well as the
regulatory environment. With the aid of the model, and on the basis
of the financial planning approved by management, the cash value of
estimated free cash flow is calculated. If regulatory capital requirements exist for the cash generating unit, these capital requirements
are deducted from the estimated free cash flows for the respective
period and are available to the cash generating unit for distribution.
This amount then corresponds to the theoretical sum that could be
paid out to the shareholder. For the assessment of the forecasted
earnings, management employs approved financial plans covering a
period of five years. The results for all periods after the fifth year are
extrapolated from the forecasted result or the free cash flow of the
fifth year together with a long-term growth rate corresponding to the
long-term inflation rate, in Switzerland and Liechtenstein. Under certain circumstances, the growth rates may vary for the individual cash
generating units because the probable developments and conditions
in the respective markets are taken into account.
Assumptions
As far as possible, the parameters, on which the valuation model is
based, are based on external market information. In this context the
value in use of a cash generating unit is most sensitive to changes in
the forecasted earnings, changes to the discount rate and changes in
the long-term growth rate. The discount rate is determined on the
basis of the capital asset pricing model (CAPM), which contains a riskfree interest rate, a market risk premium, a small cap premium, as well
as a factor for the systematic market risk, i. e. the beta factor.
The long-term growth rates outside the five-year planning period
(terminal value), on which the impairment tests for the financial statement per 31 December 2014 were based and which were used for extrapolation purposes, as well the discount rates for the individual cash
generating units were unchanged from the parameters employed per
31 December 2013. The parameters used are shown in the table
below.
The discount rate is directly influenced by the fluctuation of interest
rates. On account of the currently historically low interest rate levels
in the market, the discount rate of the cash generating units is not
changed in comparison with the previous year. In a longer-term comparison, the present interest rate environment is also reflected in substantially lower interest income as well as correspondingly lower annual earnings and free cash flows distributable to shareholders.
Regarding the fact that the discount rate is linked to current interest
rate levels, when the latter rises, basically the discount rate, and interest income, will also increase. The cash generating units are exposed
to only a limited level of risk because they operate in a local market
and only in retail and institutional banking with a limited risk profile.
Sensitivities
During the periodic preparation and execution of impairment tests
all the parameters and assumptions, on which the testing of the individual cash generating units is based, are reviewed and, if necessary,
adjusted. A change in the risk-free interest rate has an influence on the
discount rate, whereby a change in the economic situation, especially
in the financial services industry, also has an impact on the expected or
estimated results. In order to check these effects on the value in use of
the individual cash generating units, the parameters and assumptions
employed with the valuation model are subjected to a sensitivity analy
sis. For this purpose the forecasted free cash flow attributable to shareholders is changed by 10 percent, the discount rate by 10 percent and
the long-term growth rates by 10 percent. Management is of the
opinion that a change in the assumptions and parameters would not
Growth rates
in percent
Discount rates
2014
2013
2014
2013
1.0
1.0
6.0
6.0
126
lead to an impairment in the case of the Retail & Corporate Banking
segment. According to the results of the impairment tests and based
on the described assumptions, an amount of CHF 70.0 million in excess of the balance sheet value is obtained for the Retail & Corporate
Banking segment. A reduction in the long-term growth rate of 10 percent or a reduction in the free cash flow would not result in an impairment of the goodwill of the Retail & Corporate Banking segment.
Furthermore, a 10 percent increase in the discount rate would not lead
to an impairment in the goodwill. In view of the challenging situation
in the financial services industry, which is expected to persist in the
future, management estimates that an impairment of the goodwill
in the Retail & Corporate Banking segment in the coming business
years is not improbable. However, management believes that in the
medium to long term the segment will have a positive development
thanks to its relative strength in comparison with competitors, as well
as to the planned and already implemented cost-saving and efficiency
improvement measures made in the mentioned segment.
If the estimated earnings and other assumptions in future business
years deviate from the current outlook due to political or global risks
in the banking industry – such as for example due to uncertainty in
connection with the implementation of regulatory provisions and the
introduction of certain legislation, or a decline in general economic
performance – this could result in an impairment of the goodwill in
future. This would lead to a reduction in the income statement of the
LLB Group and a decrease in the equity attributable to shareholders
and net profit. Such an impairment would not, however, have an impact on cash flows or on the Tier 1 ratio because, in accordance with
Liechtenstein equity capital ordinance, goodwill must be deducted
from capital.
Other intangible assets
Customer relationships and brand values are reported as assets under
other intangible assets. These are amortised over a period of 10 to
15 years on a straight-line basis. Estimated aggregated amortisation
on intangible assets amounts to:
in CHF thousands
2015
6'406
2016
6'406
2017
6'406
2018
6'406
2019
6'406
2020 and thereafter
Total
8'721
40'753
127
20 Other assets
in CHF thousands
31. 12. 2014
31. 12. 2013
+ / – %
11'851
6'490
82.6
2'133
1'615
32.1
35'348
35'506
– 0.4
Settlement account
VAT and other tax receivables
Precious metal holdings
Claims from reinsurance contracts
Total other assets
4'141
3'720
11.3
53'472
47'332
13.0
21 Assets pledged
31. 12. 2014
in CHF thousands
31. 12. 2013
Carrying value
Actual liability
Carrying value
Actual liability
37'018
0
40'218
0
Due from banks
0
0
0
0
Mortgage loans
943'532
735'800
883'725
698'800
Total assets pledged
980'550
735'800
923'943
698'800
Financial investments
The financial investments are pledged with national and central banks
for Lombard limits, for stock exchange guarantees and to safeguard
the business activity of foreign organizations pursuant to local legal
provisions. The amounts due from banks and mortgage loans are
pledged as collateral for loans and shares in bond issues of the Swiss
Regional or Cantonal Banks’ Central Bond Institutions.
22 Due to banks
in CHF thousands
On demand
31. 12. 2014
31. 12. 2013
+ / – %
185'599
646'065
– 71.3
299'000
335'000
– 10.7
Total due to banks
484'599
981'065
– 50.6
128
23 Due to customers
in CHF thousands
31. 12. 2014
31. 12. 2013
On demand
9'773'757
9'383'868
4.2
576'078
518'713
11.1
Savings accounts
Total due to customers
+ / – %
5'308'000
5'697'414
– 6.8
15'657'835
15'599'995
0.4
+ / – %
24 Liabilities from insurance contracts (according to IFRS 4)
in CHF thousands
As at 1 January
Reclassification of non-current assets held for sale
Reclassification to financial liabilities at fair value
Newly issued insurance contracts
2014
2013
266'151
0
0
187'627
– 136'122
0
– 100.0
5'378
73'433
Expired or terminated insurance contracts
– 46'674
– 3'129
Performance change
– 13'083
8'220
75'650
266'151
– 71.6
+ / – %
As at 31 December
– 92.7
25 Financial liabilities at fair value
in CHF thousands
As at 1 January
Reclassification from liabilities from insurance contracts (according to IFRS 4)
Performance change
As at 31 December
2014
2013
811'778
0
0
829'822
136'122
0
– 100.0
329'365
102'518
221.3
– 216'291
– 70'511
206.7
132'424
– 50'051
1'193'397
811'778
31. 12. 2014
31. 12. 2013
+/–%
417'160
428'797
– 2.7
47.0
26 Debt issued
in CHF thousands
Medium-term notes *
Shares in bond issues of the Swiss Regional or Cantonal Banks’ Central Bond Institutions
Total debt issued
*The average interest rate per 31 December 2014 was 0.97 percent and per 31 December 2013 was 1.17 percent.
735'800
698'800
5.3
1'152'960
1'127'597
2.2
129
27 Deferred taxes
in CHF thousands
As at
1 January
Amount
Amount
recognised in
recognised in
the income other comprestatement hensive income
Change from
additions and
disposals to
the scope of
consolidation
As at
31 December
Deferred tax assets
2013
Loss carry forwards
1'928
– 509
0
0
1'419
4'081
0
0
0
4'081
Liability for pension plan
10'599
– 834
– 4'351
2'424
7'838
9'195
– 77
0
0
9'118
25'803
– 1'420
– 4'351
2'424
22'456
Loss carry forwards
1'419
– 29
0
0
1'390
4'081
0
0
0
4'081
13'144
Others
Total
2014
Liability for pension plan
7'838
660
4'646
0
Others
9'118
– 4'168
0
0
4'950
22'456
– 3'537
4'646
0
23'565
Total deferred tax assets
2013
Intangible assets
Property
Financial investments through profit and loss
17
0
0
0
17
7'441
– 1'174
0
2'489
8'756
343
– 343
0
0
0
11'435
– 1'604
0
0
9'831
Other provisions
18'558
4'357
0
0
22'915
Total deferred tax liabilities
37'794
1'236
0
2'489
41'519
2014
Intangible assets
Property
Financial investments through profit and loss
17
0
0
0
17
8'756
– 1'174
0
0
7'582
0
949
0
0
949
9'831
– 1'041
0
0
8'790
Other provisions
22'915
– 15'224
0
0
7'691
Total deferred tax liabilities
41'519
– 16'490
0
0
25'029
At 31 December 2014, there existed temporary differences of CHF thousands 6’897, which were not booked as deferred taxes and which in
future could be offset with potential tax allowances (previous year:
CHF thousands 7’031).
The tax losses carried forward, which were not considered as
deferred tax assets per 31 December 2014, and which expire within
he next seven years, amounted to CHF thousands 0 (previous year:
CHF thousands 0).
130
The tax losses, which were not recognised as deferred tax assets per 31 December 2014 expire as follows:
in CHF thousands
31. 12. 2014
31. 12. 2013
0
0
Within 1 year
Within 2 to 5 years
0
0
Within 6 to 7 years
0
0
+ / – %
No expiry
6'897
7'031
– 1.9
Total
6'897
7'031
– 1.9
In general, tax losses in Switzerland can be carried forward for seven
years, in the Principality of Liechtenstein and Austria they can be carried forward for an unlimited period.
28 Provisions and contingent liabilities
Provisions for legal
and litigation risks
Provisions for
restructuring
Total 2014
Total 2013
35'329
2'621
37'950
22'046
0
0
0
3'000
– 4'918
– 1'671
– 6'589
– 12'789
Increase in provisions recognised in the income statement
2'240
678
2'918
25'693
Release of provisions recognised in the income statement
– 949
0
– 949
0
31'702
1'628
33'330
37'950
in CHF thousands
As at 1 January
Provisions applied
As at 31 December
in CHF thousands
Short-term provisions
31. 12. 2014
31. 12. 2013
+ / – %
14'702
16'750
– 12.2
Long-term provisions
17'000
21'200
– 19.8
Total
31'702
37'950
– 16.5
The provisions for restructuring relate to the Focus2015 strategy announced by the LLB Group in March 2013. As per 31 December 2014,
provisions amounting to CHF 1.6 million for restructuring, covering
estimated rebuilding and restoration costs, and expenses for social
plans, were allocated. No further significant provisions or restructuring costs are to be expected in connection with the Focus2015
strategy.
Within the scope of its normal business operations, the LLB Group
is involved in various legal proceedings. It sets aside provisions for ongoing and threatened proceedings when, in the opinion of the competent specialists, payments or losses on the part of Group companies
are likely, and the amounts can be estimated.
As per 31 December 2014, the LLB Group was involved in various liti
gation and proceedings, which could have an impact on its financial
reporting. The LLB Group endeavours to disclose the claims for damages, the scope of legal proceedings and other relevant information in
order for the reader to be able to estimate the possible risk for the LLB
Group.
In 2011, LLB Verwaltung (Switzerland) AG, formerly Liechtensteinische
Landesbank (Switzerland) Ltd., was informed by the Swiss authorities
that an investigation was being conducted against it by the US authorities in connection with cross-border private banking services for US
clients. LLB Verwaltung (Switzerland) AG, the successor company with
its registered office in Zurich-Erlenbach, is responsible for further procedure. LLB (Switzerland) Ltd. ceased its banking operations at the end
of 2013, is since October 2014 no longer subervised by the Swiss Federal
Financial Market Authority (FINMA). LLB Verwaltung (Switzerland) AG
is cooperating closely with the US authorities and is working with
them to achieve an efficient settlement of the issues while complying
with the prevailing legal regulations. On 29 August 2013, Switzerland
and the USA signed a joint statement in Washington to resolve the
taxation dispute. The solution enables the banks to resolve past issues
within a clearly defined framework. The US programme is open to all
Swiss banks, excluding those banks which are the subject of criminal
investigations by the US Department of Justice (so-called category 1
banks). LLB Verwaltung (Switzerland) AG belongs to the category 1
131
banks. These banks must seek a solution individually with the US authorities. As per 31 December 2012, in cooperation with our lawyers,
on the basis of talks with the US authorities, and taking into consideration differing probabilities, various scenarios were discussed in
relation to a possible outflow of resources. On the basis of these discussions, management reached the conclusion that it is not unlikely
that an outflow of resources will occur. Therefore based on the simulated scenarios and a legal analysis as per 31 December 2012, a provision was set aside for a possible outflow of resources in connection
with the investigation being carried out by the US authorities, and the
resulting possible payment or settlement to the latter. In the opinion
of management the legal risk of an outflow of resources in connection
with the possibility that LLB Verwaltung (Switzerland) AG may not
have complied with US law, especially US tax law, was still not unlikely
as per 31 December 2014. Based on the calculation criteria applied in
the non-prosecution agreement between LLB AG, Vaduz, and the US
authorities, as well as the latest information and payments made by
other banks, the provision for LLB Verwaltung (Switzerland) AG was
reviewed as per 31 December 2014. Management believes the provision
set aside per 31 December 2014 is sufficient.
The subsidiary company swisspartners Investment Network AG, the
US Department of Justice (DOJ) and the District Attorney for the
Southern District of New York announced on 9 May 2014 that they had
signed a non-prosecution agreement. This agreement ended the investigations of swisspartners Investment Network AG and meant that
no further legal action was initiated against the company. Thanks to
the solution achieved, swisspartners Investment Network AG was
able to definitely resolve the US taxation dispute. The US authorities
investigated whether clients of swisspartners Investment Network AG
had violated US tax law and securities regulations, and whether or in
what form the company had been involved. Within the scope of the
agreement reached, swisspartners Investment Network AG undertook to make a payment of USD 4.4 million. Sufficient provisions to
cover the payment had been allocated in 2013. The specific provisions
not applied for a possible payment were written back in favour of the
income statement. An amount remains set aside to cover legal advice
and support in connection with the conclusion of the non-prosecution
agreement. Management believes that the provisions set aside per
31 December 2014 are sufficient.
Switzerland and the USA signed a joint statement in Washington
on 29 August 2012 to resolve the taxation dispute. With the launch of
their DOJ Programme 2013, the US authorities enabled the banks to
participate in the programme and to regulate possible violations of US
tax law directly with the US authorities. The US tax programme is an
expression of the Swiss and US authorities to achieve a binding resolution of the taxations dispute. The programme envisaged that banks
in Switzerland had to decide by the end of December 2013 whether and
how they wished to participate in this taxation programme. In accordance with the principle of prudence, and in line with the statements
made by the FINMA that an institution which decides in favour of
category 2 is acting responsibly, the management of Bank Linth
decided to participate in the programme in category 2, and expects
from this step a final settlement of the issue. Based on the calculations
specified by the DOJ, management made an estimate of the possible
payment and allocated an appropriate provision. Management has no
new information available, which would necessitate an adjustment of
the provision and it believes that the provisions set aside per 31 December 2014 are sufficient.
Based on the available information, the LLB Group allocated provisions in the past and in the 2014 financial statement for the US taxation dispute. The proportion of these provisions, which was set aside
for swisspartners Investment Network AG, was released with the
payment of USD 4.4 million for the final settlement of the US tax dispute. A provision amounting to CHF 21.2 million was allocated for the
LLB Group per 31 December 2014 for a possible outflow of resources in
connection with a payment to the US authorities, as well as for lawyers’ fees, which may be incurred in this case for the provision of legal
advice and support.
As per 31 December 2014, the LLB Group had no contingent
liabilities.
132
29 Other liabilities
in CHF thousands
Outstanding medium-term notes
Unredeemed coupons
Charge accounts
31. 12. 2014
31. 12. 2013
+ / – %
334
549
– 39.1
8
8
0.0
12'473
13'196
– 5.5
Accounts payable
24'750
20'958
18.1
Clearing accounts
22'680
15'263
48.6
Pension liabilities
88'450
44'175
100.2
3'362
3'806
– 11.7
Liabilities for outstanding holidays / flexi-time
Liabilities from other long-term benefits
Purchase price obligations from acquisitions
Total other liabilities
4'134
3'894
6.2
25'160
24'358
3.3
181'352
126'208
43.7
+ / – %
30 Share capital
Number of bearer shares (authorised and fully paid up)
Nominal value per bearer share (in CHF)
Total nominal value (in CHF thousands)
31. 12. 2014
31. 12. 2013
30'800'000
30'800'000
0.0
5
5
0.0
154'000
154'000
0.0
31 Share premium
in CHF thousands
As at 1 January
As at 31 December
2014
2013
+ / – %
26'298
49'458
– 46.8
– 513
– 23'160
– 97.8
25'785
26'298
– 2.0
133
32 Treasury shares
Quantity
in CHF
thousands
2'343'236
205'048
Purchases
36'000
1'071
Disposals
– 451'349
– 38'303
As at 31 December 2013 *
1'927'887
167'816
Purchases
74'247
2'851
Disposals
– 23'932
– 2'083
1'978'202
168'584
As at 31 December 2014 *
*With the coming into force of the new remuneration model, no further treasury shares are issued as a profit-sharing bonus. In the previous year 19'247 shares
or CHF thousand 700 were considered for profit-sharing purposes.
33 Retained earnings
in CHF thousands
As at 1 January
Net profit attributable to the shareholders of LLB
Dividends of LLB
Value changes to financial investments at fair value
2014
2013
1'649'358
1'645'229
+ / – %
0.3
70'684
49'821
41.9
– 43'315
– 42'679
1.5
– 3'018
0
Changes from own interests in fully consolidated companies
– 485
– 557
– 13.0
Deconsolidation and other changes
– 685
– 2'456
– 72.1
1'672'539
1'649'358
1.4
2014
2013
+ / – %
1'083
– 35'145
As at 31 December
34 Other reserves
in CHF thousands
As at 1 January
– 1'054
222
Actuarial gains / (losses) according to IAS 19 (after taxes)
Foreign currency translation
– 31'694
36'007
As at 31 December
– 31'665
1'083
134
35 Non-controlling interests
in CHF thousands
2014
2013
+/–%
104'278
100'817
3.4
Actuarial gains / (losses) according to IAS 19 (after taxes)
– 4'028
75
(Dividend) / reduction nominal value in non-controlling interests
– 1'595
– 1'572
1.5
1'771
1'007
76.0
1'920
3'951
– 51.4
102'346
104'278
– 1.9
As at 1 January
Increase / (reduction) in non-controlling interests
Non-controlling interests in net profit
As at 31 December
36 Fair value measurement
Measurement guidelines
The fair value represents a market-based measurement and not an
entity-specific valuation. It is defined as 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 on the
principal market or the most advantageous market.
