stato patrimoniale - Banca Popolare di Vicenza

Transcription

ANNUAL REPORT
Banca Popolare di Vicenza main branch
in Lecce, Piazza Libertini
Banca Popolare di Vicenza
(Translation from the Italian original which remains the definitive version)
Headquarters
(Translation from the Italian original
which remains the definitive version)
Banca Popolare di Vicenza main branch
in Lecce, Pizza Libertini
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Joint-stock company - Member of the Italian bankers
association an Italian interbank deposit protection fund - Parent
of the Banca Popolare di Vicenza Banking Group - Registered
office: I-Vicenza - Via Btg. Framarin, 18 - Tax Code 00204010243
- Vicenza Business Register n. 1858 - Bank listing n. 1515 – Albo
Società Cooperative n. A159632 - Capital stock fully paid Banking Group 5728.1
2015
ANNUAL REPORT
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CONTENTS
CORPORATE OFFICERS ............................................................................................................................................- 5 BPVI GROUP STRUCTURE .......................................................................................................................................- 6 PRINCIPAL DATA AND SUMMARY INDICATORS FOR THE BPVI GROUP ................................................- 7 TERRITORIAL PRESENCE OF THE BPVI GROUP AT 31 DECEMBER 2015 ....................................................- 9 DIRECTOR’S REPORT ON OPERATIONS .......................................................................................................- 12 ECONOMIC, FINANCIAL AND CREDIT SCENARIO .......................................................................................- 12 CHANGES IN THE REGULATORY AND TAX FRAMEWORK ........................................................................- 26 GROWTH OF THE BPVI GROUP: ACTIVITIES WITH STRATEGIC IMPORTANCE ...................................- 33 THE OPERATIONAL STRUCTURE OF THE BPVI GROUP ..............................................................................- 48 COMMERCIAL ACTION: CHARACTERISTICS AND RESULTS .....................................................................- 58 SYSTEMS ....................................................................................................................................................................- 64 SYSTEM OF INTERNAL CONTROLS....................................................................................................................- 68 CORPORATE SOCIAL RESPONSIBILITY AND IMAGE ....................................................................................- 96 CONSOLIDATED RESULTS OF OPERATIONS ................................................................................................ - 105 FINANCIAL ASSETS AND LIABILITIES ............................................................................................................- 117 PRINCIPAL EQUITY INVESTMENTS .................................................................................................................- 120 EQUITY .....................................................................................................................................................................- 122 OWN FUNDS AND RATIOS .................................................................................................................................- 125 COMMENTS ON THE INCOME STATEMENT .................................................................................................- 127 TRANSACTIONS WITH RELATED PARTIES, SIGNIFICANT NON-RECURRING AND ATYPICAL
AND/OR UNUSUAL TRANSACTIONS .............................................................................................................- 151 SIGNIFICANT SUBSEQUENT EVENTS ..............................................................................................................- 153 MAIN RISKS AND UNCERTAINTIES AND OUTLOOK FOR OPERATIONS .............................................- 153 PROPOSAL TO COVER THE LOSS FOR THE YEAR ........................................................................................- 154 GLOSSARY ............................................................................................................................................................... - 155 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ........................................................................- 162 CONSOLIDATED INCOME STATEMENT .........................................................................................................- 164 STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME ............................................................... - 165 STATEMENT OF CHANGES IN CONSOLIDATED EQUITY..........................................................................- 166 STATEMENT OF CONSOLIDATED CASH FLOWS ........................................................................................ - 168 EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...................................- 171 CERTIFICATION OF THE FINANCIAL REPORTING MANAGER ............................................................... - 407 INDEPENDENT AUDITOR’S REPORT ...............................................................................................................- 409 SEPARATE FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION .........................................................................................................- 414 -3-
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INCOME STATEMENT ..........................................................................................................................................- 416 STATEMENT OF COMPREHENSIVE INCOME ................................................................................................ - 417 STATEMENT OF CHANGES IN EQUITY ...........................................................................................................- 418 STATEMENT OF CASH FLOWS ........................................................................................................................ - 420 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS.....................................................................- 423 CERTIFICATION OF THE FINANCIAL REPORTING MANAGER ............................................................... - 661 INDEPENDENT AUDITOR’S REPORT ...............................................................................................................- 663 FINANCIAL STATEMENTS OF SUBSIDIARY COMPANIES .........................................................................- 667 -
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CORPORATE OFFICERS
BOARD OF DIRECTORS
Chairman
Stefano Dolcetta Capuzzo *
Deputy Chairman
Marino Breganze *
Andrea Monorchio *
Managing Director and General Manager
Francesco Iorio *
Director and Secretary
Giorgio Tibaldo *
Director
Paolo Angius
Alessandro Bianchi
Grazia Bonante
Roberto Cappelli
Giorgio Colutta *
Vittorio Domenichelli
Giovanni Fantoni *
Maria Carla Macola
Matteo Marzotto
Alessandro Pansa
Maurizio Stella
Nicola Tognana *
Roberto Zuccato *
BOARD OF STATUTORY AUDITORS
Chairman
Acting Auditors
Alternate Auditors
Giovanni Battista Carlo Zamberlan
Laura Piussi
Paolo Zanconato
Giuseppe Mannella
Marco Poggi
BOARD OF ARBITRATORS
Chairman
Acting Auditors
Alternate Auditors
Sergio Porena **
Gian Paolo Boschetti **
Altegrado Zilio Cambiagio **
Lelio Barbieri **
Sergio Brunetti **
Senior Deputy General Manager
Iacopo De Francisco
Deputy General Manager
Adriano Cauduro ***
* Members of the Executive Committee (in charge up to 9 March 2016)
** In charge up to 9 March 2016
*** Seconded to the subsidiary Banca Nuova S.p.A. as General Manager from 1 January 2016
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BPVI GROUP STRUCTURE
The structure of the Banca Popolare di Vicenza Group at 31 December 2015 is analysed below by
business area.
Banks
Private Equity
Banca Nuova S.p.A.
100%
0.04%
Farbanca S.p.A.
70.77%
NEM SGR S.p.A.
100%
1.00%
1.00%
Consumer loans and others
Proprietary Trading
Prestinuova S.p.A.
100%
BPV Finance
International Plc
100%
0.04%
1.00%
Services
Servizi Bancari
S.c.p.A.
96%
0.04%
0,04%
Immobiliare Stampa
S.c.p.A.
99.92%
BPVi Multicredito –
Agenzia in Attività
Finanziaria S.p.A.
100%
Pop. Vicenza
Assessoria e
Consultoria LTDA
99%
Monforte 19 S.r.l.
99.92% (1)
Berica ABS 4 S.r.l.
0% (2)
Adriano SPV S.r.l.
0% (2)
= Company part of the Economic Group of BPVi
(1) Merged into Immobiliare Stampa on 1 January 2016.
(2) Companies for the securitisation of the transferred credits that are neither investees of the Group Parent nor of any of its
subsidiaries; with the completion of the securitisation, Banca Popolare di Vicenza, in light of the current Supervisory Regulations for
Banks (First Part, Title I, Chapter 2, Section II, Par. 3.1 of Circular no. 285), attained a control situation in the form of dominant
influence which entailed a change of the Banking Group.
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PRINCIPAL DATA AND SUMMARY INDICATORS FOR THE BPVI
GROUP
Statement of Financial Position and Regulatory
figures
Changes
31/12/2015 31/12/2014
(+/-)
(in millions of euro)
Banking business net of exposures with central counterparties
- of which Direct funding
- of which: Indirect funding (excluding BPVi shares)
- of which Loans to customers
Banking business
- of which: Indirect funding (excluded BPVi shares)
Net interbank position
Cash financial assets
- of which Financial assets available for sale
Property, plant and equipment and intangible assets
- of which land and buildings
- of which goodwill
Total Assets
Equity (excluding net income)
Equity (including net income)
Comon Equity Tier 1
Total Capital
Risk-weighted assets
61,544
21,943
14,550
25,051
61,671
21,943
14,550
25,178
-7,823
5,872
5,726
609
498
6
39,783
3,941
2,534
1,656
2,023
24,884
71,025
28,613
14,910
27,502
73,394
30,373
14,910
28,111
-2,503
6,559
5,321
974
524
330
46,475
4,490
3,732
3,025
3,349
28,985
-9,481
-6,670
-360
-2,451
-11,723
-8,430
-360
-2,933
-5,320
-687
405
-365
-26
-324
-6,691
-549
-1,197
-1,370
-1,327
-4,101
%
-13.3%
-23.3%
-2.4%
-8.9%
-16.0%
-27.8%
-2.4%
-10.4%
212.6%
-10.5%
7.6%
-37.5%
-5.0%
-98.1%
-14.4%
-12.2%
-32.1%
-45.3%
-39.6%
-14.1%
Changes
Reclassified Income Statement figures (1)
31/12/2015 31/12/2014
(+/-)
Net interest income
Net fee and commission income
Net Operating income
Net Operating costs
Net profit from operating activities
Net impairment adjustments
Net provisions for risks and charges
Net income for the period before income tax
Net income
503.9
322.4
1,052.6
-754.2
298.5
-1,826.9
-513.1
-1,892.5
-1,407.0
511.1
301.3
1,077.4
-669.1
408.3
-1,521.3
-18.5
-1,134.3
-758.5
-7.2
21.1
-24.8
-85.1
-109.8
-305.6
-494.6
-758.2
-648.5
%
-1.4%
7.0%
-2.3%
12.7%
-26.9%
20.1%
n.s.
66.8%
85.5%
Changes
Other information
31/12/2015 31/12/2014
(+/-)
Number of employees at the end of the period
Average number of employees (2)
Outlets
Bank branches
Number of clients
5,466
5,273
627
579
1,378,962
5,515
5,295
701
654
1,351,042
-49
-22
-74
-75
27,920
%
-0.9%
-0.4%
-10.6%
-11.5%
2.1%
For the reconciliation between the reclassified income statement data and the Income Statement items prescribed by Bank of Italy
Circular no. 262, reference is explicitly made to the “key” provided in the paragraph “Comments on the income statement”.
(2) The average number of employees is calculated in accordance with the indications contained in Bank of Italy Circular no. 262.
(1)
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Key performance indicators
31/12/2015 31/12/2014
Structure ratios (%)
Loans to customers / total assets
Direct funding / total assets
Loans to customers / direct deposits
Loans to customers / direct deposits (net of exposures with
central counterparties)
Changes
63.3%
55.2%
114.7%
114.2%
60.5%
65.4%
92.6%
96.1%
2.8 p.p.
-10.2 p.p.
22.2 p.p.
18.0 p.p.
Asset management and retirement savings / indirect deposits
Total Assets / Equity (leverage)
48.4%
15.7 x
44.3%
12.5 x
4.2 p.p.
3,2 x
Efficiency ratios (%)
Cost/Income (1)
71.6%
62.1%
9.5 p.p.
4.2
2.8
4.8
95.6
199.6
5.7
2.8
5.3
96.5
203.5
-1.6
-0.1
-0.5
-1.0
-3.9
62.55%
21.13%
7.50%
42.41%
59.32%
0.74%
5.29%
62.37%
14.95%
6.03%
37.90%
54.07%
0.73%
3.09%
0.18 p.p.
6.18 p.p.
1.47 p.p.
4.51 p.p.
5.25 p.p.
0.01 p.p.
2.21 p.p.
6.65%
6.65%
8.13%
10.44%
10.44%
11.55%
-3.79 p.p.
-3.79 p.p.
-3.42 p.p.
Productivity ratios (%)
(2)
Direct deposits per employee (in millions of euro)
Indirect deposits per employee (in millions of euro)
Loans to customers per employee (in millions of euro)
Net interest income per employee (in millions of euro)
Net Operating income per employe (in thousands of euro)
Risk ratios (%)
Risk-weighted assets / total Assets
Net non performing loans /net loans
Net bad loans/net loans
Bad loans coverage (%) (3)
Non-performing loans coverage (%)
Performing loans coverage (%) (4)
Credit cost (5)
(3)
Capital adequacy ratios (%)
CET 1 ratio
Tier 1 ratio
Total Capital Ratio
The indicator is calculated as the ratio between “operating costs” and “operating income “of the reclassified income statement.
Productivity indicators are calculated with reference to the average number of employees.
(3) The coverage is determined including the so-called “liquidations” that pertain to partial write-offs on loans for which bankruptcy
proceedings still in progress at the reporting date.
(4) The coverage is determined excluding repurchase agreements and guarantee margins.
(1)
(2)
(5) The
indicator is calculated as the ratio between “net impairment adjustments on: loans and advances” and net loans and advances to
customers.
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TERRITORIAL PRESENCE OF THE BPVI GROUP AT 31 DECEMBER 2015
Presence in Italy
Distribution of branches BPVi’s Group
at December 2015
2
75
3
5
57
221
BPVi
17
75
Banca Nuova
2
25
Farbanca
1
1
1
2
14
78
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The sales network of the
BPVi's Group
31/12/2015
Branches
Finance
Shops
Private
Customer Points
TOTAL
% Comp.
Banca Nuova
Farbanca
BPVi Multicredito
485
93
1
-
1
9
3
30
5
-
516
107
1
3
82.3%
17.1%
0.2%
0.5%
Total
579
13
35
627
100.0%
31/12/2015
Geographical distribution of branches
Number
% Comp.
Northern Italy
Central Italy
Southern Italy
380
103
96
65.6%
17.8%
16.6%
Total
579
100.0%
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Presence abroad
BPVi Representative Office
BPVi’s Subsidiary
Ireland
BPVi Finance
Russia
Moscow
(Opened in
october 2013)
U.S.A
New York
(Opened in february
2012)
India
- New Delhi
(2006)
Brasil
San Paulo
(Operating from
january 2011)
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China
- Hong Kong (80’s)
- Shanghai (2005)
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DIRECTOR’S REPORT ON OPERATIONS
ECONOMIC, FINANCIAL AND CREDIT SCENARIO
OVERVIEW OF THE INTERNATIONAL MACROECONOMIC SCENARIO
In 2015, worldwide economic activity continued to expand, albeit only moderately and with
different intensity among the main areas. In general, the performance of advanced economies
seemed better grounded, while a substantial, persistent weakness was confirmed among
Emerging Countries.
The GDP of the United States, after gaining strength in the central quarters of the year, slowed
down in the 4th quarter, albeit still recording overall growth of 2.4% per year in 2015 (same
change as in 2014), thanks to the resilience of consumption and the improvement in employment,
which led to the FED decision to apply he long-expected rise in the monetary policy rates, after
approximately seven years of stability. In the United Kingdom, too, the economy continued to
perform well, with GDP changing by +2.2% in 2015 (albeit slightly slower than the previous
year’s +2.9%), driven by the positive contribution of household spending. The economic
performance of Japan was more modest: after avoiding a technical recession, it ended 2015 with
an annual growth of 0.4% (after remaining stationary in 2014), bolstered by the favourable
performance of the exports, which benefited from the yen’s depreciation, although they were
affected by the fragility of household consumption.
The main emerging economies remain weak overall, hampered by structural obstacles and
macroeconomic imbalances, with highly differentiated trends between various Countries: the
intensifying recession in Brazil contrasted with the positive evolution of the economic situation
in India and the attenuation of the fall in Russia’s GDP. In China, although the GDP growth rate
remained brisk (6.9% per year in 2015), it has been gradually declining for over one year, mainly
because of the weakness of domestic demand and exports. The Chinese Central Bank recently
intervened with measures in support of the country’s economy with large liquidity injections
and a significant devaluation of the Yuan. These initiatives, however, caused severe instability
on international financial markets, whose effects are still being felt.
The economic activity in the Euro Area maintained a positive intonation during the year,
thanks, in particular, to the recovery in household consumption, whilst the exports’ thrust
weakened. Among the major economies in the Area, Spain is exhibiting the briskest growth
(after experiencing a deeper recession in recent years), whilst the performance of France and
Germany was less impressive. In Italy, too, the GDP finally returned to growth, thus determining
Italy’s exit from its recession, thanks mostly to the positive effects deriving from external factors,
such as Quantitative Easing, the drop in the price of oil, the devaluation of the Euro, but also
from internal factors, including the resumption of investments, positively influenced by the start
of the Expo, and the more expansionary fiscal policy. Even in the presence of a consolidation of
the recovery both for the Euro Area and for Italy in upcoming months, some elements of
uncertainty still remain, tied, in particular, to the performance of international trade, to the slowdown of emerging economies, to the persistence of geopolitical tensions in the Middle East and
North Africa, and to general instability on financial markets.
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MACROECONOMIC PERFORMANCE OF THE EURO AREA
In 2015, the economy of the Euro Area consolidated its moderate growth: according to the
latest estimates, the Eurozone GDP grew by +1.5% y-o-y (after +0.9% the previous year),
buoyed by the rise in household spending, which offset the weakness of investments and the
trailing off of the exports’ thrust caused by the deterioration in the international environment.
Among the major countries of the Euro Area, Italy got out of its recession (the estimated change
in 2015 was +0.6%) and Spain’s economy accelerated (+3.2% y-o-y), whilst GDP growth was
more modest in Germany (+1.5% y-o-y) and in France (+1.1% y-o-y).
The most recent economic indicators seem to confirm that the Eurozone’s economic growth is
continuing, at a pace that is similar to the previous year’s and with nearly homogeneous
performance across the main Countries, thanks mainly to the support from domestic demand.
However, the outlook for economic recovery in the Euro Area is burdened by downside risk tied
to the slowing Emerging Countries and the intensifying political tensions in the Middle East,
which could bear down on international growth, on the foreign demand for Eurozone exports,
and on confidence in general.
On the production front, there are signs of recovery in industrial production, which in 2015
grew by 1.4% year-on-year. The expansion of production activities is confirmed by the general
improvement of the results of the most recent qualitative surveys carried out with businesses.
Domestic demand continued to improve gradually, buoyed by a series of factors, including the
yet more accommodating monetary policy bias, the collapse in oil prices and the
improvements in the financial conditions of households and businesses. During the year,
household spending exhibited growth (the 3rd quarter grew by +0.4% over the 3rd quarter) and,
while consumer confidence attenuated slightly in early 2016, it gradually improved, thanks to
more favourable assessments of future employment levels. The labour market confirmed the
positive signals observed in the most recent months, albeit in the presence of marked differences
between the various countries of the Euro Area, with the unemployment rate down to 10.4% in
December 2015, from 11.4% at the end of 2014, the lowest levels since September 2011.
While the performance of foreign trade was affected by the slowdown in demand in Emerging
Countries and, in particular, by the decline in trade flows with Russia, it remained on track for
lively growth, buoyed also by the devaluation of the Euro against the main international
currencies: in 2015, exports of goods grew by 5.3% year on year.
After reaching its lowest point in January 2015, inflation gradually climbed back and reached
+0.2% per year in December (-0.2% per year at the end of 2014). The decline in energy prices
continues to contribute to the weakness of inflation, albeit to a progressively smaller extent. Net
of the more volatile components, such as energy and food products, core inflation remained
more stable, recording, throughout the first part of the year, values just below 1.0% (+0.9% in
December 2015).
INTERNATIONAL MONETARY POLICY
In 2015, the monetary policy bias in major advanced Countries remained accommodating,
with the goal of sustaining the economic recovery in the various Countries.
When the Federal Open Market Committee (FOMC) met in December, the FED decided to raise
the target range of the federal funds rate by 25 basis points (to 0.25-0.50%), thus starting the
normalisation phase of its monetary policy. This rise, the first one since 2006, marks the end of
the zero rate monetary policy that had been adopted in December 2008. The reason for the rate
hike was the economic improvement and the consequent increase in employment levels.
Nevertheless, the FOMC stressed that the monetary conditions remain accommodating and
will continue to promote the strengthening of the labour market and inflation’s return
towards the medium term target. Lastly, the FED anticipates a gradual rise of official rates,
which will nonetheless be conditioned by global economic and financial developments.
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Among the other major advanced economies, the expansionary bias of the Bank of England
and of the Bank of Japan remained unchanged. In particular, to promote the growth of the
Japanese economy, in January 2016 the Bank of Japan decided to implement an additional
expansionary measure, applying (starting on 16 February) a negative rate of 0.1% on the excess
of the deposits held by financial institutions with the Bank of Japan.
Among emerging economies, monetary policy became more expansionary in China, where the
Central Bank reduced, yet again, both the mandatory reserve coefficient, and the reference rates
on bank deposits and loans and injected liquidity with short-term repurchase transactions, in
part to offset interventions in support of the exchange rate.
In the Euro Area, since the weakening foreign demand and the descent of oil prices are currently
slowing the return of inflation to levels in line with the price stability target, the Governing
Council of the ECB, in its monetary policy meeting of 3 December, decided to enhance the
monetary stimulus, introducing a new package of measures. In detail, with regard to interest
rates, the ECB reduced the rate on deposits with the Central Bank by 10 basis points, to -0.30%,
while interest rates on the main refinancing operations and on marginal refinancing operations
remained unchanged, respectively at 0.05% and at 0.30%. With regard to unconventional
monetary policy measures, the ECB extended the duration of the purchase programme by six
months (at least until March 2017, or even beyond if necessary), expanded the range of
admissible securities, including the bonds issued by regional and local public Administrations
of the Area and decided that the principal repaid at the maturity of the securities purchased
within the programme will be reinvested as long as it is necessary. Moreover, the main
refinancing operations and the longer term refinancing operations with 3 month maturity will
be carried out by auctions at fixed rate and with full award of the amounts requested at least
until the end of the last maintenance period of 2017. Lastly, the Governing Council of the ECB
announced that it will make greater use of the available instruments to the extent to which it will
be necessary to ensure that inflation returns to levels consistent with price stability. Currently,
the securities purchase Programme (Quantitative Easing), started by the ECB in March 2015, is
proceeding regularly and it continues to have a favourable impact on the cost and availability of
credit to households and businesses. At 5 February 2016 (last available measurement), a total
amount of Euro 557 billion of government securities had been purchased, as well as Euro 153
billion of covered bonds and Euro 18 billion of asset-backed securities. In this regard, in March,
June, September and December 2015 four more auctions of the TLTRO were held (thus bringing
their grand total to 6), whereby the funds assigned to Eurosystem intermediaries rose to a total of
Euro 418 billion (the total amount obtained from the start of the programme for Italian banks
alone amounts to Euro 118 billion).
INTERNATIONAL FINANCIAL MARKETS
For the financial markets, 2015 ended with generalised volatility, after a first half of the year
still marked by more favourable conditions. A positive direction to the markets in the early
months of 2015 was given mainly by the expansionary monetary policy bias implemented by the
ECB through the introduction of Quantitative Easing, whose favourable effects were partially
interrupted, starting from the summer, by fears over the Greek crisis and by the slowing Chinese
economy with the triple devaluation of the yen. After a gradual recovery of the prices of financial
assets in the autumn months thanks to the attenuation of the previously emerged tensions, from
early December onwards the international markets entered a new phase of uncertainty, triggered
by a broader decline in oil prices and by the intensification of the slowdown indicators in China
and in other emerging Countries.
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Stock performance, in particular, exhibit a differentiated profile among the major advanced
economies. In 2015, stock market indexes performed poorly in the United States (the Dow Jones
changed by -2.2% in the year), particularly affected by the decline in oil prices, while they grew
in Japan (the Nikkey grew by +9.1%), where they benefited from the continuation of the
expansionary monetary policy launched by the Central Bank of Japan, together with the
structural interventions by the government to give momentum to the Japanese economy. In the
Euro Area, overall stock market performance was positive in 2015 (the DJ Euro Stoxx 50 changed
by +3.8%), albeit with several differences between member states. In detail, the Italian Stock
Exchange had the best results among the main European markets, benefiting in particular from
the excellent performance of the securities of the financial sector, whose impact is stronger in the
Italian exchange than in the other European countries: in 2015, the Ftse Mib index gained 12.7%
(after +0.2% in 2014), thanks in particular to the good performance of the banking sector,
which grew by 14.8% during the year. However, in 2016 new risk elements came to light for the
sector; they are tied to the restructuring problems of some banks and to the enforcement of the
new “bail in” rules, which, together with the intensifying international financial tensions, have
triggered a wave of heavy selling of banking securities. The performance of the other major
markets in the Old Continent were more modest in 2015: +9.6% the Frankfurt Dax, +8.5% the
Paris Cac 40, while the Madrid Ibex and the London Ftse 100 ended the year with an overall
decline (respectively -7.2% and -4.9%).
Stock market volatility was accompanied by a substantial improvement in the sovereign
spreads of the Euro Area, which benefited from the expansionary conditions of the monetary
policy and by the strengthened government bond purchase programme on the part of the ECB.
Overall, the spread between 10-year BTP and the corresponding German Bund decreased to
approximately 97 points at the end of 2015, approximately 40 points lower than the value at the
beginning of the year, subsequently rising back to the threshold of 150 basis points in the early
months of 2016 as a result of international financial turmoil. On currency markets, the Euro
continued its decline, which started in mid-2014: the depreciation of the single European
currency, which at year end reached 1.09 relative to the US Dollar (-10% over the year), was
mainly due to the start of the rise in interest rates in the United States, contrasted by the still
highly expansionary bias of European monetary policy.
As regards the commodities market, in 2015 the bearish trend in prices of leading commodities
continued, in particular for oil. Oil prices underwent a clear, progressive reduction, amounting
to -36% year on year (Brent), reaching USD 36.5 per barrel, its mid-2004 level, because of excess
supply relative to the global demand for energy and of competition issues in the Middle East.
With reference to precious metals, after the previous year’s stability gold declined by 10.4% in
2015, reaching USD 1,062 per ounce in December.
THE ITALIAN ECONOMY
The Italian economy exhibited a muted recovery in 2015, thus marking its exit from the
recession that started in 2012: according to the most recent estimates, Italian GDP grew by 0.6%
per year, after 3 consecutive negative years (-0.4% in 2014, -1.7% in 2013, -2.5% in 2012). The
Italian economic expansion was mainly sustained by household spending, which more than
offset the decline in fixed investments and the weakening exports, held back, as in the rest of the
Euro Area, by the decline in demand in the main emerging economies. According to the most
recent economic indicators, the Italian economy’s growth should gather strength in the
upcoming months, thanks to the favourable performance of household consumption,
bolstered by the increase in purchasing power as a result of the fall in energy prices and by the
improved employment trends, and to the tangible recovery in fixed investments, tied to the
recovery of production and to the more favourable conditions on the credit market as a result of
the ECB’s expansionary monetary policy.
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B
On the production front, the faint signs of recovery in industrial production, whose average
year on year growth in 2015 was 1.0%. The qualitative indicators in the manufacturing sector
continue to point to a favourable evolution of the productive activity of entities: in January
2016, the manufacturing PMI (Purchasing Managers’ Index, a survey carried out among the
purchasing managers of entities in the manufacturing sector), in spite of a slight slowdown after
the December peak, was positioned, for the 12th month in a row, above the threshold indicating
an expansion in production. The business confidence in the manufacturing sector also remained
at high levels, bolstered by more favourable expectations on general economic trends.
Internal demand continued its gradual improvement: household spending grew again in the
3rd quarter of the year (+0.4% quarter on quarter), continuing to provide a significant boost to
Italian GDP growth, and consumer confidence reached its historic high in January, thanks to
more favourable assessments of general economic performance and of employment trends,
consistent with the recovery of the labour market. The Italian unemployment rate gradually
declined during the year, reaching 11.4% in December, remaining below the 12% threshold for
the 6th consecutive month and staying at its lowest values since the end of 2012. The outlook for
youth employment also improved. This category has felt the greatest impact of the prolonged
decline in economic activity: youth unemployment (between 15 and 24 years of age) declined to
37.9%, although it still remained above the European average (22.0%).
On foreign trade front, the weak demand in emerging economies started to show its effects on
the performance of Italian exports, which in the second part of the year slightly slowed their
growth rate, although their average change in 2015 was the greatest in the last three years
(+3.7% per year). The expansion in exports is equally distributed among Non-EU countries
(+3.6% per year), where, however, sales gradually tapered off during the year as a result of the
decline in demand from emerging markets and from commodity producer countries (in
particular, China, Turkey, Russia, North Africa, Brazil), and EU countries whose performance
remained moderately positive (+3.8% per year). Imports, in turn, confirmed their moderate rise
(the average change in 2015 was +3.3%).
After reaching an historical minimum at the start of 2015, inflation remained modest during the
year, reaching +0.1% year-on-year in December (zero change at the end of 2014) and it
continued to be affected by the decline in energy prices. The core inflation rate, net of the most
volatile components, such as energy and food products, remained at very moderate levels (+0.6%
per year in December).
Lastly, public finance data are still providing negative signals. According to the most recent
available information, the Italian public debt, after reaching a new record high in May,
amounted to Euro 2,169.9 billion, up by +1.6% (Euro +34 billion) compared to the end of 2014.
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B
CREDIT AND SAVINGS DYNAMICS
In 2015, the Italian banks’ lending activity recorded the first signs of recovery, after the
negative performance of recent years, although it still remained at rather modest levels. The
improvement of the Italian banking System’s lending activity is mostly evident in the positive
trend of new loans to households and businesses, consistently with the gradual recovery of the
domestic economy, as is also confirmed by the results of the latest business surveys, which point
to an increase in credit demand, especially on the part of households, and a loosening of
lending criteria by the banks.
The ample availability of funds, guaranteed to the Credit System by the European Central Bank,
along with the still modest growth in lending, contributed to keep Italian banks’ funding
activity at low levels, with the evident contraction of longer-term, costlier funding
components, such as bonds. On the other hand, the more liquid technical forms of funding,
like current accounts, confirmed their growth, which was promoted by investors’ prudent
decisions in a market environment characterised by high uncertainty and low returns. The
performance of asset management continued to be positive in 2015, with both net investment
and total assets under management growing relative to the previous year.
On the bank rates front, the expansionary monetary policy of the European Central Bank and
consequently the banks’ lower funding needs promoted the decrease of the cost of funding,
whilst the decline of the reference interest rates and the resumption of competitive dynamics
among credit institutions translated into an improvement of the conditions applied to loans to
households and businesses.
Trend of operating volumes
(% chg. yoy)
2015
2014
2%
1%
0%
-1%
Loans
-2%
Deposits
-3%
-4%
-5%
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
Apr-15
May-15
Mar-15
Feb-15
Jan-15
Dec-14
Oct-14
Nov-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
-6%
Bank lending and credit risk indicators
Lending activity in Italy in 2015, though remaining at still modest levels, showed the first signs
of improvement, consistently with the gradual recovery of the domestic economy. The
performance of loans, as indicated by the more recent business surveys, was boosted in
particular by the growth in the credit demand of households, which was recently accompanied
by growth in loan applications by businesses, albeit to a lesser extent.
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B
In December 2015, the stock of gross loans to the private sector1 exhibited a slight reduction by
0.4% per year (the yearly change in December 2014 was -1.2%), affected both by the reduction in
banks’ operations with the other financial institutions (-6.6% per year as at December 2015),
and by the decline in loans to businesses, which amounted to -1.8% per year, although the
intensity in stock reduction slowed down compared to recent years. On the household side,
instead, in December 2015, loans grew by 3.9% per year, which benefited from certain statistical
discontinuities tied to the reorganisation of primary bank groups, which took place during the
year2.
However, more evident signs of a recovery of lending activity are seen in new loans, especially
to households, whose total amount disbursed in 2015 grew by 52.0% compared to the previous
year. Particularly significant is the increase in new loans for the purchase of homes, which
nearly doubled relative to 2014 (+95.4%), which reflects both households’ higher demand for
credit, also tied to the improved outlook on the real estate market, and the banks’ greater
willingness to grant loans compared to the past. In 2015, new loans to businesses also increased,
after the negative trend exhibited until the end of 2014, with 14.0% growth compared to the
previous year.
In spite of the first positive signs, lending in Italy is still affected by the evident deterioration of
the quality of bank lending in Italy, reflecting the long recessionary phase experienced by the
domestic economy in recent years, attested, in particular, by the rise in gross non-performing
loans, which grew to nearly Euro 201 billion in December 2015, with annual growth of 9.4%
(the change at the end of 2014 had been +17.8% per year). The ratio of gross non-performing
loans to total lending also worsened, reaching 10.50% in December 2015 from 9.57% in
December 2014 (+0.93 percentage points in one year). Significant increases were also recorded on
the other categories of hardship loans, whose incidence over total lending, according to the
most recent available data, rose from 7.00% in June 2014 to 7.33% in June 2015.
Funding
In 2015, Italian banks’ funding activity remained at rather modest levels, consistently with the
persistently weak lending activity of the banking system, and the ample supply of liquidity
assured by the European Central Bank with non conventional monetary policy interventions,
such as the TLTRO, the purchases of Abs and covered bonds, and the programme of purchases
of Government bonds issued by Euro area countries (Quantitative Easing); all these measures are
aimed at promoting economic growth in Euro area countries through the support of the banking
channel.
In December 2015, Italian Banks’ direct funding3 from residents rose slightly, by 0.3% per year
(at the end of 2014, annual change had been -1.9%), continuing to be affected mostly by the
severe decline in the bond component, with an annual drop by 13.0%, as the main consequence
of the availability of medium and long term funding supplied by the ECB to banks, as well as of
the decline in investors’ demand following the inclusion of this form of funding in the bail-in
from 1 January 2016 onwards.
1
The private sector includes loans to: Insurance companies and pension funds, Other financial institutions, Businesses
and Households.
2
The stock of household loans recorded a statistical discontinuity in June and October 2015, by effect of the
reorganisation of primary bank groups (approximately Euro 17.6 billion were included in the consumer credit
category). Without these discontinuity, the change in household loans was lower, i.e. +0.9% per year in December
2015.
3
The aggregate does not include bank bonds held in the portfolio of the banks, which also comprise bank securities
issued and concurrently bought back by the issuers.
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B
On the other hand, banks’ transactions with central counterparties grew sharply (+23.3% per
year in December 2015), without which direct funding in fact contracted by 1.2% year on year.
In detail, funding activity confirmed the positive change in repurchase agreements (+22.1% per
year), especially with the central counterparties, and of the more liquid forms of funding such
as current accounts, which increased by 8.4% per year. The growth exhibited by current account
continues to be tied to the current uncertain economic-financial environment, which holds back
households’ investments, and to the low remuneration offered by the other forms of funding,
such as deposits with pre-set duration, which confirmed their contraction (-10.5% per year). In
2015, the latter funding instruments continued to be affected by banks’ policies, less attractive
for customers and more oriented towards asset management and insurance products.
Signs of recovery are coming from deposits from foreign countries which, after the negative
performance that characterised all of 2014, grew by 4.9% in December 2015 compared to the
levels of December 2014 (the change at the end of 2014 had been -3.8% year on year).
Lastly, the results of indirect funding were confirmed to be positive, continuing the good
performance of 2014 thanks in part to the contribution of the banking channel which, as
mentioned above, continued to place the credit institutions’ asset management products with a
view to increase the contribution of revenues from services. According to the data published by
Assogestioni (the Italian association of the major asset management firms in the industry, which
monitors asset management market performance) in 2015, approximately Euro 141.7 billion
flowed into funds and asset management products, up by 6.2% compared to 2014 (Euro +8.3
billion). In December 2015, moreover, total assets under management reached Euro 1,834.6
billion, up by 15.5% compared to December 2014 (Euro +246.2 billion), thanks both to new
transfers from investors and to the good performance of financial markets in the first part of
2015.
Bank interest rates
In 2015, the rates applied on the stock of existing loans with households and businesses
continued to be reduced, consistently with the decline in the level of the reference rates and the
resumption of competitive dynamics among credit institutions, especially with reference to the
highest quality customers, which translated into a loosening of lending policies. In detail, in
December 2015 the average rate on loans to households reached 3.63% (3.79% in December
2014), down by 16 basis points, whilst the rate applied to loans to non financial companies
declined more markedly to 2.94% (3.49% at the end of 2014), down by 55 basis points year on
year.
The containment of the interest rates applied to customers is yet more readily apparent,
considering the conditions for new loans to households and businesses, whose average rate in
December 2015 declined by 60 basis points to 3.35% for households and by 83 basis points to
1.74% for businesses. Particularly significant was the drop in the rate applied to new loans for
the purchase of homes, i.e. 2.49% in December 2015 (-34 basis points in the last 12 months), a
historic low, as a result both of the reduction in the reference rates used to index this type of
loans and of the containment of the spreads applied by banks, in part because of greater
competitive pressure.
On the funding front, the cost of funding continued to decline for Italian Banks, thanks to the
expansionary monetary policy initiatives implemented by the ECB and the consequent lower
liquidity requirement of credit institutions. The average rate on deposits (weighted average rate
of deposits, repurchase agreements and bonds) dropped to 1.19% in December 2015 (1.50% at the
end of 2014), down by 32 basis points in the past 12 months, thus confirming its record low
levels. In particular, the rate on deposits and repurchase agreements declined to 0.52% (-21
basis points in the last year) affected mostly by the sharp drop in the yield of deposits with preset duration (-41 basis points year on year), whilst the rate on bonds in December dropped to
2.94% (-22 basis points in the last 12 months).
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B
Lastly, the banking spread, i.e. the difference between bank interest rates on loans and on
deposits, shrank slightly by effect of the sharp decrease in the average rate on loans, only
partially offset by the slower decline of the cost of funding: in December 2015, the banking
spread declined to 2.06% (2.12% at the end of 2014), down by 6 basis points relative to the same
month of the previous year.
ECONOMIC SITUATION IN AREAS SERVED BY THE GROUP
Veneto
In 2015, several economic indicators point to an improvement in the health of the economy of
Veneto, after the hardships experienced in recent years. In addition to the consolidated growing
trend of exports and the more recent positive performance of production activities, domestic
consumption and the residential sector showed the first signs of recovery, after a long period
of contraction.
In the 4th quarter of 2015, according to the most recent survey published by Unioncamere del
Veneto, industrial production confirmed its expansion with a year on year increase of 2.3%
(+1.5% per year in the 3rd quarter), thus further extending the period of growth (9 consecutive
quarters). The increase in the production levels was boosted, in particular, by the international
markets, with good growth rates for both foreign revenues (+3.2% year on year) and especially
for foreign orders (+4.1% year on year), but the contribution of domestic demand was also
confirmed to be positive (+2.8% year on year for domestic orders).
In fact, the domestic market is providing the first signs of recovery, starting with the
residential sector which, after the evident difficulties of recent years, in the first 6 months of 2015
(latest available data) recorded a significant increase in residential real estate transactions, i.e.
+9.4% relative to the same period of 2014. To this should also be added the trend reversal
exhibited at the start of the year by the revenues of construction companies, which confirmed its
slight increase in the 3rd quarter of 2015 (+0.1% year on year), after the sharply negative trend of
the recent past.
However, one of the most awaited positive notes of 2015 was the return to growth of retail sales,
which in the 3rd quarter of 2015, again according to Unioncamere del Veneto, increased by 3.5%
year on year, thus continuing along the long path to recovery on which it has been since the start
of the year. It should nonetheless be noted that the growth in revenues is due to the determining
contribution of large scale retail distribution (supermarkets, hypermarkets and department
stores), whilst small stores continue to experience some difficulties.
In spite of the encouraged indications listed above, the real driver of Veneto’s economy
continues to be mostly represented by the foreign market. In the first 9 months of 2015,
exports from Veneto exhibited a decidedly positive performance, growing by 5.8% relative to
the same period of the previous year (the average figure for Italy is +4.2% per year), confirming
its standing as the 2nd region in Italy in terms of value of exported goods (behind only
Lombardy). The positive performance of regional exports was also confirmed by the good results
achieved on foreign markets by most of the local manufacturing districts, with as many as 20
districts out of 25 exhibiting an increase in sales abroad. Particularly significant is the
performance of the Prosecco di Conegliano e Valdobbiadene wine, the Food Products of the
Verona province, Eyeglass making of the Belluno province, the Biomedical industry of Padova,
Tanning in Arzignano and artistic Furniture in Bassano del Grappa.
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B
The regional labour market, lastly, in spite of the persistence of some elements of fragility,
continues to exhibit a markedly better picture compared to the national average, as highlighted
by the trends of the main employment indicators. In the 3rd quarter of 2015, according to the
latest data published by Istat, the employment rate climbed to 64.0% (56.7% for Italy), while the
unemployment rate, in spite of a slight rise to 7.0% (+0.3 percentage points year on year), was
confirmed as one of the lowest in the country (10.6% for all of Italy).
Friuli Venezia Giulia
In 2015, the economic performance of Friuli Venezia Giulia showed that several positive
elements were present, as attested by the confirmation of growth in production activities, by the
brilliant results achieved by exports and by the first signs of recovery of the residential real estate
market and of retail trade.
In the 4th quarter of 2015, according to the most recent data published by the local
Confindustria, industrial production confirmed its positive performance, with an impressive
increase of 5.2% year on year (10th consecutive quarter with growth), an evident acceleration
compared to the previous quarter (+1.0% year on year). The revenues of manufacturing entities
grew markedly (+3.1% year on year), mainly on the strength of demand from foreign markets
(+2.4% year on year), and above all of domestic demand (+3.9% year on year). New orders also
continued to race ahead, confirming their fast expansion (+4.8% year on year).
Signs of recovery are coming from the real estate market, with the number of residential real
estate transactions that, in the 1st half of 2015 (most recent available figure), recorded significant
growth of 7.8% relative to the same period of 2014 (the change in 2014 had been +1.6% year on
year), with better performance both compared to the North East (+6.4% year on year) and, above
all, to Italy (+2.9% year on year).
The domestic market, after the difficulties experienced in recent years, seems to be on the right
track to recovery, as attested by the positive performance of retail revenues, which also grew in
the 3rd quarter of 2015 (+2.1% year on year), thus confirming the trend reversal recorded at the
start of the year.
One of the most significant features, however, continues to be the brilliant performance of
Friuli’s exports, which in the first 9 months of 2015, according to the latest data published by
Istat, have grown by 6.0% year on year (the Italian average was +4.2% year on year), benefiting
from the strong increase in the sales of the transport means sector, consisting mostly of the
products of shipyards and boatyards. The positive change in Friuli’s exports is also confirmed by
the good performance exhibited by most of the local manufacturing districts, with 6 out of 9
districts recording growth in sales on foreign markets in the first nine months of 2015,
confirming the ability to compete successfully on the international arena as well. Particularly
positive results, above the regional average, were recorded by the San Daniele district, which
reversed the negative trend of the previous year (-3.5% year on year in 2014), for Trieste’s Coffee,
which confirmed its growing trend of recent years, for Friuli Wines and for Maniago’s Knives.
The regional labour market, lastly, confirmed its overall better condition than the national
average, although some difficulties still persist. In the 3rd quarter of 2015, according to the latest
available data, the employment rate climbed to 63.8% (56.7% for Italy), but the unemployment
rate also rose slightly, to 7.8% (+0.9 percentage points year on year), nonetheless remaining
markedly below the Italian average (10.6%).
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B
Lombardy
In 2015, Lombardy’s economy took further significant steps forward on its path out of the
recession, on which it had already embarked at the end of 2013. This is confirmed, in particular,
by the performance of production, which has now remained positive for over 2 years, by the
recovery in services and retail commerce, by the acceleration of exports, and by the signs of
improvement in the labour market.
In the 4th quarter of 2015, industrial production continued to stay in positive territory for the
11th quarter in a row, growing by 1.9% year on year, substantially in line with the previous
quarter’s +1.7% year on year. Yet more positive was the performance of foreign revenues (+3.2%
year on year) and of foreign orders (+2.1% per year), but domestic orders grew slightly as well
(+0.9% year on year).
The construction industry, instead, is more uncertain: in the 1st half of 2015 (latest available
figures) there was a good increase in the number of transactions in the residential segment
(+5.9% year on year), above the national average figure (+2.9% year on year), but transactions in
the non-residential segment declined (-2.1% year on year), after the positive performance of 2014.
On the services front, in the 4th quarter of 2015 service companies experienced revenue growth
(+1.7% year on year), thus continuing along their slow path back to their previous levels of
turnover. Initial signs of recovery also came from retail commerce, which in early 2015 exhibited
the first positive changes (+2.7% year on year in the 4th quarter of 2015) after the recent years’
declining trend.
The data concerning foreign trade confirm that in 2015 Lombardy continued to be 1st in Italy in
terms of value of exported goods, in front of Veneto, Emilia Romagna and Piedmont. The
overall performance of Lombardy’s exports in the first 9 months of 2015 improved, growing by
2.1% year on year (versus the Italian average of +4.2%), after expanding by +1.4% in 2014. Also
positive was the performance of most of the industrial districts in the region, which represent the
local production excellence, with as many as 19 districts out of the region’s 28 reporting an
increase in sales abroad. Particularly outstanding performance levels were noted, in particular,
for instrument mechanics in Varese, Metalworks in Lecco, Furniture in Brianza, Woodworking in
the Viadanese and Casalasco districts and Aeronautics in Varese.
Lastly, the situation of the regional labour market improved, with the employment rate
climbing to 65.3% in the 3rd quarter of 2015 (whereas in Italy it was 56.7%), and a slight decline
in the unemployment rate, to 6.7% (-0.8 percentage points year on year), still among the lowest
values in Italy (the average national figure was 10.6%).
Tuscany
The latest available economic data, pertaining to 2015, point to a slight improvement in
Tuscany’s regional economic environment, with particular reference to the performance of
exports and to the signs of recovery from the real estate market and the employment levels, but
some fragility persists, as attested by the still weak performance of the manufacturing sector.
In the 3rd quarter of 2015, according to the latest survey published by the local Unioncamere,
regional production grew by 1.9% year on year, thus reversing the negative trend that had
persisted since the end of 2011 (-0.3% year on year in the 2nd quarter of 2015). Positive signs also
came from trends in foreign revenues (+2.3% year on year) and in foreign orders (+1.2% year on
year), which benefited from the lively demand from foreign markets, while domestic demand is
still struggling to get back on track.
Some initial positive indications are coming from the real estate sector, both for the residential
market, with the number of residential transactions growing by 5.2% year on year in the 1st half
of 2015 (latest available data), and for the non residential sector, which in the same period
recorded a 5.8% year on year increase in transactions, reversing the negative trend of the
previous year.
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B
On the foreign trade front, Tuscan exports continued to grow in the first 9 months of 2015,
albeit not at particularly impressive levels, i.e. by 2.1% year on year, thanks to the good vitality
exhibited by several manufacturing sectors such as food and drinks, transport means, wood and
paper, electrical appliances and metals and metal products. On the other hand, sales abroad of
machinery and equipment and jewellery and bijouterie products. The international
competitiveness of Tuscan manufacturing products was also confirmed by the good performance
of the exports of most of the region’s production districts. As many as 11 out of 16 districts
recorded increases in sales abroad, with particularly impressive performance levels for Boatyards
in Viareggio, Chianti Wines, Paper products in Capannori, Marble in Carrara and Leather and
shoes in Arezzo.
Lastly, the situation of the regional labour market improved slightly, with the employment
rate climbing to 66.1% in the 3rd quarter 2015 (whereas in Italy it was 56.7%), while the
unemployment rate declined slightly, to 8.5% (-0.5 percentage points year on year), still
markedly lower than the average in Italy (10.6%).
Sicily
In 2015 the Sicilian economy, in spite of the persistence of certain deep-rooted structural
hardships, is starting to show the first, tentative signs of recovery, evident in particular in the
slight upturn of the economy as a whole, in the recovery of the real estate market and in the good
performance of exports in the food sector, which contributes to make Sicily known throughout
the world.
On the basis of the most recent data published by Unioncamere, in 2015 there was a substantial
stabilisation of the declining trend of the number of active companies in the region
(-0.5% compared to the end of 2014), after the severe deterioration of the business environment
observed in recent years. Specifically, the slightly positive performance of the service sector, in
particular services connected with hospitality and food services and travel agencies, partially
offsets the decrease in active business in the fields of construction, farming and manufacturing.
The stabilisation of the local production businesses is associated with the slow recovery of the
regional economy: Sicily’s GDP, according to the latest available estimates, apparently
experienced slight growth in 2015, i.e. 0.3% year on year, as compared to the slightly more lively
performance estimated for Italy as a whole (+0.7% year on year). The Sicilian economy is
expected to grow with more vim in 2016 (+0.7% year on year) and in 2017 (+0.8% year on year),
albeit less markedly than the national average (the forecast for Italy is respectively +1.1% and
+1.3%).
Signs of recovery are also coming from the real estate sector, which, in the first 6 months of 2015
(latest available data), recorded an increase in the number of transactions both in the residential
segment (+3.0% compared to the same period of 2014) and, above all, in the non residential
segment (+9.9% year on year), which reversed the negative trend of recent years.
On the exports front, the data for the first 9 months of 2015 are negative overall (-9.1% compared
to the same period of 2014), once again because of the sharply negative performance of the
petroleum industry, which generates nearly 60% of Sicilian exports by itself and which is still
affected by the severe drop in oil prices. Without this component, however, regional exports
grew significantly, by +12.5% year on year, thanks mostly to the positive contribution of the
food sector, which includes many local centres of excellent appreciated and recognised
throughout the world, and of the chemical industry. The positive performance of exports,
excluding the petroleum component, is also confirmed by the performance of most local
manufacturing districts, with as many as 6 out of the region’s 8 districts exhibiting growth in
sales abroad. Particularly impressive results were observed for Sicilian Oil, Fruit and Produce in
Catania and Sicilian fish products.
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B
Lastly, conditions on the regional labour market are still challenging, in spite of some signs of
improvement. Lastly, the situation of the regional labour market improved, with the
employment rate climbing to 40.1% in the 3rd quarter 2015 (whereas in Italy it was 56.7%), and
a slight decline in the unemployment rate, to 19.8% (-1.4 percentage points year on year), still
among the lowest values in Italy (the average national figure was 10.6%).
The other main regions where the Group operates
The latest available figures on the economic performance of Lazio point to the presence of
several positive notes, as attested by the slight rise in the number of active enterprises, by the
brilliant growth in exports and by the improvement in the conditions of the labour market.
However, some critical issues are observed especially in the residential real estate market,
although the available data are still partial.
In 2015, according to the data published by Unioncamere, the number of active enterprises in
the region rose, bucking the national trend and increasing by more than 2,800 since the end of
2014. This positive performance is mainly sustained by the growth in the number of active
enterprises in the services sector, especially in the activities connected with tourism, such as
hospitality and catering and rental and travel agencies.
In 2015, the residential real estate sector slowed down: after the good performance of 2014, the
number of real estate transactions declined (-2.1% year on year), whereas the nationwide figure
grew (+2.9% year on year).
But the most striking figure comes from the outstanding results obtained by Lazio’s enterprises
on foreign markets. In the first 9 months of 2015, the region’s exports grew sharply, by +13.0%
year on year, well above the national average (+4.2% year on year). The export performance is
sustained by the excellent performance reported by different manufacturing sectors, such as
petroleum, pharmaceuticals (which generates nearly half of the region’s exports by itself),
metallurgy, textiles and clothing and machinery.
Lastly, the regional labour market is showing signs of recovery, as confirmed by the
improvement of the main employment indicators. In the 3rd quarter of 2015, the employment
rate rose slightly to 59.3% (56.7% was the average figure in Italy), while the unemployment rate
declined to 9.6% (-2.3 percentage points year on year), hence below the Italian average (10.6%).
In 2015, Emilia Romagna continued along the path to economic recovery, thanks mostly to the
boost from foreign markets. Production activities and the construction sector have also shown
some signs of improvement, while some elements of uncertainty persist within services, tied to
the weak performance of domestic demand.
In the 3rd quarter of 2015, too, according to the most recent data published by the local
Unioncamere, industrial production confirmed its positive performance, with a slight increase
of 0.6% year on year, albeit slowing down compared to the previous quarter (+2.3% year on
year). Revenues also grew slightly (+0.7% year on year), thanks in particular to the contribution
from foreign markets (+1.4% year on year), as did order (+0.3% year on year).
During the year, the first signs of improvement came from the construction sector which at the
start of the year reversed the negative trend of recent years. In the 3rd quarter of 2015, the
revenues of construction companies grew by 2.1% year on year, in line with the performance of
the first 2 quarters of the year. In the field of real estate, it is reported, in the 1st half of the year
(latest available data), the growth in residential transactions (+3.1% y-o-y), while non-residential
transactions came to a screeching halt (-17.3% year on year), after the good performance
experienced in 2014.
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B
The service sector in Emilia-Romagna still exhibits some weaknesses, as is highlighted by the
performance of retail commerce which, in the 3rd quarter of 2015, experienced a further slight
decline in sales, i.e. -0.7% year on year, in line with the figure for the previous quarter (-0.6% year
on year), after a start that had raised some hopes (+3.0% year on year in the 1st quarter of 2015).
The result of the region’s exports were confirmed to be positive and they confirmed Emilia
Romagna’s 3rd place among Italian regions (after Lombardy and Veneto) in terms of value of
exported goods. In the first 9 months of 2015, regional exports grew by 3.9% relative to the same
period of 2014, substantially in line with the national average (the annual change for Italy as a
whole was +4.2%). This positive performance reflects the increase in sales abroad reported by
different manufacturing sectors such as transport means, rubber and plastics, food and drinks,
electrical appliances and, to a lesser extent, machinery. Among the region’s districts, particularly
outstanding performance levels were achieved by the Biomedical industry of Mirandola, Woodworking machines in Rimini, Food in Parma, Machines for the food industry in Parma, ICT in
Bologna and Modena and Ceramic tiles in Sassuolo.
Lastly, the situation on the labour market improved, as confirmed by the positive trends of the
main employment indicators. In the 3rd quarter of 2015, the employment rate rose slightly to
67.1% (56.7% for Italy), while the unemployment rate declined slightly to 6.7% (-0.5 percentage
points year on year) and was confirmed as one of the lowest in the country (the average Italian
figure was 10.6%).
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CHANGES IN THE REGULATORY AND TAX FRAMEWORK
The main legal, regulatory and fiscal changes promulgated in 2015 are described below.
The main legal changes
With regard to legal changes, of note is Italian Law Decree no. 3 of 24 January 2015, “Urgent
measures for the banking system and for investments” (published in the Official Gazette of the
Italian Republic no. 19 of 24 January 2015 and in force since 25 January 2015, subsequently
converted with amendments into Law no. 33 of 24 March 2015) which introduced a reform of
regulations for co-operative banks. In particular, the new law introduced the obligation for cooperative banks with assets exceeding Euro 8 billion to be transformed into joint-stock
companies within 18 months from the entry into force of the implementing provisions. The
latter measures were issued by the Bank of Italy with its instruction of 9 June 2015, publishing
the 9th revision of Circular no. 285 of 17 December 2013 (as specified below) and entered into
force on 27 June 2015.
The referenced reform also prescribed that in co-operative banks, the Bank of Italy, in the case
of withdrawal, death or exclusion of the stockholder, even after the transformation into jointstock company, may limit or postpone, in full or in part and without time limits, the right to
the reimbursement of the shares and of the other equity instruments of the outgoing
stockholder, if this is necessary to assure the adequate capitalisation of the bank.
The aforementioned Law Decree no. 3 also introduced changes on the matter of the “portability
of current accounts” (effective since 26 June 2015) in favour of “consumer” customers,
providing, inter alia, a reference to the time prescription of Directive 2014/92/EU (12 business
days) within which banks shall assure the transfer of the payment services relating to a current
account (and any connected accounts), including SDD, recurring transfers, payment cards etc.,
with or without the concurrent closure of the accounts depending on the request the customer
submits to the new destination bank. Failure to comply with the terms and procedures entails
penalties for the banks (Article 144 of the Italian Consolidated Law on Banking and Lending,
paragraphs 1 and 8), as well as payment of an indemnity to the customer, in proportion to the
delay and to the balance of the account, in ways to be prescribed by dedicated decrees, which
will also indicate procedures and terms for the transfer of financial instruments.
On 12 May 2015, Italian Legislative Decree no. 72 was promulgated; it was published in the
Official Gazette no. 134 of 12 June 2015 and entered into force on 27 June 2015. The Decree
implements Directive 2013/36/EU (CRD IV), on access to the activity of credit institutions and
the prudential supervision of credit institutions and investment firms. The decree made
amendments to Italian Legislative Decree no. 385 of 1 September 1993 (Consolidated Law on
Banking and Lending – “TUB”) and to Italian Legislative Decree no. 58 of 24 February 1998
(Italy’s Consolidated Financial Markets Act – “TUF”).
On 27 May 2015, Italian Law no. 69 was promulgated, introducing “Provisions on the matter of
offences against public administration, mafia-type organisations and accounting fraud”; it
was published in the Official Gazette no. 124 of 30 May 2015. This law, whose purpose is to raise
the penalties for corruption, extortion and embezzlement, concurrently provided a series of
amendments to the Italian Civil Code consisting of stricter penalties for the accounting fraud
offence, in the case of listed and unlisted companies.
In the Official Gazette no. 116 of 21 May 2015, Italian Legislative Decree no. 66 of 7 May 2015
was published; it entered into force on 5 June 2015 and it introduced changes to the regulations
covering credit rating agencies.
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Specifically, the Decree contains provisions to amend the TUF, the TUB and Legislative Decree
no. 252 of 5 December 2005 (regulations for complementary pension plans). In particular, the
Decree addresses three aspects:
– supervision of the enforcement of Regulation no. 1060/2009: In Italy, CONSOB is the
Authority responsible for supervision, co-operation and the exchange of information within
the EU, tasked with co-operating and exchanging information useful for supervision, on the
basis of specific memorandums of understanding with the industry authorities with
competence over the different categories of operators (credit institutions, investment firms,
insurance companies, pension agencies, investment management companies) such as the
Bank of Italy, IVASS and COVIP;
– administrative financial penalty: an administrative financial penalty shall be assessed
against banks and financial intermediaries in case of violation of the provisions of the
Regulation and of its implementing instructions;
– pension funds: organisational procedures shall be adopted for the evaluation of the
creditworthiness of the entities or of the financial instruments in which they invest, taking
care to verify that the criteria selected for said evaluation, defined in their own investment
policies, do not rely exclusively or mechanically on the credit ratings issued by rating
agencies. Supervision over compliance with the rule shall be carried out by the COVIP.
On 8 June 2015, part of Regulation (EU) 2015/751 of the European Parliament and of the Council
of 29 April 2015 on interchange fees for card-based payment transactions, published on the
Official Journal of the European Union on 19 May 2015, entered into force. The purpose of the
Regulation is to raise the level of competition and integration of the European payment card
market and, for this reason, starting from 9 December 2015, a limit to the application of
interchange fees is prescribed, amounting to 0.3% of the value of individual transactions for
credit card and to 0.2% for debit cards. The aforementioned Regulation also dictates uniform
technical and commercial requirements in order to strengthen the harmonisation of the industry
and it has a gradual entry into force, which will be concluded no later than 9 June 2016.
On 27 June 2015, Italian Law Decree no. 83 was published on no. 147 of the Official Gazette; it
introduces “Urgent measures on bankruptcy, civil matters and civil proceedings and on the
organisation and operation of the judicial administration”. The Law Decree, which entered
into force the day it was published on the Official Gazette, intervenes on the bankruptcy law
with regard to composition with creditors and bankruptcies, on the code of civil procedure with
respect to enforcement procedures and on the civil code (introducing Article 2929-bis “On the
expropriation of assets subject to unavailability lens or to disposals without consideration”). In
particular, the regulations set out in the aforementioned Law Decree are directed, inter alia, at
strengthening the provisions on issuing funds to entities experiencing hardship, promoting the
contestability of entities in composition with creditors to incentivise virtuous behaviours of
debtors under hardship and promote efficient outcomes to restructuring attempts, strengthening
safeguards protecting the impartiality and independence of the persons appointed to assist the
judge in the management of bankruptcy proceedings and providing the possibility of concluding
new types of debt restructuring agreements.
On 15 May 2014, the European Parliament and Council approved Directive 2014/59/EU, the
“BRRD” (Bank Recovery and Resolution Directive), which introduced, in all European countries,
harmonised rules to prevent and manage crises in banks and investment entities.
The BRRD was transposed in Italy with Legislative Decrees no. 180 and 181 of 16 November
2015, which, respectively, implemented the BRRD and amended the provisions contained in the
“TUB” (Consolidated Law on Banking and Lending) and in the “TUF” (Consolidated Finance
Act) according to the changed regulatory environment.
The new regulations for crisis recovery and resolution introduced a series of instruments for the
effective prevention and management of potential banking crises, while safeguarding essential
bank transactions and minimising taxpayers’ exposure to losses.
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The aforementioned “BRRD” provides that, in case of deterioration of the financial or capital
conditions of individual banks, the Resolution Authorities (in Italy, the Bank of Italy) may adopt
measures supplementing the traditional instruments for the management of bank crises (i.e.
extraordinary administration, compulsory administrative liquidation). In these cases, the
resolution procedure shall be ordered, which provides the possibility of applying a broad range
of instruments to overcome the bank’s crisis, including the “bail-in”, which will enable decisionmaking Authorities to write down/convert into shares certain receivables in order to absorb the
losses of an intermediary in a crisis situation. The application of the bail-in excludes certain
categories of liabilities, specifically those with the greatest relevance for the stability of the
system or those protected by bankruptcy regulations, such as deposits amounting to less than
Euro 100,000, bonds secured by the bank's assets and short-term debt instruments on the
interbank market. This new regulatory framework should ensure that stockholders will be the
first to incur losses and that creditors incur them after stockholders, provided that no person
incurs losses exceeding those (s)he would have incurred if the bank had been liquidated
according to the ordinary procedure (in Italy, administrative compulsory liquidation).
The application of the bail-in in Italian laws has been in force since 1 January 2016.
In this regard, it should be pointed out that the Single Resolution Mechanism (SRM), established
with Regulation (EU) no. 806/2014 and responsible for the centralised management of banking
crises in the Euro Area, has been in force since 1 January 2016.
Directive no. 2015/2366/(EU) on payment services in the internal market (otherwise known as
“PSD2”) was published on 23 December 2015 on the Official Journal of the European Union.
The new EU rules are directed at improving security in the use of payment services, broadening
customers’ choice and stimulating competition in order to promote innovative payment method,
especially with regard to on line payment services.
Member States shall adopt and publish the necessary measures to comply with the Directive no
later than 13 January 2018.
The main regulatory changes
Concerning banking and financial regulatory measures, on 8 January 2015 CONSOB approved
the regulatory amendments necessary to transpose Directive 2011/61/EU (“AIFMD”) of the
European Parliament and of the Council of 8 June 2011 on managers of alternative funds.
Consequently, the CONSOB amended the Intermediaries and Issuers regulations. In
particular, in the Intermediaries Regulations the chosen approach was to identify a single body
of regulations applicable to the entire collective asset management sector. However, certain
specific features of the management of UCITS (Undertakings for Collective Investment in
Transferable Securities) with respect to the management of alternative investment funds (“FIA”)
were safeguarded. Alternative investment funds include all investment funds not covered by the
scope of the European Directive pertaining to UCITS funds, i.e. open or closed-end hedge or
speculative funds; closed-end real estate and equity funds, as well as the open-end funds
harmonised with the UCITS directive.
With regard to the Issuers’ Regulation, the amendments were directed at defining the procedure
that Italian and foreign managers must follow for the purposes of the domestic and cross-border
marketing of FIA, be they reserved for professional investors or for retailed investors and at
specifying disclosure obligations with respect to inventors. In this regard, with reference to
professional investor, Annex 1-bis defines the minimum set of disclosure to be provided before
concluding the investment. Concerning, instead, the information to be provided to retail
investors, in case of subscription of open-ended FIA, the current regulations are confirmed, with
the obligation to prepare the Key Investor Information Document (KIID), whereas in the case of
closed-end FIA the provisions issued to implement the EU directive on prospectuses
(2003/71/EC) apply.
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The amendments to the Issuers’ Regulations, lastly, are directed at implementing the new
discipline of the TUF relating to the obligations of the managers of FIA that acquire significant
and controlling interests in unlisted companies or in listed issuers.
Subsequently, the transposition of the referenced AIFMD Directive was completed with a series
of instructions by the Ministry of the Economy and Finance, by the Bank of Italy and by the
CONSOB. In particular, the Bank of Italy issued the following instructions, which entered into
force on 3 April 2015:

Instruction of 19 January 2015, introducing the new Regulation on collective asset
management which repeals and replaces the Instruction of the Bank of Italy of 8 May 2012;

Joint instruction with the CONSOB of 19 January 2015 amending the Joint Regulation
on intermediaries’ organisation and procedures of 29 October 2007.
On 17 January 2015, the Decree of the Ministry of the Economy and Finance of 15 January 2015
was published in the Official Gazette; it revised the rules for transparency in the placement of
Government bonds. In particular, the aforesaid Decree:

established the reduction of the maximum fees applicable to customers;

identified the procedures for communicating the notices containing the issue dates of
short-term, medium-term and long-term Government bonds and the date by which
interested parties may reserve the bonds offered by the Treasury;
–
set the maximum amount applicable for management and administration expenses and the
procedures for publicising the notices containing the issue dates of Government bonds.
The CONSOB, with its resolution no. 19158 of 29 May 2015, approved, at the end of the public
consultation completed on 13 May 2015, the amendments to the regulations on the penalty
assessing proceeding that introduced a new phase of direct communication between the
recipients of the proceeding and the Commission. In particular, the Commission decided to:

transmit the final report of the administrative penalties office to the involved parties,
including the penalty assessment proposal;

send “automatically” (i.e. with no need for dedicated request) the final report of the
administrative penalties office to the parties that, in the preliminary phase, submitted
written pleadings or participated in the hearing before the administrative penalties office;

extend to 30 days the term prescribed for the submission of written arguments.
The term for the conclusion of the proceeding changed from the current 180 to 200 days.
Subsequently, the CONSOB intervened once again on the rules for the penalty assessing
proceeding, starting a public consultation on 6 November 2015. The proposed amendments to
the Issuers’ Regulations became necessary to implement those made to the TUF by Legislative
Decree no. 72 of 12 May 2015, transposing Directive 2013/36/EU (CRD IV) and pertain mainly:

the provisions pertaining to Consob’s power to issue orders to cease and desist violations
under Article 194-quater of the TUF. The proposal regulatory amendments were formulated
in view of the need to guarantee the involved parties’ right of defence;

the criteria for calculating turnover for banks, authorised parties, insurance companies and
over enterprises, for the purposes of the maximum legal limit for the enforcement of the
administrative penalties against entities and/or companies responsible for the violation;

the determination of the procedures for publishing the sanctions in accordance with Article
195-bis of the TUF. This with particular regard: (a) to timing; (b) to the content of the
document to publish; (c) to the system for margin notation of the legal action initiated
against the decision and its outcome and, lastly, (d) the cases of exclusion and publication
in anonymous form.
The consultation remained opened until 7 December 2015.
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By effect of the transposition in Italy of the European directive BRRD, with particular regard to
the bail-in instrument, Consob, on 24 November 2015, published its Notice no.
0090430 whereby it directed intermediaries’ attention to the new regulatory environment, so that
the enforcement of the current rules on the correctness of intermediaries’ behaviour and the
transparency of information to provide to customers shall take into account the new reference
context of the bail-in.
In particular, intermediaries shall ensure that all customers, both professional and retail (i.e.
the set of small investors) have adequate information and hence full awareness of the risks
connected with their investment decisions. Lastly, intermediaries are obligated to adopt the
most suitable procedural solutions to ensure that information is received by customers and that
the intermediary can demonstrate its actual receipt.
With Resolution no. 19446, published in the Official Gazette no. 281 of 2 December 2015 and
entered into force last 3 December, Consob approved the amendments implementing the TUF
under Articles 119 and 119-bis of the Issuers’ Regulation on ownership structures and
obligations to disclose significant equity investments.
Concerning the regulatory intervention by the Bank of Italy, in 2015, Circular no. 285
“Supervisory instructions for banks”, issued by the Bank of Italy on 17 December 2013, was
subjected to numerous revisions, of which the most relevant ones are pointed out.
With the 8th revision of 10 March 2015, the regulations for securitisations were amended and
provisions for public disclosure about asset encumbrance were introduced.
On 9 June 2015, as reported above, to implement Italian Law no. 33 of 24 March 2015, reforming
regulations for co-operative banks, the 9th revision to Circular no. 285 was published; it
introduced a new Chapter 4 "Co-operative Banks".
Subsequently, on 22 June 2015, the Bank of Italy published the 10th revision of Circular no. 285,
introducing, in Part One, Chapter 7 “Non-EU banks in Italy”. The Chapter replaced, revising
them, the corresponding provisions contained in Circular no. 229 of 21 April 1999, “Supervisory
regulations for banks” (Title VII, Chap. 3).
With revision no. 11 of 21 July 2015 were introduced in Part One, Title IV of Circular no. 285,
Chapters 3 (System of internal controls), 4 (Information system), 5 (Operating continuity) and
6 (Governance and management of the liquidity risk), previously contained in Circular no. 263
of 27 December 2006. The most important changes are contained in the chapter pertaining to the
“System of internal controls” that was amended to regulate internal systems for reporting
violations (“whistleblowing”) and to introduce specific safeguards against the risks connected
with the banks’ portion of encumbered assets (“asset encumbrance”).
With revision no. 14 of 24 November 2015, Chapters 11 (Liquidity) and 12 (Financial leverage
indicator) to take into account the innovations made to the regulatory framework by the
Commission Delegated Regulations no. 61/2015 on Liquidity Coverage Requirement for banks
and no. 62/2015 relating to the Leverage Ratio for banks and investment entities.
On 3 April 2015, the Bank of Italy published its Circular no. 288 introducing the supervisory
regulations for persons operating in the financial sector (financial intermediaries, larger credit
guarantee associations, pawnbrokers and trust companies regulated by Article 199, Paragraph 2,
of the Consolidated Financial Markets Act – TUF) subject to the supervision of the Bank of Italy
as a result of the reform of the Title V of the TUB, operated by Legislative Decree no. 141 of 13
August 2010, as amended. The provisions of Circular no. 288 entered into force on 11 July, i.e. the
60th day after the publication on the site of the Bank of Italy (12 May 2015). Upon the entry into
force of the implementing provisions, current intermediaries 107 and 106 shall submit a request
for authorisation to enrol in the single register of “authorised 106”.
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With its instruction of 15 July 2015, Bank of Italy amended some profiles contained in the
rules contained in the instruction “Transparency of banking and financial transactions and
services. Correctness of the dealings between intermediaries and customers” of 29 July 2009 as
amended, in order to transpose regulatory changes introduced in recent years, to achieve a
simplification of the information documents and to provide clarification on current
regulations.
On 26 August 2015, IVASS and Bank of Italy sent a joint letter to insurance companies and
intermediaries, including banks, requiring them to raise the level of customers’ protection in
the sale of policies associated with mortgages and loans. The letter provided indications for
insurance companies and intermediaries to enable customers to achieve the benefits sought by
subscribing such products. IVASS and Bank of Italy, in their respective fields of competence,
verify compliance with the indications provided. The two Regulatory Authorities ordered that,
no later than 90 days from the receipt of the aforesaid letter, the Administrative Body of the
Company, as well as that of the Insurance intermediary, shall adopt a plan, to be submitted to
the Supervisory body and to be implemented in the following 90 days, containing the initiatives
directed at making the products and the procedures to offer and perform the contracts in line
with the aforesaid indications.
Lastly, with its Instruction of 1 December 2015, Bank of Italy made some changes to the
procedure for assessing the requirements of banks’ representatives regulated by Circular no.
229, replacing the sixth period of Title II, Chapter 2, Section II, par. 2.
The main tax changes
Regarding the changes to tax regulations, it is pointed out that Law Decree no. 83 of 27 June
2015, converted, with amendments, by Law no. 13 of 6 August 2015, contains provisions on the
write-downs of receivables claimed by banks and other financial companies from customers.
In particular, with effect from the tax period current as at 31 December 2015, the write-downs
and losses on loans and advances to customers recognised in the financial statements for this
reason (net of revaluations) are entirely deductible, both for IRES and IRAP purposes, in the year
when they are allocated in the income statement. Only for the first period of application, the
deduction of the write-downs and losses on loans and advances to customers (other than those
realised by disposal against payment) is limited to 75% of their amount, with the residual 25%
deferred to subsequent years. It should be remembered that until 31 December 2012 the writedowns (net of revaluations) were deductible only for IRES purposes by no more than 0.30% of
the amount of the receivables recorded in the financial statements with the deduction of the
excess amount in the 18 subsequent years, whilst in the years 2013 and 2014 the write-downs and
the losses on loans and advances to customers (net of revaluations) were deductible, both for
IRES and IRAP purposes, in constant portions in the year when they were recognised and in the
four subsequent years. In this regard, the transitional rules of Law-Decree no. 83/2015 prescribed
that the 25% portion, non deductible in 2015, as well as the write-downs and losses recognised in
the financial statements until the year current at 31 December 2014 and not yet deducted on the
basis of the previous rules, shall be deductible in upcoming years according to the following
percentages: 5% of the related amount in tax period current at 31 December 2016, 8% of the
related amount in tax period current at 31 December 2017; 10% of the related amount in tax
period current at 31 December 2018; 12% of the related amount in tax period current at 31
December 2019 and until the tax period current at 31 December 2024; 5% of the related amount in
tax period current at 31 December 2025.
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Article 17 of the Italian Law Decree of 27 June 2015 also prescribed that deferred tax assets
(“DTA”) relating to the value of goodwill and of the other intangible assets may no longer be
transformed into tax credits, in accordance with Article 2 of Law Decree no. 225 of 29 December
2010 (converted with amendments by Law no. 10 of 26 February 2011). The tax credit
transformation prohibition applies for all deferred tax assets recognised for the first time starting
from the financial statements for the year current as at 27 June 2015 (effective date of Italian Law
Decree no. 83/2015).
Also referenced are the main changes provided in Italian Law no. 208 of 28 December 2015,
“2016 Stability Law” containing provisions for the preparation of the annual and multi-annual
State budget, in force since 1 January 2016.
On the matter of corporate income tax (IRES) starting from the tax period following the one
current at 31 December 2016 (i.e. starting from the 2017 tax period for entities whose year
matches the calendar year), the IRES rate is reduced from 27.5% to 24%. Also with effect from
2017 onwards, for Bank of Italy and the credit and financial institutions per Legislative Decree
no. 87/92 (credit institutions, SGRs, SIMs, financial intermediaries, e-money institutions,
payment institutions and financial entities), a 3.5% surtax is added to the IRES rate. On the other
hand, entities subject to the aforesaid additional IRES are allowed fully to deduct interest
expense from corporate income both for IRES and for IRAP purposes (previously, only 96% of
interest expense was deductible).
For entities earning business income and for persons exercising arts and professions who make
investments in new tangible capital assets from 15 October 2015 to 31 December 2016, the tax
deductible cost for depreciation or lease payment is increased by 40%. All new capital assets are
subject to tax relief with the exclusion of investments in buildings and constructions, of capital
tangible assets for which the Ministerial Decree of 31 December 1988 sets depreciation rates
below 6.5% and of the assets per the specific Annex 3 to Law no. 208/2015 (ducts, pipelines,
rolling stock and aircraft).
Lastly, Law no. 208/2015 introduced “Country by Country reporting” into the Italian system, as
suggested by the OECD. Within its scope, Italian parent companies of multinational groups
whose revenues are at least equal to Euro 750 million shall be obligated to report to the Italian
Revenue Agency, to enable the Agency to evaluate intercompany transactions that may lead to
possible erosions of the tax base. The obligation should pertain to the tax periods that start on or
after 1 January 2016 and it shall be fulfilled no later than the deadline for filing the income tax
return or, at the latest, no later than 12 months from the end of the reference year. A specific
decree of the Minister of the Economy and Finance, which shall be promulgated no later than 90
days from the date the 2016 Stability Law enters into force, shall establish procedures, terms,
elements and conditions for the transmission of the aforesaid documentation to the Italian
Revenue Agency.
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GROWTH OF THE BPVI GROUP: ACTIVITIES WITH STRATEGIC
IMPORTANCE
The year 2015 was one of profound change in the long history of our Bank and it is the starting
point for the resurgence of the BPVi Group. There were many changes, both external and
internal, on the basis of the decisive turnaround action, started with a new management, and of
the new growth strategy that will enable the Group to compete more adequately and effectively,
in an ever more complex, internationally oriented market environment.
Among the main external change factors we should, first of all, discuss the reform of the
regulations for co-operative banks, introduced with Law Decree no. 3 of 24 January 2015,
“Urgent measures for the banking system and for investments”, which established the obligation
for co-operative banks with assets exceeding Euro 8 billion to be transformed into joint-stock
companies within 18 months from the entry into force of the implementing provisions, which in
fact came into force on 27 June 2015. As is well known, the reform applies to the 11 largest Italian
co-operative banks, including Banca Popolare di Vicenza, whose assets (amounting to Euro 46.5
billion at 31 December 2014) far exceeded the limit of Euro 8 billion set by the regulations.
This change is a part of a broader context of major change in the European banking
environment, whereby, starting from November 2014 and after the Comprehensive Assessment,
the 129 largest European banks, including Banca Popolare di Vicenza came under the
supervision of the ECB.
Among the internal factors that specifically involved our Group, in particular, were the
outcomes of the inspection carried out by the ECB in February-July 2015 and of the
subsequent further analyses carried out at the behest of the Board of Directors. In view of the
initial evidence which led to the emergence of numerous critical elements with reference to the
operations on BPVi shares and on certain significant investments made by the previous
management on Luxembourg-based funds, the Board of Directors initiated a profound
transformation of BPVi’s management organisation, first with the appointment of the new
Managing Director and General Manager and then continued with the appointment of the new
Senior Deputy General Manager and with the inclusion of other highly experienced
professionals who have formed an almost completely renewed top management team. The
renewal also involved the Board of Directors, with the appointment of the new Chairman and
the co-optation of some Directors.
In this context, the Board of Directors of the Parent Bank, since the meeting of 7 July, tasked the
new management, assisted by leading legal, financial, accounting and tax advisors, to start a
thorough capital survey, which brought to light the existence of financing transactions, totalling
Euro 1,087 million, that, in accordance with the criteria identified by the ECB, were considered
“correlated” to the purchase of shares of the Bank. The complex surveying activity, whose
preliminary results had already been reflected in the 2015 Half Year Report, entailed, in these
Financial Statements, the recognition of write-downs and allocations to provisions for risks and
charges, which determined most of the net loss of the year, i.e. Euro -1.4 billion. To this is also
added the deduction of a “prudential filter” from the Regulatory Capital at the end of 2015
which, together with the recorded loss, brought the CET 1 ratio to 6.65%, lower than the
minimum capital requirement set by the ECB, i.e. 10.25%.
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The new top management, at the behest of the Board of Directors, immediately focused on the
definition of a comprehensive programme for the turnaround of the BPVi Group, entailing, in
addition to the transformation of Banca Popolare di Vicenza into a joint stock company, also the
launch of an important capital strengthening programme and the concurrent listing on the
Stock Market. The capital strengthening plan is mainly based on a capital increase up to Euro 1.5
billion, which shall be submitted, together with the transformation into a joint stock company
and listing on the Stock Market, for the approval of the next Stockholders’ Meeting (set for 5
March 2016 in second call) and carried out by the end of April 2016. The aforementioned capital
increase is guaranteed by a preliminary guarantee agreement stipulated with UniCredit S.p.A.
whereby, according to usual terms and conditions in the context of a capital increase, UniCredit
undertook to subscribe, at the offer price of the shares connected with the capital increase, all
new shares that may have been left unsubscribed at the end of the Global Offering, up to a
maximum amount of Euro 1.5 billion. The success of the planned capital increase is aided by the
aforesaid listing and placement of the Bank’s shares on the Stock Market, because it enables the
involvement of a range of investors, including institutional ones, that is markedly higher than
in the past, while assuring that the Bank’s shares are tradable and liquid. With the completion
of the planned capital increase by Euro 1.5 billion, the pro-forma CET1 ratio at 31 December
2015 would be above 12% (Total Capital Ratio above 14%), thus amply higher than the
minimum requirement set by the ECB for the BPVi Group.
The programme to revamp the BPVi Group is founded, on the aforesaid initiatives of an
extraordinary nature, also on a new, comprehensive five-year Business Plan (2015-2020),
approved on 30 September 2015, which forcefully reaffirms BPVi’s role as a local bank in its own
core areas and outlines a simpler, more streamlined Bank, focused on the traditional commercial
bank business, concentrated on the distribution of products and services and on advising
customers. The new mission the Group has defined for itself is to serve enterprises and
entrepreneurs with a dedicated, all-round service model, and to serve households and small
businesses with an offer of high quality banking and financial products, simple and attractive,
through branch structures that will couple streamlined operations with expanded advisory and
service capabilities. The Business Plan will enable the BPVi Group to return to profitability and
capitalisation levels that are consistent with its significant potential, continuing to play a leading
role in the communities where it operates, in the Northeast and in the other regions where it is
active.
The main activities of strategic importance that marked the operations of the BPVi Group during
2015 are described in greater detail below.
INSPECTIONS
The European Central Bank (hereafter, ECB) carried out an inspection at Banca Popolare di
Vicenza pertaining to Risk Management – Market Risk (management of Proprietary Trading and
Governance). The inspection started on 26 February 2015 and ended on 1 July 2015.
The audit of Risk Management - Market Risk involved, inter alia, the inspection of the
procedures for the subscription of the 2013 and 2014 capital increases carried out by the Bank,
and of the settlement of treasury shares as matching entry of the “Provisions for the purchase of
treasury shares”.
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In this regard, the inspection report and the draft “Recommendation on certain remedial actions
following an on-site inspection” submitted to the Board of Directors and to the Board of
Statutory Auditors on 1 December 2015 (after being shown in advance in the course of the exit
meeting in July 2015 at the end of the inspection) and the draft “Decision establishing
requirements pursuant to Article 16(2) of Regulation (EU) No 1024/2013 and Recommendation
on certain remedial actions following an on-site inspection”, transmitted by the ECB to the Bank
on 19 January 2016, brought to light certain observations and critical profiles with respect, inter
alia, to: i) purchasing and subscribing the Bank's treasury shares (“Financing of treasury shares
Governance and internal controls” and “Trading on trading shares – secondary market”); ii)
compliance with the MIFID regulations in the placement of the last capital increases (“Trading
on treasury shares: primary market MIFID compliance”).
In particular, with reference to the above aspects, the inspection brought to light the presence of
cases in which the Bank’s customers used, to subscribe the capital increases of 2013 and 2014,
and to purchase shares of the Bank in the period between 1 January 2014 and 28 February 2015,
amounts resulting from loans issued by the Bank itself which, according to criteria identified by
the ECB, were deemed by the ECB to be “correlated” to the subscription or to the purchase of the
shares. The inspection also revealed that in some cases executives of the Bank signed letters
whereby, spending improperly on behalf of the Bank, they assumed obligations to “guarantee”,
“provide a return” and/or “buy back” the Bank shares that were purchased or subscribed by
said customers.
The ECB’s assessments were carried out with the support of the Bank’s Internal Audit
Department and of the other corporate functions, which provided data and information
necessary for completing the analyses of the ECB’s inspection group.
With regard to the aforesaid critical profiles, the Bank promptly formed a working Group,
supported by leading legal, financial, accounting and tax advisors and the Bank’s management,
appointed to survey the risks and potential impact on income and capital deriving from the
circumstances observed by the ECB inspection group (extending the scope of investigation also
outside the 2013-2014 time interval of the Authority’s inspections) while meeting the requests
formulated by the ECB in the pre-closing meeting and repeated in the aforesaid draft “Decision
establishing requirements pursuant to Article 16(2) of Regulation (EU) No 1024/2013 and
Recommendation on certain remedial actions following an on-site inspection”.
The Directors believe that the results of the extensive, thorough analyses carried out to date and
of the related assessments provide a reasonable basis for the preparation of the consolidated
financial statements at 31 December 2015.
In particular, the total amount of loans disbursed by the Bank and identified as “correlated”
with the purchase or subscription of Bank shares as a result of the analyses carried out,
calculated according to the computing rules adopted by the ECB, is Euro 1,086.9 million. With
reference to that phenomenon, the consolidated 2015 financial statements include a restricted
reserve under Article 2358, Paragraph 6, of the Italian Civil Code for an amount equal to that
capital subject to the loan transactions, after deducting value adjustments for creditworthiness
(Euro 465.9 million) and specific provisions for risks and charges (Euro 316.5 million), which was
recognised for reasons of prudence considering the risks associated with these positions. The
amount of the aforementioned restricted reserve is therefore Euro 304.4 million4. This
phenomenon is also reflected on the Bank's own funds at 31 December 2015, which, in line with
the ECB's instructions, were subject to a "prudential filter" of the same amount as the restricted
reserve.
4
In addition to the aforesaid amount of Euro 304.4 million, there is another non-distributable equity reserve pursuant to
Art. 2358, paragraph 6 of the Italian Civil Code in the amount of Euro 57 million relating to the two “ordinary” capital
increase transactions to expand the stockholder base, which offered new Stockholders the possibility of subscribing
BPVi shares with resources deriving from a loan granted by the Bank, in compliance with the provisions of Art. 2358
of the Italian Civil Code.
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In the financial statements at 31 December 2015, from the Own Funds was deducted, directly or
indirectly, the value of the portion of the letters of commitment/guarantee that refers to shares
not included among those purchased or subscribed by customers using loans that were qualified
as “correlated”, amounting to Euro 52.4 million (in view of which an additional allocation of
Euro 36.1 million was made to the provisions for risks and charges and a deduction of Euro 16.3
million was made from Own Funds by applying a “prudential filter”).
Overall, at 31 December 2015, the “prudential filter” applied to the Group’s Own Funds as a
result of the aforesaid inspections amounted to Euro 320.8 million.
The complex estimates related to the potential risks connected with the critical
profiles/observations that emerged from the ECB’s inspections were based on the best
information available at the date of approval of the consolidated financial statements and in light
of the applicable accounting standards.
In addition, in view of the legal risks relating to the dispute already promoted by customers and
to the complaints received, pertaining to the operations involving Bank shares, as well as those
connected with the critical profile pertaining to compliance with MiFID and/or financial
intermediation rules, which were the subjects of the inspection by the ECB, allocations to the
provisions for risks and charges were recognised, respectively, of Euro 79.4 million and Euro 57
million, in addition to those referred to the financing transactions correlated with the purchase or
subscription of Bank shares and to the aforementioned letters of commitment or guarantee.
Within the inspection, the ECB highlighted certain observations relating to the Bank’s
governance and system of internal controls. In the draft decision, transmitted to the Bank on 19
January 2016, the ECB confirmed that the Bank will be required to: (i) define and implement new
internal policies directed at improving the processes with reference, for example, to the pricing
policy, to financial investments, to the approval of the new products and to hedge accounting;
(ii) provide a more effective assignment of responsibility and sharper definition and separation
of the roles within the internal governance structure; (iii) strengthen the monitoring of
operational risks and set limits to operations in line with best practices; (iv) improve the
processes and the content of reports to the Bank’s top management; (v) strengthen the control
functions.
In view of these requests, the Bank has already started to implement the related actions to be
summarised within a dedicated action plan to be transmitted to the ECB, once the definitive
“decision” is received, with the initiatives already completed, those planned and the related
schedule.
In addition, on 13 April 2015 the ECB initiated an inspection on “Risk governance and risk
appetite framework” in accordance with Articles 10 and 11 of the Single Supervision Mechanism
(SSM) Regulation and with Article 142 of the SSM Framework Regulation, completed on 17 April
2015. In particular, an assessment was made of (i) operation and effectiveness of the Board of
Directors and of the Board of Statutory Auditors, as well as of (ii) the Risk Appetite Framework
(RAF) of the Bank.
The outcomes of this inspection were notified to the Bank on 19 January 2016 and they
referenced the critical profiles already emerged from the inspection carried out between
February and July 2015 with particular reference to the governance structure and to the risk
management system in relation to which they highlighted areas for improvement. The Bank
replied to the ECB on 16 February 2016, pointing out the actions already taken, in particular with
reference to the Risk Appetite Framework (RAF), and those started indicating the date when
they will be completed.
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Lastly, on 22 April 2015 CONSOB started an inspection under Article 10, Paragraph 1, and the
combined provisions of Articles 115, Paragraph 1, Letter c) and 116, Paragraph 1 of Italian
Legislative Decree no. 58 of 24 February 1998 (Consolidated Financial Markets Act, “TUF”) to
ascertain, inter alia, the controls directed at managing the conflict of interest inherent in the
placement of own issue securities, the process for the definition of the proposal to revise the
value of treasury shares resolved annually by the Board of Directors, the assessment of the
adequacy of customers’ investments, and the management of customers’ orders pertaining to the
sale of treasury shares. At the date of preparation of the draft financial statements for the year
ended 31 December 2015, the outcome of this audit has not yet been disclosed to the Bank.
Therefore, it cannot be ruled out that the assessments of CONSOB, as the competent supervisory
authority, in relation to the conduct in question, may impact the Bank's financial statements and
income in the future.
ACTIONS TAKEN BY THE BOARD OF DIRECTORS OF THE BANK
The year ended 31 December 2015 was characterised by the progressive emergence, within the
inspections started by the Supervisory Authority and the further surveys carried out by the
Bank, of observations and critical profiles relating, inter alia, to purchases and subscriptions of
Bank shares and to some investments made by the previous management.
In particular, the Internal Audit Department, called to support the ECB’s inspection team,
brought to the attention of the Board of Directors for the first time at the end of the Month of
April 2015 some initial, partial indications relating to cases in which a potential “correlation”
was observed between loans issued to Bank customers and the purchase and subscription of
Bank shares by them. This first notice was then followed by others, whereby, starting from the
month of May, the Internal Audit Department brought to the attention of the Board of Directors
the first findings that progressively emerged in relation to the critical elements uncovered by the
inspection of the Supervisory Authority.
In the context that was thus outlined, the Board of Directors started the renewal of the
managerial structure of the Bank, appointing, from 1 June 2015, Mr. Francesco Iorio as
Managing Director and General Manager, replacing Mr. Samuele Sorato and terminating, with
effect on 4 June 2015, the employment of the Deputy General Manager in charge of the Markets
Division and the Deputy General Manager in charge of the Finance Division.
In the following weeks, the Board of Directors, at the proposal of the new Managing Director Mr.
Francesco Iorio, decided to hire Mr. Iacopo De Francisco as the new Senior Deputy General
Manager and Head of the Markets Division, and other highly experienced professionals as new
Heads of the Finance Division and of the Loans Division. Moreover, also in light of the
observations and critical elements emerged in the course of the aforesaid inspections, the Board
of Directors entirely renewed the management structure of the control functions (Internal Audit
Department, Risk Management Department and Compliance and Anti-money Laundering
Department).
As stated previously, the Board of Directors of the Bank, in light of the critical elements
emerged in the course of the inspection by the ECB and of the initial evidence that the Internal
Audit Department brought to its attention, promptly tasked, in the meeting of 7 July 2015, the
new Managing Director to carry out an in-depth survey of the Group’s assets in relation to the
observations and to the critical elements noted, extending the scope of investigation also beyond
the scope of the inspection. To carry out this survey activity, a working group consisting of the
Bank’s managers and supported by leading legal, accounting and tax advisors was appointed.
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The outcome of this thorough analysis had already been reflected in the half-year report
approved by the Board of Directors on 28 August 2015 and it was subsequently further refined in
the last quarter of 2015, significantly contributing to the Euro 1.4 billion loss of 2015 and to the
application of a “prudential filter”, amounting to Euro 320.8 million, deducted from the
Regulatory Capital of the end of 2015.
Taking into account the impact of the evidence that emerged in the course of the year on the
regulatory capital of the Bank, the Board of Directors initiated a programme to strengthen the
capital of the Bank that entails, inter alia, a capital increase up to Euro 1.5 billion (and for which
please refer to the paragraph “Capital Targets and Strengthening Action”).
In light of the results of the inspection by the ECB and of the additional study activities carried
out, the Bank also started the appropriate additional investigations in order to ascertain any
individual liability of officers and managers of the Bank and take the initiatives necessary to
protect the interests of the Bank.
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CAPITAL TARGETS AND STRENGTHENING ACTIONS
On 25 February 2015, the ECB announced the decision made with respect to the prudential
requirements for the Banca Popolare di Vicenza Group, prescribing, at the consolidated level, a
minimum Common Equity Tier 1 and Total Capital Ratio of 11%, starting from 31 July 2015.
Subsequently, as the BPVi itself disclosed to the market in advance, on 7 May the ECB reduced
the minimum capital requirement in terms of CET1 ratio from 11% to 10.3%, leaving unchanged
the minimum requirement in terms of Total Capital Ratio at 11%. This reduction was due to the
evaluations made by the ECB with respect to the inclusion in the 2014 financial statements of
impairments on receivables tied to the Asset Quality Review carried out in 2014 by the
Supervisory Authority. Following the 2015 SREP, which takes into account, inter alia, the results
of the inspection carried out in 2015, the ECB, on 25 November 2015, notified the Bank that,
starting from the same date, the minimum capital requirement on a consolidated basis, in
terms of CET1 Ratio, was set to 10.25%.
The CET1 ratio and the Total Capital ratio at 31 December 2015 reflect the outcome of the
thorough analysis that, in light of the observations and of the critical elements emerged within
the inspections of the ECB, the Board of Directors conducted on the assets of the Group as
discussed previously and that was completed in the fourth quarter of 2015, significantly
contributing to the loss of Euro 1.4 billion of the year 2015 and to the application of a
“prudential filter”, amounting to Euro 320.8 million, deducted from the Regulatory Capital at
the end of 2015. The CET1 ratio and the Total Capital Ratio at the end of 2015 are thus
respectively at 6.65% and 8.13%, i.e. above the regulatory minimums, but in evident decline
from the values recorded at the end of 2014 (10.44% for the CET1 ratio and 11.55% for the Total
Capital ratio) and, with respect to the CET 1 ratio, lower than the minimum capital
requirement of 10.25% set by the ECB.
The improvement in capital adequacy ratios is pursued through a capital strengthening plan,
already approved by the Board of Directors on 28 August 2015, that enables it to restore the
values of the above ratios above the minimum targets, including prospective ones, defined by
the ECB. This programme has already entailed the issue of subordinated Tier 2 bonds for a total
amount of Euro 250 million, the sale of some non strategic equity investments (including the
ones held in the ICBPI and in Save, sold in December 2015) and it provides, above all, for a
capital increase up to Euro 1.5 billion, which shall be submitted for approval to the next
Extraordinary Stockholders’ Meeting (set for 5 March 2016 in second call), to be carried out by
April 20165. With the completion of the planned capital increase by Euro 1.5 billion, the proforma CET1 ratio at 31 December 2015 would be above 12% (Total Capital Ratio above 14%),
thus amply higher than the minimum requirement set by the ECB for the BPVi Group.
As was already announced on 16 February 2016 and discussed in greater detail in the “report”
prepared by the Board of Directors in view of the extraordinary Stockholders’ Meeting of 4/5
March 2016, to ensure that the capital strengthening objectives would be achieved in a complex
market environment and that the interests of all stockholders are safeguard, up to 45% of the
capital increase shall be reserved to current stockholders, at least 50% of the capital increase
shall be reserved to institutional investors and 5% to retail. Claw-back mechanisms are
provided, whereby it will be possible to reallocate in favour of a tranche any shares not placed in
the other tranches. The issue price of the shares, to be equal for every category of investors,
shall be determined at the end of the placement through the “book building” method, on the
basis of the market’s demand for new shares.
5
Among the capital strengthening procedures carried out in 2015, of note is the conversion that took place, with
settlement date on 29 May 2015, of the convertible bond “Banca Popolare di Vicenza 5% 2013/2018 convertibile con
facoltà di rimborso in azioni”, (i.e. convertible bond with possibility of repayment in shares), of Euro 253 million,
which had been issued in 2013.
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Lastly, it is specified that current stockholders shall benefit from specific conditions for
participation in the capital increase. In particular:

stockholders who keep the shares for a certain period of time after listing shall be entitled
to subscribe additional shares at a price discounted by up to 50% relative to the listing
price;

in addition, stockholders who participate in the capital increase shall be entitled to
subscribe additional shares at the same conditions set out above.
With respect to the planned capital increase, on 21 September 2015 the Bank executed a
preliminary guarantee agreement stipulated with UniCredit whereby, according to usual terms
and conditions in the context of a capital increase, UniCredit undertook to subscribe, at the offer
price of the shares connected with the capital increase, all new shares that may have been left
unsubscribed at the end of the Global Offering, up to a maximum amount of Euro 1.5 billion.
The Subscription Price shall be defined by mutual agreement between the Company and the
Joint Global Coordinators after the bookbuilding process with Italian and international
institutional investors and indicated in a placement and guarantee agreement.
The Preliminary Guarantee Agreement shall cease to be valid on whichever date comes first
between 30 April 2016 (with the possibility of an extension, mutually agreed by the Bank and
UniCredit, with the approval of the ECB), and the date of stipulation of the placement and
guarantee agreement in which the Subscription Price shall be determined following the
bookbuilding process.
PROJECT FOR THE TRANSFORMATION OF BANCA POPOLARE DI VICENZA INTO
A JOINT STOCK COMPANY AND LISTING ON THE STOCK MARKET
As is well known, the reform of the regulations for co-operative banks, introduced with Law
Decree no. 3/2015, established the obligation for co-operative banks with assets exceeding
Euro 8 billion to be transformed into joint-stock companies within 18 months from the entry
into force of the implementing provisions, which in fact came into force on 27 June 2015. The
aforesaid decree also applies to Banca Popolare di Vicenza, whose assets (amounting to Euro 46.5
billion at 31 December 2014) far exceeded the limit of Euro 8 billion set by the regulations. The
Board of Directors in the meeting of 7 July 2015, tasked the new Managing Director and General
Manager Mr. Francesco Iorio to carry out all the activities necessary for the aforesaid
transformation. In the same meeting, the Board of Directors tasked the Managing Director to
define a work plan aimed at the listing of the Bank's shares on the Electronic Stock Market
organised and managed by Borsa Italiana.
Together, the transformation into a joint stock company, the capital increase and the listing of the
shares on the Stock Market represent a fundamental step to lay the groundwork for the Group’s
newly launched renewal process. In particular, the aforesaid listing and placement of the Bank’s
shares on the Stock Market was deemed the optimal option for the full success of the planned
capital increase, because it enables the involvement of a range of investors, including
institutional ones, that is markedly higher than in the past, while assuring that the Bank’s shares
are tradable and liquid. To assure the conditions for the completion of the listing operation, a
placement syndicate was put together for the aforesaid offer and listing of the Bank’s shares.
Thus, the structure of the syndicate consists of five Joint Global Coordinators: BNP PARIBAS,
Deutsche Bank AG, London Branch, J.P. Morgan, Mediobanca and UniCredit Group
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On 16 February 2016 the Board of Directors of Banca Popolare di Vicenza called the
Stockholders’ Meeting for 4 March 2016, on first call, and for 5 March 2016, on second call, in
order to resolve:

the transformation of the Bank into a joint stock company;

the delegation of powers to the Board of Directors to increase the share capital, with the
exclusion of the right of option in accordance with Article 2441, Paragraph 5, of the Italian
Civil Code, for a total maximum amount of Euro 1.5 billion (including any share premium)
directed at strengthening the Bank’s capital, reserving the stockholders’ pre-emption right
in proportion to the shares held up to 45% of the increase;

the listing of the Bank's shares on the Electronic Stock Market organised and managed by
Borsa Italiana S.p.A.;

the authorisation to buy and sell treasury shares, in the service of the possible stabilisation
activity which may be carried out following the listing.
Stockholders and members who do not vote in favour of the transformation will have the
possibility of exercising the withdrawal right in accordance with Article 2437, Par. 1, letter b) of
the Italian Civil Code in compliance with which the Board of Directors set to Euro 6.30 the
liquidation value of each share, having consulted the Board of Statutory Auditors and the
independent auditors. For more information, please refer to the report illustrating the decisions
made by the Board of Directors and to the additional documentation published on this matter on
the Bank’s website.
For this purpose, it is specified that, in accordance with Italian Law Decree no. 3/2015, converted
by Law no. 33/2015 and with the related implementing provisions issued by Bank of Italy (9th
revision of Circular no. 285/2013), the Board of Directors, taking into account the indications
provided by the Bank of Italy and in light of the Bank’s financial position, having consulted the
opinion of the Board of Statutory Auditors, resolved to limit entirely and without time limits the
reimbursement, with the Bank’s own funds, the shares resulting from any exercise of the
withdrawal right. The shares resulting from the exercise of the withdrawal right shall be offered
to the other stockholders and they may subsequently be offered on the market; if they are not
placed, the residual shares will then be returned to stockholders once the law-mandated
procedures are completed.
THE NEW 2015-2020 BUSINESS PLAN
On 30 September 2015, the Board of Directors of BPVi approved the new 2015-2020 Business
Plan, which calls for a revamping strategy based on exploiting the model of a Commercial Bank
that has deep local roots and is focused on Corporate, SME and household customers.
The 2015-2020 Business Plan starts from the transformation of the Bank from a cooperative to a
listed joint stock company and from the Capital Increase and it has the objective of restoring, and
maintaining throughout the five years of the Plan, the level of the capital ratios above the
requirements set by applicable regulations and by the ECB. The successful execution of the
strategic initiatives and the attainment of the objectives set out in the new 2015-2020 Business
Plan are thus directly tied to the completion of the Capital Increase.
The objective of the 2015-2020 Business Plan of the BPVi Group is to reach profitability and
capitalisation levels that are consistent with its significant potential, continuing to play a leading
role in the communities where it operates, in the Northeast and in the other regions where it is
active.
The new mission the Group has defined for itself is to serve enterprises and entrepreneurs with
a dedicated, all-round service model, and to serve households and small businesses with an offer
of high quality banking and financial products, simple and attractive, through branch structures
that will couple streamlined operations with expanded advisory and service capabilities.
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The 2015-2020 Business Plan develops along six main guidelines, described below:

transformation into a listed joint stock company and renewal of the governance;

soundness, also strengthened through the capital increase up to Euro 1.5 billion, to be
completed by April 2016 (with respect to which the Bank has already executed with
UniCredit Group a preliminary guarantee agreement for the subscription of the shares)
with the attainment of capital ratios (in 2020, the CET1 ratio will be 12.9%, the Total Capital
ratio 13.7%) at the level of the leading domestic operators, a strengthened liquidity position
and the structural improvement of the system of internal controls;

redesigned customer service models, with the establishment of 2 commercial divisions:
one dedicated to local communities (Community Bank), serving households and small
businesses, and the other focused on corporate, SME and private customers (Corporate &
Private Bank), organised to provide high quality services to enterprises and entrepreneurs;

transformation and simplification of the operating model, through the simplification of
the organisational structure of the Bank and of the Group (by the end of 2016, 150 branches
are expected to be closed, of which 75 were already closed in 2015), the outsourcing of
some activities with low value added, rigorous control over spending and the development
of personnel management and evaluation on the basis of merit, coupled with the
continuous improvement of their professional competencies and capabilities. On the
human resources front, streamlining initiatives are planned in the time interval of the plan,
using the most appropriate available instruments, which will reduce the total number of
employees by approximately 600, with approximately 100 new employees expected to be
hired.

active credit management, with a more effective credit management platform, the sale of
portfolios of non-performing loans and selective use of outsourcing. In particular, the Plan
envisages, for non-performing loans, targeted sales of portfolios amounting to
approximately Euro 1.5 billion, long-term strategic partnerships with operators specialised
in recovery activities and the use of qualified internal resources on the high-value
positions, with an improved recovery model;

asset requalification, with an exclusive focus on the banking business, the disposal of
assets that are not strategic and not functional for the performance of the commercial bank
activity.
Subsequently, on 9 February 2016, the Board of Directors approved an update of the
economic/capital and financial projections of the 2015-2020 Business Plan, confirming the
strategic guidelines already approved in September. The new economic/capital objectives were
updated to take into account the final results of the financial statements at 31 December 2015 and
the findings of the analysis conducted on loans considered “correlated” to the
purchase/subscription of BPVi shares, both in terms of impact on supervisory capital ratios and
of classification as non performing loans, as well as the latest market developments. The volumes
traded according to the new Plan are lower than those previously approved, as a result of the
difference between actual 2015 year-end values and those originally assumed when developing
the 2015-2020 Plan. The main deviations concerned direct deposits, as a result of the
extraordinary events that affected banks and the banking system as a whole in the second half;
net loans, also as a result of further write-downs related to the purchase/subscription of capital,
as well as on the government bond portfolio, as a result of disposals in the last quarter of 2015.
Compared to the previous version, the Plan’s updated economic projections show a lower level
of operating income (-65 million at 2020), mostly due to a more moderate growth in interest
income. The reduction in income is largely offset by lower operating costs (-43 million at 2020) as
a result of stronger cost containment measures. Lastly, the new Plan envisages further loan value
adjustments of 24 million in 2020, with the cost of borrowing increasing from 0.60% to 0.70% in
2020.
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Overall, net income targets are substantially confirmed: over 200 million in 2018 and over 300
million in 2020. By the end of the Plan period, the CET1 ratio is expected to reach 12.9%, with
the Total Capital ratio at 13.7%, the ROTE Adjusted at 8.2%, the Cost Income Ratio at <50%, and
the Liquidity Coverage Ratio at >120%, including the effect of the proposed capital increase. As
with the previous plan, these economic and financial objectives do not include possible benefits
arising from disposals of non-core holdings and future application of advanced methods (AIRB)
for calculating capital ratios.
CHANGES IN THE INVESTMENT SEGMENT
The final part of the year 2015 was characterised by the disposal of some non strategic equity
investments, carried out consistently in accordance with the guidelines outlined in the new
2015-2018/20 Business Plan and directed also at achieving income statement benefits and
improvements in terms of capital ratio and liquidity position.
Among them, particularly noteworthy was the sale to Mercury Italy S.r.l. (a special purpose
vehicle indirectly held by the Bain Capital, Advent International and Clessidra Sgr funds), of the
85.79% interest in the share capital of ICBPI - Istituto Centrale delle Banche Popolari Italiane
S.p.A. previously held by Credito Valtellinese S.c., Banco Popolare S.c., Banca Popolare di
Vicenza S.c.p.a., Veneto Banca S.c.p.a., Banca popolare dell'Emilia Romagna S.c., Iccrea Holding
S.p.A., Banca Popolare di Cividale S.c.p.a., UBI Banca S.c.p.a., Banca Popolare di Milano S.C.r.l.,
Banca Sella Holding S.p.A. and Banca Carige S.p.A. On 18 December 2015, as a result of the
authorisations received from the competent supervisory Authorities, the transaction was
completed and it entailed for Banca Popolare di Vicenza the sale of its entire 9.99%
shareholding in ICBP, collecting Euro 216 million and recording a net capital gain of Euro 165.3
million. The agreement executed by the parties further provides an additional price component
in the form of “earnouts”, connected with the future income that may be recognised to CartaSi
S.p.A. by Visa Inc. for the sale of the equity investment it holds in Visa Europe. In the
commercial field, the duration of the agreements already existing between the seller members
and ICBPI was extended to December 2020, through an extension scheme for a period of 3+2
years, with right to withdraw granted to the seller Parties at the third anniversary of the closing.
With reference to commercial relationships, the seller members have already stipulated a
commitment to maintain, with respect to the ICBPI Group, the current percentage of business
allocated, at the date of closing, by each company of the Group of the seller member on the ICBPI
Group relative to the total.
In the final part of the year, other disposals of non strategic equity interests were also carried out
by Banca Popolare di Vicenza. Among them, in particular, was the sale on 29 December 2015, to
Marco Polo Holding S.r.l. (a subsidiary of Finanziaria Internazionale Holding S.p.A.) of the
equity investment held in SAVE S.p.A., listed on the Electronic Stock Market organised by
Borsa Italiana, that operates mainly in the airport sector. In detail, 4,842,000 shares of SAVE
S.p.A. were sold, representing 8.75% of the capital stock of the company, at a price of Euro 63.4
million. The price was paid on 30 December 2015, for 10% of the total, concurrently with the
transfer of the entire equity investment held by the Bank; the remaining 90% was paid no later
than 22 February 2016, with the entire equity investment maintained restricted in the Bank’s
favour until full settlement. The disposal of the equity investment in SAVE S.p.A., in
consideration of the agreed execution procedures, determined the accrual of a net capital gain of
Euro 16.7 million in 2015.
On 28 December 2015 the Bank completed the sale of the 19% equity investment held in
Agripower S.r.l., a company that is active in the management of electricity generating plants
based on the anaerobic digestion of cereal crops, at a price of Euro 1.4 million, with the
recognition of a net capital gain slightly above Euro 270 thousand.
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On 30 December 2015, Banca Popolare di Vicenza also completed the sale of the 800 units held
in the Closed-end Mutual Fund reserved to Qualified Investors called “21 Investimenti II” in
favour of PineBridge Secondary Partners III L.P. at the price of Euro 18.3 million, of which Euro
3.7 million collected on the same date and Euro 14.6 million to be collected on 30 December 2016.
The aforesaid sale generated a net capital gain of Euro 3.97 million on the 2015 financial
statements.
On 31 December 2015, the Bank completed the sale of the 10.93% % equity investment held in
Consorzio Triveneto S.p.A., a company that is active in the performance of ITC services to the
customers of the banking sector, sold to the controlling stockholder of the investee (Bassilichi
S.p.A.) at a total price of Euro 1.9 million, of which Euro 1.3 million relating to the portion of
equity investment, amounting to 7.54%, sold to 31 December 2015 and Euro 590 thousand
relating to the residual portion of equity investment, of 3.39%, whose sale shall be completed by
15 March 2016 at the end of the pre-emption procedure that involved the other members of
Consorzio Triveneto S.p.A. The net capital gain generated by said equity investment sale, whose
main component was recognised in 2015, amounted to Euro 1.53 million.
Lastly, of note is the stipulation on 21 December 2015 of the deed of merger by absorption of
Monforte 19 S.r.l., a real estate company belonging to the Banca Popolare di Vicenza Group,
which manages several prime properties for business use by the Group and other parties.
Monforte 19 S.r.l. was merged into Immobiliare Stampa S.c.p.a., a real estate company owned
by the Banking Group. The merger became effective on 1 January 2016.
COMMERCIAL AGREEMENTS
The partnership with Cattolica Assicurazione was renewed in December 2012, with the execution
of a framework agreement to regulate strategic and commercial bancassurance partnerships. The
agreement, which has five-year duration (December 2017) and can be tacitly renewed for 5
additional years (December 2022), replaced, since 1 January 2013, the previous agreements
existing between the parties since 2007.
The partnership involves life and non-life products and it contains provisions pertaining to
ownership structures, to governance and to the operations of the product-specific companies
Berica Vita S.p.A., ABC Assicura S.p.A. and Cattolica Life Ltd, of which BPVi and Cattolica own
respectively 40% and 60% of the share capital.
In addition, Banca Popolare di Vicenza owns 15.07% of Cattolica (corresponding to 26,267,793
shares) and it has assumed with it, until 31 December 2018, a lock-up obligation in relation to
4,120,976 shares.
The new agreement confirmed and consolidated the historic collaboration between the two
groups, confirming the obligations of exclusivity and preference for the distribution of life and
non-life insurance products of the Cattolica Assicurazioni Group through the network of the
BPV Group and prescribing some obligations for the insurance company in the use of the
services offered by the companies of the BPVi Group. Subject to the contractual deadlines
indicated, the agreement also prescribes cases of early termination for extraordinary reasons tied
to the dissolution of the distribution agreement or to a change in the Bank’s legal status (as a
result of a corporate transformation or merger into another, non cooperative company; upon the
occurrence of these events, Cattolica will be entitled to withdraw from the agreement in the 180
days following the event and with effect 180 days exercising that right).
- 44 -
B
In case of cessation of the partnership, BPVi:

is obligated to buy back the entire property of the three product-specific companies at a
price equal (i) for the equity investments in Berica Vita and Cattolica Life, to the
corresponding proportional value of the embedded value (i.e. the value of the portfolio
existing on the buy-back date), and (ii) for the equity investment in ABC Assicura, to the
fair market value, with minimum value equal to the value of the investment originally
made by Cattolica revalued to the present date and

shall be fully and immediately entitled to stipulate new bancassurance agreements with
third partners.
The Bank deems that there are no indications, in the evolution of the business, that may
reasonably induce to assume that the current distribution agreements with Cattolica may be
terminated; moreover, the strategic nature of the partnership was re-confirmed, extending to 31
December 2018 the lock-up obligation on 4,120,976 of the Cattolica shares held by Banca
Popolare di Vicenza, with initial expiration on 31 December 2015.
With the goal of assuring a broad, comprehensive range of products that is well suited for the
needs of private customers, of note, in view of its relevance, was the extension for 6 more years
of the commercial agreement between the BPVi Group and Compass Banca S.p.A., pertaining
to the promotion and distribution of Compass consumer credit products through the distribution
network of the BVPi Group. The new agreement was executed on 30 December 2015, at the
expiration of the pre-existing agreement that had bound the parties since 2009.
The new agreement generally confirmed the terms of the existing agreement, including the
exclusivity restriction for the companies of the BPVi Group, and it introduced some changes,
including:

the absence of a tacit renewal, hence the expiration set for the date of 31 December 2021,
except in case of early termination according to the law or as prescribed by the agreement
itself;

the right of Banca Popolare di Vicenza to withdraw from the agreement early if the Bank
itself is involved in extraordinary corporate transactions (e.g. mergers, splits, sales of
companies) and/or in case of significant change to the stockholder structure of the Bank,
which could determine an objective dominant influence over the latter’s business
strategies. In such cases of withdrawal, the Bank shall recognise to Compass the penalty
amounts, predetermined according to the year in which the Bank should withdraw,
proportionately decreasing in relation to the residual duration of the agreement and with
the exclusion of any penalty in case of withdrawal in 2021. It should be specified that in
this case of the Bank’s withdrawal, Compass shall not be entitled to ask for indemnification
of any additional damage with respect to any contractually agreed penalty;

globally ameliorative economic conditions, also in consideration of the high quality of the
credit and of the volumes of production of previous years;