As far as possible, the fair value is determined on the basis of the
quoted market prices in active markets accessible to the company on
the measurement date. An active, accessible market is one in which
transactions for the asset or liability take place with sufficient fre
quency and volume to provide pricing information on an ongoing
basis. The fair value is determined using significant and observable
inputs. These are basically available in the case of quoted assets or
liabilities. If a market for financial or non-financial assets or liabilities
is inactive, or if no observable inputs, or insufficient observable inputs,
are available, the LLB Group must employ techniques or processes
(valuation methods or models) to determine the fair value. The valuation techniques contain assumptions including estimates to enable
an exit price on the measurement date from the perspective of the
market participant to be determined. However, such assumptions and
estimates contain uncertainties, which at a later date can lead to substantial changes in the fair value of financial and non-financial assets
and liabilities. In the case of financial and non-financial assets and
liabilities, for which a valuation technique involving non-observable
market data is used to determine the fair value, these are measured
at the transaction price. This fair value can differ from the fair value
determined on the basis of valuation techniques.
All financial and non-financial assets and liabilities measured at
fair value are categorised into one of the following three fair value
hierarchies.
Level 1
The fair value of listed securities and derivatives contained in the trading portfolio and financial investments is determined on the basis of
market price quotes on an active market.
Level 2
If no market price quotes are available, the fair value is determined by
means of valuation methods or models, which are based on assumptions made on the basis of observable market prices and other market
quotes.
Level 3
For the remaining financial instruments neither market price quotes
nor valuation methods or models based on market prices are available.
Our own valuation methods or models are employed to measure the
fair value of these instruments.
135
Valuation methods
Valuation methods and techniques are employed to determine the fair
value of financial and non-financial assets and liabilities for which no
observable market prices on an active market are available. These
include, in particular, illiquid financial investments and financial
liabilities from insurance contracts as well as investment property.
If available, the LLB Group uses market-based assumptions and inputs
as the basis for valuation techniques. If such information is not available, assumptions and inputs from comparable assets and liabilities
Valuation model
are employed. In the case of complex and very illiquid financial
and non-financial assets and liabilities, the fair value is determined
using a combination of observable transaction prices and market
information.
The LLB Group employs standardised and accepted valuation techniques to determine the fair value of financial and non-financial assets
and liabilities, which are not actively traded or listed. In general, the
LLB Group uses the following valuation methods and techniques as
well as the following inputs.
Inputs
Significant non-observable inputs
Level 2
Own investment funds
Market to Model
Option model
OTC Structured Product
Discounted par value of capital
protection based on discount rate
Market prices of the underlying assets
Underlying assets of future contracts
Market interest rates, prices
of comparable assets
Level 3
Financial investments form
insurance contracts
Basically cost approach
and market to model
Audited financial statements,
insurance sums. Assets can be
transferred if insurance event occurs
Illiquidity, special micro-economic
conditions, insolvency risks
Financial liabilities form
insurance contracts
Basically cost approach
and market to model
Audited financial statements,
insurance sums. Assets can be
transferred if insurance event occurs
Illiquidity, special micro-economic
conditions, insolvency risks
Investment property
External expert opinions, relative
values in market comparison
Prices of comparable properties
Assessment of special property
factors, expected expenses and
earnings for the property
Purchase price liabilities
from acquisitions
Discounted expected values based
on assumptions and company factors
Specific company assets
Development of business activity,
such as development of profit and
client assets under management
136
Measurement of fair values by active markets or valuation
techniques
The following table shows the classification of fair value hierarchies of
financial and non-financial assets and liabilities of the LLB Group. All
assets and liabilities are measured at fair value on a recurring basis in
in CHF thousands
the statement of financial position. As per 31 December 2013, the LLB
Group had no assets or liabilities which were measured at fair value
on a non-recurring basis in the balance sheet.
In the 2013 business year there were no significant transfers between Level 1 and Level 2 financial instruments.
31. 12. 2014
31. 12. 2013
+ / – %
561
5'061
– 88.9
0
0
1'471'766
1'119'330
520'036
485'288
7.2
1'472'326
1'124'391
30.9
61.8
Level 1
of which financial investments from insurance contracts
Total Level 1
31.5
Level 2
Total Level 2
0
0
87'781
86'950
1.0
507'121
528'281
– 4.0
139'818
115'946
20.6
594'903
615'231
– 3.3
Level 3
0
0
0
0
Investment property
536'620
322'075
66.6
536'620
322'075
66.6
16'385
21'383
– 23.4
Total Level 3
553'005
343'458
61.0
Total assets
2'620'234
2'083'081
25.8
Level 1
Total Level 1
520'036
485'288
7.2
520'036
485'288
7.2
0
0
520'036
485'288
7.2
Level 2
139'818
115'946
20.6
139'818
115'946
20.6
165'809
108'929
52.2
Total Level 2
305'627
224'875
35.9
Level 3
Total Level 3
Total liabilities
536'620
322'075
66.6
536'620
322'075
66.6
0
0
25'160
24'358
3.3
561'780
346'433
62.2
1'387'442
1'056'596
31.3
137
Measurement of assets and liabilities classified as Level 3
For the recurring measurement of the fair value of financial and non-
financial assets and liabilities for which significant non-observable
inputs have been used and which are classified as Level 3, the effects
on the income statement in the business year 2014 are immaterial and
therefore they are not shown. The measurement or valuation had no
influence on other comprehensive income in 2014.
The measurement process to determine the fair value of recurring
and non-recurring Level 3 assets and liabilities, especially the significant non-observable inputs as shown in the previous table are explained in the following. The interrelationships between observable
and non-observable inputs are not explained in the following because
such interrelationships have no significant influence on the measurement on fair value.
Financial investments from insurance business and financial
liabilities from insurance business
Individual subsidiary companies are active in the insurance sector.
Within the scope of this business only fund-linked insurance policies
are written. The configuration of the fund-linked insurance policies
envisages that, in the occurrence of the insured events, the value of
the insurance coverage fund plus a risk benefit are to be paid out. The
investment risk of the fund-linked insurance policies is always borne
by the policy holder. Accordingly, the company is not exposed to an
investment risk at any time. The valuation of these insurance policies
is carried out periodically and in compliance with IFRS. Changes in
insurance coverage funds and the corresponding provisions are
booked to profit and loss. Basically, the valuation is made on the basis
of the cost approach and market-to-model methods. In the cost approach method, the valuation is based on the replacement value. In
the market-to-model method, models are employed which calculate
a market-consistent value for the assets. Changes in the inputs on
which the measurement of the fair value is based can lead to a significant change in the models. It cannot be quantified to what extent
changes influence the fair value and the sensitivity of fair value because the valuation of an insurance policy is based on an individual
measurement, which is influenced by various assumptions such as
the type of assets, the contract duration and payment flows. Consequently, a significant change in the fair value can occur, which is not
quantifiable.
Investment property
Investment property is periodically valued by external experts or are
valued on the basis of relative values in a market comparison. If no
corresponding values for comparable properties are available on
which to base a reliable calculation of the fair value, assumptions are
made. These assumptions contain assessments and considerations of
such circumstances as the location and condition of the property, as
well as the expected costs and revenues with it. Properties are always
revalued whenever on the basis of events or changed circumstances
the fair value no longer reflects the market price, so that changes in
the calculation of the fair value can be promptly determined and recognised in the accounts. Changes in the inputs on which the measurement of the fair value is based can lead to significant changes in it.
It cannot be quantified to what extent changes influence the fair value
and the sensitivity of fair value because the valuation of a property is
based on an individual measurement, which is influenced by various
assumptions. Consequently, a significant change in the fair value can
occur, which is not quantifiable. Investment properties do not diverge
to highest and best use.
As per 31 December 2014, a shareholders’ agreement existed between
swisspartners Investment Network AG, Zurich and LLB AG, Vaduz, according to which the shareholders are granted the right to sell the
share capital and voting rights to the LLB. At the same time, the shareholders of the LLB are granted the right to buy the remaining shares
and voting rights. This purchase price obligation is determined periodically on the basis of a calculation specified in the shareholders’
agreement, which is based on a company value composed of customer
equity, an earnings value and an actual value. The input factors, which
are applied to calculate the purchase price obligation and to determine the company value, comprise information that is partly available
to the public such as assets under management, annual profit and
equity. Assumptions are made in the discounting of the purchase price
commitment and in considering its future development. These assumptions relate to the future development of annual profit and the
value of customer equity. As far as possible the assumptions are based
on factors observable on the market such as overall economic trends
or macro-economic developments. Changes in the inputs on which
the measurement of the fair value is based can lead to significant
changes in the purchase price obligation. It cannot be quantified to
what extent changes influence the fair value and the sensitivity of fair
value because the measurement is influenced by the company and
economic developments and trends.
138
Structured products (OTC market)
Among its financial investments, the LLB Group has structured products with capital protection until final maturity, whose market value
is estimated by the LLB Group with the aid of valuation models.
Structured products with capital protection until final maturity are
periodically valued on the basis of an internal cash value model. On
the basis of their characteristics up to maturity, the products correspond to zero coupon bonds. To calculate the discount interest rate in
the cash value model, assumptions are made regarding the interest
rate components, which are estimated periodically on the basis,
Movements of level 3 financial instruments
in CHF thousands
among other criteria, of the market data of other bond issuers. Since
no public market exists, assumptions are made regarding the redemption fees of issuers. These assumptions are periodically reviewed on
the basis of data from various market participants and information
from issuers regarding internal liquidity management.
Fluctuations on the bond markets, for example due to monetary
policy measures or the credit worthiness and internal liquidity of issuers, could lead to changes in valuation, particularly of the bid / ask
spreads with redemptions during the term to maturity.
Assets
Liabilities
at fair value through
profit and loss
at fair value through
profit and loss
322'075
322'075
Profit / (loss)
– 51'242
– 51'242
Purchases
128'686
128'686
Disposals
– 78'779
– 78'779
300'844
300'844
– 25'709
– 25'709
Transferred to level 3 (from level 2)
– 59'255
– 59'255
536'620
536'620
There are no risks from Level 3 positions.
139
Notes to the consolidated off-balance-sheet transactions
Notes to the consolidated
off-balance-sheet transactions
37 Contingent liabilities and assets
in CHF thousands
31. 12. 2014
31. 12. 2013
Collateral guarantees and similar instruments
34'984
30'587
+ / – %
14.4
Performance guarantees and similar instruments
38'235
46'129
– 17.1
Total contingent liabilities
73'219
76'716
– 4.6
31. 12. 2014
31. 12. 2013
+ / – %
255'362
101'878
150.7
38 Credit risks
in CHF thousands
Irrevocable commitments
Pay-in and pay-up obligations
Total credit risks
8'964
8'964
0.0
264'325
110'841
138.5
31. 12. 2014
31. 12. 2013
+ / – %
195'729
436'100
– 55.1
39 Fiduciary transactions
in CHF thousands
Fiduciary deposits with other banks
Fiduciary loans
472'286
406'253
16.3
Other fiduciary financial transactions
481'863
424'819
13.4
1'149'878
1'267'172
– 9.3
Total fiduciary transactions
40 Lending and pension transactions with securities
LLB has own securities which have been lent or pledged by LLB. These
are recognized in LLB’s balance sheet and recorded in the table below.
In addition, third-party securities that were either borrowed by LLB
or received as collateral are disclosed in the table. These are not recognized in LLB’s balance sheet.
31. 12. 2014
in CHF thousands
Self-owned securities lent or delivered as collateral within the scope of securities
lending or borrowing transactions, or self-owned securities transferred in connection
with reverse repurchase agreements
of which capable of being resold or further pledged without restrictions
Securities received as collateral or borrowed within the scope of securities lending
or borrowing transactions, or securities received in connection with reverse
repurchase agreements, which are capable of being resold or further pledged
without restrictions
of which resold or further pledged securities
31. 12. 2013
Carrying value
Actual liability
Carrying value
Actual liability
5'397
5'397
31'936
31'936
5'397
5'397
31'936
31'396
0
2'105'637
0
2'814'412
0
14'246
0
43'114
140
Pension plans and other long-term benefits
Pension plans and
other long-term benefits
41 Pension plans
Post-employment benefits
The LLB Group has established a number of pension plans in compliance with prevailing legal provisions, which insure most employees in
the event of death, invalidity and retirement. In addition, further plans
exist for long-service anniversaries which qualify as other long-term
employee benefits. In the case of the pension plans, contributions are
made by employees, which are then supplemented by corresponding
contributions from the LLB Group. The pension schemes are financed
in compliance with the local legal and fiscal regulations. The risk benefits are based on the insured salary and the pension benefits on the
accumulated capital. The assets of the funded pension plans are held
within separate foundations or insurances and may not revert to the
employer. The mortality rates specified in the Professional Pensions
Law 2010 (BVG 2010) were employed to calculate the mortality, life
expectancy and invalidity rates for all pension plans. The last actuarial
valuations were performed on 31 December 2014 and 31 December
2013. The actuarial gains and losses are included directly in equity or
other comprehensive income. Joint committees are set up for pension
plans, which are administered via collective foundations.
The foundation board of the autonomous pension foundation is
also composed of an equal number of employee and employer representatives. On the basis of the legal provisions and the pension plan
regulations, the foundation board is obligated to act solely in the interest of the foundation and the actively insured persons and pensioners. Consequently, in this pension plan the employer itself may not
decide on benefits and their financing, rather decisions must be taken
on equal terms.
The foundation board is responsible for determining the investment
strategy, for amendments to the pension plan regulations, and especially, for the financing of the pension plan benefits. The foundation
board members of the pension plans specify investment guidelines for
the investment of the pension plan assets, which contain the tactical
asset allocation and the benchmarks for the comparison of performance with a general investment universe. The assets of the pension
plans are well diversified. With regard to diversification and ecurity,
the legal provisions of the BPVG Pension Law apply to pension plans
in Liechtenstein, and the legal provisions of the BVG Pension Law apply
to pension plans in Switzerland. The foundation board members continually monitor whether the selected investment strategy is suitable
for the provision of the pension plan benefits and whether the risk
budget corresponds to the demographic structure. The observance of
the investment guidelines and the investment performance of the
investment advisers are reviewed on a quarterly basis. In addition, the
investment strategy and its suitability and effectiveness are periodically checked by an external consultant.
Up to 31 December 2012, the pension plan was structured as a final
salary plan, i.e. all pension plan benefits were calculated as a percentage of the insured salary. From 1 January 2013, the plan was redesigned
and every employee now has a pension savings account. The savings
balance and interest (no negative interest is possible) are credited to
this pension savings account annually. At the time of retirement, the
insured person may choose between a life-long pension, which includes a reversional spouse pension, or the withdrawal of the savings
capital. In addition to old-age benefits, the pension plans also include
invalidity and partner pensions. These are calculated on the basis of
the insured annual salary. Furthermore, the insured employee may
purchase improvements to his pension plan up to a maximum sum
specified in the regulations. If the employee leaves the company, the
savings credit balance is transferred to the new employer’s pension
plan or to a blocked pension savings account. When determining the
benefits, the minimum provisions of the Professional Pension Plans
Law (BPVG) and its implementing ordinance are to be observed. The
minimum salary to be insured and the minimum pension savings balance sum are stipulated in the BPVG. On account of the pension plan
structure and the legal provisions of the BPVG, the employer is subject
to actuarial risks. The most important of these are investment risk,
interest rate risk and longevity risk. The risks of death and invalidity
have been congruently re-insured since 1 January 2013. Currently, the
individually accumulated pension capital is converted into a life-long
pension at age 64 with a pension conversion rate of 5.60 percent.
Amendments to the contribution payments made by the bank, the
associate companies, or the employees in accordance with the regulations require the approval of the bank, the associate companies and a
majority of all employees. The employer must bear at least half of the
contributions. In the event of underfunding, financial recovery contributions may be charged to both the employer and the employee to
eliminate the shortfall in coverage.
141
Pension plans andother long-term benefits
One-time effects influencing pension plans and other
long-term benefits
On 1 January 2014, the LLB Group introduced a new compensation
model. This implements a higher variable salary component and
makes the variable salary component subject to pension plan contributions. The Foundation Board of the Personnel Pension Fund Foundation of LLB AG had approved the new compensation model in April
2013. The new compensation model led to an increase in the benefit
obligation and to a one-time charge in personnel expenses of CHF
2.9 million, as well as an additional annual expense of CHF 1.4 million.
Both effects were recognised fully in the income statement per 31 December 2013.
The closure of LLB (Switzerland) Ltd., as announced in connection
with the Focus2015 strategy, led to a reduction in the benefit
obligation and to a one-time reduction in personnel expenses of
CHF 3.9 million, which was recognised fully in the income statement
per 31 December 2013.