an ameliorative scheme for the recognition of the “production bonus” to the Bank (socalled “rappel”), which was agreed for a proportionately growing amount with respect to
the production goals that will be achieved and with the correlated provision of specific
thresholds for this purpose.
- 45 -
B
BANCA POPOLARE DI VICENZA’S RATINGS
The Parent Bank Banca Popolare di Vicenza is assigned a counterparty rating by the agencies
DBRS and Fitch Ratings.
On 11 February 2016, the rating agency Fitch lowered the Bank’s long-term rating by two
notches, from B+ to B-, confirming the short-term rating at B. The downgrade mainly reflects the
weakening of BPVi’s liquidity position following the significant reduction in deposits at 31
December 2015 since the latest rating review in October 2015. According to Fitch, the quality of
BPVi’s assets has further deteriorated in the second half of 2015, with an incidence of nonperforming loans of approximately 30% of gross loans at the end of 2015, from about 25% in June
2015. Fitch expects the quality of the credit portfolio to further deteriorate in the short and
medium term. Capitalisation is considered very weak with a CET 1 ratio at 6.65% at the end of
2015, due to the €1.4 billion loss and the filters applied to regulatory capital in connection with
capital related to loans granted by the Bank. However, Fitch emphasises that the Bank announced
a plan to strengthen capital, including a €1.5 billion capital increase, which will be completed in
the second quarter of 2016 with the goal of bringing the CET1 ratio above 12%, the sale of non
performing loans and some non-core assets. The Bank’s rating has been identified as “Rating
Watch Negative”, reflecting an increased risk of execution in connection with the Bank’s ability to
implement a successful turnaround and achieve its Business Plan objectives, including listing and
capital increase. With regard to the latter, Fitch is reassured by the presence of a preliminary
subscription agreement with UniCredit, but the Agency also believes that the current difficulties
in the financial markets could potentially result in the operation being postponed or not being
completed successfully.
On 19 February 2016, the rating agency DBRS lowered the Bank’s long-term rating by one notch
to BB (low), confirming the short-term rating at R-4. The rating action by DBRS followed the
publication of the results of 2015 by BPVi, with the Bank recording a loss of Euro 1.4 billion, and it
took into consideration the deterioration of the Bank’s franchise, position and liquidity buffer.
BPVi ratings were put under observation with negative implications, to reflect BPVi’s increased
liquidity risk, as well as the execution risks for the capital plan that BPVi has to complete. A
successful completion of the listing and of the capital increase in April, together with an
improvement in funding and in the liquidity position could provide stronger support for the
ratings. On the other hand, any delay in the completion of the Bank’s capital plan or further
deteriorations in the franchise or in the liquidity position could contribute to a negative pressure
on the rating.
The table below summarises the ratings assigned to Banca Popolare di Vicenza.
Rating agency
DBRS
Fitch Ratings
Long term rating
Short term rating
Outlook
Date
BB (low)
R-4
Under Review
Negative
19/02/2016
B-
B
Rating Watch
Negative
11/02/2016
- 46 -
B
UPDATES ON SIGNIFICANT PROCEEDINGS
With its letter of 30 July 2014, the Consob notified the Bank of the start of a proceeding in
accordance with Article 195 of the TUF against certain corporate offices and, inasmuch as it is
liable jointly and severally with them, against the Bank itself, pointing out - in relation to the
placement of bonds issued by Banca IMI - a possible violation of the combined provisions of
Article 21, Paragraph 1, Letter d), of the TUF and of Article 15 of the Joint Regulations of the
Bank of Italy and Consob of 29 October 2007, which obligate intermediaries to adopt suitable
procedures to assure the correct performance of the investment services, and of Article 21,
Paragraph 1, Letter a) of the TUF, which obligates intermediaries to behave with diligence,
correctness and transparency, to best serve customers’ interests, and of Articles 39 and 40 of
Consob Regulation no. 16190 of 29 October 2007, which regulate customer profiling and the
adequacy assessment. The penalty assessment proceeding ended in 2015 with the imposition of
administrative penalties equal or close to the prescribed minimum; therefore, they were not
published on the Consob Bulletin.
On 18 February 2015 the Deputy Chairman of Banca Popolare di Vicenza, Prof. Marino Breganze,
was indicted, in his capacity as Chairman and legal representative of the subsidiary Banca
Nuova, for participation with other persons in the offences per Articles 40 and 644 paragraphs I
and V no. 1 of the Italian Criminal Code (causality relationship and usury) within the scope of
the criminal proceeding R.G.N.R. 20909/12 initiated before the Prosecutor’s Office at the Court of
Palermo, which, should it end with a conviction, will not have negative impacts on the Bank’s
income, capital and financial situation, considering the small size of the amount. The
proceedings are currently in the hearings phase.
On 22 September 2015, the Bank was served a search and concurrent seizure order - in
accordance with Articles 247 et seq. of the Italian Code of Criminal Procedure - issued by the
Prosecutor, Mr. Luigi Salvadori, Deputy Prosecutor with the Court of Vicenza. Within this
criminal proceeding, the Bank is under investigation for the administrative offence dependent on
a criminal offence prescribed and punished by Articles 21, Par. I, and 25-ter, Par. I, Letter R),
Italian Legislative Decree no. 231 of 8 June 2001, for the offences per Articles 81, Par. II (formal
conspiracy - protracted offence), and 110 of the Italian Criminal Code (penalty for those who
conspire to commit the offence), 2637 of the Italian Civil Code (market manipulation) and 2638 of
the Italian Civil Code (obstruction of public supervisory authorities in the exercise of their
duties) with reference to which, an investigation is currently underway involving former
Chairman Cav. Lav. Mr. Giovanni Zonin, former Directors Messrs. Giuseppe Zigliotto and
Giovanna Maria Dossena and the former General Manager, Mr. Samuele Sorato, and the former
Deputy General Managers Messers. Emanuele Giustini and Andrea Piazzetta within the criminal
proceeding No. 5628/15 R.G.N.R. – Mod. 21. At present, the proceeding is in the preliminary
investigation stage.
It is pointed out, that the Bank, therefore, is exposed to the risk of being subjected to the penalties
prescribed by Legislative Decree no. 231 of 8 June 2001, which to date are not quantifiable.
- 47 -
B
THE OPERATIONAL STRUCTURE OF THE BPVI GROUP
TERRITORIAL PRESENCE OF THE BANCA POPOLARE DI VICENZA GROUP
This section of the Report on Operations provides information about the territorial presence and
positioning of the Branch Network and the changes in employment by the BPVi Group.
Traditional distribution channels
At 31 December 2015, the BPVi Group’s network consisted of 579 branches, situated in 16
regions and 69 provinces throughout Italy, accounting for 1.9% of the national total.
BPVi Group's branches trend
628
500
100
67
637
638
1
1
1
528
106
106
107
103
92
94
94
429
436
436
dec2007
dec2008
dec2009
633
640
639
1
2
1
640
640
654
3
1
1
1
579
94
94
93
1
107
95
525
541
543
545
560
dec2010
dec2011
dec2012
dec2013
dec2014
BCF
Farbanca
93
80
333
345
dec2005
dec2006
BPVI
Cariprato
Banca Nuova
485
dec2015
As showed in the previous chart, after a long consolidation phase, which lasted nearly 8 years,
in 2015 a phase of streamlining and optimisation of the sales network of the BPVi Group was
launched, as provided by the new 2015-2020 Business Plan; it involved the closure of 75
branches. The streamlining activity started in the second half of 2015 and it involved the Parent
Bank, with the closing of 37 branches in Veneto, 15 in Tuscany, 14 in Lombardy, 7 in Friuli
Venezia Giulia and 1 branch both in Emilia Romagna and in Lazio.
This activity is expected to continue in the first part of 2016 as well, with the closure and
consolidation of 79 additional branches, 64 of the Parent Bank and 15 of Banca Nuova.
- 48 -
B
The geographical distribution (regions and main provinces) of the BPVi Group’s branches is
shown below; it confirms the deep roots in the original region of Veneto (38.2% of branches)
and throughout the Northeast (51.3% of branches), one of the wealthiest, most productive
areas of Italy.
BPVi Group's branches
geographical distribution
12/31/2015
% Comp.
2015
Veneto
di cui Vicenza
di cui Treviso
di cui Padova
di cui Verona
di cui Venezia
Friuli Venezia Giulia
di cui Udine
di cui Pordenone
Emilia Romagna
Trentino Alto Adige
NORTHEAST ITALY
221
83
38
28
27
25
57
31
13
17
2
297
38.2%
14.3%
6.6%
4.8%
4.7%
4.3%
Lombardia
di cui Brescia
di cui Bergamo
di cui Milano
Liguria
Piemonte
NORTHWEST ITALY
75
30
20
9
5
3
83
13.0%
5.2%
3.5%
1.6%
75
27
15
7
1
2
25
22
103
13.0%
4.7%
2.6%
1.2%
1
2
1
78
28
17
14
96
0.2%
0.3%
0.2%
13.5%
4.8%
2.9%
579
Toscana
di cui Prato
di cui Firenze
di cui Pistoia
Marche
Umbria
Lazio
di cui Roma
CENTRAL ITALY
Abruzzo
Puglia
Campania
Sicilia
di cui Palermo
di cui Trapani
Calabria
SOUTHERN ITALY
TOTAL
- 49 -
12/31/2014
Abs. Chg.
258
94
52
33
31
27
64
36
14
18
2
342
-37
-11
-14
-5
-4
-2
-7
-5
-1
-1
0
-45
89
36
24
13
5
3
97
-14
-6
-4
-4
0
0
-14
90
31
22
8
1
2
26
23
119
-15
-4
-7
-1
0
0
-1
-1
-16
2.4%
16.6%
1
2
1
78
28
17
14
96
0
0
0
0
0
0
0
0
100.0%
654
-75
9.8%
5.4%
2.2%
2.9%
0.3%
51.3%
0.9%
0.5%
14.3%
0.2%
0.3%
4.3%
3.8%
17.8%
B
The following table shows the changes during the year in the Branch network of each Group
bank.
BPVi Group's branches trend
12/31/2015 12/31/2014 Abs. Chg.
Banca Nuova
Farbanca
485
93
1
560
93
1
-75
0
0
Total
579
654
-75
Third Party Networks and the other sale channels of the BPVi Group
In addition to branches, at 31 December 2015 the BPVi Group’s sales network includes 13 finance
shops6 (1, BPVi, 9 Banca Nuova and 3 BPVi Multicredito), 35 private customer points7 (30 for
BPVi and 5 for Banca Nuova), totalling 627 outlets. On 1 January 2015, Prestinuova’s last financial
space located in Naples was closed.
In addition to the physical network, the BPVi Group also has third party networks of freelance
professionals (Financial Promoters and Financial Agents), supporting branch operations with
the goal of acquiring and retaining a significant number of new customers, both among
individuals and small businesses. As at 31 December 2015, the financial promoter network
consisted of 110 professionals (50 BPVi and 60 Banca Nuova), whilst at the same date, the
number of agents operating at the Group company called “BPVI Multicredito Agenzia in
Attività Finanziaria Spa” stood at 116 professionals.
BPVi Group's Other distribution
channels
Finance Shops
Private Customer Points
Financial Spaces (Prestinuova)
Financial Promoters
Financial Agents
ATM
POS
6
12/31/2015 12/31/2014 Abs. Chg.
13
35
0
110
116
680
50,905
14
32
1
119
180
757
40,116
-1
3
-1
-9
-64
-77
+10,789
Permanent operating point open to the public where the Bank allows one or more Financial Promoters and/or Agents
appointed with a specific agency agreement to carry out their professional activities exclusively for the bank.
7
Permanent operating point open to the public, dedicated to the operating management of Private Banking customers.
- 50 -
B
Electronic channels and e-money
In addition to the traditional distribution channels, our Bank has long provided an established
range of electronic channels, alternative to ordinary branches, through which individual
customers and businesses can, autonomously and at any time, make queries and give
instructions in relation to their accounts.
Appreciation for this operating mode has progressively grown over time and, in line with the
market’s evolutionary trends, the offering has become richer with the introduction of new
features and with parallel constant upgrades with the best technological solutions and according
to the most stringent security parameters.
Indeed, as a result of the great importance reached by channels other than branches, a project
was launched in 2015 for the complete revision of the multi-channel platform dedicated to
individual customers, which will see the further extension of the functions available on direct
channels (Internet Banking, Smartphones, Tablets, etc.), the remote activation of sale processes
through the digital signature of the contracts by the Bank and by the Customer (“paperless”
Process), the complete renovation of the Trading Online functionality, a greater integration of the
Contact Centre with the account management instruments present in the branch and the
introduction of innovative functions that will enable customers to interact with the Bank in real
time (“Remote Operator”).
In 2015, particularly noteworthy was the launch, in January, of the BPViGO! brand, which
represents the new, single point of access to the multi-channel world for the Group’s
individual customers. At the same time, the home banking graphic interface was redesigned
and the presentation of certain information was reorganised, and the range of features was
expanded with a view to making most of the products and services offered by the branch
progressively available to the customer. In particular, in the second half of 2015 a new online
sale process was released; it is directed at new customers and it enables them to remotely
purchase a prepaid card or a current account with related main accessory services (ATM card,
prepaid card, multichannel service, time deposit, etc.); transactions take place in self-service,
fully paperless mode, inasmuch as the contracts are signed with remote digital signature, both
by the Bank and by the customer. In addition, the implementation of a similar process directed at
all customers in possession of a multichannel service, whereby the customer, within his/her own
Internet Banking service, will be able to purchase some of the main banking products (e.g.
Securities Deposit), with no need to go to the branch and without producing hardcopy
documentation.
Lastly, in the field of e-money, innovative payment and cash withdrawals systems were
introduced, and in particular the BPVi MoneyGo! service, integrated in the BPViGO! app, which
enables Customers to send money in real time simply by selecting a telephone number from the
contacts in their mobile phone, and Prelievo Cardless (Cardless Withdrawal) service, which
allows customers to withdraw cash from an ATM of the Bank through a function available in the
BPViGO! app, without using the card. The further development of electronic channels is one of
the strategic themes in the new Business Plan and consequently it will see additional changes in
the years to come.
- 51 -
B
Presence abroad
The BPVi Group has 6 Representative Offices abroad, whose purpose is to facilitate commercial
transactions between Italian companies and the principal international markets, providing
appropriate services for entrepreneurs intending to expand in those areas, and to develop lasting
business relations with the principal and most experienced banking counterparties in these
countries. The Offices are located in Hong Kong (China), which has been operating since the
Eighties, in Shanghai (China), since 2005, in New Delhi (India), since April 2006, in Sao Paulo
(Brazil) in operation since January 2011, New York (USA), operating since mid-October 2011,
and Moscow (Russian Federation), opened in October 2013. The BPVi Group also has a
subsidiary in Dublin (Ireland), called BPV Finance (International) Plc, specialised in proprietary
trading, which carries out its business by investing in financial instruments, taking a mediumlong term view, and by providing loans to foreign subsidiaries of the Group’s corporate
customers.
In Countries where the BPVi Group operates Representative Offices and in the others where it
does not maintain a direct or indirect presence, to provide the best support to companies in
international markets, as at 31 December 2015 cooperation agreements were signed with 72
foreign banks with a total network of approximately 87,000 branches, located in 48 Countries,
including: Afghanistan, Albania, Argentina, Australia, Austria, Belarus, Bosnia Herzegovina,
Bulgaria, Canada, Chile, China, Croatia, Czech Republic, Ecuador, Egypt, Russian Federation,
Georgia, Japan, India, Indonesia, Iraq, Hungary, Korea, Kosovo, Macedonia, Malaysia, Morocco,
Mexico, Mongolia, Peru, Philippines, Poland, Portugal, Romania, Serbia, Slovakia, Slovenia,
South Africa, Spain, United Kingdom, United States, Taiwan, Thailand, Tunisia, Turkey,
Ukraine, Venezuela, Vietnam.
In 2015, Banca Popolare di Vicenza entered into a cooperation agreement with Portugal’s
leading bank, Caixa Geral de Depositos of Lisbon. This agreement allows the assist Italian
corporate customers, mainly SMEs, not only in Portugal, with the bank's 1,245 branches, but also,
through its subsidiaries abroad, in countries historically influenced by Portugal, such as Angola
and Mozambique.
Lastly, the BPVi Group has 3,044 correspondent bank relationships with banks located in 161
Countries, 77 account relationships with banks located in 45 countries and 490 banks with
credit lines, based in 84 countries.
HUMAN RESOURCES
At 31 December 2015 the BPVi Group had 5,466 employees, 49 fewer than in December 2014, a
decrease of -0.9% year on year.
The following table shows the changes in employment by the individual companies within the
BPVi Group in 2015; it is readily apparent that the reduction in the number of employees
involved mostly the Parent Bank. (-35 employees in the year).
- 52 -
B
12/31/2015
Staff
12/31/2014
Change
Number % Comp. Number % Comp.
abs.
%
Banca Nuova
Farbanca
4,440
710
29
81.2%
13.0%
0.5%
4,475
712
28
81.1%
12.9%
0.5%
-35
-2
1
-0.8%
-0.3%
3.6%
BANKS TOTAL EMPLOYEES
5,179
94.7%
5,215
94.6%
-36
-0.7%
PrestiNuova
BPV Finance
BPVI Multicredito
NEM SGR
Servizi Bancari
Immobiliare Stampa
9
5
2
7
231
33
0.2%
0.1%
0.0%
0.1%
4.2%
0.6%
9
6
0
9
239
37
0.2%
0.1%
0.0%
0.2%
4.3%
0.7%
0
-1
2
-2
-8
-4
0.0%
-16.7%
n.s.
-22.2%
-3.3%
-10.8%
OTHER COMPANIES TOTAL EMPLOYEES
287
5.3%
300
5.4%
-13
-4.3%
5,466
100.0%
5,515
100.0%
-49
-0.9%
TOTAL EMPLOYEES
The breakdown of the workforce of the Group’s Bank as at 31 December 2015, as shown in the
following table, shows that over 77% of personnel are employed with the branch Network,
while 17% work at the Central Offices, 47 more than at the end of 2014, mainly by effect of the
actions for strengthening some offices of the General Management; the remaining 5% at present
is not assigned to any office (seconded, on maternity leave, on leave of absence, social hour, etc.).
12/31/2015
BANKS EMPLOYEES
Banca Nuova
Farbanca
(1)
TOTALE BANCHE
Branch
network
Corp.
Center
12/31/2014
Other (1)
% Branch Branch
network
Corp.
Center
Other (1)
% Branch
3,389
801
250
76.3%
3,488
754
233
77.9%
600
79
31
84.5%
607
79
26
85.3%
17
12
0
58.6%
14
12
2
50.0%
4,006
892
281
77.4%
4,109
845
261
78.8%
(1) Includes employees transferred in other companies or on leave, etc.
The breakdown of Group employees by professional category at 31 December 2015 shows that
there are 102 executives (+2 compared to December 2014), i.e. 1.9% of the Group’s total number
of employees, 2,288 managers (-15 compared to December 2014), i.e. 41.9% of the total, and 3,076
clerical and other employees (-36 compared to December 2014), i.e. 56.3% of the Group’s
employees.
- 53 -
B
Employees by professional
category as of 12/31/2015
Category
Senior
managers
Banca Nuova
Farbanca
PrestiNuova
BPV Finance
BPVI Multicredito
NEM SGR
Servizi Bancari
Immobiliare Stampa
TOTAL
% composition
Managers
Remaining
staff
Total
Other staff (1)
85
10
0
0
1
0
2
3
1
1,880
298
9
5
1
2
4
76
13
2,474
400
20
4
3
0
1
150
19
1
2
0
0
0
0
0
2
0
4,440
710
29
9
5
2
7
231
33
102
2,288
3,071
5
5,466
1.9%
41.9%
56.2%
0.1%
100.0%
(1) Includes employees belonging to the first Area and the first two levels of second Area
At 31 December 2015, the “actual” workforce of the BPVi Group, calculated by taking account
of the employees of the Group companies as well as persons on secondment and project or
temporary workers, totalled 5,473 persons, 56 fewer than in June 2014 (-1.0%).
The following table shows the actual workforce of BPVi Group companies at 31 December 2015.
12/31/2015
Permanent Staff
Staff (a)
12/31/2014
seconded at
seconded at seconded from
(1)
Other staff
other
other
other
(1)
BPVi's
companies
companies
Group
(e)
(c)
(d)
companies
Permanent staff
(a-b-c+d+e)
Permanent
Staff
Absolute
Change
Banca Pop. di Vicenza
Banca Nuova
Farbanca
PrestiNuova
BPV Finance
BPVI Multicredito
NEM SGR
Servizi Bancari
Immobiliare Stampa
4,440
710
29
9
5
2
7
231
33
42
9
0
0
0
0
1
4
0
3
0
0
0
0
0
0
0
0
8
5
5
3
0
1
1
29
5
9
1
0
0
0
0
0
0
0
4,412
707
34
12
5
3
7
256
38
4,460
705
34
13
6
3
10
259
40
-48
2
0
-1
-1
0
-3
-3
-2
TOTAL
5,466
56
3
56
10
5,473
5,529
-56
- 54 -
B
Management of Human Resources
In 2015, a set of re-organisation initiatives were carried out; some of them have already been
completed and some are preparatory to the launch of the new organisational model of the
Commercial Network specified in the new 2015-2020 Business Plan, with effect from 1 January
2016.
Among them, of particular note are the initiatives for streamlining the network started in the
second half, which led to the closing and grouping of 75 branches, as well as the extension of the
operating model which entails the closure of the cash service in the afternoon (“cash light”
branches). These actions made it possible to optimise the personnel rosters, thus freeing resources,
dedicating them to initiatives aimed strengthening the branches with greater commercial
potential and/or to increase the number of Affluent and Small Business Account Managers. In
addition, a significant portion of the freed resources was allocated to sustain other initiatives
provided by the Business Plan within the central structures, such as the strengthening of the
structures dedicated to the management of non perfroming loans and enhancing the contact
centre.
In the last quarter of the year, the management’s activity was particularly focused on the
preparatory initiatives and projects for the launch of the model of the Commercial Network and
for the reorganisation of the General Management, in accordance with the provisions of the 20152020 Business Plan. In addition, a significant portion of the freed resources was allocated to
sustain other initiatives provided by the Business Plan within the central structures, such as the
strengthening of the structures dedicated to the management of non performing loans and
enhancing the contact centre.
Lastly, among the other significant initiatives of 2015, moreover, the Developers’ Task Force
continued its activity, which started in 2014, dedicated to promote commercial efforts within the
segment of small and medium enterprises and the qualitative and quantitative enhancement of
the Risk Management Department, carried out consistently with the regulatory provisions
dictated by Bank of Italy Circular no. 263/2006 as subsequently revised.
Training and Development Activities within the BPVi Group
In 2015, the training activity of the Banca Popolare di Vicenza Group was characterised, in
addition to the usual mandatory training, by training initiatives directed at strengthening and
supporting colleagues in certain fields such as lending and skills certification. The basic logic was
to operate, on one hand, in continuity with the activity carried out in the previous years and, on
the other hand, to pay attention to the regulatory changes and to the specific requirements of the
operating environment.
In particular, the year 2015 saw the conclusion, in July 2015 of the second edition of the
Manager Training Academy with the involvement of 23 colleagues throughout the Group. The
initiative, through technical, managerial, hands-on training, on-the-job training phases,
individual testing and coaching, led to the participants’ personal growth with a view to serving
in positions of responsibility.
Particular attention was paid to credit training, which included the training project called
“Master Credito”: the initiative, particularly significant both for the topic it dealt with and for
the involved population, was developed in collaboration with SDA Bocconi and it started at the
end of 2014 with a training assessment phase, then continuing in 2015 with the classroom phase
and involving approximately forty colleagues throughout the Group. Based on the analyses
carried out in the classroom and at the indications of the Credit Division Managers, the course
curriculum was expanded with additional in-depth modules, and it will indicatively be
completed in the first half of 2016.
- 55 -
B
In the field of credit, also of note is the launch of two specific projects on credit management,
carried out in collaboration with the CUOA Foundation, which involved all ordinary corporate
account managers, the anomalous credit corporate account managers and the corporate
personnel in charge.
A specific initiative saw the involvement of the network and headquarters credit analysts of the
Parent Bank on matters related to the financial statements and financial accounting.
During the year, training in connection with the European DEFS Certification continued, with
the involvement of the affluent account managers and of some customer account managers with
a view to development, with the planning of the training initiatives relating to the Finance
Objective project for customer account manager and with the determination, in collaboration
with AIIA, of a training curriculum dedicated to the Internal Auditor role and aimed, on one
hand, to enhance the basic notions of the profession and, on the other hand, to the possible
obtainment of the CFSA Certification.
In relation to the project for assessing and developing competencies, directed at the colleagues of
the Parent Bank’s General Management, in 2015 two manager training initiatives were carried
out with the involvement of approximately forty Managers: through classroom phases,
experience-based training, individual and group coaching, work was dedicated to the
development of a pool of growing potential and to the consolidation of managerial
competencies.
In compliance with current regulations, all mandatory training initiatives were planned and
carried out within the field of Bancassurance (Ivass), Italian Law no. 81/2008, in addition to
training in response to colleagues’ requests entered in the Human Resources Portal available in
the Corporate Intranet, also used to manage training needs.
Moreover, for the Executives of the Parent Bank, in view of constant professional development
on managerial aspects, for 2015 the Ambrosetti training initiative in “webinar” mode was
confirmed along with the English language training, one-on-one, online or in small groups
depending on specific needs. The initiatives were limited to the personnel of the General
Management of several organisations that constant communicated with the ECB.
The training plan was then completed with the completion of initiatives directed at various roles
on aspects such as credit, finance, regulations and controls. These activities were carried out to
enhance and update the colleagues’ competencies and knowledge and they involved, for
example: CAI training for customer account managers, anti-money laundering training for
different Network roles, small business training for Deputy Branch Managers and managerial as
well as commercial initiatives.
To contain costs and facilitate colleagues’ participation, a great deal of space was devoted to
online training: in particular in the case of regulatory or operational updates, the classroom
mode was replaced by the online mode (Legislative Decree no. 231/01, Fatca regulations,
attachments at third party premises, cash management...).
In addition, the colleagues of the General Management of the Parent Bank, as usual, in addition
to the internally managed training, participated in courses, seminars and conventions organised
by Outside Companies and specialised Entities.
The following table provides an overview of the quantitative results of the training activities
carried out in 2015 for the employees of BPVi Group companies, divided in the usual types of
entry training (for newly hired employees and all those who change jobs), permanent training
(with refresher training courses with specialist technical and professional content), development
training (to promote and strengthen managerial skills), and mandatory training (required by
law).
- 56 -
B
Tranining
(days)
Entrance
Permanent
Development
Mandatory
Total
Banks of BPVi Group
12/31/2014
Abs. Chg.
12/31/2015
% chg.
1,260
8,587
2,737
19,319
2,185
7,765
3,195
21,407
-925
822
-458
-2,088
-42.3%
10.6%
-14.3%
-9.8%
31,903
34,552
-2,649
-7.7%
In summary, in 2015 nearly 32 thousand days of training were administered in all to
employees of the BPVI Group. The overall reduction in the number of training days is mainly
due to the reduced training effort expended in entry training in 2015 compared to 2014, a year
that saw particular training effort dedicated to the employees of the branches acquired in 2014
from Banca Popolare di Spoleto and from Cassa di Risparmio di Ferrara, as well as to a more
attentive and focused management of training activity, also with a view to cost containment.
Labour-management relations
On the topic of labour-management relations, it should be pointed out that the first half of 2015
was affected by the union negotiation phase at the national level for the renewal of the
collective labour agreement for professionals and managers, which ended with the definition of
the draft agreement of 31 March 2015. In this regard, the Bank participated in the negotiations
for the national collective labour agreement as a member of ABI’s Committee for union and
labour relations. In the second half, instead, the discussions at the company level were carried
out mainly on the reorganisation of the commercial network and on the other issues to be
approved in the 2015-2020 Business Plan. In this regard, on 22 February 2016, the union
discussion procedure was started with respect to the definition of the agreements necessary for
implementing the structural cost reduction prescribed by the Plan (in particular, for access to the
Solidarity Fund).
Lastly, it is worth pointing out that, as a result of the corporate agreements reached previously,
additional funding was obtained for the suspension of working hours (“social hour”) for Banca
Popolare di Vicenza, Banca Nuova and Servizi Bancari.
- 57 -
B
COMMERCIAL ACTION: CHARACTERISTICS AND RESULTS
Commercial action: characteristics and changes in 2015
The commercial action of the BPVi Group was thoroughly revised and refocused with the recent
changes contained in the new 2015-2020 Business Plan, whose strategic guidelines were
approved on 30 September 2015 and confirmed on 9 February 2016 on the occasion of the
updating of the income-capital targets. With the new Plan, first of all the new mission the Group
is defined: it is to serve enterprises and entrepreneurs with a dedicated, all-round service
model, and to serve households and small businesses with an offer of high quality banking
and financial products, simple and attractive, through branch structures that will couple
streamlined operations with expanded advisory and service capabilities.
Among the most important commercial changes introduced with the new Plan, of note is the
revision of the customer service models, which will be concentrated on the core customers of
the BPVi Group, i.e. individuals and small and medium enterprises, with the goal of boosting the
overall profitability of the different segments, on one hand by boosting commercial revenues and
on the other hand by optimising service costs, thanks to a better calibration of the service levels
in relation to the actual needs of the customers.
From the operational point of view, since early 2016, the Group’s customers were segmented
with new criteria that have led to the creation of two new business units, differentiating the
service model adopted in relation to the customers served:

Community Banking, which includes private customers, excluding the private banking
segment (“mass” and “affluent” customers) and small business customers, i.e. sole
proprietorships and companies with revenues below Euro 10 million;

Corporate & Private Banking, which includes small and medium enterprises and
corporate customers, i.e. enterprises with revenues above Euro 10 million and the
individuals of the private banking segment.
Community Banking is the business unit that is focused on locally serving the different
communities of customers mentioned above with a simple service model, with attractive
products and with widespread, enhanced advisory capabilities. The distribution model will be
more incisive, thanks to a higher number of dedicated account managers and a simplified,
streamlined commercial network. The reduction in the number of branches, already started in
2015 with 75 closures and to be completed in 2016 with 79 additional closures, as well as the
extension of the hub & spoke branch model already by the end of 2016 will have a significant
role in the improvement of the level of service. In addition, the BPViGO! multichannel platform
will be further extended to complete the model of service to retail customers.
Corporate & Private Banking aims to create an integrated, dedicate platform with the goal of
proposing an offer of all-round services with high added value to enterprises and entrepreneurs
in the Northeast and in the other core regions. 15 integrated corporate & private business centres
were created; they follow the two customer segments offering specialised support on high value
added services. With regard to the corporate segment, the reference in particular is to the
structured finance segment, trade/export finance in support of the internationalisation activities
of the customer enterprises, to the equity capital market (support to listing on regulated markets
and to capital operations), to debt capital market (e.g. structuring and placement of minibonds,
where BPVi already has a leading position with a market share of 33.5% as at 31 December 2015
(in terms of volumes of total issues made in the 2014-2015 two year time interval in the Euro 5-50
million segment of issues) and to advisory activities.
- 58 -
B
With regard to the private segment, the wealth management unit was strengthened and a
dedicated structure was established for advisory services, the better to understand and satisfy
the needs of private customers/entrepreneurs. The product structure is also strengthened
through open platform operations that expand the offering to investment products of multiple
asset managers.
Segment analysis of the BPVi Group’s customers and operations
The following is a brief analysis of the characteristics of customers served and the operations of
the banks within the BPVi Group.
At 31 December 2015, customer distribution, analysed
on the basis of the new segmentation started in early
2016, confirms the commercial orientation of the BPVi
Group, with operations dedicated mainly to households
and small and medium enterprises, a typical expression
of the socio-economic operating environment of the
Group’s banks. The chart shows that the preponderant
customer segment, by far, is that of Community
Banking customers (mass, affluent, small business
customers), i.e. 96.5% of the total, while the weight of
the Private segment and of the Corporate segment is
definitely more limited, in terms of customers, with
both amounting to approximately 1% of the total, and
the segment of Large Corporate & Financials customers
is close to zero.
Community Banking dominates direct funding
(deposits and bonds, net of transactions with central
counterparties), contributing nearly 48% of the total
funds gathered by the BPVi Group Banks. With
regard to the other customer segments, in order of
importance, the Large Corporate & Financials and
Corporate segments follow, respectively with 11%
and 6% to the Group’s funding, while Private
customers contribute little more than 5% of total
funding. Lastly, more significant is the incidence of
institutional funding (consisting of funding on the
Euromarket in the form of EMTN, of the liabilities
collected in view of the securitisations and of
operations with Cassa Depositi e Prestiti), which
contributes nearly 27% of the total.
- 59 -
Clients
% composition
Private Corporate
0.6% Large Corp. &
1.0%
Financials
0.1%
Other
1.7%
Community
banking
96.5%
Direct deposits
% composition
Institutional
26.7%
Other
3.4%
Large Corp.
& Financials
10.8%
Corporate
6.0%
Private
5.3%
Community
banking
47.7%
B
Indirect deposits
% composition
With regard to indirect funding (net of the BPVi
shares held in the portfolio by the customers of the
Group’s Banks), of note is the significant
contribution of Community Banking, which
contributes approximately 49% of funds. Large
Corporate & Financials follow with 25% of the
total, while Private Banking’s weight of the
Group’s indirect funding is above 21%. Lastly, the
contribution from Corporate customers is minimal,
at 3%.
Large Corp.
& Financials
25.0%
Other
2.6%
Corporate
2.6%
Private
21.2%
Community
banking
48.5%
The analysis of the contribution on the volumes of
net loans (net of repurchase agreements with
central counterparties and of the related guarantee
margins) confirms BPVi’s attention to its core
customers, individuals and small and medium
enterprises, who are the recipients of most of the
Group’s loans. In fact, 55% of the Group’s loans are
destined to Community Banking, and 23% to
Corporate customers. Lending activities with the
Large Corporate & Financials and Private segments
are more limited, and their share of total net loans is,
respectively, 9% and 4%. The “Other” category, which
contributes to 9% of total lending, includes the loans
of the BPV Finance subsidiaries, non-performing
loans, adjusting provisions and LRO securities.
Products, services and markets
Loans
% composition
Large Corp.
& Financials
9.0%
Other
8.7%
Corporate
23.3%
Private
3.7%
Community
banking
55.3%
Commercial innovations for Individuals
The innovations launched in 2015 on the range of products dedicated to individual customers
pertained mostly to the multichannel offering, which was recently redesigned improving
usability and enhancing the range of functions on offer. For example, the online banking service
was completed revamped, by renewing the Website, the online trading features and the mobile
and tablet apps. Among the most important innovations is the possibility for new customers to
purchase products and/or services directly online, without signing any hardcopy
documentation, using the digital signature (“paperless” mode).
- 60 -
B
In addition, innovative payment tools were introduced, enabling customers to transfer money
from their smartphones, or the cash withdrawal service from all of the Bank’s ATMs without
using the debit card, but through a secret code generated by an APP on the smartphone. In 2016,
the evolution will continue with the revamping of the APPs, both for smartphones and for
tablets, with a view to better usability and the development of new, innovative features, e.g. the
possibility, for the customer, to communicate with his/her account manager via webcam, to
share documents and, lastly, to sign them digitally from his/her own multichannel with no need
to go the branch. The customer assistance service was also enhanced and enriched with new
functions: today, customers can contact the Bank to receive assistance or information via email,
via telephone, including with the “call me back” function (choosing the day and time they want
to be called by the call centre operator), or via chat line in real time, or else signing up for a
rendezvous at the branch. Among the changes in the e-money sector, from 2015 onwards all
newly issued cards are provided with contactless technology, which enables users to pay
simply by moving the card close to the reader available at many establishments. Lastly, between
the end of 2014 and the start of 2015 a new initiative was launched that provided the opportunity
to purchase Apple products (iPhone, iPad, Macbook and iMac) in the branches of the BPVi
Group, with a zero-interest rate loan with up to 18 months of maturity.
Commercial innovations for Companies
In 2015, the activities in support of local companies continued, both using traditional financial
instruments through the usual lending activity and developing high value added products and
services, designed to support the growth of start-ups, promote the internationalisation process,
rebalance the financial profile of small and medium enterprises through the intervention of
private equity funds, Minibonds and Stock Market listing.
Some of the initiatives in direct support to businesses with classic banking instruments were:
–
The loans granted with CDP and BEI funding: in 2015, BPVi continued to make use of the
ceiling of EIB and CDP financing, which allow the bank to obtain funding at competitive
rates and to issue, for the same amount, loans to companies at controlled prices. In
addition, BPVI was the first Bank to adopt the Enterprise Platform provided by the
ABI/CDP convention which entails, inter alia, the use of the Export Credit Line, which
allows use of dedicated funds for lending to Foreign Banks, to enable foreign importers to
settle the debt with the Italian counterparty on demand;
–
The SME Capital Assets - Nuova Sabatini credit line: BPVi was among the first banks to
adhere and to start, since its introduction, full and complete operations of this new
subsidised State loan in favour of small and medium enterprises in all productive sectors
and aimed at support for investments;
–
The loans guaranteed by the Central Guarantee Fund: in 2015, the State’s support activity,
carried out through the Central Guarantee Fund, continued and was expanded, allowing
access to loans for SMEs that are deserving in terms of market positioning, but need
guarantee support to supplement their modest capitalisation;
–
Advance of PA receivables: for some years, the BPVi Group has been active in the disposal
of receivables due to customer companies from the Public Administration, with particular
reference to Local Authorities. By taking advantage of the consolidated experience
acquired through the management of public treasuries and the subsequent network of
relations, the Bank can now boast 57 agreements with public administrations for the
certification and subsequent transfer of the receivable to us. The tool for the disposal of
receivables from Local Authorities is especially appreciated by local SMEs which represent
the majority of the suppliers of said Authorities;
–
“Gold” Sector: through the management of the metal it owns, BPVi has achieved
independence in the procurement of gold, being able to supply transforming customers
without continuity problems;
- 61 -
B
–
Support to Start-ups: support to employment cannot be unconnected with the launch of
new companies, whose proliferation is always more fruitful where the Local Institutions
collaborate to create a positive system in veritable incubators. In this sector, the Bank is
participating in the “Facciamo Impresa” and “Cercando Lavoro” projects, developed in
synergy with the Municipality of Vicenza and the main Trade Associations which aim to
establish and sustain micro companies in the Municipality of Vicenza and in another 14
municipalities that took part in the initiative. At the same time, the Bank took part in
another significant project to provide support to start-ups, promoted by the Giovani
Imprenditori di Confindustria Vicenza Group and called "Primo Miglio 1609”. This second
project, through the establishment of an “enterprise incubator”, proposes to support and
implement entrepreneurs’ ideas for the establishment of new enterprises in the
manufacturing industries or otherwise connected to the manufacturing sector, which is the
main one in the economy of the Vicenza area.
As indicated, in addition to the direct support provided with traditional banking instruments,
during the year a great deal of attention was also paid to the issue of “structural finance”, thanks
to the investments in the completion of the structure and in the expansion of the range of
products and services on offer by launching projects directed at supporting enterprises with
financial instruments that are not strictly banking instruments and have strong innovative
character. Among them, the main ones were:
–
Private Equity Fund: in an environment characterised by the severe undercapitalisation of
Italian enterprises and excessive use of bank loans, the BPVi decided to offer to its
customers, through the funds managed by the subsidiary NEM Sgr, the direct supply of
risk capital, but always with minority interests;
–
Minibond Project: the Development Decree (Italian Law Decree no. 83/2012) introduced
important changes pertaining to the financing instruments available to enterprises,
particularly non-listed ones, addressing the Italian enterprises’ urgent financing needs,
with particular regard to SMEs, by establishing alternative financing instruments to the
banking channel (bonds, financial bills of exchange and subordinate and participative
bonds). In this second year of activity, the focus was on the bond instrument, promoting
issues in the Euro 5-50 million range. 3 operations were completed, with the placement of
Euro 99 million and the involvement of over eighty financial institutions as subscribers.
From April 2014 to December 2015, BPVI promoted a total number of 13 issues
amounting to Euro 289.4 million in all, with a market share of 33.5% in terms of volumes
of total issues in 2014 and 2015 in the Euro 5-50 million segment;
–
Equity Capital Markets Project: a dedicated Equity Capital Markets structure has been
active since May 2014 in the Finance Division with the purpose of expanding the
commercial offering to corporate customers, complementing the ordinary services with
those connected with stock placement and Stock Market listing. In particular, in June 2014,
BPVi achieved the Nomad (Nominated Adviser) qualification and entered into a
partnership agreement with Borsa Italiana, with a view to being a favourite counterparty,
able to assist SMEs across the board to respond to their financing needs. BPVi also
launched the process for structuring and placing hybrid financial products such as “going
public convertible” and convertible bonds. At the end of 2015, the BPVi assisted 7
companies in the process for their listing on AIM Italia - Alternative Market of Capital,
the market organised and managed by Borsa Italiana for the listing of small and medium
enterprises.
- 62 -
B
RESEARCH AND DEVELOPMENT
In view of its business and industry sector, the BPVi Group does not generally carry out research
and development as such. As a result, it has not recognised any intangible assets or costs in this
regard. The routine implementation and update of the product catalogue, designed to ensure
that each business offers a complete range of products and services in line with those of major
competitors, and the revision of procedures and internal processes to ensure that the operational
structure functions adequately, do not result in new or significantly improved products, services
or processes with respect to those already present on the market, since they are not the result of
research and development in the strict sense.
- 63 -
B
SYSTEMS
SIMPLIFICATION AND BRANCH EFFICIENCY
Work continued on the optimisation of branch processes during 2015, with the purpose of
simplifying and improving Network operations.
Among the main initiatives, of note is the continuation of activities to simplify and improve
the operating processes of branches, exploiting in particular the projects pertaining to the
dematerialisation of hardcopy (paper) documentation. In particular, the acquisition of the
customers’ digital signature via tablet, with respect to the hard copy accounting documents
produced at the branch, was consolidated, reaching a utilisation rate above 80%. In parallel, each
advisor station was equipped with a tablet and the acquisition of the electronic signature was
also extended to agreements for the opening of new accounts. As is prescribed for account
statements, contracts are also stored in digital mode, made available to the customer through the
Internet Banking service and stored in accordance with the law, which makes it possible to
preserve the availability and readability of the documents over time.
In addition, it should be stressed that, in line with the provisions of the 2015-2020 Business Plan,
from January 2016 onwards, the organisational model of the commercial network was revised,
through the establishment of two distinct chains, focused respectively on Retail customers and
on Corporate & Private customers. Within this reorganisation, which involved the establishment
of 6 “Retail Districts” and 15 “Corporate & Private Business Centers”, each with specific
territorial assignments, the “Hub & Spoke” branch model will also evolve. In 2016, local
micromarkets will be set up, to be served by several branches, which will be coordinated by a
Hub Branch. The latter, being typically more structured both in terms of personnel and
competencies, will be tasked to oversee and coordinate the commercial action on the reference
micromarket. The establishment of the micromarkets will bring about significant benefits with
regard to the performance of services for customers, because the decision-making and
operational processes of the commercial chains will be streamlined and made more efficient.
LENDING
With regard to the Lending Area, in 2015 the activities in support of the A-IRB (Advanced
Internal Rating Based) project continued from last year.
Among the 2015 activities, of note was the activation, for Banca Popolare di Vicenza and
Farbanca, of the new Non-Performing Loans Management (GDS) procedure, which took place
in the second half of the year and brought about significant benefits both by unifying functions
in a single application environment, and with a view to streamlining the accounting process. In
2016, the management tool is expected to be activated for Banca Nuova as well.
In terms of the lending process, the revision of the Network Model, active on Banca Popolare di
Vicenza since 1 January 2016, has entailed the need to revise loan granting powers by the Loans
Division, which led to updates in the procedures and the pertinent rules.
With regard to the loans themselves, Risk Adjusted Price (RAP) processes were introduced at
the procedural level, making it possible to identify a consistent proposal of economic conditions
for loans, to take into account the characteristics of the operation to be granted and the riskiness
of the customer to whom the offer is addressed.
In addition, a specific working group was set up to focus on analysing and improving the
procedures and processes for managing the guarantees issued in favour of the Bank.
Moreover, activities continued to revise the internal regulations as necessary to support changed
commercial requirements and the evolution of the regulatory framework.
- 64 -
B
FOREIGN TRADING
With regard to Foreign Trading, one year after the activation, for the BPVi Group, of the
Pr.E.M.I.A. platform, the new IT procedure dedicated to supporting all foreign operations of the
Group’s banks, additional advanced functions were released, in addition to the improvement
activities connecting with the other procedures and corporate applications; these functions
pertain to: management of tax monitoring reports, which regulations have heavily modified in
terms of reporting procedures starting from the database of the Single Computerised Archive of
anti-money laundering reports, the new products of advances and loans following the
signature, by the Bank, of the Fifth Convention for issuing loans to foreign companies and
banks in Euro with CDP (Cassa Depositi e Prestiti) funding, the new with recourse and
without recourse products to complete the range of products used by foreign companies and
banks to dispose of commercial transactions with deferred payment, the restyling of the
‘Termine Libero’ product to improve the management and forward purchases and sales, with the
possibility for partial and total early extinction to cover commercial transactions, the
management of own precious metals and, lastly, the activation of operations connected with
payments in the “Renminbi Offshore” currency to assist companies in the transfers of
commercial flows towards China.
FINANCE
In 2015, investment services saw the continuation of development of the instruments for the
performance of the financial advisory service to customers. In particular, following the
promulgation, on 22 December 2014, of Consob communication no. 979961 and of the subsequent
Questions & Answers of 23 June 2015 on the distribution of complex financial products to retail
customers, a project was launched to revise the MiFID in accordance with the new provisions
introduced by the Supervisory Authority. Therefore, BPVi upgraded its own system for
rendering the advisory service, the related applications and the pre-contractual disclosure and
reporting to customers in accordance with the new regulations on complex products.
In addition, a new control was introduced in the phase involving collecting purchase orders on
financial instruments, in order to verify whether the order imparted exceeds the numeric
threshold of transactions deemed consistent with the Customer’s profile in relation to the type of
financial product and to the respective risk class (“frequency control”).
In relation to the indications provided in the ESMA guidelines on some aspects of the adequacy
requirements prescribed by the MiFID directive, a specific document called ‘Information to the
customer on the adequacy assessment’ was prepared, to illustrate the information the Bank
acquires using the MiFID questionnaire and the use it makes of it to assess the adequacy of
investments. The purpose of the document is to express the importance of the adequacy
assessment and profiling as an instrument to allow the Bank to recommend and execute orders
on products and investment services that are adequate with respect to the Customer’s profile.
With reference to the FATCA (Foreign Account Tax Compliance Act) regulations, in force since 1
July 2015, the BPVi Group upgraded its procedures in order to classify the new customers, for
U.S. (United States) purposes, by administering a Natural Persons and Legal Persons
questionnaire prepared ad hoc (Onboarding), to classify, for US purposes, customers with active
accounts as at 30 June 2014 on the basis of the bank’s internal evidence (“Due diligence”) and,
lastly, annually to report US customers and the changes in their accounts to the IRS (Internal
Revenue Service) of the United States through the Italian Revenue Agency.
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In addition, the BPVi Group adhered to the European standardisation platform ‘Target2Securities’
for regulating investment transactions on financial instruments, officially appointing BNP
Paribas Securities Services as sole Global Custodian for the settlement of Italian and foreign
financial instruments.
Evolution activities pertaining to the ‘Bancassurance’ sector, both with reference to the product
catalogue and with reference to the changes required by reference regulations within the scope
of the IVASS / Bank of Italy joint letter relating to policies associated with loans (PPI - Payment
Protection Insurance).
With reference to operations via Third Party Networks, work continued to strengthen the IT
architecture used by the Bank to manage both the operations of financial promoters and of the
agents operating with the Group company “BPVI Multicredito - Agenzia in Attività
Finanziaria”.
INFORMATION TECHNOLOGY
In 2015, the complex technological renewal project was completed; it involved the replacement
and virtualisation of all jobs in the Network, as well as the revamping of the headquarters
work stations, the printer pool and the system of shared folders to manage files in the network,
with considerable advantages in terms of operations and TCO. In addition, investments were
made on the measures for safeguarding business continuity, with infrastructural interventions
for the redundancy of fibre optics connections, and on the optimisation of internal
communications with the launch of the Microsoft Lync integrated platform, which offers
innovative features (chat, video call, virtual meetings, document sharing, etc.) and it allowed the
reduction of travel costs.
On the front of logical security, a first revision was completed of the criteria for the definition
of the authorisation profiles for the central structure and for the network model, to be
followed by a project for revising and upgrading the internal processes to manage digital
identities and access control, with the objective of streamlining the definition of the profiles and
increase control over the granting of privileges.
Activity was started to renew Internet filter and protection systems, with the simultaneous
activation of features to prevent the loss of confidential corporate data (DLP), and an
infrastructure was set up in preparation to the adoption of cloud computing solutions directed at
reducing costs and optimising the operating processes.
With regard to compliance with standards and regulations, the installation of the totems
dedicated to bank transparency was completed in all the Group’s branches for immediate
updating of the information sheets addressed to customers, with significant benefits in terms of
internal processes, reduction of operations and increased Network productivity, as well as
compliance with legal requirements. Important assessment activities were also completed on the
aspects relating to the governance of the information system and of IT security, with reference to
current bank supervision regulations (Bank of Italy Circular no. 285/2013), security of web-based
payments (EBA), contrasting cybercrime (ECB), privacy and provisions of the authority, as well
as in relation to the best industry standard.
In addition, investments were made on the optimisation of the main control processes, in
particular the processes for the management of incidents and changes, fraud prevention and
management of identities and access control.
The process of outsourcing personnel management application services was completed with the
outsourcing to Data Management of the compensation management procedure.
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SAFETY
With regard to the health and safety of employees in the workplace, in 2015 work continued on
continuous compliance with/fulfilment of the provisions of the "Consolidated law on health and
safety in the workplace" (Legislative Decree 81/2008 and subsequent amendments and
additions), e.g. the risk assessment and updating work at the Bank’s sites, the “Improvement
Plan” and the “Risk Assessment Document - DVR”.
In terms of safety, work continued on the "Assessment of Work-Related Stress Risk", mandatory
from 1 January 2011, and on confirming, for 2014, the conformity of the Workplace Health and
Safety System in accordance with UNI-INAIL Guidelines; compliance was verified through
dedicated audits conducted by primary certification companies (DNV).
Lastly, information and training (classroom sessions) continued to be provided to responsible
persons, emergency staff (first aid, fire prevention and care of the differently abled), personnel in
the Prevention and Protection Department, and Employee Safety Representatives as well as
executives with delegated powers.
In terms of physical and behavioural security, work continued on alignment to the Parent
Bank’s security standards and guidelines and Crime-Prevention Memorandums of
Understanding were signed with Prefectures and with the ABI. Additionally, robbery risk
prevention training continued for branch managers and customer managers and, more in
general, information was provided to all Network personnel.
Additionally, the Parent Bank intensified its governance work with respect to the Group’s Banks
and Companies, both in terms of safety and security, in order “consistently” to comply with legal
prescriptions.
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SYSTEM OF INTERNAL CONTROLS
THE SYSTEM OF INTERNAL CONTROLS AND AUDIT FUNCTIONS
With the 15th revision of Bank of Italy Circular no. 263 of 2006 “New regulations for the
prudential supervision of banks”, issued on 2 July 2013, introduced the new Supervisory
Regulations concerning “Internal Control System”, “Reporting System” and “Operating
Continuity”.
The Regulations defined a comprehensive framework of standards and rules undergirding the
Internal Control System, consistent with international best practices and with the
recommendations of the main international bodies (Financial Stability Board, Basel Committee
on Banking Supervision, EBA).
The Internal Control System consists of the set of functions, organisations, resources and
processes directed at assuring, in compliance with sound and prudent management and through
an adequate process for identifying, measuring, managing and monitoring corporate risks, a
business management that is sound, proper and consistent with the pre-set objectives.
The Internal Control System is a fundamental element to assure the protection of the company’s
capital, the efficiency and effectiveness of corporate processes and operations, the credibility of
financial disclosure and compliance with laws and regulations.
The current Supervisory Regulations for internal controls define the Internal Control System as a
fundamental element of the comprehensive bank governance system; it assures that activities are
carried in accordance with corporate strategies and policies and in compliance with the
standards of sound and prudent management.
The controls involve, with different roles, the Strategic Supervision Body, the Management Body,
the Control Body, the Governance Committees and all Group personnel and they are an integral
part of day to day activities. These “controls” must be identified with the goal of mitigating the
inherent risks existing in corporate processes and, consequently, assuring the correct execution of
corporate operations.
The Internal Controls structure comprises the following three tiers:

Line controls;

Risk management controls;

Internal audit.
For full disclosure, it should be recalled that, in consideration of the aforementioned inspection
results, the Board of Directors initiated a renewal process that also involved the leadership of the
control functions (Internal Audit Department, Compliance and Anti-money Laundering
Department, Risk Management Department).
Line controls
The purpose of line controls is to ensure the correct execution of operations, also by applying a
control involving a check of the regular execution of the processes. They are carried out by the
operating structures themselves (e.g. hierarchical, system-wide and sampling controls) also
through different units reporting to the heads of the operating structures, or performed within
the back office; insofar as possible, they are included in IT procedures.
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Line controls, be they carried out by real persons or through IT procedures, can be further
distinguished into:

First level line controls: these are carried out directly by those who perform a certain
activity, or by the IT procedures supporting that activity;

Second level line controls: they are carried out by persons who do not actually perform
the operations but are tasked with supervising them (“risk owners). In particular, the latter
are divided into:
o Functional controls: carried out by corporate structures separate from the operating
structures; they include the functional controls carried out within the scope of
specialist back-office or support activities (e.g., controls carried out by back office
units on Network operations;
o Hierarchical controls: carried out by corporate roles hierarchically above those
responsible for the operation (e.g. controls carried out by Network Managers on
operations carried out by the operators reporting hierarchically to them).
Risk management controls
Risk management controls serve the purpose of ensuring, inter alia:

the correct implementation of the risk management process;

compliance with the operating limits assigned to the various Functions;

the corporate operations’ compliance with regulations.
The Functions tasked with performing these controls are separate from the productive functions;
they contribute to the definition of the risk governance policies and of the risk management
process.
Specifically, these controls are carried out by the Corporate risk management Control
Functions, as defined by Bank of Italy (Compliance, Risk Management, Anti Money
Laundering and Validation) and by the Functions that, according to provisions of law,
regulations, articles of association or self-regulation, have prevalent control duties (Financial
Reporting Manager).
In particular, with reference to the Corporate risk management Control Functions, the objectives
of the controls are set out below, according to the corporate structures tasked with performing
them:

to contribute to the definition of methodologies for the measurement of risk, check
compliance with the limits assigned to the various operational functions and check the
consistency of the transactions carried out by each production unit with the assigned
risk/return targets (Risk Management Function),

to concur in monitoring the performance and stability of the first pillar internal risk
management systems used to calculate capital requirements (Validation Function);

to concur in the definition of methods for measuring/assessing the risk of non compliance
with regulations, verifying that corporate processes are capable of preventing the violation
of externally imposed regulations (laws, regulations, etc.) and voluntarily adopted
regulations (codes of conduct, codes of ethics, etc.) (Compliance Functions);

concurring in the prevention of risks connected with use of the financial system for the
purpose of laundering the revenues from criminal activities and financing terrorism, in
accordance with the reference regulations (Italian Legislative Decree no. 231/07) (Antimoney Laundering Function).
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Internal audit
The Internal Audit activity serves the purpose of identifying violations of procedures and
regulations, as well as periodically assessing the completeness, functionality, adequacy (in terms
of efficiency and effectiveness) and the reliability of the Internal Control System. Another
purpose of the activity is to bring potential improvements to the attention of the corporate
Bodies, with particular reference to risk governance policies, to the risk management process and
to risk measurement and control instruments. Based on the results of its own controls, the
Internal Audit Function submits intervention requests to corporate structures.
It should be specified that the Internal Audit Function operates throughout the Group. In
compliance with independence requirements, this Function reports hierarchically to the BPVi
strategic supervisory Body and, functionally, to the BPVi Control Committee, to the BPVi control
Body and to the BPVi management Body.
The Internal Audit Department is based on:

an Inspection Team, tasked with verifying, on site or remotely, behavioural compliance
with regulations, internal procedures and corporate standards and expressing merit
assessments with respect to certain cases. In addition to serving its main purpose of
assessing the internal control system with respect to “compliance with regulations and
corporate standards”, the inspection activity is also carried out in the interest of the process
analysis performed by the Auditing Team, as well as in the interest of the oversight activity
performed by other control Bodies and Functions (Board of Statutory Auditors, also in its
capacity as Supervisory Body, Risk Committee, second level control Functions) or strategic
supervision and management roles (Board of Directors, General Managers). In
organisations characterised mainly by territorial distribution models, as in the BPVi Group,
inspections are fundamental in the policy for the mitigation of credit, financial, operational,
and legal/reputational risks.
With regard to the inspections carried out on the Distribution Network of the BPVi Group,
in 2015 a total of 222 routine inspections were carried out (174 at the Parent Bank, 47 at
Banca Nuova and 1 at Farbanca, consisting of full audits on branches, remote audits on
Corporate Portfolios, on site audits on Promoters and Private Banking Portfolios).
Additionally, a series of in-depth surveys and remote analyses was also carried out (a total
of 171 interventions at the Group level), with focus on specific events (e.g., robberies, cases
of internal or external fraud, customer and/or employee operations, etc.). In detail, 110 indepth surveys were carried out on Banca Popolare di Vicenza (of which 34 involved the
entire Group), 37 on Banca Nuova, 13 on Farbanca, 11 on Prestinuova;

an Auditing Team, focused on the “core” activity of internal auditing, which consists of
the execution of audits directed at assessing the functionality of corporate processes (rules,
procedures and organisational structures) and the operations of the Central Offices. The
team is also focused on advisory activities in support of the Corporate Bodies and the
Corporate Functions of the Group’s Banks and Companies in the definition of internal
controls, formulating proposals for improving the risk control and management processes
and corporate governance.
With regard, instead, to the activity carried out by the Auditing Team, 39 audits of
processes and central offices were completed at Group level in 2015, while 6 more are still
ongoing. The audits involved the processes belonging to the areas of lending (4 audits),
finance (8 audits), management (6 audits), support (7 audits), operational processes (7
audits), marketing, sales and customer service (4 audits). To these were then added the
extraordinary audits carried out within the scope of the AIRB project.
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Auditing is also responsible for performing periodic audits on the adequacy and
effectiveness of the second level control Corporate Functions, on the adequacy and
compliance of the risk management and control system, including the assessment of the
effectiveness of the process for defining the Risk Appetite Framework (RAF), on the
compliance of the Internal Capital Adequacy Assessment Process (ICAAP) and of the
Advanced Internal Rating Based (AIRB) Models with the requirements set by regulations,
on the adherence of remuneration and incentive practices with respect to current
provisions and to the policies put in place by the Board of Directors of the Parent Bank.
The Internal Audit Function is carried out centrally by the Parent Bank’s Internal Audit
Department for all Companies in the Group, on the basis of specific outsourcing service
agreements and formalised SLAs. In particular, during the period an audit was carried out on
Servizi Bancari.
With regard to the activity carried out by the Risk Committee8 of the Parent Bank, it held 15
meetings in 2015. Among the main topics discussed were Compliance with the New Supervisory
Regulations pertaining to the organisation and corporate governance of banks under Bank of
Italy Circular no. 285/2013, in particular disclosure pertaining to Bank of Italy Circular no. 285
on “Internal system for reporting violations, or ‘Whistleblowing’”, the update on the progress of
the inspection activity by CONSOB, the Plan of action for 2015 of the various second and third
level control functions, the periodic reports on the activities carried out by Internal Audit,
Compliance, Anti-Money Laundering and by the Financial Reporting Manager and, lastly, the
periodic reports prepared by the Risk Management function on the risk profile of the loans
portfolio, on market, interest rate, liquidity, operating risks, related parties and equity
investments that may be held.
In addition, the reports about the audits carried out by the Internal Audit Function, by the
Compliance Function and by the Anti-Money Laundering Function were brought to the attention
of the Risk Committee.
The Risk Committee was constantly informed of the completion of the initiatives identified in
view of the audits performed by the Internal Audit, Compliance and Anti-Money Laundering
Functions.
Within the scope of the initiatives connected with the enforcement of the New Regulations for
the Prudential Supervision of Banks with regard to the Internal Control System, Reporting
System and Operating Continuity per the 15th Revision of Circular no. 263 of 27 December 2006,
on 13 October 2015 the Board of Directors of the Parent Bank approved the new 2015-2018/20
Business Plan, while also launching the plan for the execution and implementation of the
strategic actions specified in the plan. In this context, the Board provided a specific scope of work
directed at improving the System of Internal Controls, whose governance was assigned to the
Internal Audit Department.
Of note, lastly, is the activity carried out by the Internal Audit Department within the scope of
the ECB inspections and support to the survey activity carried out by the Board of Directors.
8
Former Control Committee; in compliance with Bank of Italy Circular no. 285 of 2013, on 31 March 2015 the Board
of Directors decided to change the name of the Control Committee to Risk Committee.
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THE GROUP COMPLIANCE AND ANTI-MONEY LAUNDERING FUNCTIONS
The Bodies of the Parent Bank Banca Popolare di Vicenza, in exercising their prerogatives with
regard to “taking Group-level strategic decisions on the management of risks of non compliance
with regulations (i.e. the risk of incurring judicial or administrative penalties, material financial
losses or reputation damage as a consequence of violations of mandatory or self-imposed rules)
and of the risk of money laundering and terrorism financing”, have established the “Group
Compliance Function” and the “Group Anti-Money Laundering Function”.
The Group Compliance Function provides a second level control in the prevention and
management of risks of non compliance with rules, with a view to preserving the good name of
the BPVi Group and the public’s confidence in its operational and managerial integrity,
contributing to the creation of corporate value. The Parent Bank’s Compliance Function performs
this role also on behalf of the Group’s companies that are obligated to establish this Function
because they are recipients of the obligations set out by current provisions regulating the matter.
The Group Anti Money Laundering Function provides a second level control in preventing
and contrasting the execution of recycling and terrorism financing transactions, in the interest of
the entire Banca Popolare di Vicenza Group. The Anti-Money Laundering Function performs
said role also on behalf of Group companies required to establish said function, inasmuch as they
are the recipients of obligations set forth by the Provision issued by the Bank of Italy on 10 March
2011.
The Group Organisational Model of the Compliance and Anti-Money Laundering functions is
centralised for all the Group’s Banks, for NEM SGR S.p.A., and for the companies PrestiNuova
S.p.A. and BPVi Multicredito Agenzia in Attività Finanziaria S.p.A. (solely the Anti-Money
Laundering function) and it calls for the appointment of single Contact Persons for the two
Functions with the Subsidiaries.
However, it should be noted that, on 10 September 2013, the Revision of the Regulations,
function statements and SLAs of the two Functions were submitted to the Board of Directors for
approval, consistently with the Instructions of the Bank of Italy (15th update of Circular no. 263
of 27 December 2006 promulgated on 2 July 2013) entitled “Internal control system, information
system and operating continuity”. In line with these provisions (entered into force, to a large
extent, on 1 July 2014), the most significant change, indicated in the Regulation of the
Compliance Function as regards governing compliance with the regulations, concerns the
“opening” of the Function’s operating perimeter.
In addition, at the same meeting, the new Group Policy to counteract money laundering and
terrorism financing was approved, which defines the responsibilities, tasks and operating
methods for the management, at Group level, of the risk of money laundering and terrorism
financing.
Lastly, on 4 February 2014 the Board of Directors approved a refinement of the operating model
of the Anti-Money Laundering Function, in relation to the entry into force, on 1 January 2014, of
the Bank of Italy Instruction introducing implementing provisions for adequate customer
verification. In particular, a dedicated Office was established, located in Prato, away from the
Group’s head office, in order to achieve a clearer separation, within the Function, between the
control activities and reporting and active collaboration with the Authorities.
In 2015, the marked increase in audit activities (especially ex ante activities), participation in
working groups and communication with the supervisory authorities, imposed an action to
strengthen and reorganise the Functions. In relation to this need, within the execution program
of the Business Plan the “Risks and Internal Controls” construction site was activated; it
comprises the “Compliance & Anti-Money Laundering” project. The activities are already
ongoing and, at the time, they are focusing on the remapping and weighing of the risk areas, as
well as on the verification of the possibility of scaling the duties of the Compliance Function.
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In the third quarter of 2015, the Risk Areas were re-mapped and they were distributed in the tree
regulatory sectors “Customer & Market Protection” (C&MP), “Governance & Administration
Compliance” (G&AC) and “Anti-Money Laundering” (AML).
In 2015, the Group Compliance and Anti-Money Laundering Functions performed the activities
for which they are responsible, as prescribed in the respective 2015 Compliance Plan and 2015
Anti-money laundering Plan, both through preventive assessments (ex ante activities) and
through continuous monitoring and dedicated audits (ex post activities).
The Group Anti-Money Laundering Function also carried out the other activities delegated to it
in relation to its technical skills (analysis and transmission of suspicious transaction reports,
remote checks of the precise compliance, by sales Network persons, with anti–money laundering
provisions, forwarding communications of violations of the rules on the use of cash and bearer
securities to the Ministry of the Economy and Finance and response to requests from the
Authorities).
During the year, there were constant communications with the Supervisory Authorities, with
particular reference to the inspections of the European Central Bank and of the CONSOB at the
Parent Bank (the latter one is still ongoing and a dedicated Working Group was established for
it).
During the period, progressively more attention was paid to regulatory changes and the related
organisational updates, also through participation in numerous inter-disciplinary projects and
working groups, and to consultant support within the scope of the most important projects
carried out by the bank. Inter alia, permanent Working Groups on usury and banking
transparency were activated, under the coordination of the Compliance Function, with the goal
of defining and revising the processes, procedures, controls and communication flows best
suited to prevent violations of the reference standards.
In the first part of the year, the activities connected with the project called “adequate customer
verification” coordinated by the Anti-Money Laundering Function, and launched following the
promulgation of the aforementioned Bank of Italy Instruction of 3 April 2013, were completed.
At Group level, the initiatives for the modification of products and processes and the new
product proposals were then evaluated (through the issue of “Compliance Opinions for the
Products and Wealth Management Committee”). Additionally, draft Board of Directors
resolutions pertaining to sensitive cases in terms of non-compliance risks were evaluated. In
relation to these ex ante advisory activities, at 31 December 2015 a total number of 141
Compliance interventions were carried out (comprising “Alerts”, “Compliance statements” and
“Compliance assessments”), as well as 5 Anti-money Laundering interventions
In addition, the Commercial Directives were examined and, starting from the third quarter, the
Circulars that were about to be promulgated (a total number of 144 “Authorisations” were
issued).
The monitoring activities (which also include the data flows originated by the audits performed
by the Internal Audit Department and those responsible for line controls and the data about
customer complaints at the Group level) focus, in particular, the safeguards of compliance with
regulations on the management of related party transactions, insurance brokerage (non MiFID),
the performance of investment services (be means of specific excerpts in the MiFID Area
pertaining to questionnaires, orders and securities movements), management of conflicts of
interest, anti-usury regulations (through the analysis of the rates and conditions applied),
banking transparency and personal data processing, as well as activities of the financial
promoter network. At 31 December 2015, a total number of 44 monitoring results were released
for the areas under the responsibility of the Compliance Function.
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The interventions of the Anti-Money Laundering Function (39 monitoring actions during the
period) instead pertained to compliance with respect to: adequate customer checking, keeping
the single computerised archive, reporting and active collaboration and training of personnel.
With regard, instead, to the audits carried out (“Compliance audits”, “In-depth surveys” and
“Follow-ups”) a total number of 10 interventions were carried out for compliance and 3
interventions for anti money laundering.
THE FINANCIAL REPORTING MANAGER AND THE MAIN CHARACTERISTICS OF
THE EXISTING RISK MANAGEMENT AND INTERNAL AUDIT SYSTEMS IN
RELATION TO THE FINANCIAL REPORTING PROCESS (also pursuant to article 123bis, paragraph 2 (b) of the Consolidated Financial Markets Act)
This section describes the principal characteristics of the “Model for the Governance and
Control of the BPVi Group’s administrative and accounting processes”, which is an integral
part of the Banca Popolare di Vicenza’s system of internal controls and designed to guarantee
the credibility, accuracy, reliability and timeliness of financial information.
The definition of the “Model for the Governance and Control of the BPVi Group’s administrative
and accounting processes” was guided by:

the preliminary identification of a recognised and well-known comparative model;

comparison with reference practices defined or referred to by institutional bodies9;

comparison with domestic and international best practices adopted by organisations
comparable with the BPVi Group.
Based on the Model that has been defined, the Financial Reporting Manager’s operations will
develop along a cycle of sequential activities (the “DP cycle”10), which aims to place the
administrative accounting processes under a plan, assess the adequacy and functionality of the
related audits, ascertain/declare the corporate accounting disclosures required by Law with the
knowledge deriving from the existence/adequacy of processes and the actual performance of
accounting controls.
The phases of the cycle of activities fall under the responsibility of the Financial Reporting
Manager who, however, relies not only on the results of the activities carried out by the control
functions, but also on support from the Internal Audit Department, for the performance of audit
activities defined according to a specific service agreement, and from the Organisation and
Safety Department, in order to increase efficiency while minimising the resources required in the
activity under his/her direct supervision and coordination.
The activities performed by the Financial Reporting Manager in 2015 are in line with the
provisions of the relevant work programme.
9
The COSO Report – “Internal Control Integrated Framework” developed by the Committee of Sponsoring Organizations of the
Treadway Commission, comprising the principal US professional accounting and auditing associations was used as a reference for
defining the Financial Reporting Manager's Model. It provides a methodology for the analysis and evaluation of the system of internal
controls recognised at an international level and recommended by ANDAF (National Association of Finance Directors) in a specific
position paper, as well as by ABI in Circular no. 13 dated 27 April 2007.
10 The operational activities comprising the “DP cycle” are grouped in terms of sequence, nature and purpose into the phases
indicated below:

Phase 1 - Assessment of business controls (Entity Level Control) established by the administrative-accounting Model;

Phase 2 - Definition of scope and planning of activities;

Phase 3 - Formalisation/update of administrative-accounting processes;

Phase 4 - Assessment of risks and design of accounting controls, as well as monitoring of the plan for corrective action (Risk
& Control Assessment);

Phase 5 - Test of controls;

Phase 6 - Assessment of process controls and preparation of the declaration/certification.
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On the basis of a web-based application, the Financial Reporting Manager obtained the internal
sub-certification by the Control Owners on the actual execution of the administrative and
accounting audits during the year. The Financial Reporting Manager also obtained the
certifications of those responsible for the assessment processes and the results of the audits
carried out by other control functions on behalf of the Financial Reporting Manager. Analysis of
the above processes identified that the Group’s exposure to administrative-accounting risk is
compatible with the requirements to provide correct financial information.
RISK MANAGEMENT
This section of the report presents key information about the work performed by the Group in
2015 to manage banking and financial risks. The purpose of the Risk Management function is
to measure and control risks, both at an individual level and on a consolidated basis. This
mission involves:

the definition and development of models and tools for the measurement and control of
risks at Group level, as well as the systematic and continuous verification of the adequacy
of the risk management models and tools used, while also monitoring developments in the
regulatory framework;