The following amounts are reported in the income statement and
in equity as benefit plan expenses:
Benefit expenses
Pensions plans
in CHF thousands
Other long-term benefits
2014
2013
2014
2013
– 16'521
– 18'887
– 466
– 501
– 374
2'673
– 79
13
– 16'895
– 16'214
– 545
– 488
– 67
Defined benefit costs
Service cost
Current service cost
Past service cost including effects of curtailment
Total service cost
Net interest
– 9'428
– 8'723
0
Interest income on plan assets
Interest cost on defined benefit obligation
8'710
7'446
0
0
Total net interest
– 718
– 1'277
0
– 67
Administration expense
– 728
– 731
0
0
0
0
– 112
79
Net actuarial (losses) / gains recognised
0
0
0
36
Total defined benefit cost
Others
– 18'341
– 18'222
– 657
– 440
thereof personal expense
– 18'341
– 18'222
– 657
– 440
thereof financial expense
0
0
0
0
– 220
– 206
0
0
– 657
– 440
Contributions to defined contribution plans
Remeasurement of the defined benefit liability
Actuarial (gains) / losses
Arising from changes in demographic assumptions
Arising from changes in economic assumptions
Arising from experience
Return on plan assets (excl. amounts incl. in interest income)
Others
0
0
– 58'646
15'898
8'872
12'309
10'005
12'697
– 599
– 471
Total defined benefit cost recognised in other comprehensive income
– 40'368
40'433
Total benefit cost
– 58'709
22'211
142
Development of plan obligations
Pensions plans
in CHF thousands
As at 1 January
Current service cost
2014
2013
2014
2013
448'405
485'599
3'893
3'884
501
16'521
18'887
466
Plan participation contributions
7'583
7'493
0
0
Interest costs
9'428
8'723
79
67
– 170
Gains / (losses) on curtailments
Benefits paid through pension assets
Benefits paid by employer
Actuarial (gains) / losses
Plan amendments
Liabilities extinguished on business divestiture
Others
As at 31 December
0
– 5'979
0
– 21'017
– 37'440
0
0
– 10
– 30
– 416
– 431
49'774
– 28'207
112
– 79
374
3'306
0
157
0
– 5'237
0
– 36
0
1'290
0
0
511'058
448'405
4'134
3'893
thereof active employees
378'929
327'511
thereof pensioners
132'129
120'894
17.9
16.8
Average term of obligation
Development of plan assets
Pension plans
in CHF thousands
As at 1 January
Plan participation contributions
Company contributions
Assets extinguished on business divestiture
2014
2013
404'230
404'843
7'583
7'493
14'424
14'340
0
– 5'237
Interest income on plan assets
8'710
7'446
Administration expense
– 728
– 731
– 21'017
– 37'440
10'005
12'697
Benefits paid through pension assets
Return on plan assets (excl. amounts incl. in interest income)
Asset gain / (loss)
As at 31 December
The pension fund assets per 31 December 2014 include shares of
the LLB with a market value of CHF thousands 16 (31 December 2013:
CHF thousands 10). The expected Group contributions for the 2015
financial year amount to CHF thousands 14’441 for the pension plans
and CHF thousands 353 for the other long-term benefits.
– 599
819
422'608
404'230
143
Overview of the net debt recognised in the balance sheet
Pension plans
in CHF thousands
31. 12. 2014
31. 12. 2013
31. 12. 2014
Present value of funded obligations
510'983
448'219
0
0
Minus fair value of plan assets
422'608
404'230
0
0
88'375
43'989
0
0
75
186
4'134
3'893
88'450
44'175
4'134
3'893
Under- / (over-)funded
Present value of unfunded obligations
Net debt recognised in the balance sheet
31. 12. 2013
Asset classes and expected returns
31. 12. 2014
in CHF thousands
31. 12. 2013
Share of
total assets
Share of
total assets
89'814
86'245
0
0
167'909
162'301
0
0
Equities
Quoted market prices (Level 1)
Other than quoted market prices
Bonds
Real estate
Alternative financial investments
4'290
7'708
19'500
19'700
4'449
3'912
Qualified insurance policies
95'814
85'582
Other financial investments
24'117
26'071
Cash
16'715
12'711
The expected return on bonds and shares is based on the yield for longterm federal medium-term notes and the corresponding market expectations. The remaining expected returns are based on empirical
values.
144
Weighted average of principal actuarial assumptions
Pension plans
in percent
31. 12. 2014
31. 12. 2013
31. 12. 2014
Discount rate
1.25
2.15
1.50
31. 12. 2013
2.20
Future salary increases
1.45
1.50
1.55
0.90
Future pension indexations
0.05
0.05
0.00
0.00
Life expectancy at the age of 45 and 65
Year of birth
1969
1968
1969
1968
men
23.16
23.09
23.16
23.08
women
25.52
25.59
25.52
25.59
Year of birth
1949
1948
1949
1948
men
21.39
21.29
21.39
21.29
women
23.86
23.76
23.86
23.76
Sensitivity analysis of significant actuarial assumptions
The following sensitivity analysis for the significant actuarial assumptions on which calculations are based shows how the cash value of
pension obligations would change on the balance sheet date on account of a possible change in the actuarial assumptions.
Pension plans
31. 12. 2014
31. 12. 2013
+ 0.25 %
– 0.25 %
+ 0.25 %
– 20'162
21'949
– 16'076
17'262
Salary increase
1'941
– 1'883
1'580
– 1'539
Interest credit rate
4'107
– 3'996
3'433
– 3'348
+ 1 year
– 1 year
+ 1 year
– 1 year
12'780
– 12'508
9'207
– 9'482
Discount rate
Life expectancy
– 0.25 %
145
42 Related parties
The LLB Group is controlled by the Principality of Liechtenstein, which
holds 57.5 percent of the bearer shares of Liechtensteinische Landesbank AG, Vaduz. At the end of the year under report, the LLB held
6.4 percent of its own shares (previous year: 6.3 %), 3.7 percent were
held by Thornburg Investment Management Inc. and less than 0.1 percent were held by members of the Board of Directors and the Board
of Management. The remaining bearer shares are owned by the general public.
The related parties of the LLB Group comprise the Principality of
Liechtenstein, associated companies, members of the Board of Directors and the Group Executive Management, as well as their close family members and enterprises which are controlled by these individuals
through their majority shareholding, or their role as chairman and / or
CEO in these companies, as well as their own pension funds.
Within the scope of its business activity, the LLB Group also conducts banking transactions with related parties. These transactions
mainly involve loans, investments and services. The volumes of these
transactions, the holdings and corresponding income and expenses
are shown below.
See “Scope of consolidation”, page 150 – 151 for a detailed list of the parent / subsidiary relationships of the LLB Group.
Compensation of key management personnel
Salary fixed *
in CHF thousands
2014
Contribution to
benefit plans
and other social
contributions
Salary variable
2013
2014
2013
2014
Share-based
payments
2013
2014
Entitlements
2013
2014
Total
2013
2014
2013
Members of the Board of Directors
Hans-Werner Gassner, Chairman **
300
300
0
0
74
74
0
0
40
40
414
414
Markus Foser, Vice Chairman
116
125
0
0
9
10
0
0
30
30
155
165
64
67
0
0
5
5
0
0
20
20
89
92
Markus Büchel, Member
Peter Fanconi, Member until
15 November 2013
27
0
2
0
0
29
Ingrid Hassler-Gerner,
Member until 09 May 2014
25
74
0
0
0
0
0
0
7
20
32
94
Patrizia Holenstein, Member
65
43
0
0
5
3
0
0
20
13
90
59
Roland Oehri, Member
70
70
0
0
5
5
0
0
20
20
95
95
Gabriela Nagel-Jungo,
Member since 10 May 2014
32
0
0
0
2
0
0
0
13
0
47
0
Urs Leinhäuser,
Member since 10 May 2014
Total
42
0
0
0
3
0
0
0
13
0
58
0
714
706
0
0
103
99
0
0
163
143
980
948
637
622
115
100
182
136
0
0
115
100
1'049
958
Members of the
Board of Management ***
Roland Matt, CEO
Other members of the
Board of Management
2'430
2'508
794
616
807
576
0
0
794
616
4'825
4'316
Total
3'067
3'130
909
716
989
712
0
0
909
716
5'874
5'274
*Fixed compensation fee, meeting allowances.
**The Chairman receives a fixed compensation for his 70-percent workload (prior year: 60-percent workload). He does not receive meeting allowances.
***The Board of Management comprises six members.
146
Loans of key management personnel
Fixed mortgages
in CHF thousands
Variable mortgages
Total
31. 12. 2014
31. 12. 2013
31. 12. 2014
31. 12. 2013
31. 12. 2014
31. 12. 2013
Hans-Werner Gassner, Chairman
0
0
0
0
0
0
0
0
0
0
0
0
1'297
1'379
0
0
1'297
1'379
0
0
0
0
0
0
0
0
0
0
0
0
400
0
0
0
400
0
0
0
0
0
0
0
Related parties
1'838
2'160
0
0
1'838
2'160
Total
3'535
3'539
0
0
3'535
3'539
Roland Matt, CEO
1'539
1'539
0
0
1'539
1'539
Other members of the Board of Management
1'602
1'606
0
119
1'602
1'725
0
0
0
0
0
0
3'141
3'145
0
119
3'141
3'264
Ingrid Hassler-Gerner, Member until 09 May 2014
Gabriela Nagel-Jungo, Member
Urs Leinhäuser, Member
0
0
0
Members of the Board of Management
Related parties
Total
At 31 December 2014, the maturities of the fixed mortgages for the
members of the Board of Directors and related parties ranged between 11 and 47 months (previous year: between 1 and 59 months) at
standard market client interest rates of 1.00 to 1.55 percent p.a. (previous year: 1.00 to 2.625 %). At 31 December 2014, the maturities of the
fixed mortgages for the members of the Board of Management ranged
between 12 and 46 months (previous year: between 6 and 58 months)
at standard market client interest rates of 1.80 to 2.875 percent p.a.
(previous year: 1.80 to 3.25 %).
Of the total amount for mortgages for the members of the Board of
Management, CHF thousands 1’000 (previous year: CHF thousands
1’000) was granted at the preferential interest rate for staff, the
remainder was subject to the standard market client interest rate. In
the previous year no new loans were granted. The fair value of cover
of new loans granted amounted to CHF thousands 835. No allowances
for loans to management were necessary. The LLB issued no guarantees to third parties on behalf of management.
147
Share holdings of related parties
Bearer shares
31. 12. 2014
31. 12. 2013
1'729
1'529
160
160
Hans-Werner Gassner, Chairman
0
0
Ingrid Hassler-Gerner, Member until 09 May 2014
0
851
0
0
400
400
Gabriela Nagel-Jungo, Member
235
0
Urs Leinhäuser, Member
250
0
2'774
2'940
Roland Matt, CEO
8'013
8'013
Gabriel Brenna
3'157
768
Total
Heinz Knecht
792
792
Kurt Mäder
2'894
3'622
Urs Müller
9'151
9'151
Christoph Reich
1'499
1'499
25'506
23'845
Related parties
100
200
Total
100
200
Total
Other related companies and parties
No member of the Board of Directors or the Board of Management
owns more than 0.1 percent of the voting rights.
148
Transactions with management
in CHF thousands
2014
2013
+ / – %
6'803
6'869
– 1.0
0
0
Loans
As at 1 January
Commencement / retirement of corporate bodies
400
0
Loan repayment during the year
Loans issued during the year
– 527
– 66
698.5
As at 31 December
6'676
6'803
– 1.9
– 13.6
Deposits
As at 1 January
3'562
4'122
Change
1'230
– 560
As at 31 December
4'792
3'562
34.5
– 14.4
Income and expenses
Interest income
129
151
Interest expenses
– 17
– 12
41.7
18
11
63.6
Other income *
Other expenses **
Total
*Mainly net fee and commission income.
**Services in connection with consultation.
– 4
– 1
300.0
126
149
– 15.2
149
Transactions with the Principality of Liechtenstein and companies associated with the Principality
in CHF thousands
2014
2013
+ / – %
0.5
Loans
As at 1 January
32'163
32'013
Change
23'695
150
As at 31 December
55'858
32'163
73.7
72.5
Deposits
As at 1 January
Change
As at 31 December
647'946
375'711
– 309'324
272'235
338'622
647'946
– 47.7
Income and expenses
Interest income
Interest expenses
Other income *
Other expenses **
Total
204
200
2.0
– 236
– 490
– 51.8
907
1'292
– 29.8
– 1'489
– 1'719
– 13.4
– 614
– 717
– 14.4
**Relates mainly to the compensation payment for the state guarantee. In July 2005, the EFTA supervisory authority decided that the state guarantee extended to the LLB could
remain in effect. The annual compensation payment for the state guarantee is calculated on the basis of criteria specified in EEA law and on the total amount of the savings deposits
and medium-term notes covered by the state guarantee. This ruling shall remain in effect for at least until 2020.
No guarantees have beens granted by the LLB Group for third parties
on behalf of the Principality of Liechtenstein.
Transactions with own pension funds
in CHF thousands
2014
2013
+ / – %
Loans
389
274
42.0
Change
As at 1 January
1'055
115
817.4
As at 31 December
1'444
389
271.2
4'672
11'947
– 60.9
949
– 7'275
5'621
4'672
Deposits
As at 1 January
Change
As at 31 December
20.3
Income and expenses
Interest income
1
1
0.0
– 169
– 192
– 12.0
Other income *
183
175
4.6
Other expenses
– 15
0
0
– 16
Interest expenses
Total
No guarantees have been granted by the LLB Group for third parties
on behalf of own pension funds.
– 100.0
150
Equity interest (in percent)
Jurisdiction
of incorporation
Business activity
Bank Linth LLB AG *
Uznach
Bank
CHF
16'108'060
75.2
74.2
Vaduz
Bank
CHF
154'000'000
100.0
100.0
Companies
Currency
Capital Stock
IFRS
Legal
Fully consolidated companies
LLB Verwaltung (Schweiz) AG
Erlenbach
Management company
CHF
100'000'000
100.0
100.0
Liechtensteinische Landesbank (Österreich) AG
Vienna
Bank
EUR
2'000'000
100.0
100.0
LLB Asset Management AG
Vaduz
Asset management
company
CHF
1'000'000
100.0
100.0
LLB Berufliche Vorsorge AG
Lachen
Staff welfare scheme
CHF
100'000
100.0
100.0
LLB Beteiligungen AG
Uznach
Investment company
CHF
100'000
100.0
100.0
Vaduz
Fund management
company
CHF
1'000'000
100.0
100.0
LLB Fund Services AG
Vaduz
Fund management
company
CHF
1'000'000
100.0
100.0
LLB Holding (Schweiz) AG
Erlenbach
Holding company
CHF
250'000
100.0
100.0
100.0
LLB Fondsleitung AG
LLB Invest AGmvK
Vaduz
Investment company
CHF
50'000
100.0
LLB Linth Holding AG
Uznach
Holding company
CHF
95'328'000
100.0
100.0
LLB Qualified Investors AGmvK
Vaduz
Investement company
CHF
50'000
100.0
100.0
LLB Qualified Investors Strategy One
Vaduz
Investment company
LLB Services (Schweiz) AG
Erlenbach
Service company
CHF
100'000
100.0
100.0
Milfolium Management Inc. (in liquidation)
Tortola, BVI
Management company
USD
10'000
100.0
100.0
Zurich
Asset management
company
CHF
500'000
100.0
75.7
Zurich
Asset management
company
CHF
1'000'000
100.0
75.7
swisspartners (Liechtenstein) AG **
Vaduz
Asset management
company
CHF
500'000
100.0
75.7
swisspartners Insurance Company SPC Ltd **
Grand Cayman,
Cayman Island
Insurance company
CHF
3'000'000
100.0
75.7
swisspartners Versicherung AG **
Vaduz
Insurance company
CHF
6'500'000
100.0
75.7
swisspartners Investment Network AG **
swisspartners Advisors AG **
swisspartners Wealth Management AG **
Zurich
Trust company
CHF
1'000'000
100.0
75.7
swisspartners Wealth Services AG **
Zurich
Trust company
CHF
100'000
100.0
75.7
SP Directors LTD **
London
Trust company
CHF
1
100.0
75.7
SP Management AG (in liquidation) **
Vaduz
Trust company
CHF
100'000
100.0
75.7
SP Trustees GmbH **
Zurich
Trust company
CHF
20'000
100.0
75.7
Arch Capital Partners AG **
Zurich
Investment company
CHF
100'000
100.0
75.7
HQE Trust AG **
Zurich
Trust company
CHF
100'000
100.0
75.7
Quo Datis AG **
Zurich
Management company
CHF
1'000'000
100.0
75.7
151
Equity interest
Jurisdiction
of incorporation
Business activity
Liechtensteinische Landesbank (Österreich)
Holding GmbH
Vienna
Holding company
EUR
35'000
100.0
100.0
Terrenia Anstalt
Vaduz
Management company
CHF
100'000
100.0
100.0
Vaduz
Service Company
CHF
50'000
50.0
50.0
Companies
Currency
Capital Stock
IFRS
Legal
Changes to the scope of consolidation 2014
Companies fully consolidated fot the first time
None
Companies removed from the scope
of consolidation
Changes in company names during 2014
None
Associated companies and jount ventures
Data Info Services AG
*On 31 December 2014, the LLB Group held 74.2 percent of the share capital and votes of Bank Linth LLB AG. Bank Linth LLB AG held 8'485 of its own shares on 31 December 2014.
This increased the LLB Group’s participation in Bank Linth LLB AG and deviated from the legal group participation by the said number of own shares.
**On 31 December 2014, the LLB Group held 75.7 percent of the capital and votes of swisspartners Investment Network AG, Zurich (incl. its subsidiaries). An agreement exists,
according to which the shareholders are granted the right to sell the remaining 24.3 percent of the capital and votes of swisspartners Investment Network AG to the LLB.
At the same time, the shareholders have granted the LLB the right to buy the remaining 24.3 percent of the capital and votes of swisspartners Investment Network AG. On the
basis of this put / call combination, pursuant to IRFS, the remaining 24.3 percent of the capital and votes do not represent non-controlling interests. Irrespective of the legal
situation, therefore, swisspartners Investment Network AG (incl. its subsidiaries) is to be fully consolidated by the LLB Group.
In the year under report, there were no sales of, or losses on, controlled
entities or equity stakes. As per 31 December 2014 and per 31 December
2013, there were no major restrictions in respect of the possibility to
access assets of the Group companies or to appropriate them. As per
31 December 2014 and per 31 December 2013, there were no participations in consolidated structured companies.
152
Risk management
Risk management
Principles of risk management
Risk categories
One of the core competences of a financial institute is to consciously
accept risks and manage them profitably. In its risk policy, the LLB
Group defines qualitative and quantitative standards of risk responsibility, risk management and risk control. Furthermore, the organizational and methodical parameters for the identification, measurement, control and monitoring of risks are specified. The proactive
management of risk is an integral part of corporate policy and safeguards the LLB Group’s ability to bear and accept risk.
The LLB Group is exposed to various types of risks. It differentiates
between the risk categories shown in the diagram.
Market risk
The risk of losses arises from unfavourable changes in interest
rates, exchange rates, securities prices and other relevant market
parameters.
Liquidity and refinancing risk
Represents the risk of not being able to fulfil payment obligations on
time or not being able to obtain refinancing funds on the market at
a reasonable price to meet current or future payment obligations.
Organization and responsibilities
Group Board of Directors
The Board of Directors of the LLB Group is responsible for stipulating
risk management principles, as well as for specifying responsibilities
and procedures for approving business transactions entailing risk. In
fulfilling its tasks and duties, the Group Board of Directors is supported
by the Group Audit & Risk Committee.
The Group Executive Board is responsible for the overall management
of risk readiness within the parameters defined by the Group Board
of Directors and for the implementation of the risk management
processes. It is supported in this task by the Group Audit & Risk
Committee.