verification that the risk profiles of the Group’s Banks and Companies comply with the
objectives and limits established by the respective Boards of Directors, and by the Board
of Directors of the Parent Bank with regard to the overall risk profile for the Group.
The Group’s risk propensity is defined annually within the Risk Appetite Statement approved
by the Board of Directors of the Parent Bank and its compliance is verified on the basis of the
processes formalised in the Risk Appetite Framework (RAF) and in policies dedicated to the
individual risk profiles.
In particular, in 2015 the risk monitoring and management activity was based on the Risk
Appetite Statement approved on 12 December 2014 by the Board of Directors of the Parent Bank
Banca Popolare di Vicenza, implementing, inter alia, the indications contained in the 15th
Revision of Circular no. 263 of 27 December 2006.
For the individual risk profiles, when relevant, the following reference values were identified:
–
Risk Appetite, which represents the risk level (overall and by type) the Group
intends to assume for the pursuit of its own strategic objectives;
–
Risk Tolerance, which represents the maximum allowed deviation from the Risk
Appetite;
–
Risk Capacity, i.e. the maximum level of risk (when it exists) that the Group is
technically able to assume without violating the regulatory requirements or the other
constraints imposed by the Supervisory Authority.
The indicators contained in the Risk Appetite Statement are periodically monitored by the Risk
Management Function; if the effective risk profile assumed and measured (Risk Profile) is above
the Tolerance or Capacity level, specific escalation processes will be activated, involving the
Body with strategic supervision function. To complement the aforesaid indicators, moreover,
specific “warning thresholds” were defined to supplement the monitoring perimeter of the RAS.
In 2015, the impact of Risk Appetite was further refined to better represent the Group’s new
organisational and governance set-up, and to comply with the new regulatory requirements for
“Bank recovery and resolution”, providing an integrated vision between management of the
Bank under “business as usual” conditions and under stress conditions. These innovations were
translated into the promulgation of new internal regulations, approved by the Board of
Directors of the Parent Bank on 22 December 2015 together with the objectives and limits for
the year 2016, specified through a renewed set of indicators.
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Risk profile of the BPVI Group
The Group identifies its exposure to risks within the self-assessment of capital adequacy
(ICAAP process), taking into account its own business model, its strategies, and the evolution of
the operating and market environment. These analyses are taken into account in the annual
definition of risk propensity formalised in the Risk Appetite Statement.
The following discussion covers the management and monitoring of the principal types of risk to
be applied to the Risk Appetite Framework in force in 2015, providing some indications
concerning the evolution approved at the end of the year, to be implemented in 2016.
Credit risk
Credit risk is defined as the risk of loss due to an unexpected deterioration in the
creditworthiness of a borrower, whether as a result contractual non-performance or otherwise.
The credit risk is also connected with the risk of incurring losses as a result of the performance of
advisory services involving extraordinary finance and acquisition of equity investments not
classified in the trading book for supervisory purposes, due to non-performance by the
counterparty.
The credit exposure risks considered by the BPVi Group are regulated by the “New prudential
supervisory instructions for Banks”. In particular, credit risk is included among first pillar risks,
for which the bank must calculate the minimum capital requirements, concentration, country
and transfer risks are included among the risks in relation to which banks must assess their
capital adequacy (“Second Pillar” risks, Bank of Italy, Circular no. 263 of 27 December 2006).
With regard to the way credit risk is managed, the BPVi Group defined a dedicated internal
regulation for managing credit risk, the concentration risk and the other exposure risks, which
identifies the risk measurement methods, the roles and responsibilities of the corporate Bodies
and Functions involved, and the related management reports.
The core principles of the credit exposure risk governance model of the BPVi Group, developed
according to a logic consistent with the roles and responsibilities defined in the Risk Appetite
Framework Regulation and in the ICAAP, prescribe that:
–
responsibility for defining the guidelines on managing these risks rests with the
Body with strategic supervision function of the Parent Bank which, with annual periodicity
within the process for the approval of the Risk Appetite Statement, defines the objectives in
terms of credit exposure;
–
riskiness is monitored centrally by the Parent Bank with reference to the
individual Legal Entities and to the Group as a whole;
–
individual Legal Entities must comply with the guidelines defined by the Parent
Company for risk and capital management.
In this context, the Risk Management Function monitors changes in the risk profile of the loans
portfolio at a consolidated level and for each Group bank. This activity includes the preparation
of monthly disclosures and quarterly reports, respectively for senior management at Group
banks and for the respective Boards of Directors. The Function also develops rating models, and
takes part in the definition of methodologies for estimating the general provisions needed with
reference to the related components of risk. More generally, the function also provides support
for the definition of credit measurement methodologies for accounting purposes, with the
exclusion of the “analytical” component.
In 2015 the second level audit activity of loan performance monitoring was launched, directed at
auditing, inter alia, the work of the operational and credit collection units, assuring the correct
classification of non performing exposures and the adequacy of their degree of irrecoverability.
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Within the Risk Appetite Framework (RAF), during the year the Risk Management Function
monitored compliance with the system of objectives, limits and/or thresholds of attention
approved by the Board of Directors pertaining to:
–
the expected loss of the portfolio of performing loans;
–
the level of single name and geo-sector concentration;
–
the exposure to “critical sector”, whose list is revised annually in collaboration
with the Loans Division; The Critical Sectors are the sectors that, based on assessments
made on data outside and inside the Bank, exhibit systemic risk elements as such to call
for the application of specific credit policies.
–
the instalment/income ratio and the “loan to value” referred to home mortgages;
–
the exposure to country risk in terms of relevance over the loans portfolio and
assessment of the countries with which the Group has significant exposures.
In addition, the Board of Directors, on 22 December 2015, set objectives and limits also with
reference to the rate of growth of defaulted loans, to the rate of coverage of default loans and to
the Texas ratio (non-performing loans over Common Equity), with the objective of making asset
quality monitoring yet more stringent.
In 2014, within the broader project for compliance with the 15th revision of Circular no. 263/2006
and on the basis of the Masterplan, the “credit risk management policy” was revised according
to the new concepts and to the new management process introduced with the Risk Appetite
Framework: assessments systems were introduced for the country risk and for the transfer risk,
along with a process for assessing the overall consistency of the ECAI ratings with the
independent evaluations made by the BPVi Group.
In 2015, within the scope of A-IRB (Advanced Internal Rating Based) Project, aimed at
achieving the shift to advanced credit risk management methods, the New Rating System
(models, processes, procedures, regulations) was launched for all segments (Large Corporate,
Sme Corporate, Sme Retail, Small Business and Private) with consequent activation of the New
Rating Assignment Procedure throughout the Group’s sales Network; in addition, the initiatives
directed at assuring the use of the metrics produced by the Basel 2 models (PD, LGD and EAD)
in the main corporate processes were identified and defined, inter alia. Internal ratings represent
a summary assessment, for the coming year, of the credit quality of the customer expressed as a
probability that the counterparty may become insolvent. This assessment is expressed on internal
classification scales (one for each rating segment) consisting of 11 rating classes for performing
accounts and 1 residual class for those in default. A probability of default is associated with each
rating class. Rating classes are ordered on the basis of credit risk: moving from a lower risk class
to a higher risk class means an increase in the probability of default by the debtor within the
following 12 months.
The BPVi Group has developed internal rating models that cover the types of counterparties
with which it usually works and to which it is most exposed. The models contemplate the
following customer segments: retail counterparties, divided into small businesses (mostly
comprising sole traders) and SME Retail (entities with revenues between Euro 0.7 million and
Euro 2.5 million), and corporate counterparties, divided into SME Corporate (entities with
revenues between Euro 2.5 million and Euro 150 million) and Large Corporate (entities with
revenues above Euro 150 million). These models were completed during the first half of 2014 and
released to all Group banks.
Routine monitoring activities are based on the GDC (Credit Management) instrument, aimed at
defining an advanced model for managing loan books based on predetermined strategies (goals,
actions and timing) according to the level of customer risk. This IT tool supports account
managers, allowing them to check on changes in the credit status of customers, and quickly
identify any deterioration in the standing of borrowers.
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This management tool is based on an Early Warning monitoring system, which promptly
identifies anomalies that are indicators of possible deterioration in customers’ creditworthiness.
In recent years, the tool was enhanced with the introduction of improvements deriving from AIRB rating models, including the revision of the indicators used for credit risk monitoring.
Previously, management categories were identified which include positions that, while
maintaining a performing status, present anomalous trends such as the “Watch” (SOR)
management class and the “Pre - Past Due” management category, the latter directed at carrying
out focused actions on positions that have been continuously above the allowed limit for more
than 40 days.
In addition, the management of loans is governed by “Lending Policies” that specify how the
Bank intends to accept credit risk in relation to its customers, covering both the granting and the
renewal phases of the lending relationship. The policies are directed at promoting a balanced
growth of loans to counterparties with higher standing and to regulate the issuing of loans to
customers with lower credit ratings. In particular, four different lending policies have been
identified: “development”, “management and protection/ critical sectors”, “rebalancing” and
“disengagement”. The assessment is made by the authorised functions, while the system
automatically establishes, based on the internal rating and environmental score taken together,
the powers of the Network authorisation Committees based on the level of risk (lower powers in
the case of high risk and greater powers in relation to more creditworthy customers). For critical
sectors, the “management and protection” policy represents a minimum level (the
“development” policy is inhibited).
Lastly, the standard reports on the dynamics of anomalous loans are, via the Intranet, now
available to individual account managers within the commercial network.
Concentration risk
Concentration risk is defined by the BPVi Group as the risk deriving from exposures in the loans
portfolio towards counterparties, including central counterparties, groups of related
counterparties and counterparties operating in the same industry, located in the same geographic
area or exercising the same activity or dealing the same goods, as well as to individual guarantee
providers, if credit risk attenuation techniques are applied. There are two types of concentration
risk:
–
single name concentration risk (concentration to parties belonging to the same
economic group and/or connected);
–
geo - sectorial concentration risk (concentration towards particular industries
and/or geographic areas).
Regarding single name concentration, the BPVi Group has long applied a threshold defined in
terms of the portion of loans granted to single customers or economic groups out of the total
loans granted by the Bank, net of exposures to counterparties belonging to banking and
insurance groups. This indicator is calculated for positions with borrowings exceeding Euro 60
million for the Parent Bank, Banca Popolare di Vicenza, at Euro 20 million for Banca Nuova and
at Euro 3 million for FarBanca; the latter monitoring was introduced in 2015. The BPVi Group
also defines, as part of the Risk Appetite Framework, an attention threshold relating to the
geographical and industry concentration (geo - sectorial concentration risk) of the loans portfolio.
In the sector concentration risk, concentration by economic sector is monitored (net of exposures
to banks), using the breakdowns called for by the method proposed by the ABI Studies and
Research Centre.
Lastly, the Group monitors the second pillar capital requirement in view of the single name
concentration risk, calculated according to the regulatory methodology.
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B
Other credit exposure risk
The policy for managing credit risk, concentration risk and other exposure risks regulates the
management of the credit and concentration risk as well as of the country and transfer risk.
The country risk is defined by the BPVi Group as the risk of losses caused by events that occur in
a country other than Italy. The country exposure concept is broader than sovereign risk because
it refers to all exposures, regardless of the nature of the counterparties, be they natural persons,
entities, banks or public administrations.
The country risk is monitored periodically, in order to perceive and monitor over time the
evolution of this exposure for the Group, which in 2015 did not exceed the attention threshold
approved by the Board of Directors of the Parent Bank.
The transfer risk is defined as the risk that the Group, exposed to a party that finances itself in a
currency other than the one in which its main sources of income are denominated, realises losses
due to the debtor’s difficulty in reconverting its own currency into the currency of the exposure.
The BPVi Group, with annual periodicity, evaluates the materiality of the transfer risk using the
approach suggested by the ABI, isolating exposures that are potentially subject to this risk; the
check carried out in 2015 confirmed that the risk is not significant for the Group.
The residual risk is connected to the ineffectiveness of the guarantees, when enforcing and/or
collecting the non performing and anomalous loan, connected to the incorrect management of
the guarantee both in the acquisition and in the monitoring and/or renewal stage. For this risk,
the Group does not define specific limits within the Risk Appetite Framework, but it actively
manages it through the existing processes and procedures.
The residual, transfer and country risks are included among “Second Pillar” risks, in relation to
which banks must assess their capital adequacy: the BPVi Group does not determine an internal
capital to hedge them, but they are partly quantified within the requirement for the credit risk.
Counterparty risk
Counterparty risk is the risk that the counterparty to a transaction involving specified financial
instruments will default prior to settlement. More specifically, counterparty risk emerges in the
presence of certain types of transaction that present the following characteristics:
–
the exposure to risk generated is equal to the positive fair value generated by said
transaction;
–
they present a market value which changes over time based on the underlying
market variables;
–
they generate an exchange of payments or the trading of financial instruments or
commodities.
With regard to the way credit risk is managed, the BPVi Group defined a dedicated internal
regulation for managing the counterparty risk, which identifies the risk measurement methods,
the roles and responsibilities of the corporate Bodies and Functions involved, the monitoring
activities consistent with the Risk Appetite Framework and the related management reports.
As regards the monitoring of counterparty risk within the Risk Appetite Framework, the Group
uses the associated consolidated capital requirement, calculated in accordance with supervisory
regulations, inclusive of the so-called Credit Valuation Adjustment (CVA) on OTC derivative
transactions, i.e. a capital add-on to take account of potential losses in value connected with fair
value adjustments deriving from a change in the creditworthiness of the counterparty in an OTC
derivative contract. The calculation of this additional requirement was introduced by Regulation
(EU) No. 575/2013 of the European Parliament and of the Council (commonly also known as
CRR).
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B
Market risk
Market risk is commonly defined as the risk of incurring an adverse change in the value of
exposure to financial instruments, included in the trading book for supervisory purposes, due to
unfavourable trends in the interest rates, exchange rates, inflation rate, volatility, stock prices,
commodity prices (generic risk) and issuer’s credit rating (specific risk).
With regard to market risks, the main activities of the Risk Management Function are to validate
and document the sources of, and the processes for gathering market data, to determine and
validate the methodologies adopted for pricing the financial instruments used by various entities
within the Group, and to determine the fair value, for accounting purposes, of nearly all financial
instruments held as assets.
Moreover, within the Risk Appetite Framework (RAF), the Risk Management Function, in
concurrence with the Financial Division, submits to the Board of Directors’ approval the system
of objectives, limits and/or thresholds of attention, detailed by macro-aggregates. These limits
are monitored on a daily basis with the subsequent reporting by the same Function to the Board
of Directors on a quarterly basis and to the various Committees with different periodicity.
With regard to the way the market risk is managed, the BPVi Group defined a dedicated internal
regulation that describes the methodologies for the measurement of the risk, the roles and
responsibilities of the corporate Bodies and Functions involved, and the related management
reports.
For the quantification of market risk, and the consequent definition of the limits, the BPVi
Group has long applied a model based on the Value at Risk (VaR) approach, calculated in full
evaluation through the historical simulation, this method implies the revaluation of the risk
position conveyed by the sensitivities of the portfolio with the shifts in the market parameters
that actually occurred last year. The application of the 99% confidence interval to the distribution
of probabilities of Profit & Loss (hereafter P&L) thus obtained, determines the VaR with holding
period of 1 day. In order to test the forecasting effectiveness of the results of the VaR, backtesting is carried out which makes it possible to compare the loss estimated by the model with
the profit & loss effect of measuring the positions using actual market data. The analysis involves
the so-called clean back-testing approach, which compares the VaR calculated at time t for
estimating the expected loss in time t+1 with the P&L change computed using market parameters
between time t and time t+1 for the same portfolio.
The method for the measurement of financial risks through the VaR applies in normal market
conditions and is unable to provide an adequate measurement of market risks in extreme
situations which could prejudice the Bank’s economic and capital situation. For this reason, the
need arises to conduct further analyses to assess the capacity to absorb the impact of significant
shocks that may occur in financial markets. This type of analysis takes the name of stress testing
and consists of a revaluation of the portfolio imposing particularly adverse shocks, defined
according to discretionary logic, to the various risk factors. The VaR then aims to define the risk
present in market conditions that have historically occurred, whereas stress testing tries to
quantify the risk existing in market conditions that are extreme or not contemplated in the
reference historical series. Therefore, stress testing is, de facto, a complement to VaR and it
measures potential vulnerability upon the occurrence of exceptional and unlikely events that are
nonetheless possible. In defining the stress test scenarios used, the BPVi Group has adopted a
grid of extreme and symmetrical variations regarding stock markets, parallel shifts in rate
curves, trends in exchange rates, volatility and credit spreads; in addition, two market crash
scenarios are envisioned, which reproduce events that have actually occurred in the past.
Compliance with the limits set for VaR is directed at capping, within the established confidence
interval, the maximum daily loss. However, even if the limits are complied with in the time
interval of a single day, over several consecutive days losses may still occur whose sum, within a
given time interval, may reach values that are not in line with the Group’s risk appetite.
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B
To protect itself against this possibility, the Group, in line with financial best practice, has
combined VaR limits with indicators aimed at monitoring any losses over longer periods (“stop
loss”). The stop loss limit represents the maximum allowed loss that can be accumulated over a
given period of time (one month and the entire year), at a given level of authorisation, without
the need to define specific actions. Lastly, the BPVi Group, to monitor synthetic exposure to
individual risk factors, has defined “operating limits”, which represent the maximum risk
assumable in terms of Greeks with respect to individual risk factors (sensitivity).
In 2015, the quantification and control of the VaR limits were carried out by the Risk
Management Function of the Parent Bank, while the daily checking of operating and stop-loss
limits was carried out by the Financial Monitoring & Documentation office.
The usual monitoring of the VaR limits, as defined upon preparing the Risk Appetite Statement
of the Group, was carried out both with regard to the Global Markets aggregate, and for the
Covered Call aggregate, pertaining to the Parent Bank’s operations, as well as for the trading
book of BPV Finance (the only two Group companies with their own trading books).
The aforementioned VaR limits for 2015 and the previous years were defined solely for the
trading book, whereas, with reference to the AFS (Available For Sale) portfolio, where
investments of this kind are resolved by the Board of Directors of the Parent Bank, while it does
fall under the notion of banking book and hence is subject to monitoring of the interest rate risk
through the ALM internal system, a risk monitoring activity was carried out and reported on a
weekly basis to the Finance & ALMs Committee and on a quarterly basis to the Board of
Directors and to the Control Committee, keeping track of the absorption of the specified ceiling
for the different types of investments and analysing risk through the use of the VaR and stress
testing. For 2016, VaR limits were also defined for the AFS portfolio.
In 2015, the VaR, at a confidence level of 99%, with a holding period of 1 day, of the Parent
Bank’s Global Markets aggregate, averaged Euro 1.36 million (approx. 34% in terms of
absorption of the limit, set to Euro 4 million within the Risk Appetite Framework). Concerning
instead the Covered Call aggregate, relating to the sale of bond options and equity options with
underlying securities in the banking book, the average VaR was Euro 1.61 million (0.8% in
terms of absorption of the limit set to Euro 20 million within the Risk Appetite Framework). In
relation to the subsidiary BPV Finance, the 1-day 99% VaR averaged Euro 673 thousand (26.9% in
terms of absorption of the limit, set to Euro 2.5 million within the Risk Appetite Framework).
Within the back-testing activity, in the same period of analysis, 3 cases of negative clean P&L
figure below the VaR figure were recorded in the Global Markets aggregate and 2 cases of
negative clean P&L figure below the VaR figure were recorded in the Covered Call aggregate.
Within the market risk, the BPVi Group also identifies the basic risk, defined as the risk of
incurring losses caused by non-aligned changes in the values of positions of opposite sign,
similar but not identical. With quarterly periodicity, Risk Management monitors this risk,
verifying the presence of any positions in one or more equities included in a stock index with
one or more positions in figures / other derivatives correlated to that index or that offset
opposite positions in futures on stock indices, which are not identical in terms of expiration date,
composition or both. The monitoring carried out in 2015 did not lead to observing a situation of
exposure to the basis risk.
Lastly, market risk also includes the risk of settlement of foreign exchange transactions,
defined by the BPVi Group as the risk to incur losses when, in the execution of a foreign
exchange transaction, the bank hands over the currency it sold, but does not receive the currency
it purchased. With quarterly periodicity, Risk Management monitors the indicator of the
exposure to this risk through the RAF metrics defined on it. In 2015 (until 30 September 2015),
the expected loss on the daily exposure deriving from foreign currency transactions never
exceeded the Risk Tolerance limit, i.e. Euro 1 million. In addition, within the same time interval
daily transactions in the currencies of countries at risk never exceeded the set warning threshold.
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Interest rate risk
The interest-rate risk is defined by the Banca Popolare di Vicenza Group as the possibility that
fluctuations in market interest rates may have a significant impact on the financial position and
the income of the bank. The aforesaid changes affect both income and balance sheet items, by
impacting on the net interest income (and the level of other operating costs and revenues,
sensitive to interest rates) and the value of equity, as a direct consequence of the change in the
value of assets and liabilities sensitive to the interest rate risk. Therefore, an effective
measurement, control and management system, which maintains the exposure to interest rate
risk within prudent limits, becomes essential for the strength of the bank and for the proper
structuring of its Risk Appetite. Financial differences between the assets and liabilities in the
Bank’s financial statements, and consequently, the potential exposure to interest rate risk, derives
as much from customers’ preferences regarding the financial characteristics of investment and
debt instruments, as from the decisions of the institution regarding funding methods and the use
of funds.
With regard to the way the interest rate risk is managed, the BPVi Group defined a dedicated
internal regulation that describes the methodologies for the measurement of the risk, the roles
and responsibilities of the corporate Bodies and Functions involved, and the related management
reports.
This risk is monitored each month using ALMPro ERMAS, an Asset & Liability Management
tool, which measures in “static” conditions the effect of a change in interest rates on the financial
margin and equity. Operational and strategic decisions regarding the management of the
banking book have the ultimate goal of immunising the volatility of the net interest income
(considering current profits) expected over the financial year (12 months) and of total economic
value (considering the market value of the banking book) as a consequence of changes in interest
rates.
The Parent Bank's Board is ultimately responsible for the management of interest-rate risk, as
assisted by the Finance & ALM Committee and the business functions responsible for the
strategic and operational management of such risk, both at Group level and at level of individual
legal entity within the Group. The Parent Bank’s Board of Directors approves the strategic
guidelines and operational limits proposed by the Finance & ALMS Committee, and is
periodically informed about changes in the exposure to interest-rate risk and the way it is
managed.
The Risk Management Function inputs a continuous and comprehensive flow of data into the
Asset & Liability Management system, provides for the management, maintenance and
evolution of the data base and of the parameters of the ALM system and is also responsible for
reporting to Corporate Bodies and for the monitoring of RAF metrics. Lastly, the Finance
Division is directly responsible for the operational management of interest-rate risk through the
execution of the indications provided by the Finance & ALMs Committee.
The Group’s Risk Appetite Statement for 2015, in relation to the interest rate risk, provided the
following system of objectives, limits and attention thresholds:
–
the interest rate risk indicator, both at Group level and individual legal entity
level, calculated as the ratio between the change in the economic value of the banking book
following an immediate parallel shock to the interest rate curves of 200 basis points, and
the Own Funds at the consolidated level;
–
the representation of bucket sensitivity +100 bp at the Group level;
–
the negative change in the interest margin over a time span of 12 months
following a parallel and immediate shock of the interest rate curves of +100 bp;
–
the calculation of the potential negative Net Market Value of the portfolio of
derivatives pertaining to different funding and lending strategies.
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B
In relation to the monitoring of the aforementioned limits, it should be noted that, at 31
December 2015:
–
the Group’s exposure to the interest rate in terms of sensitivity +200 bp amounted
to 15.3% of the Regulatory Capital calculated at 30 September 2015 (the figure at 31
December 2015 is not definitive yet), within the set limit both in terms of risk tolerance
(28%) and risk capacity (32%);
–
+100bp sensitivity for the bucket from 6 months to 3 years at the consolidated
level amount to approximately Euro 67.4 million, higher than the attention threshold set to
Euro 50 million because of the TLTRO refinancing operation with the ECB, amounting to
EURO 1.850 million. The other warning thresholds for bucket sensitivity +100 bp were
complied with;
–
the negative change in the interest margin over a time span of 12 months
following a parallel and immediate shock of the interest rate curves of +100 bp amounted
to 9.4% versus a threshold of -4%;
–
the risk exposure of all BPVi Group legal entities was within the established limits;
–
the “attention thresholds” relating to the potential negative Net Market Value of
the hedging strategies under Hedge Accounting were complied with.
Within the Risk Appetite Framework approved for the year 2016, the aforementioned system of
objectives and limits was updated and further enriched with the definition of capital allocated in
view of the interest rate risk.
Liquidity risk
The Banca Popolare di Vicenza Group has defined liquidity risk as the risk of incurring losses or
lower profits as a result of a temporary difficulty both in raising funds on the market (funding
liquidity risk) and/or of the presence of restrictions on the ability to sell assets (market
liquidity risk), necessary to fulfil the Group’s own payment commitments. In particular, funding
liquidity risk is incurred if the Group is not able to fulfil its own payment commitments and its
own obligations in an efficient manner (thus, according to a logic that is consistent with the
“desired” risk profile and at “fair” economic conditions), because of the inability to raise funds
without compromising its own core operations and/or financial situation. Market liquidity risk
on the other hand relates to the risk that the Group may be unable to sell an asset, except at a
capital loss, due to the illiquid nature of the market and/or due to the timing required for the
transaction.
With regard to the way the liquidity risk is managed, the BPVi Group defined a dedicated
reports.
The Risk Management function develops models and tools for the measurement of liquidity risk,
produces the daily operational maturity ladder and the monthly structural maturity ladder, and
analyses, maintains and develops the various reports produced, ensuring coordination with the
related functions within the Group’s Banks and Companies.
The operational management of liquidity risk is entrusted to a dedicated function within the
Finance Division of the Parent Bank, whose objective is to maintain the best balance between the
medium-term maturities of loans and short-term funding, while taking care to diversify it by
counterparty and maturity arranged over the counter and in the interbank deposits market. In
addition to usual banking treasury activities (daily monitoring of the Group’s liquidity and
optimisation of its short-term management), any medium and long-term imbalances are
managed using appropriate policies established by the Finance and ALMs Committee.
Additionally, the Finance and ALMs Committee is provided a report on the performance of the
Loans/Direct Funding ratio as further support to monitor the Group’s structural liquidity.
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B
For more effective monitoring of liquidity risk, for the year 2015, a system of limits and
thresholds of attention was defined: it is functional to the daily monitoring of the operational
liquidity position and the monthly monitoring of the structural liquidity position.
Within the Risk Appetite Framework, and concerning the monitoring of the Group’s daily
liquidity, the reference indicator selected is the Liquidity Coverage Ratio (LCR). This indicator
identifies, at Group level, the stock of uncommitted high quality liquid assets held by the Bank,
usable to cover the Total Net Cash Outflows which the Bank might need to cover in the short
term (30-day time span). To this indicator is added the monitoring of the 1-month and 3-month
operating liquidity margins which represent the ratio between the balance of the cash flows
maturing due respectively within the next 30 days and 90 days, considering the impossibility of
renewing funding from institutional customers, and total assets including derivatives.
With regard to monitoring the Group’s structural liquidity position, the selected reference
indicator is the Net Stable Funding Ratio (NSFR). This indicator identifies the ratio of Available
Stable Funding to Required Stable Funding, which are both calculated as the sum of capital
cash flows in the banking book expiring over a time interval exceeding 1 year.
Similar to the themes of structural liquidity, capital equilibrium is monitored through the “loans
/ direct funding ratio”. Moreover, in order to facilitate a more accurate management of liquidity
risk, “attention thresholds” are also defined on certain structural and early warning alert
indicators and on the level of funding concentration on individual counterparties, for certain
forms of funding, and on the direct funding level.
In addition, the Contingency Funding Plan (the plan for raising funds under stress conditions) is
also drafted on a yearly basis, to define the intervention strategies in case of liquidity stress,
requiring specific fund raising actions as well as the adequacy of the Group’s liquidity reserves.
As regards monitoring the risk appetite on liquidity risk, it should be pointed out that, at 31
December 2015, the LCR amounted to 47.5%, lower than the prescribed regulatory requirement;
however, the Bank has initiated a series of initiatives to strengthen its liquidity position,
achieving, as early as January, a sharp improvement of the indicator, which rose to 80.33%,
above the regulatory minimum. The Group’s funding reduction should be related to
phenomena that involved the Bank in correspondence with extraordinary events (search by the
Tax Police at the end of September 2015) and the banking system as a whole (media effect
deriving from the resolution of the four Italian banks with the Salva Banche (“Save the Banks”)
Decree in the final part of the year). The loss of retail funding was mainly made up with
initiatives on the front of funding with institutional counterparties.
objectives and limits was updated and further enriched with the definition of the following
indicators:
–
Level 1 High Quality Liquid Asset, i.e. the value of free allocatable assets
(Government bonds) for LCR purposes net of the haircut;
–
Intraday liquidity buffer, which represents the liquidity usable by the Treasury to
address potential liquidity needs within one day;
–
Net Stable Funding Ratio AFR surplus (i.e. a version of the NSFR net of wholesale
funding with maturities between 12 and 18 months) that makes it possible to anticipate
possible tensions on the NSFR that entail moving funding from the range above 12 months
to the range below 18 months, thus allowing for rapid intervention in terms of funding;
–
Asset Encumbrance, representing the percentage of assets pledged as collateral for
funding purposes (the indicator is directed at monitoring the level of assets pledged as
collateral for funding purposes, with the goal of maintaining this ratio within narrow
levels in order not to compromise the ability to use this form of funding in any stress
situations).
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B
Operational risks
Operational risk is defined as the risk of losses deriving from inadequate or dysfunctional
procedures, human resources or internal systems, or external events.
This category includes, inter alia, losses deriving from fraud, human error, the interruption of
operations, the malfunction and non-availability of systems, contractual non-performance and
natural catastrophes. Operational risk also includes legal risk, but excludes strategic and
reputation risk.
With regard to the way the operational risk is managed, the BPVi Group defined a dedicated
reports.
The framework for the management of operational risks is based, on one hand, on the
assessment of the 1st and 2nd level organisational controls, through a Risk Self Assessment, and
on the construction of the so-called Risk Map and, on the other hand, on the collection and
analysis of the Loss Data Collection at Group level.
With regard to the last point, the Parent Bank was a founding member in 2002 of DIPO, the
interbank consortium promoted by ABI that maintains an Italian database of operational losses.
As a consequence, the Group gathers regular information about its operational losses.
Within the Risk Appetite Statement, for the year 2015, the risk indicator monitored by the Risk
Management Function is represented by the sum of the operating losses recognised in the Loss
Data Collection process (LCD).
In 2015:
–
the Risk Self Assessment was carried out through the evaluation of the
organisational controls that led to the construction of the Risk Map;
–
the Parent Bank continued to gather data on operational losses for reporting to
Italian database of operational losses (DIPO). In addition, a project was launched, entailing
the evolution of the Loss Data Collection model at the Group level and its computerisation;
–
upon monitoring the RAF indicator, at 30 September 2015, the level of operating
losses that emerged, net of extraordinary events11, was found to be in line with the defined
risk appetite.
Within the Risk Appetite Framework approved for the year 2016, in addition to the indicator
represented by the significant operating losses, capital allocated in view of the operational risks
was defined.
The risks underlying the equity investments that may be held
Risks connected with the acquisition of equity investments are the risks of excessive illiquidity
of the asset deriving from equity investments in financial and non financial entities.
The BPVi Group adopted a set of internal regulations, to contain the risk of excessive illiquidity
of the assets deriving from equity investments in financial and non financial entities and to
promote adequate management of risks and conflicts of interest in accordance with sound and
prudent management principles. The regulations are based on the following fundamental
elements:
11
Within the scope of Loss Data Collection, among the operating losses were included the allocations to provisions for
risks and charges carried out in view of the risks associated with the procedures for the subscription of the 2013 and
2014 capital increases carried out by the Bank, and of the settlement of treasury shares as matching entry of the
“Provisions for the purchase of treasury shares”. In consideration of the size and origin, these allocations represent
extraordinary losses that, included in the verification of the RAF limits, led to the exceedance of the defined risk
tolerance.
- 85 -
B
the procedures for measuring and managing the risks underlying the equity investments
through the definition of the criteria for managing risk with reference to the roles and
responsibilities of corporate Bodies and Functions;
the procedures for monitoring the risks linked to the equity investment portfolio and
verifying the regulatory limits and the internally defined attention thresholds for the
different operating organisations and units;
the definition of the levels of risk propensity within the Group’s Risk Appetite Framework;
the reports to corporate Bodies and Functions.
Regarding the risks underlying the equity investments that may be held, the Risk Management
Function annually submits to the approval of the Parent Bank’s Board of Directors the system of
objectives, limits and/or thresholds of attention that, within the Risk Appetite Framework, refer
to the regulations that govern the allowed level of exposure in relation to the equity investments
that may be held; the same Function then periodically monitors these indicators, based on the
data provided by the Financial Statements Function, verifying compliance with the regulatory
and operational limits.
Lastly, the same Function participates in the process for the preparation and approval of
investments/divestments in equity assets, according to the procedures defined in the
“Regulations on the equity investments that may be held by the Banca Popolare di Vicenza
Group”; within this process, it is called upon to express its opinion with regard to compliance of
the RAF limits and of the defined attention thresholds, with reference to the proposed
investment/divestment.
As regards monitoring the risk appetite on risks underlying equity investments, it should be
pointed out that, at 30 June 2015:
the risk tolerance defined for the “general limit”, equal to 60%, was exceeded, whilst the
risk capacity limit (100%) was complied with. In particular, the equity investments held by
the Group absorbed 79.9% of Own Funds. The reason for this exceedance was connected
with the reduction to the Own Funds recorded in the financial report of the 1st half of 2015.
The risk tolerance and risk capacity limits were, both in terms of “concentration limit” and
“total limit”, were not exceeded.
the verification of the internal limits defined on the individual exposures in the
classification sub-portfolio exhibited, in relation to the “Local Initiatives” portfolio, a
higher value than the specific attention threshold. The exceedance of an attention threshold
does not entail the need for escalation with respect to the Strategic Supervision Body.
Instead, the internal operating limits on the total exposure of each individual sub-portfolio
were found to be complied with at the same measurement date.
objectives and limits was revised/updated and further enriched with the definition of capital
allocated in view of the risk tied to equity investments.
-
Risk Assets with respect to Related Parties
Risks connected with risk assets and conflicts of interest with respect to Related Parties refer
to the risk that the nearness of certain persons to the Bank’s decision-making centres may
compromise the objectivity and impartiality of the decisions to issue loans and to carry out other
transactions with the same persons, with possible distortions in the resource allocation process,
exposure of the bank to inadequately measured or controlled risks, potential damage for
depositors and stockholders.
The internal regulatory framework defined by the Group, consistently with the provisions of the
supervisory regulations12, defines the addresses to be applied by the BPVi Group, with the
following component elements:
12
Bank of Italy Circular no. 263/2006, Title V, Chapter 5.
- 86 -
B
the procedures for measuring and managing the risks underlying Related Party
transactions through the definition of the criteria for managing risk with reference to the
roles and responsibilities of corporate Bodies and Functions;
the methods for measuring risks connected with Related Party transactions;
the procedures for monitoring the risks underlying Related Party transactions and
verifying the limits assigned to the different operating organisations and units;
the definition of the levels of risk propensity (risk appetite);
the reports to corporate Bodies and Functions (Management Reporting System).
The core principles of the governance model of the BPVi Group within the assumption of risks
with respect to Related Parties, developed according to a logic consistent with the roles and
responsibilities defined in the Risk Appetite Framework Regulation and in the ICAAP, prescribe
that:
responsibility for defining the guidelines on assuming and managing the risks underlying
transactions with Related Parties shall rest with the Parent Bank’s Board of Directors;
the assumption of risks with respect to Related Parties shall be monitored centrally by the
Parent Bank with reference to the individual legal entities and to the Group as a whole;
individual legal entities shall comply with the guidelines defined by the Parent Bank for
the assumption of risks with respect to Related Parties.
The Risk Management Function, with the input of the other involved organisations, submits
annually for approval to the Board of Directors of the Parent Bank the Risk Appetite Framework
parameters in the form of objectives and limits on the exposure in risk assets referred to Related
Parties, having regard to the regulations governing the matter; the same Function then
periodically monitors these indicators, verifying, inter alia, compliance with the regulatory and
operational limits.
In 2015, the Risk Management Function, within the scope of its own 2nd level controls, started
monitoring the risks connected with transactions with Related Parties, which entails the following
stages:
measuring the risks underlying exposures to Related Parties that may be mainly due to
credit, market and counterparty risks;
verifying compliance with prudential limits (regulatory limits) at the consolidated level
and at the individual Group bank level;
verifying compliance with the limits set in Risk Appetite Framework in terms of risk
exposure to Related Parties.
At 30 September 2015, all regulatory and management limits were complied with, being
positioned below the risk tolerance limits.
Within the Risk Appetite Framework approved for the year 2016, the system of objectives and
limits described above was revised/updated.
-
Other risk profiles
The risk of excessive financial leverage is the risk that a particularly high level of debt relative
to equity makes the Group vulnerable, making it necessary to adopt corrective measures to its
own business plan, including the sale of assets with the recognition of losses that may entail
value adjustments on the remaining assets as well.
The Risk Management Function defines the methods for measurement and for stress tests and
analyses existing organisational controls and the related mitigation systems consistently with the
Risk Appetite Framework approved by the Board of Directors. At least once a year, the Risk
Management Function submits to the Board of Directors’ approval the system of objectives,
limits and/or thresholds of attention for this type of risk.
- 87 -
B
In 2015, the Risk Management Function periodically monitored, as a RAF indicator, the leverage
ratio (i.e., Tier1 Capital over total assets), which at 31 December 2015 amounted to 4.44%, below
the risk tolerance level while complying with 3% risk capacity; the indicator was affected by the
capital reduction recognised in the interim report for the first half of 2015.
Within the Risk Appetite Framework approved for the year 2016 provides for monitoring, in
addition to the levarage ratio, a further metric i.e. the off balance sheet ratio, defined as the ratio
of total exposure to OTC derivatives and SFT transactions and total assets (on-balance and offbalance sheet), considering their nominal value.
The ICT risk is defined as the risk of incurring economic, reputational and market share losses in
relation to the use of Information and Communication Technology – ICT.
The Risk Management Function co-operates in designing the process for analysing, treating,
monitoring and reporting the IT risk, and it is responsible for collecting the information,
communicating and reporting to the corporate Bodies on the status of the risk control system and
on any exceptions that may have been observed. The Risk Management Function annually
submits for the approval of the Parent Bank’s Board of Directors, within the scope of the
definition of the Risk Appetite Framework, the maximum level of exposure to the ICT risk
deemed acceptable, as determined by the ICT risk analysis process that assesses the possibility
that a threat may exploit a vulnerability of the ICT infrastructure (physical or logical) and
damage the Bank. The indicator is monitored on the basis of the results of the IT risk selfassessment, carried out on an annual basis.
With respect to the reputational risk, defined as the current or prospective risk of decline in the
profit or capital deriving from a negative perception of the bank’s image by customers,
counterparties, stockholders of the bank, employees, investors or supervisory Authorities, the
Risk Management Function defines the procedure for measuring and controlling reputational
risks, coordinating with the Compliance and Anti-Money Laundering Function and with the
other more exposed corporate organisation; the same Function measures the reputational risk on
the basis of a set of quantitative metrics (Key Risk Indicators) defined within the Risk Appetite
Framework. The main indicators identified are: complaints, internal and external frauds,
customer satisfaction index, system locks, assessment of compliance risks (usury, transparency,
anti-money laundering, MiFID), rating downgrades, media coverage.
In 2015, monitoring of the KRI continued and its analysis, together with the important changes in
the governance and corporate structure of the Group that took place during the year, confirmed
that the BPVi Group is experiencing a situation of reputational tension with consequences that
manifested themselves mostly on the front of liquidity.
Strategic risk is defined as the current or prospective risk of a decline in profits or capital
deriving from changes in the operating context, erroneous company decisions, inadequate
implementation of decisions and poor reactivity to changes in the competitive and market
environment.
The Risk Management Function defines, on the indication of the Parent Bank’s Board of
Directors, the methods for assessing the pure strategic risk and for assessing the Business risk
and for stress tests and analyses the existing organisational controls and the related mitigation
systems. The Risk Management Function is also called upon to formulate preventive opinions on
Transactions with Major Relevance, i.e. those operations from the income, capital and financial
viewpoint and with reference to their impact on the risks assumed or to be assumed, are relevant
for the Group, thereby assuring a further safeguard against Strategic Risk.
In 2015, the Risk Management Function, with the contribution of the Strategic Planning Function,
monitored compliance with the attention thresholds defined within the RAF in terms of
deviations of the actual quarterly values with respect to budget forecasts for the income
statement components that directly influence the strategic risk.
- 88 -
B
Since strategy risk goes across the other types of risk, the Risk Appetite Framework approved for
2016 prescribes monitoring it through the control and analysis of the indicators defined within
the Risk Appetite Framework over all other risk profiles and with particular regard to the
allocation of capital and funding, in order to highlight difficulties in the achievement of the
objectives of the Business Plan and/or deviations between the expected and the actual evolution
of the markets.
EXPOSURE
TO
STRUCTURED CREDIT PRODUCTS DERIVING
SECURITISATION TRANSACTIONS ORIGINATED BY THE GROUP
FROM
At 31 December 2015 there were fourteen securitisations originated by the BPVi Group and
called Berica Residential MBS 1, Berica 5 Residential MBS, Berica 6 Residential MBS, Berica 8
Residential MBS, Berica 9 Residential MBS, Berica 10 Residential MBS, Berica ABS, Berica ABS 2,
Berica ABS 3, Berica ABS 4, Berica PMI, Berica PMI 2, Piazza Venezia and Adriano. All the above
securitisations were carried out pursuant to Law no. 130/1999 via the formation of a specialpurpose entity (SPE) to which the securitised assets were sold without recourse.
It is also specified that the prerequisites of “control” under the new accounting standard IFRS 10
exists with regard to the special purpose vehicles used by the Group in its securitisation
transactions. For these companies, however, the decision was made not to proceed with the
corresponding consolidation in consideration of the fact that all financial statement values are
irrelevant with respect to those of the Group and that the assets securitised, like the related
liabilities, are already included in the Group financial statements, the prerequisites prescribed by
IAS 39 for “derecognition” not applying for the various transactions carried out13, since the
Group substantially maintained within it the risks and benefits related to the transferred
receivables.
In relation to the securitisations carried out during the year, the following information is
provided:


on 1 January 2015 the first securitisation originated by the subsidiary Prestinuova took
effect; it was carried out in accordance with Italian Law no. 130/1999 through the
establishment of the special purpose vehicle “Adriano Spv” whose securitised assets
(salary-backed and pension-backed loans and loans with delegation of payment on salary
and pension for a total amount of approximately Euro 310 million) were transferred
without recourse. The securitisation was completed in January 2015 with the issue of
Asset Backed Securities whose senior tranches (Euro 267.6 million in nominal terms) were
entirely placed on the market, whereas the junior tranche (Euro 40 million in nominal
terms) was subscribed by the Company;
on 1 May 2015, the Berica ABS 4 securitisation took effect, in which the originators (the
Parent Bank BPVi and the subsidiary Banca Nuova) assigned a portfolio of performing
residential mortgages totalling Euro 947 million. The transaction was then completed
during the year through the pro-rata subscription of the entirety of the originators’
securities. Subsequently, in the month of January of 2016, the entire senior tranche of a
nominal amount of Euro 728.9 million was sold on the market;
With the exception of the Berica Residential Mbs 1 transaction which was carried out before 1 January
2004, and for which the securitised assets were not “reinstated” on the first-time adoption of IAS-IFRS, as
allowed by IAS 1.
- 89 13
B