Group Risk Management
The Group Risk Management Department identifies, assesses and
monitors the principal risk exposure of the LLB Group and is func
tionally and organizationally independent of the operative units. It
supports the Group Executive Board in the overall management of
risk exposure.
Credit risk
The potential loss is inherent in the partial or complete default of
expected payment flows as well as in the impairment of open credit
balances on account of the downgrading of borrower’s creditworthiness.
Operational risk
Is the danger of losses due to the unsuitability or failure of internal
procedures, people or systems or as a result of external events.
Strategic risk
Arises as a result of decisions taken by the Group Executive Board,
which have a negative influence on the survival, development ability
or independence of the LLB Group.
Reputation risk
If risks are not recognised, reasonably controlled and monitored, this
can lead not only to substantial financial losses, but also to damage
to the Group’s reputation.
Risk categories
Market risk
Liquidity and refinancing risk
Credit risk
Operational risk
Insurance risk
Strategic risk
Reputation risk
153
Risk management
Risk management process
Risk policy / Risk strategy Group Board of Directors
→
Risk identification
→
Risk assessment
→
→
Risk reporting
→
Group Risk Management *
Risk management
Risk monitoring
Group Risk Management
Process monitoring Group Internal Audit
*The Audit & Risk Committee is responsible for controlling strategic risks.
Underwriting risk
With respect to the effects of the risks involved with insurance business, a primary differentiation has to be made between performance
risks, which apply to the level of success of the insurance business, and
liquidity risks, which apply to its payment level. Basically, the income
from the sale of policies should be invested with the aim of being able
to cover future claims.
Performance is achieved primarily in two areas, the actuarial area
(liabilities) and the capital investment area (assets). Actuarial risks
occur, on the one hand, if the calculated risk premiums of a period are
not sufficient to finance the damages arising in the period. And on the
other, if the provisions set aside for damages are not adequate to cover
the liabilities from earlier business periods. A range of investment risks
are involved in the area of capital investments. These include market
losses with assets (see market risks) and further the attainment of
inadequate income (interest, dividends, realized price gains) in order
to finance existing liabilities. There are also creditworthiness risks in
the area of capital investments, i.e. counterparty default risks (see
credit risks).
Risk management process
The implementation of an efficient risk management process is essential to enable risks to be identified, assessed, controlled and monitored.
The Group Board of Directors specifies the risk strategy, which provides
the operative units with a framework for the treatment of risk exposure. Depending on the type of risk, not only the stipulation of upper
limits for losses may be required but also a detailed set of regulations
which stipulate which risks may be accepted under what conditions,
and when measures to control risks are to be implemented.
The diagram shows the control loop of the LLB Group’s risk management process.
154
Risk management
1 Market risks
1.2 Valuation of market risks
Market risk is the risk that arises from changes in interest rates,
exchange rates and security prices in the financial and capital markets.
A differentiation is made between market risks in the trading book and
market risks in the banking book. The potential for losses exists primarily in the impairment of the value of an asset or the increase in the
value of liabilities (market value perspective) as well as in secondary
capacity in the diminution of current earnings or an increase in current
expenditures (earnings perspective).
Sensitivity analysis
In sensitivity analysis a risk factor is altered. Subsequently, the effects
of the alteration of the risk factor on the portfolio concerned are
estimated.
1.1 Market risk management
Scenario analysis
While the value-at-risk concept supplies an indication of possible losses under normal market conditions, it cannot provide information
about potential losses under extreme conditions. The aim of the
scenario analyses of the LLB Group is to simulate the effects of normal
and stress scenarios.
The LLB Group has in place a differentiated risk management and risk
control system for market risks. The market risk control process comprises a sophisticated framework of rules involving the identification
and the uniform valuation of market risk-relevant data as well as the
control, monitoring and reporting of market risks.
Value-at-Risk
The value-at-risk concept measures the potential loss under normal
market conditions over a given time interval.
1.3 Distribution of market risks
Trading book
As a result of the de minimis approach, the trading book is classified
as not significant. Accordingly, the market risks in the trading book are
no longer explained in detail.
Banking book
Market risks with the banking book mainly involve interest rate
fluctuation risk, exchange rate risk and equity price risk.
Interest rate fluctuation risk
This is regarded as the adverse effects of changes in market interest
rates on capital resources or current earnings. The different interest
maturity periods of claims and liabilities from balance sheet trans
actions and derivatives represent the most important basis.
Exchange rate risk
This relates to the risks arising in connection with the uncertainties
regarding future exchange rate trends. The calculation of these risks
takes into consideration all the positions entered into by the bank.
Equity price risk
This is understood to be the risk of losses due to adverse changes in
the market prices of equities.
Within the specified limit parameters, the individual Group companies
are at liberty to manage their interest rate risks as they wish. Interest
rate swaps are employed mainly to control interest rate risks. Risks are
restricted by means of value-at–risk models and sensitivity limits. In
client business, currency risks are basically controlled by making
investments or obtaining refinancing in matching currencies. The
residual currency risk is restricted by means of sensitivity limits. Investments in equities are limited by the imposition of nominal limits.
1.4 Risk monitoring
Group Financial Risk Controlling monitors the observance of market
risk limits and is also responsible for reporting market risks.
155
Risk management
1.5 Value-at-risk and sensitivities by
risk categories
Value-at-risk
The value-at-risk is an estimate of the potential loss under normal
market conditions and is calculated at the LLB Group on the basis of
a confidence level of 99 percent and a holding period of twelve weeks.
In the 2014 business year, adjustments were made to the model
used for calculating value-at-risk. Starting with the 2014 business year,
the historic value-at-risk is determined, and in the previous years the
parametric value-at-risk. Furthermore, in the 2014 business year,
a new replication was used as a basis for the model to calculate valueat-risk. The reduction of value-at-risk as per 31 December 2014 relative
to the previous year is largely attributable to the model adjustments.
Sensitivities
Interest rate sensitivity measures the market change on interest-ratesensitive instruments for the LLB Group caused by a global interest
rate adjustment of + / – 100 basis points.
In contrast, currency fluctuation affects both interest rate sensitive
and non-interest rate sensitive instruments. The sensitivity of instruments in foreign currencies is determined by multiplying the CHF
market value by the assumed exchange rate fluctuation of + / – 10
percent.
The equity price risks are measured assuming a price fluctuation of
+ / – 10 percent on the equity market.
Effects on Group net profit and equity
Currency risk
The price gains resulting from the valuation are booked to profit
and loss.
Interest rate risk
The financial investments are assigned to the category “Financial
investments at fair value through profit and loss”. Changes in the value
of interest rate instruments contained in financial investments are
reported in the income statement. In the case of derivative hedging
transactions, changes in the fair value of the effective component of
the hedging transaction are recorded directly in equity. In the year
under report, no such hedges were recorded.
Equity price risk
The valuation is carried out at current market prices. The equity price
risk is fully reflected in the income statement.
Sensitivities
31. 12. 2014
in CHF thousands
Value at Risk *
Currency risks
Interest rate risks
Equity price risks
31. 12. 2013
Sensitivity
Value at Risk
16'333
34'705
54'787
36'755
*In the 2014 business year, adjustments were made to the models for calculating value-at-risk.
Sensitivity
16'731
46'689
71'582
35'609
156
Risk management
1.6 Currency risks
Balance sheet by currency per 31 December 2014
in CHF thousands
CHF
USD
EUR
Others
Total
Assets
1'340'062
646
21'290
757
1'362'755
Due from banks
1'008'653
2'301'789
1'993'157
470'273
5'773'872
10'106'926
291'960
291'205
33'263
10'723'355
553
0
7
0
560
84'651
1'191
1'800
140
87'782
2'187'901
136'171
72'916
88
2'397'076
61
0
0
0
61
131'400
0
150
0
131'550
Due from customers
Investment property
16'385
0
0
0
16'385
153'626
0
98
0
153'724
Deferred tax assets
23'565
0
0
0
23'565
26'738
2'885
3'398
483
33'505
Other assets
Total Assets reported in the balance sheet
Delivery claims from forex spot, forex futures and forex options transactions
Total Assets
9'555
460
2'161
41'296
53'472
15'090'077
2'735'103
2'386'182
546'300
20'757'663
2'349'622
2'562'340
1'675'714
642'790
7'230'466
17'439'699
5'297'443
4'061'896
1'189'090
27'988'129
Liabilities and equity
Due to banks
Due to customers
Debt issued
328'601
76'650
68'709
10'638
484'599
10'183'822
2'596'976
2'302'404
574'633
15'657'835
75'650
0
0
0
75'650
1'193'397
0
0
0
1'193'397
162'661
1'191
1'794
164
165'810
1'123'978
0
28'982
0
1'152'960
9'828
0
0
0
9'828
25'029
0
0
0
25'029
21'410
746
1'005
292
23'452
Provisions
33'330
0
0
0
33'330
Other liabilities
168'077
6'669
6'141
466
181'352
Share capital
154'000
0
0
0
154'000
25'785
0
0
0
25'785
Less treasury shares
Capital reserve
– 168'584
0
0
0
– 168'584
Retained earnings
1'672'539
0
0
0
1'672'539
Other reserves
– 31'665
0
0
0
– 31'665
102'346
0
0
0
102'346
15'080'203
2'682'233
2'409'035
586'193
20'757'663
Liabilities and equity reported in the balance sheet
Delivery liabilities from forex spot, forex futures and forex options transactions
Total liabilities and equities
Net positions per currency
2'521'209
2'547'606
1'569'649
590'388
7'228'852
17'601'412
5'229'839
3'978'684
1'176'581
27'986'515
– 161'713
67'605
83'212
12'510
1'614
157
Risk management
Balance sheet by currency per 31 December 2013
in CHF thousands
CHF
USD
EUR
Others
Total
Assets
2'015'970
789
58'313
488
2'075'560
Due from banks
1'325'055
2'101'747
2'358'223
296'978
6'082'003
Due from customers
9'645'574
308'864
180'594
105'057
10'240'089
4'455
1
605
0
5'061
83'198
1'180
2'343
229
86'950
1'870'056
51'742
47'440
0
1'969'238
42
0
0
0
42
150'178
0
261
0
150'439
Investment property
21'383
0
0
0
21'383
167'402
0
0
0
167'402
Deferred tax assets
22'456
0
0
0
22'456
27'365
2'425
2'719
461
32'970
Other assets
Total Assets reported in the balance sheet
Total Assets
7'558
28
4'185
35'561
47'332
15'340'691
2'466'776
2'654'683
438'773
20'900'923
2'384'331
2'469'868
1'706'862
756'677
7'317'738
17'725'022
4'936'644
4'361'545
1'195'450
28'218'661
Liabilities and equity
Due to banks
Due to customers
624'292
147'501
185'245
24'027
981'065
10'319'877
2'255'901
2'484'397
539'820
15'599'995
266'151
0
0
0
266'151
811'778
0
0
0
811'778
105'069
1'180
2'334
346
108'929
1'107'612
0
19'985
0
1'127'597
Debt issued
6'491
0
0
0
6'491
41'519
0
0
0
41'519
18'842
18'842
18'842
18'842
26'039
Provisions
37'950
0
0
0
37'950
Other liabilities
114'560
4'824
6'674
150
126'208
Share capital
154'000
0
0
0
154'000
26'298
0
0
0
26'298
Less treasury shares
Capital reserve
– 167'816
0
0
0
– 167'816
Retained earnings
1'649'358
0
0
0
1'649'358
1'083
0
0
0
1'083
104'278
0
0
0
104'278
15'221'342
2'409'875
2'705'087
564'619
20'900'923
2'667'669
2'454'265
1'570'039
622'440
7'314'413
17'889'011
4'864'140
4'275'126
1'187'059
28'215'336
– 163'989
72'504
86'419
8'391
3'325
Other reserves
Liabilities and equity reported in the balance sheet
Total liabilities and equities
Net positions per currency
158
Risk management
1.7 Interest rate risks
Interest rate fluctuation risk by currencies
Increase per 100 basis points in CHF thousands
Within 1 month
1 to 3 month
3 to 12 month
1 to 5 years
Over 5 Years
Total
CHF
– 3
– 639
EUR
– 20
509
– 4'263
11
– 46'683
– 51'576
– 2'122
1'140
– 292
USD
– 22
499
– 786
– 1'951
– 869
– 181
– 2'524
31. 12. 2014
Other currencies
– 2
47
– 79
201
– 68
99
– 47
416
– 8'415
483
– 47'224
– 54'787
CHF
– 7
– 42
– 7'013
– 29'290
– 34'709
– 71'061
EUR
– 23
788
– 1'711
1'569
– 289
334
USD
– 18
225
– 1'519
385
– 49
– 976
All currencies
31. 12. 2013
Other currencies
All currencies
Interest rate repricing balance sheet
In the interest rate repricing balance sheet excess assets, equity and
liability are calculated using fixed interest rate and derivative positions in the balance sheet and broken down Interest commitments of
financial assets and liabilities (nominal) into cycle times. The positions
within an unspecified duration of interest rate repricing are allocated
to the corresponding cycle times on the basis of a replication.
– 3
73
– 94
176
– 31
121
– 51
1'044
– 10'337
– 27'160
– 35'078
– 71'582
159
Risk management
Interest commitments of financial assets and liabilities (nominal)
Increase per 100 basis points in CHF thousands
Within 1 month
1 to 3 month
3 to 12 month
1 to 5 years
Over 5 Years
Total
1'362'755
31. 12. 2014
Financial assets
1'362'755
0
0
0
0
Due from banks
3'753'203
714'128
1'013'392
130'000
0
5'610'723
902'538
1'216'226
2'674'082
4'010'089
1'798'319
10'601'253
Due from customers
0
50
0
500
0
550
48'433
74'401
132'980
549'885
126'149
931'849
Total financial assets
6'066'929
2'004'805
3'820'454
4'690'474
1'924'468
18'507'129
140'000
311'000
798'047
49'047
0
1'298'095
6'206'929
2'315'805
4'618'502
4'739'521
1'924'468
19'805'224
Total
Due to banks
Due to customers
Debt issued
Total financial liabilities
Total
Interest rate repricing exposure
195'484
70'000
219'000
0
0
484'484
7'510'869
1'222'552
2'539'501
4'263'969
0
15'536'891
7'682
29'378
120'404
579'597
415'899
1'152'960
7'714'036
1'321'930
2'878'905
4'843'566
415'899
17'174'335
20'000
25'000
38'047
405'047
810'000
1'298'095
7'734'036
1'346'930
2'916'952
5'248'613
1'225'899
18'472'430
– 1'527'107
968'875
1'701'549
– 509'092
698'569
1'332'794
2'075'560
31. 12. 2013
Financial assets
2'075'560
0
0
0
0
Due from banks
4'483'981
389'168
968'962
0
0
5'842'111
Due from customers
1'270'216
916'832
2'281'499
4'106'924
1'621'186
10'196'657
0
0
1
860
4'371
5'232
71'906
102'770
59'342
346'598
107'974
688'590
7'901'663
1'408'770
3'309'804
4'454'382
1'733'531
18'808'150
20'000
0
50'000
419'080
720'000
1'209'080
7'921'663
1'408'770
3'359'804
4'873'462
2'453'531
20'017'230
Total
Due to banks
Due to customers
Debt issued
659'595
70'000
250'000
0
0
979'595
9'769'802
657'787
1'768'581
3'274'678
0
15'470'849
15'232
43'489
109'190
519'905
439'782
1'127'597
10'444'629
771'276
2'127'771
3'794'583
439'782
17'578'041
20'000
0
50'000
419'080
720'000
1'209'080
Total
10'464'629
771'276
2'177'771
4'213'663
1'159'782
18'787'121
Interest rate repricing exposure
– 2'542'966
637'494
1'182'033
659'799
1'293'749
1'230'109
160
Risk management
2 Liquidity risk
2.3 Valuation of liquidity risks
Liquidity risk is defined as a situation where present and future payment obligations cannot be fully met or met on time, or in the event
of a liquidity crisis, refinancing funds may only be available at increased market rates (refinancing costs), or they can only be made
liquid at markdowns to market rates (market liquidity risk).
In our liquidity risk management concept, scenario analysis plays
a central role. This includes the valuation of the liquidity of assets, i. e.
the liquidity characteristics of our asset holdings in various stress
scenarios.
2.1 Liquidity risk management
Processes and organizational structures ensure that liquidity risks
are identified, uniformly valued, controlled and monitored, as well as
being included in risk reporting. The regulations, on which liquidity
risk management is based, including the risk tolerance of the LLB
Group, are reviewed regularly by the Group Executive Management
and approved by the Group Board of Directors. The liquidity risk limits
to be applied by the LLB Group are specified in the regulations.
2.2 Objectives of liquidity risk management
The objectives of the LLB Group’s liquidity risk management encompass the following points:
◆◆ the ability to meet financial obligations at all times
◆◆ compliance with regulatory provisions
◆◆ optimization of the refinancing structure
◆◆ optimization of payment streams within the LLB Group
2.4 Risk monitoring
Group Financial Risk Controlling monitors compliance with liquidity
risk limits and is responsible for reporting on liquidity risks.
161
Risk management
The following table shows the maturities according to contractual periods.
Maturity of financial assets and liabilities (nominal including coupons) *
in CHF thousands
Sight deposits
Callable
Due between 3 Due between
Due within months 12 months 3 months to 12 months
to 5 Years
Due after 5 years
Total
31. 12. 2014
Financial assets
1'362'755
0
0
0
0
0
1'362'755
Due from banks
689'426
74'704
3'780'917
1'017'909
130'710
0
5'693'665
Due from customers
347'712
533'537
1'454'138
1'585'520
5'472'208
1'888'374
11'281'489
0
0
0
3
560
19
582
87'781
0
0
0
0
0
87'781
0
1'078'042
99'442
164'516
593'432
178'613
2'114'045
2'487'673
1'686'283
5'334'497
2'767'947
6'196'911
2'067'006
20'540'317
Due to banks
Due to customers
185'484
0
80'057
219'380
0
0
484'922
9'657'814
5'339'066
287'989
279'128
10'299
0
15'574'296
0
1'193'396
0
75'649
0
0
0
0
1'193'396
0
0
0
75'649
165'809
0
0
0
0
0
165'809
0
0
41'525
133'016
625'662
430'222
1'230'425
10'009'107
6'608'111
409'571
631'524
635'961
430'222
18'724'496
Net liquidity exposure
– 7'521'434
– 4'921'828
4'924'926
2'136'423
5'560'950
1'636'784
1'815'821
Debt issued
337'544
337'544
*Derivative financial instruments at replacement values
162
Risk management
in CHF thousands
Sight deposits
Callable
Due between Due between
Due within 3 months 12 months 3 months to 12 months
to 5 Years
Due after 5 years
Total
31. 12. 2013
Financial assets
2'075'560
0
0
0
0
0
2'075'560
Due from banks
1'109'105
139'212
3'766'564
974'962
0
0
5'989'843
303'254
528'641
1'612'394
1'477'524
5'150'642
1'713'243
10'785'698
0
0
43
35
1'107
4'748
5'933
86'951
0
0
0
0
0
86'951
Due from customers
0
922'860
86'724
103'807
420'137
114'711
1'648'239
3'574'870
1'590'713
5'465'725
2'556'328
5'571'886
1'832'702
20'592'224
Due to banks
Due to customers
644'595
0
85'060
250'477
0
0
980'132
9'225'377
5'758'844
267'496
230'836
20'990
0
15'503'543
0
266'151
0
0
0
0
266'151
0
811'778
0
0
0
0
811'778
Debt issued
Net liquidity exposure
108'929
0
0
0
0
0
108'929
0
0
63'764
122'227
569'397
458'737
1'214'125
9'978'901
6'836'772
416'320
603'540
590'387
458'737
18'884'657
– 6'404'031
– 5'246'059
5'049'405
1'952'788
4'981'499
1'373'965
1'707'567
302'673
302'673
3 Credit risk
3.2 Evaluation of credit risks
Within the scope of credit risk management, vital importance is
attached to the avoidance of credit risks and the early identification
of default risks. In addition to systematic risk / return management at
the individual loan level, the LLB Group proactively manages its credit
risks at the credit portfolio level. The primary objective is to reduce the
overall level of risk through diversification and a stabilization of
expected returns.
The consistent evaluation of credit risks represents an essential prerequisite of successful risk management. The credit risk can be broken
down into the components: probability of default, loss given default
and the exposure at the time point of the default.
3.1 Credit risk management
Processes and organizational structures ensure that credit risks are
identified, uniformly evaluated, controlled, monitored and included in
risk reporting.
The process of granting a loan is based on a thorough evaluation of
the borrower’s creditworthiness, the possible impairment and the
legal existence of collateral, as well as risk classification in a rating
process performed by experienced credit specialists. The granting of
loans is subject to a specified assignment of authority. A major characteristic of the credit approval process is the separation between
front and back office functions.
Probability of default
The LLB Group assesses the probability of default of individual counterparties by means of an internal rating system. The different rating
procedures are adapted to suit the different characteristics of borrowers. The credit risk management ratings employed for banks and debt
instruments are based on external ratings from recognised rating
agencies.
The reconciliation of the internal rating with the external rating is
carried out in accordance with the following master scale.
Loss given default
The loss given default is influenced by the amount of collateralisation
and the costs of realising the collateral. It is expressed as a percentage
of the individual commitment.
The potential loss at portfolio level is broken down as follows at the
LLB Group.
163
Risk management
Rating categories
LLB-Rating
Description
1 to 4
Investment Grade
External Rating (Moody’s) **
AAA, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3
5 to 8, not rated *
Standard Monitoring
Ba1, Ba2, Ba3, B1, B2
9 to 10
Special Monitoring
B3, Caa, Ca, C
11 to 14
Sub-standard
Default
*Non-rated loans are covered and subject to limits.
**The LLB Group uses the external ratings of Moody’s exclusively in the standard approach for covering credit risks (for the segments: due from banks, finance companies and securities
firms, due from companies and due from international organisations).
Expected loss
Expected loss is a future-related, statistical concept, that permits the
LLB Group to estimate the average annual costs that could be incurred
if positions in the current portfolio are classified as at risk. It is cal
culated on the basis of the default probability of a counterparty, the
expected credit commitment made to this counterparty at the time
of the default, and the magnitude of the loss given default.
Value-at-risk concept
The value-at-risk approach aims at computing the size of fluctuations
in credit losses incurred by means of a statistical model and to show
the change in the risk status of the credit portfolio.
Risk mitigation
To mitigate credit risk exposure, the LLB Group takes security mainly
in the form of pledged assets and financial collateral. In the case of
financial collateral in the form of marketable securities, we determine
their collateral value by applying a schedule of reductions, the size of
which is based on the quality,
Derivatives
The LLB Group may employ credit derivatives to reduce risks. This
possibility has not been utilised in recent years.
3.4 Monitoring of credit risks
Scenario analysis
The modelling of external credit losses is performed on the basis of
stress scenarios, which enable us to evaluate the effects of fluctuations in the default rates of the assets pledged as collateral taking into
consideration the existing risk concentration in every portfolio.
The organizational structure of the LLB Group ensures that the business divisions which cause the risks and those that evaluate, manage
and monitor them are completely separated.
Individual credit risks are monitored by means of a comprehensive
limits system. Infringements are immediately reported to the senior
officer responsible.
3.3 Controlling credit risk
Credit risk management has the task of actively influencing the risk
situation of the LLB Group. This is carried out using a limits system,
risk-adjusted pricing, through the possibility of using risk hedging
instruments and the specific repayment of credit commitments. Risk
management is conducted both at the individual loan and at the portfolio level.
3.5 Risk provisioning
Overdue claims
A claim is deemed to be overdue if a substantial liability from a borrower to the bank is outstanding. The overdraft begins on the date
when a borrower exceeds an approved limit, has not paid interest or
amortisation, or has utilised an unauthorised credit facility.
Risk limitation
The LLB Group has in place a comprehensive limits system to restrict
credit risk exposure. In addition to the limitation of individual credit
risks, to prevent risk concentrations, the LLB Group assigns limits for
countries, segments and sectors.
164
Risk management
Default-endangered claims
Claims are regarded as being in danger of default if, on the basis of the
client’s creditworthiness, a loan default can no longer be excluded in
the near future.
Specific value allowances
Each impaired claim is individually assessed and the restructuring
strategy as well as the estimate of future recoverable amounts are
determined. An individual value allowance is allocated on the basis of
this criteria.
3.6 Country risks
A country risk arises if specific political or economic conditions in
a country affect the value of a foreign position. Country risk is composed of transfer risk (e. g. restrictions on the free movement of
money and capital) and other country risks (e. g. country-related
liquidity, market and correlation risks).
Country risks are controlled on the basis of a limits system and are
continually monitored. Ratings provided by a recognised rating agency
are utilised for certain individual countries.
General value allowances
A portfolio is classified as impaired on a collective basis, if there are
objective indications that the portfolio contains impaired claims,
which cannot however be determined individually.
3.7 Maximum credit risk without considering collateral
in CHF thousands
31. 12. 2014
31. 12. 2013
Average
5'773'872
6'082'003
5'927'938
9'308'830
8'906'012
9'107'421
79'880
63'830
71'855
1'334'645
1'270'246
1'302'446
Credit risks from balance sheet transactions
Due from banks
Loans
mortgage loans
loans to public authorities
other loans
Trading portfolio
fixed interest securities
553
5'042
2'798
87'781
86'950
87'366
Total
951'480
690'292
820'886
17'537'041
17'104'375
17'320'710
Credit risks from off-balance-sheet transactions
Contingent liabilities
Irrecoverable commitments
Liabilities for calls on share and other equities
Total
The largest credit risk for the LLB Group – without taking into consideration collateral – arises from loans made to banks and loans made
to customers. In the case of loans to customers, the majority of loans
are secured by mortgages, which are granted to clients having firstclass creditworthiness within the scope of the LLB Group’s lending
policy. Thanks to the diversified nature of the collateral portfolio, containing properties in the Principality of Liechtenstein and in Switzerland, the risk of losses is reduced to a minimum. The LLB Group
73'219
76'716
74'968
255'362
101'878
178'620
8'964
8'964
8'964
337'545
187'558
262'552
undertakes bank investments on both a secured and an unsecured
basis. The risk of losses with loans to banks is restricted, on the one
hand, through a broad distribution of risks, and on the other, by the
strict minimum lending requirements applied to the counterparties.
The three general investment principles apply, i.e. safety, liquidity and
profitability.
165
Risk management
3.8 Due from banks and loans
31. 12. 2014
31. 12. 2013
Due from
customers
Due from banks
Due from
customers
Due from
banks
10'448'399
5'773'741
10'004'411
6'081'553
96'199
130
90'994
4
Overdue, value allowance made (specific)
102'544
0
127'249
444
Default-stressed, value allowance made (specific)
184'772
0
161'151
47'688
1'129
1
1'485
0
10'833'043
5'773'872
10'385'290
6'129'689
– 47'686
in CHF thousands
Neither overdue nor value allowance made
Overdue but no value allowance made
Value allowance made (general)
Gross
Minus allowances (specific)
– 109'688
0
– 145'070
Minus allowances (general)
0
0
– 131
0
10'723'355
5'773'872
10'240'089
6'082'003
Net
Due from banks and loans neither overdue nor allowances made
in CHF thousands
Mortgage loans
Loans to public
authorities
Other loans
Total due from
customers
Due from banks
31. 12. 2014
Investment Grade
4'222'413
0
566'612
4'789'025
4'331'534
Standard Monitoring
4'652'386
79'880
648'501
5'380'767
1'442'207
191'099
0
56'491
247'590
0
30'923
0
94
31'017
0
9'096'821
79'880
1'271'698
10'448'399
5'773'741
Special Monitoring
Sub-Standard
Total
31. 12. 2013
Investment Grade
4'361'969
26'851
617'107
5'005'927
4'331'854
Standard Monitoring
4'138'595
36'920
499'258
4'674'773
1'749'699
218'595
16
59'721
278'332
0
41'134
0
4'244
45'378
0
8'760'293
63'787
1'180'330
10'004'410
6'081'553
Special Monitoring
Sub-standard
Total
166
Risk management
Loans overdue but no allowances made
in CHF thousands
Mortgage loans
Loans to public
authorities
Other loans
Total due from
customers
86'993
31. 12. 2014
52'737
0
34'256
Overdue 31 to 60 days
Overdue by up to 30 days
0
0
2'748
2'748
0
0
6'458
6'458
52'737
0
43'462
96'199
Total
31. 12. 2013
35'069
43
46'613
81'725
Overdue by up to 30 days
0
0
8'826
8'826
0
0
443
443
35'069
43
55'882
90'994
Total
Loans with specific allowances
in CHF thousands
Mortgage loans
Loans to public
authorities
Other loans
Total due from
customers
Due from banks
31. 12. 2014
Overdue Claims
Default-distressed claims
Fair value of cover
Total specific value allowances
30'816
0
71'728
102'544
0
159'763
0
25'009
184'772
0
– 159'232
0
– 18'396
– 177'628
0
31'347
0
78'341
109'688
0
19'803
0
107'446
127'249
444
122'796
0
38'355
161'151
47'688
– 110'635
0
– 32'695
– 143'330
– 446
31'964
0
113'106
145'070
47'686
31. 12. 2013
Overdue claims
Default-distressed claims
Fair value of cover
Total specific value allowances
Newly agreed loans
Newly agreed loans are not substantial.
167
Risk management
3.9 Overdue and default-distressed claims by geographical area
31. 12. 2014
in CHF thousands
Liechtenstein and Switzerland
Europe excluding FL / CH
North America
Asia
Others
Total
Default- distressed
claims
31. 12. 2013
Overdue Specific value
claims
allowance
Default- distressed
claims
Overdue Specific value
claims
allowance
178'452
127'166
63'898
144'973
126'924
89'361
32
21'440
10'729
9'628
38'178
27'339
0
1'094
0
0
989
0
6'288
1'852
6'851
54'238
6'594
54'232
0
47'321
28'210
0
46'006
21'824
184'772
198'873
109'688
208'839
218'691
192'756
3.10 Debt instruments
31. 12. 2014
in CHF thousands
Trading
portfolio
AAA
31. 12. 2013
Designation fair value
Total
Trading
portfolio
Designation fair value
Total
563'448
563'448
2'379
457'938
460'316
AA1 to AA3
252
198'307
198'559
920
85'041
85'961
A1 to A3
300
109'911
110'211
1'584
113'334
114'918
10'295
10'295
Lower than A3
Without a rating
Total
553
8'371
8'371
71'442
71'442
160
23'683
23'843
951'480
952'032
5'042
690'292
695'334
3.11 Taken over collateral
2014
2013
Financial
investments
Real estate / properties
Total
Financial
investments
Real estate / properties
Total
As at 1 January
0
0
0
82
0
82
Additions / disposals
0
0
0
0
0
0
Profit / loss
0
0
0
– 82
0
– 82
As at 31 December
0
0
0
0
0
0
in CHF thousands
Taken over collateral is disposed of again as soon as possible and recognised in other assets or financial investments or the trading portfolio.
168
Risk management
3.12 Risk concentration
Risk concentration by regions
in CHF thousands
Liechtenstein and Switzerland
Europe excluding
FL / CH
North America
Asia
Others *
Total
2'024'758
3'658'961
56'259
6'703
27'191
5'773'872
9'273'733
35'097
0
0
0
9'308'830
31. 12. 2014
Due from banks
Due from customers
0
mortgage loans
other loans
79'880
0
0
0
0
79'880
944'904
71'585
2'727
119'855
195'574
1'334'645
0
0
0
50
503
553
69'995
16'400
56
647
683
87'781
241'398
518'676
64'159
23'380
103'867
951'480
12'634'668
4'300'719
123'201
150'635
327'818
17'537'041
61'588
3'676
0
4'436
3'519
73'219
255'322
12
0
28
0
255'362
Trading portfolio
0
Total
0
Credit risks from off-balance sheet transactions
Liabilities from calls on shares and other equities
Total
8'964
0
0
0
0
8'964
325'874
3'688
0
4'464
3'519
337'545
2'284'306
3'723'523
70'005
1'275
2'894
6'082'003
8'950'722
– 39'660
0
– 5'050
0
8'906'012
63'830
0
0
0
0
63'830
800'511
81'711
2'643
195'189
190'192
1'270'246
160
3'537
0
583
762
5'042
65'161
20'107
4
797
881
86'950
31. 12. 2013
Due from banks
Due from customers
mortgage loans
other loans
Trading portfolio
Total
198'490
398'027
46'155
13'306
34'314
690'292
12'363'180
4'187'245
118'807
206'100
229'043
17'104'375
65'979
3'613
18
3'790
3'316
76'716
101'028
800
0
0
50
101'878
Total
8'964
0
0
0
0
8'964
175'971
4'413
18
3'790
3'366
187'558
*None of the categories summarised in the position “Others” exceeds 10 percent of the total volume.
169
Risk management
Risk concentration by sectors
in CHF thousands
Financial
services
Real estate
Private households
Others *
Total
5'773'872
0
0
0
5'773'872
97'831
1'239'981
6'828'963
1'142'055
9'308'830
4'863
0
0
75'017
79'880
496'933
28'112
372'075
437'525
1'334'645
31. 12. 2014
Due from banks
Due from customers
mortgage loans
other loans
Trading portfolio
0
0
0
553
553
62'179
304
15'072
10'226
87'781
Total
564'440
10'890
0
376'150
951'480
7'000'118
1'279'287
7'216'110
2'041'526
17'537'041
21'768
6'540
13'717
31'194
73'219
30'746
29'054
167'862
27'700
255'362
8'964
0
0
0
8'964
61'478
35'594
181'579
58'894
337'545
6'065'735
0
16'268
0
6'082'003
106'995
1'048'515
6'672'317
1'078'185
8'906'012
4'297
0
0
59'533
63'830
509'018
52'581
354'077
354'570
1'270'246
Total
31. 12. 2013
Due from banks
Due from customers
mortgage loans
other loans
Trading portfolio
1'541
0
0
3'501
5'042
69'294
116
14'170
3'370
86'950
Total
429'301
11'000
0
249'991
690'292
7'186'181
1'112'212
7'056'832
1'749'150
17'104'375
23'378
3'603
13'959
35'776
76'716
20'672
20'803
38'667
21'735
101'878
Total
8'964
0
0
0
8'964
53'014
24'406
52'626
57'511
187'558
*None of the categories summarised in the position “Others” exceeds 10 percent of the total volume.
170
Risk management
4 Operational and legal risk
6 Strategic risk
The LLB Group defines operational risks as being the danger of losses
due to the failure of internal procedures, people or IT systems or as
a result of an external event. Legal risks form a part of operational
risks. The LLB Group has in place an active and systematic process for
managing operational risks. Policies and directives have been formulated for the identification, control and management of this risk category, which are valid for all Group companies. Potential and incurred
losses from various organizational units, as well as significant external
events, are recorded and evaluated promptly at the parent bank. In
addition, the LLB Group collates and analyses risk ratios, e. g. from the
areas of due diligence and employee transactions for own account.
Ultimately, the risks are limited by means of internal rules and regulations regarding organization and control. The risk management process is supported by specialized software.
For the LLB Group a strategic risk represents the endangering of a projected business result due to the inadequate focusing of the Group on
the political, economic, technological, social or ecological environment. Accordingly, these risks can arise as a result of an inadequate
strategic decision-making process, unforeseeable events on the market or a deficient implementation of the selected strategies.
Strategic risks are regularly reviewed by the Group Audit & Risk
Committee and by the Group Board of Directors.
5 Insurance risk
The swisspartners Group with its business units in the Principality of
Liechtenstein and on the Cayman Islands writes solely fund-linked life
insurance policies for wealthy private clients.
These fund-linked life insurance policies generally comprise fundlinked life insurance policies with mortality cover against one-time
investments and fund-linked annuities. The policy holder bears the
investment risk and benefits from possible investment performance.
The sum at risk with mortality insurance benefits amounts to
CHF 56.6 million. A total of CHF 53.0 million of this sum is reinsured,
so that a default risk or excess of CHF 3.6 million existed at 31 December 2014.
On account of the low deductible sum at risk, a calculation and
disclosure of the sensitivities was not made. The reinsurers have at
least an “A+” rating from Standard & Poor’s. The default risk associated
with the reinsurers is regularly monitored.
7 Reputational risk
If risks are not identified, adequately managed and monitored, this
can lead not only to substantial financial losses, but also to reputational damage. The LLB Group does not regard reputational risk as an
independent risk category, but rather as the danger of additional
losses stemming from the categories concerned. Consequently, a reputational risk can both cause losses in all risk categories, such as
market or credit risks, or be caused by such losses.
Reputational risks are regularly reviewed by the Group Audit & Risk
Committee and by the Group Board of Directors.
8 Fair value of financial instruments
The table shows the fair values of financial instruments, based on the
valuation methods explained in the following, and assumptions. The
fair value represents a market-based measurement and not an entityspecific valuation. It is defined as 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 on the prin
cipal market or the most advantageous market. Details about the
measurement of fair values are shown in note 36.
171
Risk management
Fair value of financial instruments
31. 12. 2014
in CHF thousands
31. 12. 2013
Carrying Value
Fair Value
Deviation Carrying Value
Fair Value
Deviation
1'362'755
1'362'755
0
2'075'560
2'075'560
0
Due from banks
5'773'872
5'780'173
6'301
6'082'003
6'087'903
5'900
10'723'355
11'265'729
542'374
10'240'089
10'598'019
357'930
560
560
0
5'061
5'061
0
87'781
87'781
0
86'951
86'951
0
2'397'076
2'397'076
0
1'969'238
1'969'238
0
Assets
Due from customers
Liabilities
Due to banks
Due to customers
484'599
484'985
– 386
981'065
981'403
– 338
15'657'835
15'698'847
– 41'012
15'599'995
15'601'866
– 1'871
75'650
75'650
0
266'151
266'151
0
1'193'397
1'193'397
0
811'778
811'778
0
165'809
165'809
0
108'929
108'929
0
1'152'960
1'221'721
– 68'761
1'127'597
1'164'140
– 36'543
Debt issued
Deviation between fair value and carrying value
438'516
325'078
The following valuation methods are applied in calculating the fair
value of financial instruments:
9 Netting of financial assets and
financial liabilities
Cash and balances with central banks and money market
instruments
These financial instruments have a maturity or a refinancing profile
of maximum one year. The book value corresponds approximately to
fair value.
The table below provides an overview of the financial assets and financial liabilities, which are subject to an enforceable netting agreement
or similar agreements. The LLB Group has concluded agreements with
various counterparties, which permit netting. These are mainly agreements in connection with securities lending and borrowing trans
actions, reverse-repurchase deals, and over-the-counter transactions.
The LLB Group does not conduct netting with the financial assets and
financial liabilities of balance sheet transactions. Accordingly, the table
below shows unnetted amounts in the balance sheet, risks therefore
which the bank has accepted with the individual executed trans
actions, and which existed on the balance sheet date. The information
provided in the table below does not represent the current credit risk
in connection with the transactions conducted by the LLB Group.
Due from / to banks, loans and due to customers
The fair value of these positions having a maturity or a refinancing
profile are determined using similar maturity swap rates. Replicate
portfolios are employed for products for which fixed interest rates or
cash flows are not known in advance.
Trading portfolio assets, derivative financial instruments,
financial investments at fair value through profit and loss,
investment property and due from / to insurance business
For the majority of financial instruments, fair value corresponds to the
market value. The fair value of financial instruments without an
established market value is determined using generally accepted
valuation models.
172
Risk management
Subject to netting agreements
Gross amounts
before netting
in CHF thousands
Potential netting amounts
On the
balance sheet
Netting
recognised
amounts amounts, net
Financial
instruments
Financial
collaterals
Amounts after potential
netting
Amounts On the balwithout ance sheet
potential recognised
netting
amounts
31. 12. 2014
Financial assets subject to off-setting,
enforceable netting agreements or similar
arrangements
Reverse repurchase agreements
Positive replacement values
Cash collateral receivables on
derivative instruments
Total assets
1'611'152
0
1'611'152
0
– 1'597'054
14'098
87'781
0
87'781
– 1'732
– 76'648
9'402
0 1'611'152
0
87'781
0
134'547
134'547
0
134'547
– 134'547
0
0
1'833'480
0
1'833'480
– 136'278
– 1'673'702
23'500
0 1'833'480
165'809
0
165'809
– 134'547
0
31'263
0
Financial liabilities subject to off-setting,
arrangements
Negative replacement values
Cash collateral payables on
Total liabilities
165'809
0
0
0
0
0
0
0
0
165'809
0
165'809
– 134'547
0
31'263
0
165'809
1'966'885
0
1'966'885
0
– 1'966'885
0
86'950
0
86'950
– 7'651
– 25'181
54'118
31. 12. 2013
Financial assets subject to off-setting,
arrangements
Reverse repurchase agreements
Cash collateral receivables on
Total assets
0 1'966'885
0
86'950
0
25'250
25'250
0
25'250
– 25'250
0
0
2'079'085
0
2'079'085
– 32'901
– 1'992'066
54'118
0 2'079'085
108'929
0
108'929
– 25'250
0
83'679
0
Financial liabilities subject to off-setting,
arrangements
Cash collateral payables on
Total liabilities
108'929
6'863
0
6'863
– 6'863
0
0
0
6'863
115'792
0
115'792
– 32'114
0
83'679
0
115'792
173
Risk management
10 Capital adequacy requirements (Pillar I)
The adequacy of capital resources is monitored by the LLB Group and
the individual operative units. The monitoring activity is based on the
capital requirement regulations of the Principality of Liechtenstein,
which in turn are based on the directives of the Basel Committee on
Banking Supervision as adapted by the European Union.
In accordance with Basel II, the banks may choose from various
approaches to calculate the capital requirements for credit, market
and operational risks. The LLB Group applies the standard approach
for credit risks, the basic indicator approach for operational risks and
the de minimis approach for market risks. The determination of capital
requirements and tier capital is carried out on the basis of the IFRS
consolidated financial statement, whereby non-realised gains are
deducted from core capital.
At the LLB Group, the scope of consolidation for determining capital
requirements and for the financial accounts is identical. The relevant
consolidation information can be found on page 150 – 151 of the annual
report.
Apart from the legal provisions, which prevent the transfer of funds
or equity within the LLB Group, there are no other restrictions.
Capital adequacy requirements (Pillar I)
in CHF thousands
Tier 1 ratio (in percent)
31. 12. 2014
31. 12. 2013
18.3
18.8
154'000
154'000
Eligible capital
Share capital
Share premium
Retained earnings
25'785
26'298
1'672'539
1'649'358
Other reserves
– 31'665
1'083
102'346
104'278
Less distribution of profit
– 43'233
– 43'279
Non-realised gains after tax
– 24'054
– 17'749
Core capital (before adjustment)
1'855'718
1'873'989
Net long position in own shares
– 168'584
– 167'816
Other elements to be deducted from core capital
– 153'724
– 167'401
Eligible core capital (adjusted core capital)
1'533'410
1'538'772
Total eligible capital
1'533'410
1'538'772
Risk-weighted assets
Credit risks balance sheet transactions
7'328'688
6'943'825
Credit risks off-balance sheet transactions
103'813
143'338
Market risks
239'775
314'038
Operational Risks
715'850
768'338
8'388'126
8'169'539
582'739
553'158
32'419
42'387
Non-counterparty related risks
11'861
13'815
Market risk
19'182
25'123
of which interest instruments
0
0
of which equities
0
0
13'793
9'992
5'389
15'131
Total risk-weighted assets
Required capital
Credit risk
of which price risk related to shares in the banking book
of which forex and precious metal
of which commodities
of which settlement and delivery risks
Operational risks
Total required capital
0
0
57'268
61'467
671'050
653'563
174
Risk management
Segmentation of credit risks
Regulatory risk weighted
in CHF thousands
0 %
10 %
20 %
35 %
50 %
75 %
100 %
150 %
Total
31. 12. 2014
Central governments and banks
Public authorities
Administrative bodies
International organizations
1'497'346
0
29'237
0
0
0
0
36'244
0
60'813
0
0
0
13'935
0
6'324
0
27'009
0
21'756
0
1'073
0
56'162
28'287
0
0
0
0
0
0
0
28'287
Banks and securities firms
0
0
5'129'016
0
938'326
0
1
Companies
0
0
133'274
0
39'484
0
550'495
74
0
3'542
0
0
190'750
1'038'882
Retail
0 1'526'583
110'992
0 6'067'343
225
723'478
0 1'233'248
Secured by pledge
3'189
0
0
7'124'249
604'478
0
1'721'296
Overdue positions
0
0
0
0
0
4'951
27'189
1'078'042
0
0
0
0
0
292'159
Covered debentures
0
121'595
0
0
0
0
0
0
121'595
Unites in equity funds and others
0
0
0
0
0
0
43'172
0
43'172
Total
2'649'506
121'595
5'382'891
7'124'249
1'604'044
195'701
3'688'202
81'671 20'847'859
Total previous year
3'429'888
436'486
5'238'595
6'671'408
1'541'641
185'501
3'076'281
361'750 20'941'550
Shares
0 9'453'212
6'065
38'205
75'381 1'445'582
Mitigation of credit risk
31. 12. 2014
in CHF thousands
Balance sheet positions
31. 12. 2013
Covered by
recognised financial
collateral
Covered by
guarantees
Other credit commitments
0
6'669
Off-balance sheet positions
Total
Covered by recognised financial collateral
Covered by
guarantees
Other credit commitments
Total
0
6'669
0
1'900
0
1'900
50
0
50
0
0
0
0
Derivatives
0
0
0
0
0
0
0
0
Total
0
6'719
0
6'719
0
1'900
0
1'900
175
Risk management
11 Internal capital (Pillar II)
The financial market regulatory requirements with respect to quantitative risk management, which arise from Pillar II and the consultation
paper on the implementation of the Internal Capital Adequacy Assessment Process (ICAAP), are fulfilled by the LLB Group by, among other
measures, the conducting of a risk-bearing capacity calculation. The
objective of the risk-bearing capacity calculation is to ensure the continued existence of the LLB Group. In line with this objective, the adequacy of the Group’s capital resources is tested using internal models.
The results attained with the individual risk types are aggregated in
a total risk potential and are compared with the capital available to
cover these potential losses. This process enables the extent to be
determined to which the LLB Group is in a position to bear potential
losses.
For the purpose of the calculation of its risk-bearing capacity, the
LLB Group employs a value-at-risk approach with a confidence level of
99.9 percent and a holding duration of one year. Correlations between
the individual risk types are not considered. To underpin operational
risks, the LLB Group applies the values from the basic indicator
approach of Pillar I and adjusts them by adding a risk premium.
176
Assets under Management
in CHF millions
31. 12. 2014
31. 12. 2013
4'528
4'205
+ / – %
7.7
8'577
8'275
3.7
37'113
36'624
1.3
Total assets under management (incl. double counting)
50'218
49'104
2.3
of which double counting
4'102
3'794
8.1
Net new money
– 350
– 2'167
– 83.9
31. 12. 2014
31. 12. 2013
Equities
23.0
22.5
Bonds
18.5
18.2
Investment funds
25.2
23.7
Liquidity
30.5
32.2
Breakdown of assets under management
in percent
By asset classes
Precious metal / others
Total
2.8
3.4
100.0
100.0
By currencies
CHF
43.7
44.1
EUR
25.3
26.8
USD
23.9
21.9
Other
7.1
7.2
Total
100.0
100.0
177
Calculation method
Double counting
Assets under management comprise all client assets managed or held
for investment purposes. Basically, these include all balances due to
customers, fiduciary time deposits and all valued portfolio assets.
Also included are other types of client assets, which can be deduced
from the principle of the investment purpose. Custody assets (assets
held solely for transaction and safe-keeping purposes) are not included
in assets under management.
This item comprises fund units in own-managed funds, which are contained in client portfolios with discretionary mandates and in other
client safe-keeping accounts.
This item comprises the assets of the LLB Group’s own investment
funds.
Net new money
This position is composed of the acquisition of new clients, lost client
accounts and inflows or outflows from existing clients. Performance-
related asset fluctuations, e. g. price gains, interest and dividend payments including interest, commissions and expenses charged to client
accounts, are not regarded as inflows or outflows. In the year under
report, CHF 133 million were reclassified from assets under management to custody assets.
Securities, value rights, precious metals, the market value of fiduciary
investments with third parties and customer deposits are included in
the calculation of assets with discretionary mandates. The figures
comprise both assets deposited with Group companies and assets
deposited with third parties, for which the Group companies hold
a discretionary mandate.
Securities, value rights, precious metals, the market value of fiduciary
investments with third parties and customer deposits are included in
the calculation of other assets under management. The figures comprise assets, for which an administration or advisory mandate is
exercised.
Financial statement of LLB AG in the online annual report
with Excel files for your own statistics
Financial
statement
of LLB AG,
Vaduz
181
182
183
184
185
186
Management report
Balance sheet
Income statement
Notes to the financial statement
187
188
191
203
204
205
Notes on business operations
Accounting policies and valuation princi
Notes to the balance sheet
Notes to off-balance-sheet transactions
Notes to the income statement
Risk management
181
Report of the
independent auditors
As statutory auditors, we have audited the accounting records and the financial statements
(balance sheet, income statement and notes; pages 183 to 205) and the management report
(page 182) of Liechtensteinische Landesbank Aktiengesellschaft for the year ended 31 December 2014.
These financial statements and the management report are the responsibility of the Board
of Directors. Our responsibility is to express an opinion on these financial statements based
on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.
Our audit was conducted in accordance with auditing standards promulgated by the
profession in Liechtenstein, which require that an audit be planned and performed to obtain
reasonable assurance about whether the financial statements and the management report
are free from material misstatement. We have examined on a test basis evidence supporting
the amounts and disclosures in the financial statements. We have also assessed the accounting
principles used, significant estimates made and the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements give a true and fair view of the financial position and
the results of operations in accordance with the Liechtenstein law. Furthermore, the accounting records and financial statements and the management report and the proposed appropriation of available earnings comply with Liechtenstein law and the company’s articles of
incorporation.
The management report is in accordance with the financial statements.
We recommend that the financial statements submitted to you be approved.
PricewaterhouseCoopers AG
Claudio Tettamanti
(Auditor in charge)
Patrick Schwarz
St. Gallen, 26 February 2015
182
Management report
Management report
The details of the management report of Liechtensteinische Landesbank AG, Vaduz, can largely be seen in the consolidated report of the
LLB Group.
On the balance sheet date, Liechtensteinische Landesbank AG,
Vaduz, and its subsidiaries held a total of 1’978’202 bearer shares
(previous year: 1’947’134 bearer shares). This corresponds to a share
capital stake of 6.4 percent (previous year: 6.3 %). With respect to the
volume of and changes to treasury shares of Liechtensteinische
Landesbank AG, reference is made to the individual financial
statement.
The Board of Directors proposes to the General Meeting of Shareholders on 8 May 2015 that a dividend of net CHF 1.50 per bearer share
be paid out.
No important changes have occurred since the balance sheet date
which would necessitate the reporting of any additional data or a
correction of the 2014 financial statement.
183
Balance sheet
Balance sheet
in CHF thousands
Note
31. 12. 2014
31. 12. 2013
+ / – %
– 42.1
Assets
1'000'097
1'726'500
Due from banks
6'052'431
6'252'920
– 3.2
732'611
770'603
– 4.9
– 3.0
due on a daily basis
other claims
Loans
of which mortgages
5'319'820
5'482'316
1
5'701'633
5'551'074
2.7
1
4'281'966
4'242'408
0.9
of which subordinated claims (gross)
Bonds and other fixed-interest securities
Money market instruments
from public authority issuers
from other issuers
Bonds
0
0
706'206
493'051
43.2
39'652
35'625
11.3
39'652
35'625
11.3
0
0
666'554
457'426
45.7
from public authority issuers
141'136
61'690
128.8
from other issuers
525'418
395'736
32.8
0
0
of which subordinated bonds
341'440
331'407
3.0
Participations
Shares and other non-fixed-interest securities
4
61
41
46.3
Shares in associated companies
4
159'392
157'117
1.4
56'779
63'881
– 11.1
– 6.6
Intangible assets
Fixed assets
6
94'298
100'969
Own shares
2 a) / 3
79'079
72'044
9.8
17
228'087
215'158
6.0
Other assets
Accrued income and prepayments
Total assets
32'713
33'974
– 3.7
14'452'215
14'998'137
– 3.6
Liabilities
Due to banks
with agreed maturities or periods of notice
828'716
1'331'551
– 37.8
697'665
1'182'245
– 41.0
– 12.2
131'051
149'306
Due to customers
11'366'136
11'510'535
– 1.3
savings deposits
3'219'989
3'601'584
– 10.6
3.0
other liabilities
with agreed maturities or periods of notice
Certified liabilities
medium-term notes
Other liabilities
17
Provisions
tax provisions
9
8'146'147
7'908'951
7'987'769
7'742'905
3.2
158'378
166'047
– 4.6
303'649
288'163
5.4
303'649
288'163
5.4
221'808
207'359
7.0
13'653
13'430
1.7
11'092
3'030
266.1
7'372
0
other provisions
9
3'720
3'030
Provisions for general banking risks
9
340'000
310'000
9.7
10
154'000
154'000
0.0
Share capital
Share premium
Retained earnings
legal reserves
reserves for own shares
other reserves
Balance brought forward
Profit for the year
Total liabilities
22.8
47'750
47'750
0.0
1'085'080
1'045'080
3.8
390'550
390'550
0.0
79'079
72'044
9.8
615'451
582'486
5.7
3'924
995
294.3
76'407
86'244
– 11.4
14'452'215
14'998'137
– 3.6
184
in CHF thousands
Note
31. 12. 2014
31. 12. 2013
+ / – %
1 / 18
61'810
60'215
2.6
198'494
12'277
12'242
Credit risks
irrevocable commitments
1
198'456
call liabilities
1
38
34
11.3
19
9'146'471
9'928'582
– 7.9
Fiduciary transactions
20
195'762
413'483
– 52.7
185
Income statement
Income statement
in CHF thousands
Note
Interest income
of which from fixed-interest securities
of which from trading transactions
Interest expenses
Net interest income
of which from trading transactions
2014
2013
+ / – %
125'177
131'714
– 5.0
10'491
6'496
61.5
24
153
– 84.3
– 31'851
– 38'681
– 17.7
93'326
93'032
0.3
16
6
149.1
149.1
16
6
Participations and associated companies
27'561
16'086
71.3
Income from securities
27'577
16'093
71.4
Credit-related commissions and fees
Commissions from securities and investment business
Other commission and fee income
421
449
– 6.2
116'328
130'733
– 11.0
23'911
20'984
14.0
– 45'749
– 50'547
– 9.5
Net commission and fee income
94'912
101'617
– 6.6
Income from financial transactions
35'446
39'833
– 11.0
35'197
23'315
51.0
1'288
1'183
8.9
18'373
19'962
– 8.0
Commission and fee expenses
of which from trading business
21
Income from real estate holdings
Sundry ordinary income
Other ordinary income
19'661
21'145
– 7.0
270'922
271'720
– 0.3
Personnel expenses
22
– 83'769
– 77'762
7.7
Administrative expenses
23
– 40'829
– 45'177
– 9.6
– 124'598
– 122'940
1.3
146'324
148'780
– 1.7
– 26.1
Gross operating profit
Depreciation on intangible assets and fixed assets
– 20'771
– 28'089
24
– 17'059
– 12'986
31.4
Allowances on claims and allocations to provisions for contingent liabilities and lending risks
9
– 12'294
– 31'159
– 60.5
Earnings from the release of allowances on claims and of provisions
for contingent liabilities and lending risks
9
9'110
4'105
121.9
– 52
0
9'151
7'232
26.5
114'410
87'883
30.2
Income taxes
– 5'003
– 1'409
255.0
Other taxes
– 3'000
– 230
– 30'000
0
76'407
86'244
Sundry ordinary expenses
Write-downs on participations, shares in associated companies and securities treated
as long-term investments
Earnings from write-ups on participations, shares in associated companies and securities treated
as long-term investments
Result from normal business operations
Additions to provisions for general banking risks
Profit for the year
– 11.4
186
The Board of Directors proposes to the General Meeting of 8 May 2015
that the balance sheet profit at 31 December 2014 be distributed as
follows:
in CHF thousands
Profit for the year
Balance brought forward
2014
2013
76'407
86'244
3'924
995
80'331
87'239
Allocation to other reserves
30'000
40'000
Allocation to corporate capital (common stock)
43'233
43'315
7'098
3'924
Balance sheet profit
Balance carried forward
If this proposal is accepted, a dividend for the 2014 business year of net
CHF 1.50 per bearer share will be paid out on 15 May 2015.
187
Liechtensteinische Landesbank Aktiengesellschaft with its registered
office in Vaduz and two domestic branch offices is active as a full-
service (universal) bank. The LLB AG has subsidiaries in Liechtenstein,
Austria and Switzerland. At the end of 2014, LLB AG employed 502
persons (2013: 505) on a full-time equivalent basis. The average headcount in 2014 amounted to 501 persons (2013: 512) on a full-time equivalent basis.
As a universal bank, LLB AG is engaged in commission and fees business, credit and lending business, money market and interbank business, as well as securities trading business.
Commissions and fees business
Money market and interbank business
Domestic and international funds deposited with the bank, which
cannot be invested in lending business, are placed with first class
banks, predominantly in Switzerland and Western Europe.
Securities trading business
The bank offers its clients a full range of services in connection with
the execution and settlement of securities trading transactions. It
trades for its own account only to a moderate extent. Transactions
with derivative financial instruments for the bank’s own account are
largely employed for hedging purposes.
The major proportion of revenues from commissions and fees business
is attributable to commissions earned in connection with securities
trading for customers. Other important income streams are provided
by securities safe custody business, asset management (incl. investment funds) and brokering fiduciary investments.
Credit and lending business
The largest proportion of loans comprises mortgages, Lombard loans
and advances to public institutions. Mortgages are granted to finance
properties in Liechtenstein and in the neighbouring areas of Switzerland. Real estate financing for the rest of Switzerland and Lombard
loans are granted within the scope of integrated asset management
business. A major proportion of loans and advances to public authorities relates to credit facilities extended to cantons and municipalities
in Switzerland. As regards international syndicated loans, the bank is
active to only a very limited extent in this line of business.
188
Accounting policies and valuation principles
Basic principles
The accounting and valuation policies are drawn up in accordance with
the provisions of the Liechtenstein Person and Company Law (PGR),
as well as the Liechtenstein Banking Law and the accompanying Banking Ordinance.
Recording of business
All completed business transactions are valued and recorded in the
balance sheet and the profit and loss account according to the specified valuation principles. The transactions are booked on the trans
action date. Up to their date of settlement or the value date, futures
transactions are recorded at their replacement value under other
assets or other liabilities.
Foreign currency translations
Assets and liabilities denominated in foreign currencies are translated
at the foreign exchange middle rate prevailing on the balance sheet
date. Bank note holdings for exchange business are translated at the
bank note bid rate in effect on the balance sheet date. Exchange gains
and losses arising from the valuation are booked to the profit and loss
account. The following exchange rates were employed for foreign currency conversion:
Reporting date rate
31. 12. 2014
31. 12. 2013
1 USD
0.9914
0.8908
1 EUR
1.2024
1.2270
1 GBP
1.5427
1.4738
Average rate
2014
2013
0.9173
0.9237
1 EUR
1.2136
1.2273
1 GBP
1.5084
1.4499
1 USD
Liquid funds, public authority debt instruments
and bills approved for refinancing by central
banks, balances due from banks and customers,
liabilities
These items are shown in the balance sheet at nominal value minus
any unearned discount on money market instruments.
Impaired due amounts, i. e. amounts due from debtors who prob
ably will not repay them, are valued on an individual basis and
their impairment is covered by specific allowances. Off-balancesheet transactions such as commitments for loans, guarantees and
derivative financial instruments, are also included in this valuation.
Loans are regarded as overdue at the latest when interest and / or
principal repayments are more than 90 days in arrears. Overdue and
impaired interest payments are charged directly to allowances and
provisions. Loans are put on a non-accrual basis if the interest due on
them is deemed to be uncollectible and interest accrual is therefore no
longer practical.
The impairment is measured on the basis of the difference between
the book value of the claim and the probable recoverable amount taking into consideration counterparty risk and the net proceeds from the
realization of any collateral. If it is expected that the realization process will take longer than one year, the estimated realization proceeds
are discounted on the balance sheet date. The specific allowances are
deducted directly from the corresponding asset positions. A claim is
reclassified as no longer endangered if the outstanding principal and
interest are again repaid on time in accordance with the original contractual terms. To cover the risks in retail business, which are composed of numerous small claims, lump-sum individual allowances,
calculated on the basis of empirical values, are made for the unsecured
loans and overdrawn limits for which individual allowances have not
already been considered.
189
Debt instruments and other fixed-interest
securities, equities and other non-fixed-interest
securities
Trading portfolios of securities and precious metals are valued at the
market value on the balance sheet date. Securities for which there is
no regular, active market are carried at the lower of cost or market
value. Holdings of securities and precious metals as current assets are
valued at the lower of cost or market value. Interest earnings are
credited to the item interest income, dividend income is carried under
the item income from securities. Price gains are shown under the item
income from financial transactions.
Fixed-interest securities that are intended to be held until final
maturity are valued according to the accrual method. Accordingly,
interest income, including amortisation of premiums and accretion of
discounts, is recognised on an accrual basis until final maturity. Interest-related realised capital gains or losses arising from the premature
sale or redemption of securities are recognised on an accrual basis over
the remaining period to maturity, i. e. up to the original date of final
maturity. Interest earnings are credited to the item interest income.
Equities and precious metals holdings held as fixed assets are valued
at the lower of cost or market value. Dividend income is carried under
the item income from securities. Allowances are shown under the
items write-downs to participations or earnings from write-ups to
participations, shares in associated companies and securities treated
as long-term investments, or earnings from additions to participations, shares in associated companies and securities are treated as
long-term investments.
Participations
Participations comprises shares owned by LLB AG in companies which
represent a minority participation and which are held as longterm
investments, as well as all participations of an infrastructural nature.
These items are valued at cost minus necessary allowances.
LLB AG’s existing majority participations are recorded as shares in
associated companies. These items are valued at cost minus necessary
allowances.
Intangible assets
Software development costs are capitalized when they meet certain
criteria relating to identifiability, it is probable that economic benefits
will flow to the company from them, and the costs can be measured
reliably. Internally developed software meeting these criteria and purchased software are capitalized and subsequently amortised over
three to ten years.
Low-cost acquisitions are charged directly to administrative
expenses.
Tangible fixed assets
Real estate is valued at the acquisition cost plus any investment that
increases the value of the property, less necessary depreciation. New
buildings and refurbishments are depreciated over 33 years and building supplementary costs over 10 years. No depreciation is charged on
undeveloped land unless an adjustment has to be made to allow for
a reduction in its market value. Other physical assets include fixtures,
furniture, machinery and IT equipment. They are capitalized and
depreciated in full over their estimated economic life (3 to 5 years).
Low-cost acquisitions are charged directly to administrative
expenses.
Allowances and provisions
In accordance with prudent accounting practice, specific allowances
and provisions as well as general allowances are made for all risks
existing on the balance sheet date. Allowances are offset directly with
the corresponding asset position. Provisions are booked as such in the
balance sheet.
Taxes
Accruals for taxes payable on the basis of the profits earned in the
period under report are charged as expenses in the corresponding
period. Provisions for deferred tax are formed in relation to allowances and provisions recognised only for tax purposes. The calculation is made on the basis of the estimated tax rates used for
actual taxation.
190
Statement of cash flows
Provisions for general banking risks are precautionary reserves formed
to hedge against latent risks in the bank’s operating activities.
On account of its obligation to prepare a consolidated financial statement, LLB AG is exempted from the necessity to provide a statement
of cash flow. The consolidated cash flow statement of the LLB Group
is a part of the consolidated financial statement.
Off-balance-sheet transactions are valued at nominal values. Provisions are made in the case of identifiable risks arising from contingent
liabilities and other off-balance-sheet transactions.
The gross replacement values of individual contracts in derivative
financial instruments – positive and negative replacement values are
not offset against each other – are stated in the balance sheet (under
other assets or other liabilities) and in the notes to the financial statement. All replacement values for contracts concluded for the bank’s
own account are reported. In contrast, in the case of customer transactions only the replacement values for OTC contracts are reported,
or for exchange-traded products if margin requirements are inadequate. The contract volumes are reported in the statement of off-
balance-sheet transactions and in the notes. Trading positions in
financial derivatives are valued at market rates provided the contracts
are listed on an exchange or a regular, active market exists. If this is
not the case, the contracts are valued at the lower of cost or market
value. If interest business positions are hedged with derivatives,
the differential amount between the market value and the accrual
method is recognised in the settlement account.
Changes to the previous year
None.
191
1 Type of collateral
Type of collateral
Secured by
mortgage Other collateral
in CHF thousands
Unsecured
Total
Loans
Loans (excluding mortgage loans)
36'339
730'813
652'515
1'419'667
Mortgage loans
residential property
3'475'459
0
0
3'475'459
office and business property
371'162
0
0
371'162
commercial and industrial property
150'708
0
0
150'708
other
204'145
10'450
70'041
284'637
31. 12. 2014
4'237'813
741'263
722'556
5'701'633
31. 12. 2013
4'168'301
603'886
778'887
5'551'074
953
33'868
26'989
61'810
183'716
12'874
1'866
198'456
Total loans
Call liabilities
Total off-balance-sheet transactions
0
0
38
38
31. 12. 2014
184'669
46'742
28'893
260'305
31. 12. 2013
15'387
4'837
52'266
72'491
Impaired claims
Gross outstanding amount
Estimated proceeds from
realisation of collateral
Net outstanding amount
Specific allowances
31. 12. 2014
83'940
26'971
56'968
56'968
31. 12. 2013
184'943
103'269
81'675
81'675
in CHF thousands
192
2 Securities and precious metals holdings
a Securities and precious metals trading positions
Book value
in CHF thousands
Cost
Market value
31. 12. 2014
31. 12. 2013
31. 12. 2014
31. 12. 2013
31. 12. 2014
31. 12. 2013
553
5'042
550
5'114
553
5'042
553
5'042
550
5'114
553
5'042
0
0
0
0
0
0
Equities
152
151
246
245
152
151
listed
152
151
246
245
152
151
143
132
200
200
143
132
0
0
0
0
0
0
Precious metals
6'276
5'725
7'366
6'335
6'276
5'725
Total
6'981
10'918
8'162
11'694
6'981
10'918
Debt securities
listed
unlisted
of which own shares
unlisted
b Securities and precious metals holdings as current assets (excluding trading positions)
Book value
in CHF thousands
Cost
Market value
31. 12. 2014
31. 12. 2013
31. 12. 2014
31. 12. 2013
31. 12. 2014
31. 12. 2013
705'653
488'009
711'514
490'398
713'199
495'369
705'653
431'361
711'514
437'655
713'199
437'524
0
56'648
0
52'743
0
57'845
Equities
135'074
127'139
239'467
229'392
140'124
132'823
listed
78'935
71'911
168'384
168'316
78'985
71'911
unlisted
56'139
55'228
71'083
61'076
61'139
60'912
840'728
615'148
950'981
719'790
853'323
628'192
Debt securities
listed
unlisted
Total
c Securities and precious metals as fixed assets
Book value
in CHF thousands
Debt securities
valued according to accrual method
Equities
listed
unlisted
Precious metals
Total
Cost
Market value
31. 12. 2014
31. 12. 2013
31. 12. 2014
31. 12. 2013
31. 12. 2014
31. 12. 2013
0
0
0
0
0
0
0
0
0
0
0
0
285'293
276'161
289'470
289'470
291'887
280'586
291'887
280'586
0
0
0
0
285'293
276'161
289'470
289'470
0
29'036
29'652
31'262
35'830
29'036
29'652
314'330
305'814
320'732
325'300
320'923
310'238
193
3 Own shares included in current assets (excluding trading positions)
Quantity
Book value
Quantity / in CHF thousands
31. 12. 2014
31. 12. 2013
31. 12. 2014
31. 12. 2013
Start of year
1'943'554
2'375'656
71'912
69'013
55'000
0
2'150
0
– 23'932
– 432'102
– 2'083
– 37'603
Bought
Sold
Allowances
0
0
6'956
40'502
End of year
1'974'622
1'943'554
78'935
71'912
4 Participations and shares in associated companies
in CHF thousands
31. 12. 2014
31. 12. 2013
Participations
With market value
0
0
Without market value
61
41
Total participations
61
41
With market value
0
4
Without market value
159'392
157'112
Total shares in associated companies
159'392
157'117
194
5 Substantial participations and shares in associated companies
Company name and registered office
Business activity
Currency
Share capital
% share
of votes
% share
of capital
CHF
50'000
50.0
50.0
Participations
Data Info Services AG, Vaduz
Service company
LLB Fondsleitung AG, Vaduz
Fund management company
CHF
1'000'000
100.0
100.0
LLB Fund Services AG, Vaduz
Fund management company
CHF
1'000'000
100.0
100.0
LLB Beteiligungen AG, Uznach
Investment company
CHF
100'000
100.0
100.0
LLB Holding (Schweiz) AG, Erlenbach
Holding company
CHF
250'000
100.0
100.0
LLB Verwaltung (Schweiz) AG, Erlenbach *
Management company
CHF
100'000'000
100.0
100.0
LLB Asset Management AG, Vaduz
Asset management
CHF
1'000'000
100.0
100.0
LLB Qualified Investors AGmvK, Vaduz
Investment company
CHF
50'000
100.0
100.0
Milfolium Management Inc., Tortola, BVI (in liquidation)
Management company
USD
10'000
100.0
100.0
swisspartners Investment Network AG, Zürich* / **
Asset management
CHF
500'000
75.7
75.7
LLB Linth Holding AG, Uznach
Holding company
CHF
95'328'000
100.0
100.0
Bank Linth LLB AG, Uznach *
Bank
CHF
16'108'060
74.2
74.2
Liechtensteinische Landesbank (Österreich) AG, Vienna*
Bank
EUR
2'000'000
100.0
100.0
*Indirect participation.
**The purchase of further shares in this participation is tied to certain conditions and commitments of Liechtensteinische Landesbank AG (not included in the balance sheet) which
valued on 31 December 2014 amounted to CHF 21.5 million (selling right / selling commitment for the shareholders of swisspartners Investment Network AG against Liechtensteinische
Landesbank AG). On 31 December 2014, the equity of swisspartners Investment Network AG stood at CHF 35.2 million, the company’s loss for the year amounted to CHF 11.1 million.
195
6 Statement of fixed assets
in CHF thousands
Total participations
(non-controlling interests)
Total shares in
associated companies
Cost
Accumulated
depreciation
Book value
31. 12. 2013
Investments
Disinvestments
Reclassifications
Additions
Depreciation
Book value
31. 12. 2014
2'187
– 2'146
41
0
0
0
20
0
61
193'736
– 36'619
157'117
2'380
– 105
0
0
0
159'392
Total securities and
precious metals as fixed assets
385'675
– 79'861
305'814
9'132
– 616
0
0
0
314'330
Total intangible assets *
112'303
– 48'422
63'881
3'481
0
0
0
– 10'583
56'779
Real estate
bank premises
other properties
Other fixed assets
Total fixed assets
162'848
– 94'327
68'521
1'225
0
1'983
0
– 4'296
67'433
27'021
– 10'038
16'983
0
0
– 1'983
0
0
15'000
81'386
– 65'921
15'465
2'291
0
0
0
– 5'891
11'865
271'255
– 170'286
100'969
3'516
0
0
0
– 10'187
94'298
Fire insurance value of
real estate
197'112
195'643
Fire insurance value of
other fixed assets
42'913
37'217
*Solely licence and software costs.
Depreciation is carried out according to prudent business criteria over
the estimated service life. No undisclosed reserves exist.
196
7 Pledged or assigned assets and assets subject to reservation of ownership
in CHF thousands
31. 12. 2014
31. 12. 2013
37'018
40'218
0
0
5'397
31'936
5'397
31'936
2'105'637
2'814'412
14'246
43'114
Excluding lending transactions and pension transactions with securities
Book value of pledged and assigned (as collateral) assets
Actual commitments
Lending transactions and pension transactions with securities
Self-owned securities lent or delivered as collateral within the scope of securities lending or borrowing transactions,
or self-owned securities transferred in connection with reverse repurchase agreements
of which capable of being resold or further pledged without restrictions
Securities received as collateral or borrowed within the scope of securities lending or borrowing transactions, or
securities received in connection with reverse repurchase agreements, which are capable of being resold or further pledged
without restrictions
of which resold or further pledged securities
8 Liabilities due to own pension funds
in CHF thousands
Current account, call money and time deposits
31. 12. 2014
31. 12. 2013
+ / – %
3
47
– 93.7
Savings deposits
5'443
4'624
17.7
Total
5'446
4'672
16.6
9 Allowances and provisions / provisions for general banking risks
in CHF thousands
Total
31. 12. 2013
Specific
allowances
Recoveries,
overdue
interest,
currency
differences
81'544
– 38'472
10'581
11'615
– 8'533
131
0
0
679
– 577
233
0
0
0
7'372
0
7'372
New
provisions
charged
to income
statement
Provisions
released
to income
statement
Total
31. 12. 2014
56'736
Allowances for loan default risks
Specific allowances
Lump-sum individual allowances (incl. those for country risks)
Provisions for taxes and deferred taxes
Other provisions
Total allowances and provisions
Minus allowances
Total provisions according to balance sheet
3'030
– 290
0
1'641
– 661
3'720
84'705
– 38'762
10'581
21'307
– 9'771
68'060
– 81'675
– 56'968
3'030
11'092
310'000
30'000
340'000
197
10 Share capital, significant shareholders and groups of shareholders linked by voting rights
31. 12. 2014
in CHF thousands
Total
nominal
value
Quantity
31. 12. 2013
Capital
ranking for
dividend
Total
nominal
value
Capital
ranking for
dividend
Quantity
Share capital
154'000
30'800'000
144'109
154'000
30'800'000
144'264
Total common stock
154'000
30'800'000
144'109
154'000
30'800'000
144'264
No conditional or authorized capital exists.
31. 12. 2014
in CHF thousands
With voting right: Principality of Liechtenstein
31. 12. 2013
Nominal
Holding in %
Nominal
Holding in %
88'550
57.5
88'500
57.5
11 Statement of shareholders’ equity
in CHF thousands
2014
Share capital
154'000
Share premium
47'750
Legal reserves
390'550
Reserve for own shares
72'044
Other reserves
582'486
310'000
87'239
Total shareholders’ equity as at 1 January (before profit distribution)
1'644'069
Dividend and other distributions from previous year’s profit
– 43'315
Net profit for the year
76'407
Allocation to provisions for general banking risks
30'000
Total shareholders’ equity at 31 December (before profit distribution)
1'707'161
Of which:
Share capital
154'000
Share premium
47'750
Legal reserves
390'550
Reserve for own shares
79'079
Other reserves
615'451
340'000
80'331
198
12 Maturity structure of assets, liabilities and provisions
Sight
deposits
in CHF thousands
Callable
Due within
3 months
Due between Due between
3 months
12 months
to 12 months
to 5 years
Due after
5 years
Immobilised
Total
Assets
Cash and balances with central
banks
Due from banks
Loans
of which mortgage loans
Securities and precious metals held
for trading
Securities and precious metals holdings
as currents assets (excluding trading positions)
Securities and precious metals holdings
as fixed assets
0
0
0
0
0
0 1'000'097
732'611
0
3'830'467
1'166'092
271'240
52'021
0 6'052'431
49'106
477'748
1'044'989
935'274
2'397'068
797'448
0 5'701'633
49'106
234'505
319'865
538'851
2'388'385
751'254
0 4'281'966
6'981
0
0
0
0
0
0
6'981
840'728
0
0
0
0
0
0
840'728
29'036
285'293
0
0
0
0
0
314'330
257'271
0
66'453
36'917
36'533
55'024
83'818
536'016
31. 12. 2014
2'915'830
763'041
4'941'909
2'138'283
2'704'841
904'493
83'818 14'452'215
31. 12. 2013
3'474'596
764'431
5'315'667
1'919'798
2'542'367
894'375
86'903 14'998'137
Other assets
Total assets
1'000'097
Liabilities and provisions
Due to banks
Due to customers
of which savings deposits
of which other liabilities
of which medium-term notes
Provisions (excluding provisions
for general banking risks)
0
122'793
8'258
0
0
0
3'261'607
96'597
102'877
512
2
0 11'366'136
828'716
0
3'178'484
13'680
27'311
512
2
0 3'219'989
7'904'540
83'123
82'917
75'567
0
0
0 8'146'147
0
0
24'366
72'701
185'353
21'229
0
303'649
0
0
24'366
72'701
185'353
21'229
0
303'649
0
0
0
0
11'092
0
0
11'092
54'695
0
59'012
25'371
38'324
58'059
0
235'461
31. 12. 2014
8'656'900
3'261'607
302'768
209'207
235'281
79'290
0 12'745'054
31. 12. 2013
8'881'727
3'570'889
398'447
243'928
213'352
45'724
0 13'354'067
Other liabilities
Total liabilities and provisions
697'665
7'904'540
Bonds and other fixed-interest securities that
are due in the following business year
190'254
199
13 Due from and due to associated companies and related parties
a Due from and due to participations and associated companies
in CHF thousands
Due from participations
Due to participations
31. 12. 2014
31. 12. 2013
+ / – %
54'387
67'614
– 19.6
0
0
Due from associated companies
742'005
1'107'698
– 33.0
Due to associated companies
803'550
1'098'960
– 26.9
31. 12. 2014
31. 12. 2013
+ / – %
6'764
2'078
225.5
– 48.1
b Due from and due to qualified participations and companies associated with the Principality
in CHF thousands
Due from the Principality of Liechtenstein
326'210
628'174
Due from companies associated with the Principality *
Due to the Principality of Liechtenstein
49'094
30'085
63.2
Due to companies associated with the Principality *
12'411
19'772
– 37.2
*Associated companies: Liechtensteinische Kraftwerke, Liechtensteinische Gasversorgung, LTN Liechtenstein TeleNet AG, Liechtensteinische Post AG, Liechtenstein Bus Anstalt and
AHV-IV-FAK-Anstalt.
The stated due from and due to are included in the balance sheet in the
items loans and due to customers.
c Loans to corporate bodies
in CHF thousands
31. 12. 2014
31. 12. 2013
+ / – %
3'135
3'539
– 11.4
3'141
3'264
– 3.8
d Related party transactions
Transactions (e. g. securities transactions, payment transfers, lending
facilities and interest on deposits) were made with related parties
under the same terms and conditions as applicable to third parties.
200
14 Breakdown of assets and liabilities by location
31. 12. 2014
in CHF thousands
FL / CH
31. 12. 2013
Abroad
FL / CH
Abroad
Assets
1'000'097
0
1'726'500
0
Due from banks
2'305'367
3'747'064
2'457'862
3'795'058
Loans (excluding mortgages)
1'031'349
388'318
883'699
424'967
Mortgage loans
4'281'966
0
4'242'408
0
0
706'206
0
493'051
283'692
57'747
272'211
59'196
61
0
41
0
98'408
60'984
113'202
43'915
Participations
Intangible assets
56'779
0
63'881
0
Fixed assets
94'298
0
100'969
0
Own shares
79'079
0
72'044
0
Other assets
187'163
40'924
180'798
34'360
Total assets
20'907
11'806
24'249
9'725
9'439'165
5'013'050
10'137'865
4'860'273
Liabilities
274'195
554'521
801'967
529'584
Due to customers (excluding savings deposits)
Due to banks
5'203'814
2'942'333
5'484'775
2'424'176
Savings deposits
401'962
2'850'886
369'103
3'199'622
303'649
0
288'163
0
Other liabilities
163'856
57'952
181'969
25'390
10'763
2'890
12'300
1'130
Provisions
11'092
3'030
0
0
310'000
0
340'000
Share capital
154'000
0
154'000
0
47'750
0
47'750
0
1'006'001
0
973'036
0
79'079
0
72'044
0
Share premium
Legal reserves
Reserves for own shares
Profit carried forward
Profit for the year
Total liabilities
3'924
0
995
0
76'407
0
86'244
0
10'525'416
3'926'799
11'615'895
3'382'242
15 Geographical breakdown of assets by locations
31. 12. 2014
in CHF thousands
31. 12. 2013
Absolute value
% of total
Absolute value
Liechtenstein / Switzerland
9'439'165
65.3
10'137'865
% of total
67.6
Europe (excluding Liechtenstein / Switzerland)
4'451'069
30.8
4'367'471
29.1
North America
122'887
0.9
118'379
0.8
Asia
111'715
0.8
116'636
0.8
Others
Total assets
327'379
2.3
257'786
1.7
14'452'215
100.0
14'998'137
100.0
201
16 Breakdown of assets and liabilities according to currencies
in CHF thousands
CHF
EUR
USD
Others
Total
Assets
Due from banks
Loans (excluding mortgages)
Mortgage loans
986'223
12'948
325
601
1'000'097
1'312'651
1'974'420
2'294'893
470'467
6'052'431
861'904
248'886
275'621
33'256
1'419'667
4'281'184
782
0
0
4'281'966
583'365
24'647
98'193
0
706'206
306'443
24'049
10'948
0
341'440
Participations
61
0
0
0
61
159'392
0
0
0
159'392
Intangible assets
56'779
0
0
0
56'779
Fixed assets
94'298
0
0
0
94'298
Own shares
79'079
0
0
0
79'079
Other assets
186'092
4'820
1'652
35'523
228'087
Total on-balance-sheet assets
Total assets
26'259
3'118
2'859
477
32'713
8'933'730
2'293'670
2'684'492
540'324
14'452'215
2'495'547
1'675'952
2'564'495
642'828
7'378'822
11'429'277
3'969'622
5'248'987
1'183'152
21'831'037
Liabilities
147'019
302'435
324'604
54'658
828'716
Due to customers (excluding savings deposits)
Due to banks
3'433'216
1'900'521
2'296'684
515'726
8'146'147
Savings deposits
3'219'989
3'217'362
2'627
0
0
274'667
28'982
0
0
303'649
Other liabilities
208'671
7'925
4'541
671
221'808
11'499
724
739
691
13'653
Provisions
11'092
0
0
0
11'092
340'000
0
0
0
340'000
Share capital
154'000
0
0
0
154'000
Share premium
Legal reserves
Reserves for own shares
47'750
0
0
0
47'750
1'006'001
0
0
0
1'006'001
79'079
79'079
0
0
0
3'924
0
0
0
3'924
76'407
0
0
0
76'407
Total on-balance-sheet liabilities
9'010'687
2'243'214
2'626'568
571'746
14'452'215
2'523'682
1'675'177
2'572'836
606'363
7'378'058
11'534'369
3'918'391
5'199'404
1'178'109
21'830'273
– 105'092
51'231
49'583
5'043
764
Profit carried forward
Profit for the year
Total liabilities
Net position per currency
202
17 Other assets and liabilities
in CHF thousands
Precious metal holdings
Tax prepayments
31. 12. 2014
31. 12. 2013
35'313
35'377
+ / – %
– 0.2
193
261
– 26.2
101'717
84'958
19.7
Other receivables *
74'226
84'529
– 12.2
113.3
Clearing accounts
12'436
5'831
Deferred tax claim
4'202
4'202
0.0
Total other assets
228'087
215'158
6.0
96
96
0.0
8
8
0.0
Outstanding medium-term notes
Unredeemed coupons
Charge accounts
8'243
7'322
12.6
161'316
103'276
56.2
Settlement account
19'738
15'531
27.1
Other receivables *
17'834
71'276
– 75.0
Clearing accounts
14'573
8'442
72.6
0
1'408
– 100.0
221'808
207'359
7.0
Other liabilities
Total other liabilities
*Replacement values are shown gross.
203
Notes to off-balance-sheet transactions
Notes to
off-balance-sheet transactions
18 Contingent liabilities
in CHF thousands
31. 12. 2014
31. 12. 2013
+ / – %
26'233
26'580
– 1.3
8'387
7'134
17.6
21'505
20'250
6.2
Other contingent liabilites
5'685
6'251
– 9.1
61'810
60'215
2.6
Credit guarantees and similar instruments
Performance guarantees and similar instruments
Total contingent liabilities
19 Open derivative contracts
Trading instruments
Positive
replacement
value
Negative
replacement
value
1'800
711
“Hedging” instruments
Contract
volume
Positive
replacement
value
Negative
replacement
value
Contract
volume
1'794
48'095
16'035
77'113
1'534'790
0
18'684
0
0
0
75'004
74'241
7'297'329
0
0
0
6'711
6'711
80'567
0
0
0
68
67
926
0
0
0
0
0
0
0
0
0
206
206
136'240
0
0
0
1'183
1'183
29'840
0
0
0
31. 12. 2014
85'682
84'202
7'611'681
16'035
77'113
1'534'790
31. 12. 2013
75'067
72'868
8'843'792
9'891
30'408
1'084'790
in CHF thousands
Interest rate instruments
Swaps
Forward transactions
Forward contracts
Options (OTC)
Precious metals
Forward contracts
Options (OTC)
Equity / indices contracts
Options (OTC)
Commodities
Forward contracts
Total excluding netting agreements
Liechtensteinische Landesbank AG has concluded no netting agreements.
20 Fiduciary transactions
in CHF thousands
31. 12. 2014
31. 12. 2013
+ / – %
Fiduciary deposits with other banks
195'762
413'483
– 52.7
Total fiduciary transactions
195'762
413'483
– 52.7
204
21 Income from trading operations
in CHF thousands
Foreign exchange trading
Foreign note trading
Precious metals trading
Securities trading
Total
2014
2013
+ / – %
26'665
20'618
29.3
1'130
1'103
2.5
933
856
9.0
6'470
737
777.4
35'197
23'315
51.0
22 Personnel expenses
in CHF thousands
2014
2013
Salaries and remuneration
– 67'775
– 61'593
10.0
Social benefits and pension scheme contributions
– 12'920
– 13'514
– 4.4
of which pension scheme contributions
Other personnel expenses
Total
+ / – %
– 9'373
– 7'736
21.2
– 3'074
– 2'655
15.8
– 83'769
– 77'761
7.7
The emoluments of the Board of Directors and the Board of Management are disclosed in the consolidated financial statement.
23 Administrative expenses
in CHF thousands
Occupancy expenses
Expenses for IT, machinery, vehicles and other equipment
2014
2013
– 3'645
– 3'533
+ / – %
3.2
– 13'048
– 12'793
2.0
Other business expenses
– 24'136
– 28'852
– 16.3
Total
– 40'829
– 45'178
– 9.6
+ / – %
24 Other ordinary expenses
in CHF thousands
Losses on receivables
2014
2013
– 13'286
– 20
Operational risk
– 1'620
– 12'600
– 87.1
Sundry other ordinary expenses
– 2'153
– 366
488.0
Total other ordinary expenses
– 17'059
– 12'986
31.4
205
Risk management
Risk management
Overview
Operational and legal risks
LLB AG’s risk policy is governed, in legal and operative terms, by the
Liechtenstein Banking Law, the corresponding Banking Ordinance and
the principles of the Basel Committee for Banking Supervision as well
as by the bank’s own statutes and business regulations. The ultimate
responsibility for basic risk policy and for continually monitoring the
bank’s risk exposure lies with the Board of Directors. In fulfilling this
function, it is supported by the Group Audit & Risk Committee. The
Board of Management has overall responsibility for risk management.
It is supported by separate expert committees. An independent Group
Risk Management monitors compliance with the issued regulations.
Internal regulations and directives concerning organization and
controls are employed to limit exposure to operative and legal risks.
In formulating these instructions, the Board of Management is supported by the Operational Risk Committee. Compliance with these
regulations is regularly checked by the Group Compliance and Group
Operational Risk / ICS Department and by the Group Internal Audit
Department. External legal experts are brought in on a case-by-case
basis to control and manage legal risks.
Liquidity risks
Market risk
On the basis of its business activity, LLB AG is exposed primarily to
interest rate fluctuation, share price and currency risks. The Group Risk
Management Committee is responsible for managing risks associated
with trading activities, and the Asset & Liability Committee for controlling interest rate fluctuation risks. These bodies limit risk exposure
using sensitivity and value-at-risk analyses. Aggregate risks are analysed and worst-case scenarios are simulated on a regular basis.
Credit default risks
Liquidity risks are monitored and managed in accordance with the
provisions of banking law.
Business policy concerning the use of derivative
financial instruments
Within the scope of balance sheet management, interest rate swaps
are concluded to hedge interest rate fluctuation risks. Furthermore,
derivative financial instruments are employed primarily within the
context of transactions for clients. Both standardized and OTC derivatives are traded for the account of clients.
Credit and lending facilities are extended primarily in interbank business, in private and corporate client business mainly on a secured
basis, and in business transactions with public authorities. The Group
Credit Risk Committee is responsible for credit risk management. The
bank pursues a conservative collateral lending policy. Credits and
loans are granted within the scope of strict credit approval procedures.
An internal rating system is employed to determine risk-related terms
and conditions. A limits system based on the creditworthiness of the
individual country is used to control country risks.
Valuation estimates of real estate are stipulated in internal directives. The market value, which serves as the basis for loan-to-value
ratios, is determined as follows:
◆◆ owner-occupied property: actual value
◆◆ investment property: productive and actual value, depending on
the property and the ratio of productive to actual value
◆◆ owner-used commercial or industrial property: the productive and
actual values attainable on the market, depending on the property
and the ratio of productive to actual value
◆◆ building land: internally stipulated price estimates taking into
consideration future use
206
Locations and addresses
Locations and addresses
Headquarter
Group companies
Städtle 44 · P. O.Box 384 · 9490 Vaduz · Liechtenstein
Telephone +423 236 88 11 · Fax +423 236 88 22
Internet www.llb.li · E-mail [email protected]
Liechtensteinische Landesbank (Österreich) AG
Wipplingerstrasse 35 · 1010 Vienna · Austria
Telephone +43 1 533 73 83-0 · Fax +43 1 533 73 83-22
Internet www.llb.at · E-mail [email protected]
Branches
Balzers
Höfle 5 · 9496 Balzers · Liechtenstein
Telephone +423 388 22 11 · Fax +423 388 22 22
Eschen
Essanestrasse 87 · 9492 Eschen · Liechtenstein
Telephone +423 377 55 11 · Fax +423 377 55 22
Bank Linth LLB AG
Zürcherstrasse 3 · P. O. Box 168 · 8730 Uznach · Switzerland
Telephone +41 844 11 44 11 · Fax +41 844 11 44 12
Internet www.banklinth.ch · E-mail [email protected]
LLB Asset Management AG
Städtle 7 · P. O. Box 201 · 9490 Vaduz · Liechtenstein
Telephone +423 236 95 00 · Fax +423 236 95 06
Internet www.llb.li / assetmanagement
E-mail [email protected]
LLB Fund Services AG
Äulestrasse 80 · P. O. Box 1238 · 9490 Vaduz · Liechtenstein
Telephone +423 236 94 00 · Fax +423 236 94 06
Internet www.llb.li / fundservices · E-mail [email protected]
swisspartners Investment Network AG
Am Schanzengraben 23 · 8022 Zurich · Switzerland
Telephone +41 58 200 00 00 · Fax +41 58 200 01 00
Internet www.swisspartners.com · E-mail [email protected]
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Publishing information
Published by: Liechtensteinische Landesbank AG, 9490 Vaduz, Liechtenstein · Design and Layout: Eclat AG, 8703 Erlenbach, Switzerland
Printed by: BVD Druck + Verlag AG, 9494 Schaan, Liechtenstein · Photos: Roland Korner, close up AG, 9495 Triesen, Liechtenstein · Paper: Printed on Munken Polar
Tradition meets Innovation
1925 04.15
Annual Report 2014