on 1 November 2015, the Berica PMI 2 securitisation took effect, in which the originators
(the Parent Bank BPVi and the subsidiary Banca Nuova) assigned a portfolio of
performing residential mortgages and unsecured loans granted to small-medium
enterprises totalling Euro 1,175 million. This transaction is currently in the warehousing
phase since the relative Asset Backed Securities have not yet been issued by the vehicle
company.
The following table shows the details of the exposures held by the Group at 31 December 2015
deriving from the Group’s own securitisations.
All exposures considered (with the sole exception of those referred to the Berica Residential Mbs
1 securitisation) are not reported as assets since the aforesaid securitisations do not qualify for
derecognition under IAS 39. Therefore, the ABS securities held were eliminated and the
securitised assets remaining on the date, and the related liabilities, were written back. The
amounts indicated in the table, therefore, relate to the actual carrying amount solely for the
exposures pertaining to Berica Residential Mbs 1, while for all other transactions the amounts
represent the residual nominal values of the various tranches of ABS held by the Group and the
residual amount recoverable in relation to the other types of exposures.
The following table shows the details of the securitised assets underlying the exposures held by
the Group at 31 December 2015 deriving from the Group’s own securitisations.
- 90 -
B
SPE
Berica Residential Mbs 1
Berica 5 Residential Mbs
Berica Abs
Berica Abs 2
Berica Abs 3
Berica Abs 4
Berica PMI
Berica PMI 2
Piazza Venezia
Adriano
Total
Securitized assets (net exposure)
Non performing
Unlikely to pay
loans
Past due/in
Performing loans
arrear impaired
Total
13.5
30.3
27.2
25.1
6.7
5.6
19.0
4.8
1.0
12.4
11.1
-
4.8
11.9
31.7
27.0
10.8
9.1
30.0
14.8
17.0
11.7
42.0
2.2
45.2
0.9
0.3
0.2
0.4
0.4
0.2
4.0
0.5
0.5
1.6
1.9
2.2
0.2
1.3
77.3
128.7
381.4
543.8
624.7
592.7
849.3
596.4
784.7
850.8
725.0
1,079.7
487.4
228.4
95.6
171.2
440.5
596.3
642.6
607.6
902.3
616.5
803.2
864.1
781.3
1,084.1
543.9
230.6
156.7
259.1
13.7
7,950.3
8,379.8
EXPOSURE AS INVESTOR TO STRUCTURED CREDIT PRODUCTS DERIVING FROM
SECURITISATION TRANSACTIONS ORIGINATED BY THIRD PARTIES
As at 31 December 2015, the BPVi Group’s exposure to Asset Backed Securities deriving from
securitisations originated by third parties totals Euro 278.2 million.
The table that follows shows the details of the exposures held, divided according to the type of
underlying securitised assets and to the degree of subordination of the individual tranches. The
special purpose entity was not consolidated in any transaction, since the conditions set out by
IFRS 10 were not met.
Exposures
Type of assets securitized
senior
ABS - Credit for consumption
ABS - Other asset
Total
mezzanine
Total
junior
18.0
248.2
12.0
-
18.0
260.2
266.2
12.0
-
278.2
Exposures having “Consumer loans” as their underlying assets, classified among “Financial
assets available for sale”, refer to investments made in ABS issued within operations originated
by primary Italian players operating in the sector. At 31 December 2015, valuation reserves of
Euro 89 thousand, before taxes, are recorded on them.
The other exposures are instead recorded among “Loans and advances to customers” and refer
mainly (Euro 176.8 million) to Asset Backed Securities issued within the scope of securitisations
carried out in accordance with Law no. 130/1999 in which the Group acted as arranger in the
structuring of the transactions and also acts as servicer, calculation agent, cash manager, paying
agent and collection account bank for nearly all of them. On these exposures, no elements
emerged that may indicate the existence of an impairment and the related fair value, estimated
with an internal model that is based on specific analyses to determine the expectations of
repayment on the part of the SPV, was found to be aligned to the related carrying amount.
- 91 -
B
In addition, the Parent Bank holds, together with the other partner banks of the originator, its
own share of the only tranche issued within the scope of the securitisation carried out by Banca
Nuova Terra. Said exposure is recorded in the financial statements with an amount of Euro 70.8
million, and has been subject to a total impairment loss of Euro 8.8 million, of which Euro 4
million recognised in 2015.
EXPOSURE TO SOVEREIGN DEBT SECURITIES
As a result of the growing interest of the market in exposures held by the company in sovereign
debt securities, and as recommended by the European Securities and Markets Authority (ESMA)
in Document no. 2011/226, the details of the related exposures held by the BPVi Group at 31
December 2015 are provided below. As indicated in the ESMA document, "sovereign debt"
means bonds issued by central and local governments and government entities, as well as loans
granted by said parties.
At 31 December 2015, the BPVi Group holds exposures to sovereign debt amounting to nearly
Euro 5.2 billion, all referred to the Italian State with the exception of a marginal exposure (Euro
363 thousand) in Argentine Government bonds. The table that follows shows the breakdown of
exposures to the Italian State, all represented by debt securities, by accounting category, by type
of interest rate and by residual duration.
Exposures to sovereign debt
Financial assets held for trading
- fixed rate
- floating rate
- inflation linked
Financial assets available for sale
- fixed rate
- floating rate
- inflation linked
Total
Expiry date
Within 12
months
12 to 36 months
36 to 60 months
1.0
1.0
1,411.6
53.9
71.4
1,286.3
702.2
116.3
585.9
3,117.4
54.3
3,063.1
1.0
1.0
5,231.2
224.5
71.4
4,935.3
1,412.6
702.2
3,117.4
5,232.2
-
-
Over 60 months
-
Total
The inflation linked exposures recorded among “Financial assets available for sale” hedge the
interest rate risk and the inflation risk for a nominal amount of Euro 3,893 million.
At 31 December 2015, sensitivity to increases by 1 bps in the Republic of Italy credit spread for
Government securities classified as "Financial assets held for trading" equalled Euro -2.8 million.
- 92 -
B
INFORMATION ABOUT LENDING
The situation of the loan portfolio of our Group is presented below in terms of concentration,
geographical distribution and distribution by economic sector, together with a number of risk
indicators. The data used in this analysis were obtained by processing data compiled for the
purposes of reporting to the Central Risks Database and they include cash loans, guarantees
and derivatives. Group Banks and companies are excluded from the aggregates, which however
do include all securitised mortgages, even if derecognised, in order to provide a complete picture
of the way the Group’s loans portfolio is structured.
Concentration of customers
The Group’s loans portfolio is well spread overall with around 291 thousand positions, of
which approximately 273 thousand, i.e. 93.9% of the total, have facilities of less than Euro 250
thousand. The most numerous bracket consists of loans up to Euro 25 thousand, representing
53.6% of all positions, up by more than two points compared to the level at the end of 2014. The
proportion of classes from Euro 26 thousand to Euro 250 thousand is 40.3%, down from 42.0% in
December 2014, whilst facilities above this latter threshold account for 6.1% of the total, versus
6.7% at the end of 2014.
Considering the amounts drawn down, instead, the brackets with facilities up to Euro 25
thousand account for just 4.5% of total loans granted by the Group (albeit increasing markedly
from 3.6% at the end of 2014), while the bracket from Euro 26 thousand to Euro 250 thousand is
much larger (35.2% versus 34.4% in December 2014), and those drawing against greater facilities
are at 61.1% (compared to 62.0% at the end of 2014). In particular, facilities in excess of Euro 5
million represent 23.4% of total loans drawn down, a decline from 25.0% at the end of 2014.
Additionally, concerning the single name concentration risk the Group, in order to assure
appropriately fractioned positions, set specific limits on the total amount granted to customers or
groups of customers whose facilities exceed certain thresholds. In particular:
for the Parent Bank, the percentage of credit granted to counterparties, whether individual
or in the same group, with facilities exceeding Euro 60 million, must remain within a
maximum limit of 8% of the bank’s total facilities (net of those pertaining to banking and
insurance Groups);
for Banca Nuova, the percentage of credit granted to counterparties, whether individual or
in the same group, with facilities exceeding Euro 20 million, must remain within a
maximum limit of 4% of the bank’s total facilities.
for FarBanca, the percentage of credit granted to counterparties, whether individual or in
the same group, with facilities exceeding Euro 3 million, must remain within a maximum
limit of 4% of the bank’s total facilities.
In December 2015 the limit had been widely complied with both by the Parent Bank (5.8%,
versus a limit at 8%) and by Banca Nuova (1.8%, whereas the limit is 4%) and by FarBanca (2.3%
versus a limit of 4%).
-
Briefly, the data of this paragraph confirm, yet again, the evolution of the Group’s portfolio in
the direction of greater granularity.
- 93 -
B
Geographical distribution
The geographical distribution of Group gross lending in December 2015 (excluding repurchase
agreements), considering the region/province of residence of individuals and the registered
offices of legal persons, did not change substantially since the end of December 2014, confirming
the strong concentration of the Group’s loans in its original home regions, like Veneto (39% of
total loans, with the Vicenza province at 16%) and Friuli V.G. (8%).
Loans by region
Loans by region
december 2014
december 2015
Sicilia
9%
Lazio
6%
Emilia R.
5%
Other regions
and foreign
7%
Toscana
14%
Lombardia
13%
Veneto
39%
Friuli V.G.
8%
Lazio
6%
Sicilia
9%
Emilia R.
5%
Other region
and foreign
8%
Toscana
13%
Lombardia
12%
Veneto
39%
Friuli V.G.
8%
As regards the other regions, Tuscany and Lombardy reached a significant level, with 13% and
12% respectively, followed by Sicily with 9% and Lazio with 6%.
Distribution by business sector
Analysis at Group level of the distribution of the loans portfolio by business sector highlights, in
December 2015, a decrease in the weightings of “Non-financial companies" (from 54.7% at the
end of 2014 to 53.6% at the end of 2015) and of the “Other sectors” (from 1.3% to 1.1%), with an
increase for “Financial companies” (from 3.4% to 3.6%), for “Households” (from 33.4% to 34.4%)
and “Personal Businesses” (from 7.1% to 7.4%); these latter two values confirm the tendency
towards a more granular structure of the Group’s portfolio, as already outlined in the section on
loan concentration.
Financial
Companies
3.4%
Households
33.4%
Distribution by sectors
Distribution by sectors
December 2014
December 2015
Personal
Business
7.1%
Other Sector
1.3%
Financial
Companies
3.6%
Non finacial
Companies
54.7%
Households
34.4%
- 94 -
Personal
Business
7.4%
Other Sector
1.1%
Non finacial
Companies
53.6%
B
Concerning “Non Financial Companies” and “Personal Businesses”, which together account for
61.0% of the Group’s loans, they are distributed in highly granular merchandise segments, called
ATECO. For representation reasons, the latter are grouped together in this Report on Operations,
into macro-sectors with the most homogeneous characteristics as possible. Therefore, the ATECO
macro-sector are characterised, within our Group, by the following percentages of the total loans
portfolio: “Construction and Real Estate businesses” account for 19.5% of the total, followed by
“Wholesale and retail commerce” with 11.8%, by “Other services” (mainly personal services)
with 5.9%, by “Financial services and business services” with 3.9%, by “Metal working” (5.2%),
by “Other light industry” (which contains industrial sectors other than metal working, basic
industry and textile and clothing) with 4.6%, by “Mining and basic industry” (3.3%), by “Textile
and clothing” at 2.5%, by “Farming” (2.4%) and, lastly, by the companies involved with “Supply
of electricity, gas, water, and waste treatment” with 1.8%.
Other risk indicators
With regard to performing loans, the main instrument for monitoring changes in risk conditions
is the Early Warning system, based on performance indicators of the relationship and on all the
information that comes from the IT systems of the Group’s banks and that can forewarn of a
change in the risk level associated with the counterparty. At Group level, then, the performing
positions with performance anomalies are classified as “Watch” and “Pre-Past Due” (the latter
are continuous overdrafts exceeding 40 days, but which have not yet reached the 90-day
threshold that would trigger the classification as defaulted).
Concerning the evolution of these categories, the percentage of loans classified as “Watch”
relative to the total portfolio, grew from 6.7% to 7.5% between December 2014 and December
2015, whereas “Pre-Past Due” loans decreased from 3.2% to 2.2%.
The changes in the standard risk indicators identifiable from the financial statements are
analysed in the section of the previous Report covering the results of Group operations.
- 95 -
B
CORPORATE SOCIAL RESPONSIBILITY AND IMAGE
Information on the Stockholding Structure of Banca Popolare di Vicenza
At the end of 2015, the Capital Stock of Banca Popolare di Vicenza was held by 111,041 Members
(+2.0%, compared to 108,830 at the end of 2014). Also considering the holders of stocks not
registered in the Members’ Register, which numbered 7,953 in 2015, the total number of
Members/Stockholders amounts to 118,994 (up by +2,197 compared to the end of 2014, +1.9%
per annum). The increase in the number of members is connected with the granting, in January
2015, of the requests to be admitted as member for member candidates who had participated in
the capital increase of 2014, directed at expanding the member base.
The analysis of the Stockholder structure at the end of 2015 confirms the presence of a large
number of natural persons (88.5%), with a small representation of companies, entities and
institutions (11.5%).
Shareholders composition
Men
Women
Companies, admin. body, institution
Total
2015
% comp.
2014
Abs chg
% chg.
64,125
41,231
13,638
53.9%
34.6%
11.5%
63,075
40,585
13,137
1,050
646
501
1.7%
1.6%
3.8%
118,994
100.0%
116,797
2,197
1.9%
The geographical breakdown of the Members/stockholders confirms the Bank’s deep roots in its
traditional regions: approximately 67% of Members/stockholders reside in Veneto (29% in
Vicenza) and Friuli Venezia Giulia. However, in recent years, consistent with the expansion of
Group operations also in other areas of Italy, a considerable increase was recorded in the weight
of Members/stockholders from other important regions where the Group operates, for example,
Lombardy, Tuscany, Sicily, Emilia Romagna and Lazio.
- 96 -
B
Shareholders distribution
by geographical area
Veneto
Vicenza
Treviso
Padova
Verona
Venezia
Belluno
Rovigo
Friuli V. G.
Udine
Pordenone
Gorizia
Trieste
Toscana
Lombardia
Sicilia
Emilia Rom.
Lazio
Other regions
Foreign
Total
2015
N.
2014
% comp.
N.
% comp.
% chg.
yoy
abs.
chg.
yoy
66,067
34,572
12,384
6,519
5,600
4,292
2,145
555
13,262
9,148
2,562
662
890
11,664
11,000
7,191
2,976
2,358
4,206
270
55.5%
29.1%
10.4%
5.5%
4.7%
3.6%
1.8%
0.5%
11.1%
7.7%
2.2%
0.6%
0.7%
9.8%
9.2%
6.0%
2.5%
2.0%
3.5%
0.2%
65,582
34,549
12,299
6,453
5,465
4,211
2,082
523
12,973
9,018
2,503
622
830
11,235
10,691
6,916
2,814
2,259
4,088
239
56.2%
29.6%
10.5%
5.5%
4.7%
3.6%
1.8%
0.4%
11.1%
7.7%
2.1%
0.5%
0.7%
9.6%
9.2%
5.9%
2.4%
1.9%
3.5%
0.2%
0.7%
0.1%
0.7%
1.0%
2.5%
1.9%
3.0%
6.1%
2.2%
1.4%
2.4%
6.4%
7.2%
3.8%
2.9%
4.0%
5.8%
4.4%
2.9%
13.0%
485
23
85
66
135
81
63
32
289
130
59
40
60
429
309
275
162
99
118
31
118,994
100.0%
116,797
100.0%
1.9%
2,197
Banking services for Members/stockholders
A short description of the commercial offer of financial services is provided below; it is
dedicated to the Stockholder Structure and it comprises the principal products and services,
starting with current accounts. Briefly, the offer consists of:
– Current account facilities: there are two package current accounts (SocioPiù Famiglia and
SocioPiù Valore), to which is reserved a preferential rate on facilities.
– Home mortgages: a special promotion was reserved to Stockholders with a favourable
spread;
– Time Deposits: an advantageous return was reserved for all Bank Members on the
SemprePiù Time Deposit in 2015;
– Insurance: Members are entitled to a series of insurance coverages, such as the MedicalHealthcare Policy, the Baggage Policy and the Injury Policy, which protect them against
various risks and eventualities. In addition, special discounts are provided on a broad range
of Policies dedicated to homes, families and persons.
– Loans: unsecured loans are provided for all Members for the recovery of property and
furniture damaged by natural calamities.
Moreover, among the other significant initiatives, of note is the completion of special guides,
available in all branches, which describe the practical benefits of Members/stockholders. In
detail, in 2015 the “1.50% Loan for Members” and “Economic Conditions for Members” were
produced. Lastly, in 2015 the Bank reserved a series of special discounts to the relatives and
friends of its Members on current account products and on savings accounts.
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Socially worthy donations of Banca Popolare di Vicenza
The present chapter describes the main initiatives undertaken by the Bank in 2015 in favour of
the local area and the local community. The initiatives undertaken by the Bank in the different
forms of support for the arts, donations, social-cultural sponsoring and institutional patronage,
were, as ever, guided by the criterion of diffusion and distribution breadth in order to involve
the highest possible number of persons, the most disparate fields and the most extensive
geographical coverage.
Donations
As prescribed by Article 53 of the Parent Bank’s Articles of Association, in 2015 BPVi distributed
a total of Euro 432,774 to 178 good
causes out of the sum approved
by the Members’ Meeting for
charitable works, welfare, culture
Sport; 7.6%
and projects of social benefit. In
Voluntary
Culture; 26.3%
terms of allocation, 26.3% of the
Associations;
13.2%
funds went to culture and to the
artistic
heritage
of
our
communities, 23.3% to research,
academic work and education,
Churches;
14.8% to healthcare and support,
14.8%
14.8% to parishes and Catholic
church organisations, 13.2% to
Research; 23.3%
volunteer
organisations
and
Health and care
associations in support of the
support; 14.8%
underprivileged
and
the
remaining 7.6% to sports and
youth associations.
Support for Universities and Education Centres
In 2015, Banca Popolare di Vicenza confirmed its support to the young and their education,
offering products and services designed for households and students. The bank is particularly
interested in instituting scholarships and supporting projects aimed at broadening universities’
range of educational offerings.
In 2015, particularly noteworthy was the renewed support for the University Hub of Vicenza,
for Esac Formazione and the CUOA of Altavilla Vicentina, which has become a reference point
in Italy’s corporate training scenario.
Also in 2015, the Centro Internazionale di Studi di Architettura Andrea Palladio (Andrea
Palladio International Architectural Study Centre) in Vicenza, supported by the Bank since 1995,
received a contribution for the organisation of the course on Palladian architecture for Italian and
foreign students.
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Support of scientific research
In 2015, Banca Popolare di Vicenza renewed its decision to allocate a “Health Care and Medical
Research Credit Line” to support hospitals and research institutes, confirming its focus on the
health care industry, which is essential for the well-being of the community.
Particular attention was paid to the Health Care Unit of Vicenza, the San Bortolo Hospital,
which the Bank has supported since 1990. In 2015, the San Bortolo Hospital of Vicenza benefited
from donations intended for scholarships for the Paediatric Surgery, Orthopaedics and
Traumatology, Neurology, Eye and Maxillofacial Surgery Operating Units.
Artistic restoration initiatives
During the year, initiatives were taken in support of some delegations of the FAI Fondo
Ambiente Italiano (Italian Environmental Fund) and Associations engaged in the restoration
and recovery of the cultural heritage of Italy.
In addition, the Bank supported the project for the digitalisation of guided visits inside Villa
Valmarana ai Nani.
Initiatives in support of music and the theatre
In 2015, the Bank engaged in several initiatives in support of music and concerts. In 2015, the
Bank continued to provide, as it has without interruption since 1996, a contribution to the
musical seasons of the Società del Quartetto and of the Orchestra del Teatro Olimpico
(Orchestra of the Olympic Theatre) of Vicenza. The Bank also renewed its contribution to the
Settimane Musicali (weekly musical performances) and to Incontro sulla tastiera (Meeting on
the keyboard).
Lastly, as regards support for theatre and shows, the Bank has been making a contribution to the
Teatro Comunale di Thiene (Municipal Theatre of Thiene) and the Teatro Politeama Pratese
for more than fifteen years, providing support since its reopening in 1999.
Institutional sponsorships
In addition to its support of good causes, Banca Popolare di Vicenza has always been very active
locally with sponsorship initiatives in favour of small and medium enterprises operating in the
fields of industry, crafts and commerce, culture and sports.
In support of the local economy
Banca Popolare di Vicenza plays a leading role in the areas where it operates, as attested by
many initiatives providing institutional support to several Entities and Trade Associations in
Vicenza, of Veneto, of Trentino Alto Adige and of Tuscany, including Confindustria Vicenza,
Confindustria Trento and Confesercenti Prato.
Also noteworthy is the support provided, for 2015 as well, to Ente Fiera di Vicenza (Vicenza
Fair).
Banca Popolare di Vicenza sponsored the first edition of “TEDxVicenza”, held on 27 June at
Teatro Olimpico, centred on the theme entitled “Planting the seeds”. The purpose of the event
was to the celebrate ideas and innovations, to involve the local communities and their main
public and private players, facilitating the encounter between individuals and groups with
different sensitivities and competencies, in order to create new projects and communities of
innovators. Approximately fifteen speakers succeeded each other on the stage of Teatro
Olimpico, to share ideas and experiences with the public.
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Support to culture
Banca Popolare di Vicenza has always provided practical support to culture and the recovery of
the local artistic heritage. Among the various initiatives, it is worth mentioning the multi-year
partnerships that Banca Popolare di Vicenza has with La Fenice Theatre Foundation of Venice,
of which the Institute is an official sponsor, whereby tickets for La Fenice Theatre shows are sold
in all BPVI branches, and the Bank’s logo is reproduced on tickets issued by La Fenice and on all
promotional support, and the sponsorship of the Campiello Literary Award, promoted by
Confindustria Veneto, which has continued uninterrupted since 2000.
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Support to sports
In football, the Bank has been the official sponsor of Vicenza Calcio (first team and youth teams)
since 2001, and BPVi’s logo has adorned players’ jerseys in recent years. The Bank is the official
sponsor of the Udinese Calcio football club, placing pitch-side ads in Udine’s Friuli stadium, of
Real Vicenza and of the Paolo Rossi Academy of football. The Institution is also active in rugby:
it is a sponsor for Rugby Rovigo Delta and for Rangers Rugby Vicenza. Additionally, we
should recall the sponsorships of the “Stravicenza”, Udine City Half Marathon, Prato City Half
Marathon as well as of the Vicenza Half Marathon. With regard to tennis, the Group supports
some significant events in the areas where it operates, e.g. the “Città di Vicenza” International
Tennis tournament, the “2015 Padova Challenge Open” tournament, the 33rd ITF Junior
Circuit “Città di Prato” and the “Città di Caltanissetta” International Tennis tournament
(Banca Nuova). In 2015, the Bank also supported the Reggio Emilia Basketball School and the
youth sector of Pallacanestro Reggiana, Pallacanestro Vicenza 2012. With reference to golf,
Banca Popolare di Vicenza sponsored the Pro Am Asiago Invitational, the Pro Am Banca
Popolare di Vicenza Alps Tour 2015 (Colli Berici Golf Club) and the FFC Golf Tournament
circuit organised by the Cystic Fibrosis Research Foundation, to publicise the newly-launched
prepaid card. During the year, lastly, support was provided to the 12th and 13th stage of the
Giro di Italia, respectively arriving in Vicenza and starting from Montecchio Maggiore and,
remaining in the field of bicycling, the 67th PIVA Trophy and the 70th Industry, Commerce and
Crafts Grand Prix of Prato.
Promotion of culture, art and the artistic treasures owned by the Bank
Banca Popolare di Vicenza also confirmed its commitment to culture in 2015 with a series of
conferences organised in its own historic headquarters in Vicenza, the Palladian Palazzo Thiene.
The first set of events was the traditional cycle of “Sunday Lectures” in January 2015,
accompanying the December 2014 exhibition “Capolavori che ritornano. L’Ottocento e il primo
Novecento nella Collezione Banca Popolare di Vicenza” (“Returning Masterpieces: The
Nineteenth Century and the early Twentieth Century in the Banca Popolare di Vicenza
Collection”).
In June, the Bank hosted, in Palazzo Thiene, Ms Anna Maria Cancellieri, former Prefect of
Vicenza, Interior Minister in the Monti Government and Justice Minister in the Letta
Government, for the public presentation of her autobiographical book “Una vita bellissima” (“A
Wonderful Life”).
Another cultural initiative that continued in 2015 was the “Palazzo Thiene Schools Project”; this
initiative, which has reached the eighth edition, involved, once again, pupils from schools in
Veneto and Friuli Venezia Giulia regions, and the provinces of Bergamo, Brescia, Florence and
Prato in a renewed and expanded range of educational visits to the palace and its art collections.
Among initiatives intended for the young, of note is the Bank’s participation in the “Festival of
Creative Culture”, promoted by the Italian Banking Association (ABI), which for one week in
March involved pupils from the city’s grammar and middle schools in instructional and
theatrical workshops directed at the analysis of a painting from the BPVi collection, Carlo
Ferrarin's “Piazza dei Signori”, and to its translation into an audio narrative through role-play.
Banca Popolare di Vicenza then participated, in 2015, in the “Invito a Palazzo” (Invitation to
Palazzo Thiene) event, promoted on a yearly basis by the ABI, as part of which the historical
headquarters of the participating Banks are open to the public with guided visits.
Lastly, Palazzo Thiene was the location for the awards ceremony of the "Vicenza Fiorita 2015"
contest, promoted by the F.A.I. in collaboration with the Bank and Giornale di Vicenza, to
recognise the most elegant balcony decorated with flowers.
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In the field of music, we should mention the concert offered in February in the Palladian hall of
Palazzo Thiene, by the young pianist Chiara Opalio, an emerging talent in the international
chamber music field, and the Invitation to Summer choir concert, organised in June in the
Palazzo Thiene courtyard and performed by the Crodaioli conducted by Bepi De Marzi, with a
repertoire dedicated to the memory of the Great War on the mountains of Vicenza.
In the field of art, for the promotion and appreciation of its artistic heritage, in 2015 the Bank
loaned some of the artworks from the BPVi collection to major domestic and international
exhibitions: Caravaggio’s Coronazione di spine (the Crowning with Thorns), on show from March
to July at the Jacquemart Andrée Museum in Paris, the paintings Bacco con quattro uomini anziani
(Bacchus with four elderly men) by Pietro della Vecchia, Bacco e Arianna (Bacchus and Ariadne)
and Baccanale con l’arrivo del corteo di Sileno (Bacchanal with the arrival of the cortege of Silenus),
both by Giulio Carpioni, loaned for the “Arte e Vino” (Art and Wine) exhibition organised in
spring at the Palazzo della Gran Guardia in Verona as part of the initiatives tied to Expo 2015,
and the beautiful Allegoria della Terra (Allegory of Earth) by Leandro Bassano, shown at Palazzo
Martinengo in Brescia, in an exhibition dedicated to food in Art. In the second half of 2015,
moreover, the following works of art were loaned out: La Carità by Carlo Dolci to an exhibition at
Galleria Palatina of Palazzo Pitti in Florence and the Sixteenth Century Madonna col Bambino by
Carlo Portelli in the first, important, monographic exhibition dedicated to the artist at the
Galleria dell’Accademia in Florence.
With a view to showcasing the artistic assets it owns, the Bank organised in Palermo, in the
spectacular setting of Palazzo Celestri di Santa Croce e Trigona di Sant’Elia, from 4 October 2015
to 6 January 2016, the exhibition “Capolavori che si incontrano. Bellini, Caravaggio Tiepolo e i maestri
della pittura dal ‘400 al ‘700 nella Collezione Banca Popolare di Vicenza” (“Masterpieces put together:
Bellini, Caravaggio Tiepolo and the painting masters from the Fifteenth to the Eighteenth
Century in the Banca Popolare di Vicenza Collection”). It showed visitors ninety paintings
owned by the Bank, taking them through the most popular subjects for painters, from the
Renaissance to the French Revolution.
External communications and corporate image
In 2015, 95 press releases were issued (they are available at the Bank’s website
www.popolarevicenza.it); they confirmed the significant presence of BPVi on local and national
media.
To make external communications ever more effective and thorough, and in view of the growing
importance of the use of social networks, Banca Popolare di Vicenza has its own accounts on
Twitter (@popolarevicenza), Facebook and Linkedin Through the social networks, the Bank
shares its press releases and involves the public in its cultural and promotional initiatives.
Additionally, the Bank has long been present on YouTube as well, with a dedicated channel
where the videos on the Bank’s initiatives, produced by the corporate TV, BPVi Channel, are
made available.
The investment in the co-production of films also continued; it is an important image-boosting
instrument for the Bank and it also allows the Bank to take advantage of certain benefits, in
accordance with the tax credit law. In particular, the BPVi Group co-produced two films that had
excellent box office and viewership results: Matteo Garrone’s “Il racconto dei racconti” (Tale of
Tales) and Piero Messina’s “L’Attesa” (The Wait).
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Marketing Initiatives
In 2015 the commercial activities targeting individual customers and businesses were supported
and sustained by a series of promotional actions and initiatives. Among the main ones, in the
month of April the initiative called “Cogli al volo l’amicizia” (Catch Friendship’s Opportunity),
based on the “bring a friend” scheme and combined with the contest by the same name. Through
word of mouth, customers were able to invite friends, relatives and acquaintances to become
current account holders with the Bank. For the occasion, Banca Popolare di Vicenza dedicated
two particular current account solutions to customers at special conditions, available online and
at the branch.
With the goal of consolidating the partnership and provide a real contribution for the
development of the services offered by Fiera di Vicenza (Vicenza Trade Fair), Banca
Popolare di Vicenza also planned a series of initiatives to enrich the broad and exclusive
offering to the Bank’s customers. The first of them is the new loan dedicated to
exhibitor enterprises based in Italy, that intend to participate in the events organised by
the Fiera di Vicenza, also abroad. In particular, there is a new type of fixed rate loan
with preferential conditions, issued all at once and without approval and instalment
collection expenses, which enables exhibitors to pay by instalments, in 12 months, all
expenses necessary to organise and participate in the event (registration fee, rent of the
exhibition spaces, transport, personnel, etc.). In addition, a new collection solution for
entities exhibiting at the Fiera di Vicenza was devised: a temporary Wi-Fi POS to be
used during the trade show, which can be reserved online, with the amounts collected
credited to the exhibitor’s current account or on a prepaid card (C/cConto Imprese) for
enterprises that are not customers of Banca Popolare di Vicenza.
Another important initiative pertains to the nationwide advertising campaign dedicated to the
zero rate loan called “Miniprestito Hi-Tech”, to purchase Apple products at BPVi branches. The
campaign involved the transmission of the dedicated ad on some major Italian radios (Radio
DeeJay, 101, Capital, Radio Italia solo Musica italiana, Subasio and Kiss Kiss) for about one
month, accompanied by an important communication action on digital channels - desktop and
mobile - that involved a broad range of Italian websites. The digital campaign that started at the
end of June continued throughout the summer, ending in mid-September.
In addition, from November 2015 onwards a specific commercial communication action was
designed; it is dedicated to the Time Deposit, through a shop window campaign in all branches
of Banca Popolare di Vicenza and Banca Nuova, developed through 6 different photographic
subjects aimed at highlighting the beauty of the main Italian cities where our Bank is present.
The communication action also involved a nationwide advertising campaign through the most
widely read regional and provincial daily papers, in their paper and web versions. The
campaign, planned in December 2015 over a time interval of three weeks, provided a significant
opportunity for publicity, concentrating in particular on the provinces of Vicenza, Verona,
Padova, Treviso, Belluno, Udine, Brescia, Bergamo and the regions of Tuscany and Sicily.
The better to represent the specific nature of the offer intended for pharmacies and farmers,
Banca Popolare di Vicenza was present with its own promotional stand at the major tradeshows
of the industries, such as Cosmofarma in Bologna, Vinitaly in Verona and SIMEI in Milan. At
the community level, moreover, the Bank continued to participate in the events held at the
Vicenza Fair and the Longarone Fair, of which the Bank is an institutional sponsor.
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With the goal of publicise the various entities that are active locally and to provide an active
contribution to sustain them, in 2015 BPVi carried out a series of partnerships supported by the
production of co-branded prepaid cards, obtainable in the bank and via web, through dedicated
sites. Examples of some cards are the Cystic Fibrosis Research Card, which allows users to
contribute to support the activities promoted by FFC Onlus (Foundation for Research on Cystic
Fibrosis), the Science Museum Card, developed as a result of the partnership with the Leonardo
da Vinci Museum of Science and Technology in Milan, the Udinese Academy Card, developed
as a result of the multi-year partnership with Società Sportiva Udinese Calcio and the Cinema
Italia Card, originating from collaboration with the MiBACT (Italian Ministry of the Cultural
Heritage and Tourism).
The co-marketing initiatives also include the close partnership with Gardaland, the famed
amusement park, which entailed, in 2015 as well, the launch of numerous initiatives and the
development of products and services for the young and households. Moreover, the Bank
continued to sell, at its branches, entrance tickets for the Park, providing a discounted price to all
account holders.
In partnership with the Municipality of Vicenza, moreover, the City Card initiative was
renewed, dedicated to students of schools in the Vicenza area. The project, launched in 2008,
involved a total of 14,000 students, and the services connected with the card, in addition to
payment for meal and school bus services, were extended to payment for summer camps and
inter-school services.
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CONSOLIDATED RESULTS OF OPERATIONS
SCOPE OF CONSOLIDATION
At 31 December 2015, the scope of consolidation of the BPVi Group is as follows:
Companies carried at net
equity
Companies consolidated Line-by-line
Parent Bank
S.c.p.A.
100%
Banca Nuova
S.p.A.
70.77%
Farbanca S.p.A.
100%
0.58%
NEM SGR S.p.A.
100%
1.41%
BPVI Multicredito
S.p.A.
100%
Fondo NEM
Imprese
95%
Fondo NEM
Imprese 2
99.42%
Industrial
Opportunity Fund
40%
ABC Assicura S.p.A.
98.59%
40%
60%
Berica Vita S.p.A.
Cattolica Life Ltd.
0.10%
Prestinuova S.p.A.
Servizi Bancari
S.c.p.A.
15.07%
40%
100%
96%
60%
60%
BPV Finance
International Plc
1%
Società Cattolica di
Assicurazione S.c.p.A.
0.10%
1.66%
1%
1%
47.95%
SEC Servizi
S.c.p.A.
46 %
1%
San Marco S.r.L
0.04%
99.92%
0.04%
Immobiliare
Stampa S.c.p.A.
Magazzini Generali
Merci e Derrate S.p.A.
0.04%
25%
56.67%
99.92%
Monforte 19 S.r.l.
0.04%
Giada Equity Fund
Popolare Assessoria e Consultoria Ltda, a subsidiary of which the Parent Bank holds a 99%
equity investment, was excluded from the scope of consolidation and valued at cost being that its
value is insignificant with respect to the Group’s consolidated financial statements.
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exists with regards to the special purpose vehicles used by the Group in its securitisation
irrelevant with respect to those of the group and that the assets securitised are already included
in the Group financial statements, the prerequisites prescribed by IAS 39 for the so-called
“derecognition” not applying for the various transactions carried out14.
Compared to 31 December 2014, the only noteworthy change in shareholdings of the subsidiaries
or companies subject to significant influence relates to the subsidiary Farbanca Spa, which was
the subject of additional acquisitions by the Parent Bank, whose interest now amounts to 70.77%
versus 70.29% at 31 December 2014.
******
The financial statements of the Banca Popolare di Vicenza Group at 31 December 2015 therefore
comprise the financial and operating information reported by the Parent Bank and its direct and
indirect subsidiaries and associated companies.
The statements of financial position and income statements used for consolidation purposes
according to line-by-line and equity methods were those referred to 31 December 2015, with the
exceptions set out below. These statements were adjusted, where necessary, to align them with
the correct and consistent IAS/IFRS standards applied by the Group. The financial statements of
companies consolidated line-by-line, but presented using formats that differ from those
established in Bank of Italy Circular no. 262 of 22 December 2005 and subsequent amendments,
have also been reclassified in accordance with these formats.
In detail, the associate Società Cattolica di Assicurazione was recorded at the equity value
reported in the Interim Report on Operations at 30 September 2015, while the data used for
Cattolica Life, Berica Vita and ABC Assicura were derived from the statements of financial
position and income statements prepared by the three associates to be incorporated in the
consolidated financial statements of the Parent Bank Società Cattolica di Assicurazione SCpA at
30 September 2015. This approach was necessary due to the fact that these associates will
approve their respective financial statements at 31 December 2015 on a date subsequent to the
Parent Bank’s date of approval of its own separate financial statements and of the Group’s
consolidated financial statements for 2015. A similar decision had been made in 2014 as well, and
therefore the contribution of the aforesaid associates to the BPVi Group’s operating results
nonetheless reflects 12 months of operations (last quarter of 2014 and first three quarters of 2015),
as opposed to 9 months of contribution to the result for the year 2014.
In addition, the equity investment in Giada Equity Srl was carried at the NAV values reported in
its Interim Report at 30 June 2015, whilst the carrying amount of Magazzini Generali Merci e
Derrate SpA and San Marco Srl was kept at zero, inasmuch as both companies, based on the
latest available information15, have negative equity.
allowed by IAS 1.
15 For Magazzini Generali Merci e Derrate SpA, the last approved financial statements refer to the year
2013, whilst for San Marco Srl reference was made to the draft 2014 Financial Statements prepared by the
directors but not yet approved by the Stockholders’ Meeting.
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Lastly, the equity investments held indirectly through mutual funds managed by the subsidiary
Nem Sgr were recognised at fair value, in accordance with the derogation provided by IAS 28,
par. 19. For fair value determination, the investments being solely in companies not listed on an
active market, reference was made to the policies used by investment schemes which provide a
valuation at historical purchase cost, adjusted to reflect deterioration in each investee’s balance
sheet, results of operations and financial position if applicable, or events that can permanently
affect the investee’s prospects and the estimated realisable value16.
BANKING BUSINESS
At 31 December 2015, the banking business of the Group, comprising total funding and cash
loans to customers, reached Euro 61,671 million, down by 16% compared to Euro 73,394 million
at 31 December 2014.
Banking business
Total funding
- of which: Direct funding
Loans to cusotmers
Changes
31/12/2015
31/12/2014
(+/-)
36,493
21,943
14,550
25,178
Total
61,671
45,283
30,373
14,910
28,111
73,394
%
-8,790
-8,430
-360
-2,933
-19.4%
-27.8%
-2.4%
-10.4%
-11,723
-16.0%
Net of exposures to central counterparties (repurchase agreements carried out in the Euro MTS
market with Cassa Compensazione e Garanzia and the related guarantee margins), the Group’s
banking business amounts to Euro 61,544 million, a decline of 13.3% compared to Euro 71,025
million at the end of December 2014.
Banking business
Total funding
Loans to cusotmers
Changes
31/12/2015
31/12/2014
(+/-)
36,493
21,943
14,550
25,051
Total
61,544
43,523
28,613
14,910
27,502
71,025
%
-7,030
-6,670
-360
-2,451
-16.2%
-23.3%
-2.4%
-8.9%
-9,481
-13.3%
At 31 December 2015 the Group’s total funding, consisting of the sum of direct funding and
indirect funding, amounted to Euro 36,493 million, down by 19.4% compared to Euro 45,283
million of 31 December 2014 (-16.2% net of exposures to central counterparties).
Direct funding, amounting to Euro 21,943 million, declined by 27.8% compared to the end of
2014 (-23.3% net of funding repurchase agreements carried out with central counterparties
whose amounts, at the end of 2015, were reduced to zero as a result of the Bank’s decision to
finance the Government bonds in ECB), with a decline of all the various forms of funding and, in
particular, of current accounts and unrestricted deposits (-18.2%), of time deposits (-33.7%) and
of bonds (-31.4%).
16 In accordance with the provisions promulgated by the Bank of Italy (“Regulation on the collective management of assets” promulgated with the Instruction of 19
January 2015, Title V, Chapter IV, Section II, Paragraph 2.4.6.) on the criteria for the measurement of equity investments in unlisted entities.
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It should be specified that the reduction in direct funding was concentrated in particular in the
last 4 months of the year and it is correlated to two extraordinary events that involved the Bank
(search by the Tax Police at the Bank’s offices on 22 September 2015) and the banking system as a
whole (the “Save the Banks” Decree at the end of December) and to the relevance they had in the
media. At the end of January 2016 direct funding stabilised on values that were substantially
in line with those at the end of 2015.
Indirect funding (excluding BPVi shares) amounted to Euro 14.6 billion (-2.4%), with assets
under administration declining by 9.7%, whilst assets under management and retirement savings
grew by 6.7%.
As at 31 December 2015, net cash loans to customers amounted to Euro 25,178 million, a
reduction of 10.4% with respect to the end of 2014. This aggregate performance reflects both the
reduction of lending repurchase agreements with central counterparties, and the significant
write-downs made by the Group in 2015 (over Euro 1.3 billion) on loans and advances to
customers.
Gross loans to customers, excluding repurchase agreements with central counterparties and the
related guarantee margins amounted to Euro 28.8 billion and declined by 3.7% compared to the
value at the end of 2014. New loans issued by the Group in 2015 amounted to approx. Euro 2.3
billion, of which 82.6% were to households and to small and medium enterprises.
DIRECT FUNDING
Direct funding, determined as the sum of "Due to customers", "Debt securities in issue" and
"Financial liabilities at fair value", amounted to Euro 21,943 million at 31 December 2015, versus
Euro 30,373 million at the end of 2014 (-27.8%).
Net of repurchase agreements carried out with central counterparties, whose amounts, at the
end of 2015, were reduced to zero as a result of the Bank’s decision to finance the Government
bonds in ECB), this aggregate declined by 23.3%.
It should be specified that the reduction in direct funding was concentrated in particular in the
last 4 months of the year and it is correlated to two extraordinary events that involved the Bank
(search by the Tax Police at the Bank’s offices on 22 September 2015) and the banking system as a
whole (the “Save the Banks” Decree at the end of December) and to the relevance they had in the
media. At the end of January 2016 direct funding stabilised on values that were substantially
in line with those at the end of 2015.
Direct funding
Current accounts and demand deposits
Time deposits
Repurchase agreements
Bonds
Certificates of deposit and other securities
Other payables
Changes
31/12/2015
31/12/2014
(+/-)
11,415
1,710
5,539
132
3,147
13,963
2,579
1,760
8,080
135
3,856
%
-2,548
-869
-1,760
-2,541
-3
-709
-18.2%
-33.7%
-100.0%
-31.4%
-2.2%
-18.4%
Total
21,943
30,373
-8,430
-27.8%
Total net of exposures with central counterparties
21,943
28,613
-6,670
-23.3%
The aggregate in question, in addition to the aforementioned zeroing of repurchase agreements,
shows the decline all other forms of funding: current accounts and demand deposits (-18.2%),
time deposits (-33.7%), bonds (-31.4%), certificates of deposit and other securities (-2.2%), and
other payables (-18.4%).
- 108 -
B
Among bonds, funding carried out on the EMTN programme declined slightly: new issues
carried out in 2015 amounted to a nominal value of Euro 1,155.7 million, while repayments/buybacks had a nominal value of Euro 1,267.5 million. Conversely, the issues placed on customers
were affected by repayments and buy-backs amounting to Euro 2.9 billion in view of new issues,
almost entirely concentrated in the first 8 months of the year, for only Euro 682 million. In
addition, last May the convertible bond issued in 2013 for a nominal value of Euro 253 million
was converted into shares of the Parent Bank. Subordinate issues existing at the end of 2015 had
a nominal value of Euro 725 million of which a nominal amount of Euro 450 million were issued
on the EMTN programme and placed with institutional investors.
The reduction in other payables is entirely referred to liabilities relating to assets sold and not
derecognised (Euro 2,052 million at 31 December 2015, Euro 2,880 million at 31 December 2014),
as the matching entry of the receivables sold within the own securitisations that do not meet the
derecognition requirements under IAS 39 and therefore were reinstated under asset line item 70
in the statement of financial position. The aforesaid liabilities, posted net of the cash available to
the various special purpose entities and generated with the periodic collection of the instalments
of the securitised loans, represent the share of the Asset Backed Securities issued by the special
purpose entities and placed on the market. In this regard, the subsidiary Prestinuova executed its
first securitisation transaction in early 2015, through the assignment to a vehicle company
(Adriano SPV) of performing salary-backed loans for approximately Euro 310 million, which was
later completed with the issue of ABS; its senior tranches (a nominal Euro 267.6 million) were all
placed on the market. The other two securitisations carried out by the Group in 2015 instead do
not contribute to form the aggregate value in question, because one is a self-securitisation (Berica
ABS 4) and the other is a transaction in the warehousing phase (Berica PMI 2).
INDIRECT FUNDING
Indirect funding (excluding BPVi shares) of the Group, at market values, amounted to Euro
14,550 million at 31 December 2015, down by 2.4% compared to 31 December 2014 17, with assets
under administration declining by 9.7%, whilst assets under management and retirement savings
grew by 6.7%.
Indirect funding
Changes
31/12/2015
31/12/2014
(+/-)
%
Assets under administration
Shares
Other securities
Assets under management and pension premiums
Mutual funds/Sicav
Portfolio management
Pension premiums
7,507
1,328
6,179
7,043
4,852
64
2,127
8,312
1,147
7,165
6,598
4,353
96
2,149
-805
181
-986
445
499
-32
-22
-9.7%
15.8%
-13.8%
6.7%
11.5%
-33.3%
-1.0%
Total
14,550
14,910
-360
-2.4%
Source: management accounting
Assets under management and retirement savings benefited from the positive contribution of
“mutual funds” (+11.5%), while “retirement savings” declined (-1%) along with “portfolio
management” (-33.3%). Among assets under administration, the “other securities” declined
(-13.8%), while “shares” grew (+15.8%).
Please note that the indirect funding figure as at 31/12/2014 decreased by Euro 331 million compared to
the value recorded in the 2014 financial statements as the market value of certain securities in assets under
administration was recalculated.
- 109 17
B
BPVi shares in guarantee and administration deposit with the Bank as at 31 December 2015,
measured at the price of Euro 48 set by the Stockholders’ Meeting held on 11 April
2015,amounted to Euro 4,384 million, versus Euro 5,610 million at 31 December 2014 (-21.9%),
reflecting mainly the effect of the reduction in value of the shares of the Parent Bank Banca
Popolare di Vicenza approved by the aforementioned Stockholders’ Meeting. For complete
disclosure, it is pointed out that the Board of Directors of the Parent Bank, on 16 February 2016,
set to Euro 6.30 the liquidation value of each BPVi share to be paid to Members and stockholders
who, in relation to the proposal to transform the Bank into a joint stock company, or “S.p.A.” (to
be submitted to the Stockholders’ Meeting of 4/5 March 2016) will exercise the withdrawal right
in accordance with Article 2437, Par. 1, letter b) of the Italian Civil Code.
LOANS TO CUSTOMERS
Cash loans to customers, corresponding to the item “Loans and advances to customers” under
assets, amounted to Euro 25.2 billion, down by 10.4% relative to 31 December 2014; this
performance reflects both the reduction of lending repurchase agreements (-81.9%, i.e. Euro 497
million) and, in particular, with central counterparties, and above all the significant write-downs
(over Euro 1.3 billion) made by the Group on exposures to customers during the year.
value at the end of 2014. New loans issued by the Group in 2015 amounted to nearly Euro 2.3
billion, of which 82.6% were to households and to small and medium enterprises.
Loans to customers
Current accounts
Repurchase agreements
Mortagages
Credit cards, personal loans and salary assignment
Other transactions
Debt securities
Total
Changes
31/12/2015
31/12/2014
(+/-)
4,093
110
16,168
527
3,902
378
25,178
4,771
607
17,354
530
4,362
487
28,111
%
-678
-497
-1,186
-3
-460
-109
-14.2%
-81.9%
-6.8%
-0.6%
-10.5%
-22.4%
-2,933
-10.4%
The aggregate performance is characterised by the decline of all components: current accounts
(-14.2%), repurchase agreements (-81.9%), mortgages (-6.8%), credit cards, personal loans and
salary-backed loans (-0.6%), debt securities (-22.4%) and other transactions (-10.5%).
Loans to customers include assets sold but not derecognized totalling Euro 8,284 million (Euro
7,351 million at 31 December 2014) in relation to the securitisations originated by the Group18.
These transactions do not meet the derecognition requirements of IAS 39, so the residual
securitised assets at the reporting date have been “reinstated” in the financial statements, in the
relevant technical forms.
allowed by IAS 1.
- 110 18
B
On 1 January 2015 the first securitisation originated by the subsidiary Prestinuova took effect; it
was carried out in accordance with Italian Law no. 130/1999 through the establishment of the
special purpose vehicle “Adriano Spv” whose securitised assets (salary-backed and pensionbacked loans and loans with delegation of payment on salary and pension for a total amount of
approximately Euro 310 million) were transferred without recourse. The securitisation was
completed in January 2015 with the issue of Asset Backed Securities whose senior tranches (Euro
267.6 million in nominal terms) were entirely placed on the market, whereas the junior tranche
(Euro 40 million in nominal terms) was subscribed by the Company.
On 1 May 2015, the Berica ABS 4 securitisation took effect, in which the originators (the Parent
Bank BPVi and the subsidiary Banca Nuova) assigned a portfolio of performing residential
mortgages totalling Euro 947 million. The transaction was then completed during the year
through the pro-rata subscription of the entirety of the originators’ securities.
Lastly, on 1 November 2015, the Berica PMI 2 securitisations took effect, in which the originators
(the Parent Bank BPVi and the subsidiary Banca Nuova) assigned a portfolio of performing
residential mortgages and unsecured loans granted to small-medium enterprises totalling Euro
1,175 million. This transaction is currently in the warehousing phase since the relative Asset
Backed Securities have not yet been issued by the vehicle company.
LOANS/DIRECT FUNDING RATIO
Loans / direct funding ratio
Loans to customers
Direct funding
Net imbalance
Loans / direct funding ratio
Changes
31/12/2015
31/12/2014
(+/-)
25,178
21,943
28,111
30,373
3,235
-2,262
114.7%
92.6%
%
-2,933
-8,430
-10.4%
-27.8%
5,497
-243.0%
By effect of the changes that took place in the aggregate values of direct funding and of the loans,
illustrated above, the “Loans / Deposits Ratio” amounted to 114.7% versus 92.6% of 31
December 2014.
Net of repurchase agreements traded with central counterparties (Cassa di Compensazione e
Garanzia) and of the related guarantee margins, the loans/direct funding ratio at 31 December
2015 amounted to 114.2%, versus 96.1% at the end of 2014.
- 111 -
B
The tables which follow summarise the contribution of the Group’s various Companies to the
individual components of banking business (direct funding, indirect funding, loans to
customers) for the purpose of identifying their incidence on total operations and of providing a
global overview of the Group’s banking operations.
Direct funding
Banca Nuova
Banca Nuova
Farbanca
Total
Loans to customers
(+/-)
%
(762)
18,712
85.3%
3,393
(449)
2,944
13.4%
326
(209)
117
0.5%
Other subsidiaries
Indirect funding
Contribution to consolidated
19,474
Farbanca
Prestinuova
Total
Eliminations and
consolidation
adjustments
Individual
results
166
-
166
0.8%
4
-
4
0.0%
21,943
100.0%
23,363
(1,420)
Eliminations and
consolidation
adjustments
Individual
results
(+/-)
%
13,235
(1)
13,234
91.0%
1,312
(28)
1,284
8.8%
34
134
(2)
32
0.2%
14,581
(31)
14,550
100.0%
Eliminations and
consolidation
adjustments
Individual
results
%
21,213
84.3%
-
2,842
11.3%
Farbanca
Prestinuova
527
-
527
2.1%
-
383
1.5%
BPV Finance
199
186
0.7%
27
0.1%
25,178
100.0%
Other subsidiaries
Total
383
27
26,107
- 112 -
(916)
(+/-)
2,842
Banca Nuova
22,129
(13)
-
(929)
B
CREDIT QUALITY
As of 1 January 2015, new rules for the classification of non performing loans came into effect.
These rules were issued by the Bank of Italy in its 7th update of Circular 272 of 30 July 2008 and
aim to align the definition of non performing financial assets with the new notions of “nonperforming exposure and forbearance” introduced by the implementing technical standards
relating to harmonised consolidated supervisory statistics reporting defined by the EBA and
approved by the European Commission on 9 January 2015 (ITS). The same update also
introduced the definition of “forbearance”, which can be applied to non performing exposures
(“non-performing exposures with forbearance measures”) as well as performing exposures
(“forborne performing exposures”).
In particular, while the overall scope of non performing loans remains the same, as of 1 January
2015 they are broken down into the categories of bad loans, unlikely to pay and past-due. The
sum of these categories corresponds to the aggregate “non-performing exposures” set forth in
the ITS. As of the same date, the categories of watchlist exposures and restructured exposures are
no longer used. As a result, to enable a like-for-like comparison, reporting as at 31 December
2014 has been restated by including the new category of unlikely to pay exposures, which were
classified as watchlist and restructured under the previous regulations on credit quality.
Net non perfoming loans to
customers
Changes
31/12/2015
31/12/2014
(+/-)
Bad loans
Unlikely to pay
Past due exposures
Total
1,889.2
3,295.6
135.4
5,320.2
1,696.3
2,175.8
329.3
4,201.4
%
192.9
1,119.8
-193.9
11.4%
51.5%
-58.9%
1,118.8
26.6%
At 31 December 2015, net non performing loans to customers showed an increase in absolute
value of Euro 1,118.8 million compared to 31 December 2014 (+26.6%). In detail, bad loans loans
grew by 11.4% and unlikely to pay by 51.5%, whilst past due exposures declined by 58.9%.
Trends in non performing loans reflect the “structural” evolution of the portfolio, affected by the
further deterioration recorded during the year by the real estate and construction sector. In
addition, the new trigger events, already introduced at the end of 2014, started to be
progressively applied, for a more objective identification of credit pathologies that may lead to
impairment or even insolvency. In the first half of the year, a thorough survey was carried out on
the portfolio of “early warning” performing loans (internal management category which
includes performing loans that have some anomalies that could lead to the impairment of the
position) according to the approaches used in the Comprehensive Assessment and with the
referenced new classification rules that entered into force on 1 January 2015 promulgated by the
Bank of Italy.
Lastly, the change in non performing exposures, and in particular of the unlikely to pay
exposures in the second half, was significantly influenced by the Group’s decision to reclassify
among non performing loans the exposures to certain Members/Stockholders (Euro 882.4
million in all, of which Euro 572 million correlated with the purchase of BPVi shares) that,
applying the criteria indicated by the ECB, were financed by the Group for the purchase of BPVi
shares and that, on the basis of the analyses carried out internally and of the reduced value of the
shares, no longer had sufficient cash flows for full repayment of the exposure.
Lastly, the criteria used to quantify the forecast losses for bad loans were revised to be more
conservative, for example, generally providing the full write-off of positions older than 10 years
and the application of more conservative “haircuts” to mortgage-backed loans.
- 113 -
B
31 December 2015
Categories
Gross
exposure
Adjustments
Net
exposures
Non performing loans
Bad loans
Unlikely to pay
Past due exposures
Performing loans
Loans to customers and debt securities
Repurchase agreements and collateral margin
8.962,6
4.369,4
4.438,9
154,3
20.004,7
19.878,0
126,7
3.642,4
2.480,2
1.143,3
18,9
146,8
146,8
-
5.320,2
1.889,2
3.295,6
135,4
19.857,9
19.731,2
126,7
Total
28.967,3
3.789,2
25.178,1
Non performing loans (included partial write-offs for
bankruptcy proceedings)
9.237,5
3.917,3
Bad loans (included partial write-offs for bankruptcy
proceedings)
Credit Cost
4.644,3
5,29%
% loans
gross
%
coverage
% net
loans
30,94%
15,08%
15,32%
0,53%
69,06%
68,62%
0,44%
40,64%
56,76%
25,76%
12,25%
0,73%
0,74%
0,00%
21,13%
7,50%
13,09%
0,54%
78,87%
78,37%
0,50%
5.320,2
31,59%
42,41%
21,13%
2.755,1
1.889,2
15,88%
59,32%
7,50%
Adjustments
Net
exposures
31 December 2014
Categories
Gross
exposure
Impaired loans
Bad loans
Unlikely to pay
Past due exposures
Performing loans
6.473,6
3.401,7
2.704,1
367,8
24.079,4
23.319,6
759,8
2.272,2
1.705,4
528,3
38,5
170,2
170,2
-
4.201,4
1.696,3
2.175,8
329,3
23.909,2
23.149,4
759,8
Total
30.553,0
2.442,4
28.110,6
Non performing loans (included partial write-offs for
bankruptcy proceedings)
6.765,2
2.563,8
Bad loans (included partial write-offs for bankruptcy
proceedings)
Credit Cost
3.693,3
3,09%
1.997,0
% loans
gross
%
coverage
% net
loans
21,19%
11,13%
8,85%
1,20%
78,81%
76,33%
2,49%
35,10%
50,13%
19,54%
10,47%
0,71%
0,73%
0,00%
14,95%
6,03%
7,74%
1,17%
85,05%
82,35%
2,70%
4.201,4
21,93%
37,90%
14,95%
1.696,3
11,97%
54,07%
6,03%
The coverage of non performing loans grew, i.e. total adjustments as a percentage of gross
lending, excluding partial write-downs for bankruptcy proceedings (so-called “write-offs”),
rising from 35.10% at 31 December 2014 to 40.64% at 31 December 2015. The coverage
percentage, including “write-offs”, was 42.41%, versus 37.90% as at 31 December 2014.
In detail, net non perfoming loans to customers at 31 December 2015 were as follows:
 net bad loans, representing 7.50% of net loans (6.03% at 31 December 2014), amounted to
Euro 1,889.2 million, with a coverage percentage, determined without taking account of
partial write-offs of receivables for bankruptcy proceedings (“write-offs”), of 56.76% (50.13%
at 31 December 2014). Including “write-offs”, the coverage percentage was 59.32% (54.07% at
31 December 2014);
 net unlikely to pay loans, representing 13.09% of net loans (7.74% at 31 December 2014),
amounted to Euro 3,295.6 million with a percentage coverage of 25.76% (19.54% at 31
December 2014);
 net past due exposures totalled Euro 135.4 million, with a coverage percentage of 12.25%
(10.47% at 31 December 2014).
- 114 -
B
Lastly, the “general provision” for performing loans to customers (excluding performing
repurchase agreements and guarantee margins) amounted to Euro 146.8 million at 31 December
2015, assuring coverage of 0.74%, versus 0.73% at the end of 2014.
The cost of credit on a yearly basis, defined as the ratio between net adjustments to cash loans to
customers and net loans amounted to 5.29% (3.09% at 31 December 2014).
INTERBANK AND LIQUIDITY SITUATION
At 31 December 2015, the Group's net exposure to the interbank market was Euro -7,823.3
million, versus Euro -2,502.9 million at the end of 2014.
(in millions euro)
Changes
31/12/2015
31/12/2014
(+/-)
%
Net exposure to Central Banks
Repurchase agreements position
Other net secured exposure
Net exposure through cash collateral
Net unsecured position
Debt securities
(6,542.6)
(851.2)
(674.9)
909.1
(663.7)
-
(1,543.9)
(594.3)
(339.5)
471.6
(519.0)
22.2
(4,998.7)
(256.9)
(335.4)
437.5
(144.7)
(22.2)
323.8%
43.2%
98.8%
92.8%
27.9%
-100.0%
Total
(7,823.3)
(2,502.9)
(5,320.4)
212.6%
The net exposure to Central Banks includes the time deposit connected with maintaining the
compulsory reserve (Euro 108.5 million at 31 December 2015, Euro 205.2 million at the end of
2014) and the refinancing operations in which the Group participated by forming a pool of assets
eligible as collateral. In particular, at 31 December 2015, there are two three-year refinancing
operations in place within the scope of the ECB’s initiative called TLTRO (Targeted Longer Term
Refinancing Operations), of which Euro 1,249 million carried out in 2014 and Euro 600 million
carried out in 2015. The remainder is represented by ordinary refinancing operations through
participation in the weekly auctions of the ECB (“MRO”). The significant increase in the
exposure to the ECB is due to the choice to finance, in the final part of the year, the Government
bonds in ECB, while zeroing the repurchase agreements existing with Cassa Compensazione e
Garanzia.
The repurchase agreements position had a negative imbalance of Euro 851.2 million, up
compared to Euro -594.3 million at 31 December 2014, by effect of the new transactions of this
kind carried out using Asset Backed Securities issued within the scope of own securitisations.
Of the other net secured exposures, Euro 175 million refer to the financing received from
multilateral development banks (Euro 339.5 million at 31 December 2014), while the residual
amount refers to a loan received by the special purpose vehicle Berica PMI 2 (“bridge
financing”), while awaiting the definitive structuring of the notes expected to be issued in the
Spring of 2016, within the securitisation by the same name carried out by the Group and
reinstated in the financial statements because the derecognition requirements in accordance with
IAS 39 are not met.
The net exposure through cash collateral had a positive balance of Euro 909.1 million (Euro
471.6 million at 31 December 2014) and refers almost exclusively to mutual guarantees, aimed at
mitigating credit risk, that are exchanged on a daily basis with all major market operators with
which the Group carries out OTC derivative and repo/bond buy sell back transactions,
quantified on the basis of the market value of existing positions. The guarantees are regulated by
international standards (CSA/GMRA) subscribed with the various market counterparties on
existing ISDA agreements that regulate the aforesaid transactions.
- 115 -
B
The net unsecured position amounted to Euro -663.7 million, compared to Euro -519 million at
31 December 2014, while the O/N funding, used for temporary coverage of cash imbalances,
amounted to zero.
The table below summarizes the cash flow statements for 2015 and 2014, derived from the
consolidated financial statements at 31 December 2015, which show that in 2015 the Group
absorbed net liquidity of Euro 19.3 million.
Liquidity
(in millions euro)
Changes
31/12/2015
31/12/2014
(+/-)
Cash and cash equivalents at the beginning of the
year
Net liquidity generated/absorbed by operating
activities
Net liquidity generated/absorbed by investing
activities
Net liquidity generated/absorbed by funding
activities
%
192.8
2,389.2
(2,196.4)
-91.9%
(66.7)
(2,702.3)
2,635.6
-97.5%
34.4
(111.2)
145.6
n.s.
13.0
617.1
(604.1)
n.s.
Total net cash generated/absorbed in the year
(19.3)
Cash and cash equivalents at the end of the year
173.5
(2,196.4)
192.8
2,177.1
(19.3)
n.s.
-10.0%
Net liquidity absorbed by operating activities in 2015 amounted to Euro -66.7 million versus
Euro -2,702.3 million absorbed in 2014, and it resulted from:

liquidity generated by financial activities, amounting to Euro 2,365.5 million versus Euro
839.2 million in 2014;

liquidity absorbed by financial liabilities of Euro 2,630.3 million, compared to Euro 3,575.1
million in 2014;

liquidity of Euro 198.1 million generated by operations, versus Euro 33.5 million
generated in 2014.
In 2015, net liquidity generated by investment activities amounted to Euro 34.4 million (Euro
-111.2 million in 2014), of which Euro 38.3 million derive from the sale/repayment of the
securities recorded under “Financial assets held to maturity” (Euro 5 million in 2014), Euro 9.2
million from the net cash flows generated by investee companies versus net absorption of Euro
81.7 million in 2014, whilst tangible and intangible assets absorbed Euro 13.1 million (Euro -34.5
million in 2014).
Lastly, in 2014, the liquidity generated by funding activities amounted to Euro 13 million (Euro
617.1 million in 2014), almost entirely related to the effects of the share capital operations.
- 116 -
B
FINANCIAL ASSETS AND LIABILITIES
At 31 December 2015, the Group’s cash financial assets amounted to Euro 5,871.8 million, versus
Euro 6,558.8 million at 31 December 2014 (-10.5%).
Changes
31/12/2015
(+/-)
- Debt securities: Governments and Central Banks
- Debt securities: other issuers
- Listed equities
- Unlisted equities
1,190.0
1,010.8
153.8
25.4
-
7.8
7.8
4.3
4.3
5,725.8
5,231.5
46.0
17.1
159.1
244.2
27.9
5,321.1
4,426.5
44.8
88.4
255.0
479.4
27.0
404.7
805.0
1.2
(71.3)
(95.9)
(235.2)
0.9
7.6%
18.2%
2.7%
-80.7%
-37.6%
-49.1%
3.3%
-
43.4
43.4
(43.4)
(43.4)
-100.0%
-100.0%
(687.0)
-10.5%
Financial assets held to maturity
Total
%
138.2
1.0
133.1
1.0
3.1
Financial assets at fair value
- Debt securities: Governments and Central Banks
- Listed equities
- Unlisted equities
- Mutual funds
- Loans
31/12/2014
5,871.8
(1,051.8)
(1,009.8)
(20.7)
(24.4)
3.1
6,558.8
3.5
3.5
-88.4%
-99.9%
-13.5%
-96.1%
81.4%
81.4%
In detail, at 31 December 2015, the BPVi Group’s cash financial assets refer to:
 assets held for trading of Euro 138.2 million, down by 88.4% compared to 31 December
2014, as a result of the disposal of almost all investments in Italian Government bonds,
but also of the other debt securities and equities;
 financial assets at fair value of Euro 7.8 million, entirely referred to convertible bonds for
which the BPVi Group exercised the “fair value option”;
 financial assets available for sale of Euro 5,725.8 million, up by 7.6% compared to 31
December 2014. Investments in Italian Government bonds grew, whilst the decline in
equities reflects, in particular, the sales, completed at the end of the year, of the equity
investments held in the Central Institute of Italian Cooperative Banks and in Save Spa.
Lastly, the reduction in exposure to mutual funds is related both to the sales completed in
the last quarter of the year, in particular by the subsidiary BPV Finance, and to the
impairment recognised on certain funds and, in particular, on the Luxembourg-based
Funds Athena, Optimum MS1 and Optimum MS2 on which the ECB has found critical
profiles and which, due to the changed time span of the investment, were measured
based on the estimated realisable values of the individual underlying assets instead of
using the NAV valuation disclosed by the management company.
The financial assets held to maturity, which were entirely held by the subsidiary BPV Finance,
were entirely sold and/or repaid.
Overall, at 31 December 2015, the BPVi Group holds cash assets representing exposures to
sovereign debt amounting to Euro 5,232.5 million, equal to 89.1% of the Group’s cash financial
assets at that date, all referred to the Italian government bonds with the exception of a marginal
exposure (Euro 368 thousand) in Argentine Government bonds.
- 117 -
B
At 31 December 2015, there were no financial liabilities held for trading, which, instead,
amounted to Euro 68.6 million at 31 December 2014 and entirely referred to short positions on
Italian Government securities.
The Group's net exposure to derivative instruments at 31 December 2015, compared to 31
December 2014, is analysed below.
31/12/2015
Trading derivatives
Positive
fair value
31/12/2014
Negative
fair value
Positive
fair value
Negative
fair value
Derivatives on debt securities and interest rates
Derivatives on equities and equity indices
Derivatives on exchange rates and gold
3,167.0
0.3
39.6
(2,762.7)
(0.1)
(8.7)
6,248.6
0.3
30.2
(5,867.4)
(0.2)
(17.9)
Total
3,206.9
(2,771.5)
6,279.1
(5,885.5)
In 2015, the Group carried out an intense portfolio compression activity that is still ongoing but
that has already led to the substantial halving of the book values of the derivatives held for
trading, while also optimising the capital absorptions connected with the trading book.
In addition, in 2015 the Group changed its operating procedures for the structuring of hedges to
banking book entries which, contrary to what took place previously, now no longer transits on
the trading portfolios.
The breakdown of “hedging” derivatives is shown below.
31/12/2015
Hedging derivatives
Coperture del fair value
- debt securities
- mortgages
- own bond issues
Positive
fair value
Negative
fair value
31/12/2014
Notional
Positive
fair value
Negative
fair value
Notional
33.0
13.6
19.4
(117.1)
(53.3)
(63.8)
-
1,718.2
220.0
1,207.4
290.8
44.7
11.2
33.5
(264.3)
(157.6)
(106.7)
-
1,957.9
455.0
1,100.5
402.4
-
(770.5)
(766.8)
(3.2)
(0.5)
3,915.9
3,673.0
100.0
142.9
53.2
53.2
-
(261.1)
(215.0)
(46.1)
-
10,245.0
2,595.0
7,650.0
-
Fair value option (natural hedging)
- own bond issues
63.5
63.5
(0.5)
(0.5)
964.8
964.8
110.3
110.3
(2.4)
(2.4)
2,681.9
2,681.9
Total
96.5
(888.1)
6,598.9
208.2
(527.8)
14,884.8
Coperture dei flussi di cassa
- debt securities
- mortgages
- due to customers
The fair value hedges pertain to interest rate risk on specific fixed-rate and floating rate with
maximum rate mortgage portfolios classified as “Loans and advances to customers”, on
individual own-issue bonds recorded among “securities in issue” and on inflation linked Italian
government bonds recorded among “financial assets available for sale” hedged also for inflation
rate.
To represent the aforesaid hedging transactions, the Group opted for the “Micro Fair Value
Hedge” accounting model for those relating to own-issue bonds and to investments in debt
securities, while it used the “Macro Fair Value Hedge” model for those relating to mortgage
loans, with the consequent recognition of the revaluations of the hedged assets (Euro 46.2 million
at 31 December 2015 versus Euro 87.4 million at 31 December 2014) in Asset line item 90
“Remeasurement of financial assets backed by macro hedges”.
- 118 -
B
The cash flow hedges pertain to specific portfolios of floating rate mortgages recorded among
“loans and advances to customers”, Italian Government bonds recorded among “financial assets
available for sale”, in particular inflation linked BTP, and loans and advances to customers, the
latter activated by the subsidiary Prestinuova on the notes issued as part of its securitisation
transaction completed in early 2015.
Cash flow hedged floating rate loans amounted to Euro 100 million at 31 December 2015, versus
Euro 2.55 billion at the end of 2014. In this regard, it should be specified that at 31 December
2014, the underlying assets of cash flow hedging derivatives for mortgages referred both to
tailor-made interest rate swaps that replicate the amortisation schedule and the method of
indexing the hedged assets and to the related swaption collars that enabled to limit the
consequences of any sudden changes in the interest rate curve.
Finally, the fair value option is used to manage own-issue bonds related, from their origin, to
derivative contracts entered into in order to mitigate their interest rate risk.
OTC derivatives entered into with market counterparties, mostly banks, is almost entirely
secured by bilateral offsetting agreements that provide the option of offsetting creditor positions
with debtor positions in case of counterparty default. Moreover, in order further to attenuate
credit risk, specific Credit Support Annex contracts were stipulated, which regulate the cash
collateral financial guarantees given/received by the various counterparties with which the
Group operates.
The following table shows the Group’s net exposure in derivatives, determined on the basis of
the net fair values of all existing contracts with a single counterparty with respect to the
transactions that are secured by a bilateral offsetting agreement, whilst the remaining
transactions are posted on the basis of the fair value of each individual contract.
31/12/2015
Derivatives
Positive
fair value
OTC derivatives with market counterparties
- covered by bilateral offsetting arrangements
- not covered by bilateral offsetting arrangements
OTC derivatives with Group clients
320.5
320.5
97.1
31/12/2014
Negative
fair value
(768.2)
(768.2)
(5.6)
Positive
fair value
630.2
629.4
0.8
100.1
Negative
fair value
(651.8)
(647.3)
(4.5)
(4.5)
At 31 December 2015, the exposures with positive fair values with market counterparties are
secured by cash collaterals deposited with the Parent Bank BPVi, totalling Euro 307.6 million
(Euro 570 million at 31 December 2014).
Derivatives with customers at the end of 2015 include gross non performing exposures of Euro
14.8 million, written down by Euro 1 million to take account of the related credit risk. The
remaining performing positions, instead, were written down by Euro 2.7 million.
- 119 -
B
PRINCIPAL EQUITY INVESTMENTS
Following are the main investments and disposals of equities carried out during 2015.
Purchases of equity instruments and capital transactions by investee companies
During 2015, Banca Popolare di Vicenza carried out various transactions on subsidiaries and/or
on AFS securities that changed the interests held in existing investee companies or, while
maintaining the share held by the Bank unchanged, led to an increase in the invested amount,
both because of new acquisitions of shares and because of participation in capital increases.
Among them, particularly noteworthy was the payment in various tranches of amounts
(totalling Euro 8.1 million), called up by the NEM Imprese, NEM Imprese II and Industrial
Opportunity Funds managed by the subsidiary NEM SGR S.p.A., as fees and commissions and
for new investments.
In addition, BPVi subscribed, within the scope of a commitment made previously, new shares
and new financial instruments issued by the investee V.E.I. Capital S.p.A. with a value of
approximately Euro 5.9 million.
In 2015, BPVi also effected several purchases of Farbanca S.p.A. shares from selling stockholders
for over Euro 200 thousand, raising the share held by Banca Popolare di Vicenza in the
subsidiary to 70.77% at 31 December 2015.
In June, Banca Popolare di Vicenza increased its investment in San Marco S.r.l. an associate of
which it owns 46%, for a net amount of Euro 1.1 million in order to promote its recapitalisation,
together with the other Members. The investee’s situation, which emerged afterwards in the
second half of 2015, led to the decision to fully write off the book value of this equity investment
In December, the Bank increased its investment in the insurance company ABC Assicura S.p.A.,
included in the scope of the bankassurance partnership in place with the Cattolica Assicurazioni
Group, by an amount of Euro 1.6 million through a capital payment directed at maintaining the
capital ratios of the investee in accordance with the Solvency II regulations.
Lastly, within the debt restructuring operations, completed through the mechanism of the
conversion of the credit claimed by the Bank into shares, units and/or equity financial
instruments of the debtor counterparties, the Bank made several investments, including, in
particular, those in Nuova Sorgenia Holding S.p.A. (conversion of receivables amounting to
approximately Euro 4.1 million) and Aedes S.p.A. (conversion of receivables amounting to more
than Euro 2.1 million into units of the Immobiliare Leopardi Fund), in addition to other, smaller
ones.
Sales of equity instruments
The final part of the year 2015 was characterised by the disposal of some non strategic equity
investments, carried out consistently in accordance with the guidelines outlined in the new
2015-2018/20 Business Plan and directed also at achieving income statement benefits and
improvements in terms of capital ratio and liquidity position.
Among them, of particular note, in view of their relevance, are the sale of the 9.99% shareholding
held by BPVi in ICBPI - Istituto Centrale delle Banche Popolari Italiane S.p.A., the sale of the
8.75% shareholding in the listed company SAVE S.p.A., the sale of 800 units held in the ClosedEnd Mutual Fund “21 Investimenti II”, the sale of the 10.93% shareholding in Consorzio
Triveneto S.p.A. and, lastly, the sale of the shareholding representing 19% of the capital stock of
Agripower S.r.l.. For additional details on these transactions, please refer to the chapter entitled
“Changes in the investment segment” of the section dedicated to Activities with strategic
relevance of this Report on Operations.
- 120 -
B
Among the other relevant sales that took place in 2015, of note is the July disposal of the
shareholding in S.I.A. S.p.A., European leader in the design, construction and management of
infrastructure and technological services in the areas of payments, of e-money, of network
services and of the capital markets dedicated to Financial Institutions, to Central Banks, to
Entities and to Public Administrations, at the price of Euro 1 million that generated a gross
capital gain of approximately Euro 0.9 million.
In addition, in December Banca Popolare di Vicenza terminated by mutual agreement with
Veneto Sviluppo S.p.A. the private Partnership Agreement, executed with that counterparty on
9 November 2009, relating to the establishment of a capital intended for Veneto Sviluppo S.p.A.
itself. As a result of said termination, the Bank was repaid, recognising a small capital gain, the
original investment of Euro 1 million.
In addition, of note is the partial redemption (for approximately Euro 1 million) of units by JP
Residential VII S.a.r.l., a real estate investment vehicle, in relation to the completion of disposals
of portfolio assets, the partial redemption of units by the NEM Imprese II fund as a result of the
completion of the sale of Pittarosso S.p.A., target of the investment made in Capitolonove S.r.l.
and the repayments (for more than Euro 2.5 million) of some investments made in the coproduction of works in the movie-making sector, carried out by the Bank in accordance with
“Tax credit” regulations.
- 121 -
B
EQUITY
The Group’s equity at 31 December 2015 amounted to Euro 2,534.1 million, reporting a decrease
of Euro 1.2 billion with respect to the figure at the end of 2014.
The definition of equity used by the Group corresponds to the sum of the following line items:
“Valuation reserves”, “Redeemable shares”, “Equity instruments”, “Reserves”, “Additional
paid-in capital”, “Capital stock”, “Treasury shares” and “Net income (loss) for the year”.
Group equity
(in millions euro)
Capital stock
Additional paid-in capital
Reserves
Valuation reserves
Equity instruments
Treasury shares
Equity
Net income
Total equity
- of which restricted reserves ex art. 2358, c. 6, Civil Code
Changes
31/12/2015
31/12/2014
(+/-)
377.2
3,206.6
224.0
157.4
1.4
(25.5)
3,941.1
(1,407.0)
351.9
3,365.1
608.9
186.8
3.2
(25.9)
4,490.0
(758.5)
2,534.1
3,731.5
361.4
61.9
%
25.3
(158.5)
(384.9)
(29.4)
(1.8)
0.4
7.2%
-4.7%
-63.2%
-15.7%
-56.3%
-1.5%
(548.9)
-12.2%
(648.5)
85.5%
(1,197.4)
-32.1%
The ECB’s review of the capital, referred to in the specific section of the Report on Operations,
brought to light a correlation between acquisitions/subscriptions of BPVi shares and loans
disbursed to certain Members/Stockholders. In this regard, as highlighted in the table shown
above, the equity reserves at 31 December 2015 are subject to a restriction making them nondistributable pursuant to Art. 2358, paragraph 6 of the Italian Civil Code, in the amount of Euro
304.4 million. In addition to the aforesaid amount, there is another non-distributable equity
reserve pursuant to Art. 2358, paragraph 6 of the Italian Civil Code in the amount of Euro 57
million (Euro 61.9 million as at 31 December 2014) relating to the two “ordinary” share capital
increase transactions to expand the stockholder base, which offered new Stockholders the
possibility of subscribing BPVi shares with resources deriving from a loan granted by the Bank,
in compliance with the provisions of Art. 2358 of the Italian Civil Code.
During January 2015, the Parent Bank Banca Popolare di Vicenza, in executing the “financed”
share capital increase transaction intended for new stockholders that closed out at the end of
December 2014, issued 214,784 new shares for an overall exchange value of Euro 13.4 million
posted partially under the item Capital stock (Euro 0.8 million) and partially under the item
Additional paid-in capital (Euro 12.6 million).
In May 2015, the Parent Bank Banca Popolare di Vicenza performed the conversion of the “BPVi
2013-2018 Convertibile” convertible bond, with a nominal amount of Euro 253 million, issued as
part of the capital increase completed in 2013, by issuing 5,777,325 new shares. As a result,
Capital stock increased by Euro 21.7 million, Additional paid-in capital increased by Euro 230.4
million and the remaining amount, relating to share fractions that cannot be issued, was settled
in cash.
Lastly, in December 2015, the Parent Bank Banca Popolare di Vicenza issued 763,100 new shares
free of charge, as a loyalty bonus for subscribers of the 2013 capital increase. Consequently, their
value (Euro 2.9 million) was transferred from Additional paid-in capital to capital.
Lastly, Euro 398.7 million was drawn from Additional paid-in capital to cover the loss for the
year 2014, as approved by the Stockholders’ Meeting on 11 April 2015.
- 122 -
B
The change in Reserves was due to draw-downs (Euro 359.8 million) to cover the amount of the
loss for the year 2014 not covered by the amount taken from Additional paid-in capital. The net
losses of the BPVi Group in 2015 were likewise allocated to the item under consideration with
the closing of certain mortgage cash flow hedging activities (approximately Euro 29.5 million net
of the related tax effect and of the portion already re-allocated to the income statement, referred
also to the profits of this kind achieved in past years). The remaining changes were associated
with the measurement of the Companies consolidated at net equity.
“Equity instruments”, amounting to Euro 1.4 million at 31 December 2015, reflect the equity
component embedded in the convertible subordinated bond “BPVi 15^ Emissione 2009-2016”,
which is reported separately in accordance with IAS 32. The “equity component” relating to the
“BPVi 2013-2018 Convertibile” convertible bond, which amounted to Euro 1.8 million at 31
December 2014, was reclassified to Reserves following the conversion.
Treasury shares at 31 December 2015 equal Euro 25.5 million (Euro 25.9 million at 31 December
2014), corresponding to 407,527 shares retained in the portfolio because they support the
“Loyalty Bonus” due to Members/Stockholders as part of the capital increase of Euro 608 million
made in 2014 by the Parent Bank Banca Popolare di Vicenza. More specifically, in 2017, these
shares may be assigned, as bonuses, to those Members who fulfilled the requirements prescribed
by the regulations of the transaction.
The valuation reserves were reduced by Euro 29.4 million compared to 31 December 2014,
mainly because of the derecognition of the reserves on equities sold in 2015 and, in particular, of
the equity investments held in Istituto Centrale delle Banche Popolari and in Save SpA.
Positive, instead, were the changes in fair value that took place on Italian government bonds
recorded among “financial assets available for sale” and on the related derivatives hedging the
cash flows (net total of Euro 20.2 million), while valuation reserves relating to the derivatives
hedging cash flows of assets and liabilities at amortised cost decreased (by Euro -7.1 million) .
This item also includes the reserves deriving from the actuarial valuation of defined benefit
pension plans (the positive effect recognised during the year amounted to Euro 4 million), the
reserves arising from the valuation of land, buildings and works of art at deemed cost on the
first-time adoption of IAS/IFRS, together with the reserves relating to special revaluation laws. It
also includes the valuation reserves of the investees measured at equity, which in 2015 decreased
by Euro 13.3 million.
- 123 -
B
The following table shows the breakdown of valuation reserves at 31 December 2015 compared
to 31 December 2014.
Valuation reserves
Changes
31/12/2015
31/12/2014
(+/-)
%
- Italian government securities
- Other debt securities
- Quoted equities
- Unquoted equities
- Mutual funds
Property, plant and equipment
Cash-flow hedges
- Italian government securities
- Assets/Liabilities at cost
Actuarial gains (losses) on defined-benefit pension
plans
Portion of valuation reserves of equity investments
carried at equity
Special revaluation laws
557.2
527.5
0.8
(2.7)
25.0
6.6
0.1
(505.4)
(503.0)
(2.4)
209.6
146.7
(1.6)
9.7
50.4
4.4
0.1
(137.7)
(142.4)
4.7
347.6
380.8
2.4
(12.4)
(25.4)
2.2
(367.7)
(360.6)
(7.1)
165.8%
259.6%
-150.0%
-127.8%
-50.4%
50.0%
0.0%
267.0%
253.2%
-151.1%
(6.4)
(10.4)
4.0
-38.5%
25.5
38.8
(13.3)
-34.3%
86.4
86.4
-
0.0%
Total
157.4
186.8
(29.4)
-15.7%
The following table reconciles the equity and net income of the Parent Bank Banca Popolare di
Vicenza with those of the Group that pertain to the Parent Bank itself.
31/12/2015
of which: net
income for the
period
Equity
Parent bank's statement of financial position
31/12/2014
of which: net
income for the
year
Equity
2,465.1
(1,399.4)
3,638.6
(823.7)
(231.6)
(231.6)
9.7
9.7
17.2
17.2
13.3
13.3
278.0
226.9
74.0
-
11.2
3.2
16.8
5.0
Year results pertaining to the Group, as to:
- companies consolidated line-by-line
- companies valued at shareholders'equity
Differences compared to carrying values, as to:
Write-off of dividends collected during the year from:
-
Derecognition of intercompany profit and loss
Derecognition of intercompany capital gains from discontinuing
and contributing operations
Other consolidation adjustments
Consolidated statement of financial position
(28.0)
-
(30.3)
(0.3)
(11.0)
4.7
(4.4)
(9.5)
0.5
(4.0)
10.6
(14.6)
76.8
(1.5)
0.4
(1.9)
(0.3)
3,731.5
(758.5)
2,534.1
(1,407.0)
Consolidated equity pertaining to the Parent Bank, i.e. Euro 2,534.1 million, is Euro 69 million
than the value reported in the Parent Bank's separate financial statements at 31 December 2015
(Euro 2,465.1 million).
The consolidated net loss, amounting to Euro 1,407 million, was Euro 1,399.4 million higher than
the Parent Bank’s.
- 124 -
B
OWN FUNDS AND RATIOS
Own funds and the Own fund requirements at 31 December 2015 were determined in
accordance with the regulatory framework of Basel 3, including the transitional provisions and
the national discretionary powers. In this regard, the Group exercised its right to sterilise the
valuation reserves relating to debt securities issued by central governments of European Union
countries held in the “Financial assets available for sale” portfolio, including the valuation
reserves relating to cash flow hedges on the same securities.
Regulatory capital and capital adequacy ratio
Common Equity Tier 1 (CET1)
Additional Tier 1 (AT1)
Tier 2 (T2)
Changes
31/12/2015
31/12/2014
(+/-)
%
1,655.6
366.9
3,025.1
323.9
(1,369.5)
43.0
-45.3%
0.0%
13.3%
2,022.5
3,349.0
(1,326.5)
-39.6%
1,784.2
33.3
22.7
150.6
2,057.7
57.1
57.7
146.2
(273.5)
(23.9)
(35.0)
4.3
-13.3%
0.0%
-60.6%
2.9%
Capital adequacy requirements
1,990.7
2,318.8
(328.1)
-14.1%
Common Equity Tier 1 Ratio
Tier 1 Ratio
Total Capital Ratio
Surplus(Deficit) respect minimal requirements art.
92 CRR, included combined capital reserve
requirement
24,884.3
6.65%
6.65%
8.13%
28,985.1
10.44%
10.44%
11.55%
(4,100.8)
-3.79 p.p.
-3.79 p.p.
-3.42 p.p.
-14.1%
(896.0)
-293.2%
Own Funds
Requirement for Credit and Counterparty risk
Requirement for Credit Value Adjustment
Requirement for Market risk
Requirement for Operational risks
(590.4)
305.6
At 31 December 2015, Own funds amounted to Euro 2,022.5 million, versus Euro 3,349 million at
31 December 2014. This change was primarily caused by the loss for the year and the “prudential
filter” (Euro 320.8 million net of adjustments to loans and allocations to the provisions for risks
and charges recorded in the income statement) applied to deduct from the calculation of Own
Funds the capital with respect to which a correlation was found between
purchases/subscriptions of BPVi shares and loans disbursed to certain Members/Stockholders,
i.e., in relation to which other elements were detected that require it to be deducted from the
Common Equity Tier 1 capital elements pursuant to Art. 36 of Regulation (EU) no. 575/2013 (for
a more detailed description, please refer to the “Inspections” paragraph of this Report). Overall,
the impact of the critical elements emerged and ascertained during the year on own Funds at 31
December 2015 amounted to Euro 1,139.3 million.
The Common Equity Tier 1 Ratio and the Tier 1 Ratio are both 6.65% (10.44% at 31 December
2014), while the Total Capital Ratio is 8.13% (11.55% at 31 December 2014). At 31 December 2015,
the Group’s capital exceeded the minimum regulatory requirements of Article 92 of the CRR by
Euro 31.8 million. The impact on the Group’s capital ratio at 31 December 2015 connected with
the critical elements emerged from the inspection by the ECB and the subsequent in-depth
surveys carried out internally, specifically pertaining to the critical profiles that in accordance
with Article 36 of Regulation (EU) no. 575/2013 do not allow to compute in the Own Funds of
the Group elements of Common Equity Tier 1 for an amount of Euro 1,139.3 million, is
approximately 380 bps.
- 125 -
B
However, the Basel 3 framework also prescribes establishing additional capital reserves above
the regulatory minimums in order to provide banks with high quality capital means to be used at
times of market stress to prevent dysfunctions in the banking system and avoid interruptions in
the loan granting process and to address risks deriving from the systemic relevance of banks at
the global or domestic level.
In this regard, the capital conservation buffer has already been provided19, while the
countercyclical capital buffer 20, the buffer for entities with global systemic relevance (G-SII
buffer) and the buffer for other entities with systemic relevance (O-SII buffer)21 will be applied
from 1 January 2016 onwards. The total amount of the aforesaid additional capital reserves is
called “combined capital reserve requirement” and banks are obligated to address it with
Common Equity Tier 1 (CET1) capital. At 31 December 2015, the BPVi Group had a deficit of
Euro 590.4 million on the “combined capital reserve requirement” prescribed by the prudential
regulations.
Lastly, last November the ECB set to 10.25% (formerly 10.30%) the target value of CET1 Ratio for
the Banca Popolare di Vicenza Group. At 31 December 2015, the deficit of Common Equity Tier 1
(CET1) capital compared to the target ratio was Euro 895.1 million.
In reference to the aforesaid deficits, the Board of Directors has already decided to take all
measures needed for transformation into a joint stock company (“S.p.A.”) and for listing the
shares on the Electronic Stock Market managed by Borsa Italiana, as well as to carry out a capital
increase up to Euro 1.5 billion, which will bring the capital ratios to above the ECB targets by the
end of April 2016. The completion of these activities, currently in progress and envisaged in the
new 2015-2020 Business Plan, approved by the Board of Directors during the meeting of 30
September 2015 and updated, on the basis of 2015 preliminary results, on 9 February 2016, will
allow the Group to comply with the stringent regulatory requirements going forward.
Capital adequacy requirements were calculated using the following methods:

risk-weighted assets used for determining the credit and counter-party risk requirement
have been quantified using the standard method and simplified credit risk mitigation
(CRM) by adopting unsolicited external ratings provided by the ECAI DBRS for the
supervisory portfolio “Exposures to Central governments or central banks” by the
Moody’s, S&P and Fitch ECAI for the supervisory portfolio “Elements that represent
positions relating to securitisations” and unsolicited ratings by the Cerved Group ECAI
for the supervisory portfolio “Exposures to Companies”;

the market risk requirement is determined using the standard method, under which
sensitivity models are used to represent derivatives involving interest rates and debt
securities;

the operational risks requirement was determined using the basic method, with the
calculation of the reference aggregate aligned to the new supervisory provisions.
For banking groups, the capital conservation reserve is equal to 2.5% of total risk exposure.
On 30 December 2015, the Bank of Italy published the decision with which it set, for the first three
months of 2016, to zero percent the coefficient of the countercyclical capital buffer applicable to exposures
towards Italian counterparties.
19
20
The requirements for entities with global systemic relevance or for the other entities with systemic
relevance do not apply to the Group and to the Bank.
21
- 126 -
B
COMMENTS ON THE INCOME STATEMENT
The 2015 income statement reported a consolidated loss of Euro 1,407 million due mainly to the
extraordinary initiatives for the survey of the Group’s assets, which led to write-downs and
provisions amounting to more than Euro 2.3 billion.
The net profit from operating activities declined by 26.9% compared to 31 December 2014,
significantly affected by some extraordinary components.
Among the operating income (-2.3%), revenues from core activities grew with the net interest
income and net fee and commission income that grew by 1.7% overall. Also positive was the
performance of dividends and the results of the equity investments measured at equity
(+63.2%), while the contribution of the net profit from the property portfolios (-12.7% excluding
the capital gain of Euro 166.7 million realised with the sale of the interest held in the Istituto
Centrale delle Banche Popolari). The other operating income also declined (-68.6%), mostly as a
result of re-crediting to customers in the first half of 2015 due to the reversal of commissions and
expense reimbursements charged in past years.
The net operating costs grew by 12.7%. Payroll costs grew (+2.1%); they include non-recurring
charges of Euro 10.4 million due to voluntary redundancy and retention costs and, above all, the
other administrative costs (+33%) affected both by the ordinary and extraordinary contributions
paid to the National Resolution Fund, to the Interbank Deposit Protection Fund and to the Single
Resolution Board (totalling Euro 59.2 million) and by the expenses for professional advisory
services required within the scope of the due diligence on capital and expenses accrued in 2015
pertaining to the transformation into a joint stock company and Stock Market listing (totalling
Euro 11.4 million). Net of these extraordinary components, the operating costs were
substantially stable (+0.6% compared to 2014).
Impairment adjustments on loans and advances amounted to Euro 1,333.4 million, reflecting
both the further increase in non performing loans in 2015, of which a significant portion refers to
loans correlated with the purchase of BPVi shares, as well as the growth of almost 5.5 percentage
points in the relative average coverage with the cost of credit amounting to 5.29% versus 3.09%
in 2014). Adjustments on financial assets available for sale and equity investments also
increased (Euro 171.2 million compared to Euro 36.2 million at 31 December 2014), mostly
referred to the Athena, Optimum MS1 and Optimum MS2 funds. Lastly, adjustments of Euro
334.6 million were also recognised on goodwill and other intangible assets, in addition to Euro
600 million already recognised in 2014 and they determine a residual book value of the goodwill
of Euro 6.2 million at the end of 2015, entirely referred to the Farbanca CGU.
Of significant size were also the provisions for risks and charges, amounting to Euro 513.1
million, almost entirely relating to legal risks associated with transactions for the purchase and
subscription of BPVi shares discussed in the “Inspections” paragraph of the Report on
Operations.
Taking into account the aforementioned capital gain connected with the sale of ICBPI (Euro
+166.7 million) and the capital losses recognised on certain own buildings (Euro -17.6 million in
all between adjustments to the fair value of investment properties and impairment write-downs
on properties for business use). The Group ended the year 2015 with a net loss of Euro -1,407
million, after computing positive taxes of Euro 486.3 million.
To better appreciate the contribution made to net income by the various areas of the Bank's
operations, the trends in the principal performance indicators that characterised the year 2015 are
discussed below and compared with those in the prior year.
- 127 -
B
Changes
Reclassified Income Statement
31/12/2015 31/12/2014
(in thousands of euro)
(+/-)
Net interest income
Dividends and Profit (loss) from equity investments
Net financial income
Net profit for the property portfolios
Other operating charges/income
Administrative costs:
- payroll
- other administrative costs
Depreciation
Net Operating costs
- of which on loans and advances
- of which impairment on financial assets available for sale and Equity investments
- of which impairment on goodwill and other intangible assets
Gains (losses) on disposal/evaluation of investments
Income tax
Minority interests
Net income
(7,185)
18,554
%
503,880
47,928
511,065
29,374
-1.4%
63.2%
551,808
540,439
11,369
2.1%
322,425
163,043
15,337
301,301
186,839
48,816
21,124
(23,796)
(33,479)
7.0%
-12.7%
-68.6%
1,052,613
1,077,395
(24,782)
-2.3%
(718,423)
(410,374)
(308,049)
(35,727)
(633,553)
(401,951)
(231,602)
(35,554)
(84,870)
(8,423)
(76,447)
(173)
13.4%
2.1%
33.0%
0.5%
(754,150)
298,463
(669,107)
408,288
(85,043)
(109,825)
12.7%
-26.9%
(1,826,949)
(1,333,363)
(171,209)
(334,571)
(1,521,269)
(868,456)
(36,243)
(600,000)
(305,680)
(464,907)
(134,966)
265,429
20.1%
53.5%
372.4%
-44.2%
(513,060)
149,028
(18,456)
(2,837)
(494,604)
151,865
n.a.
n.a.
(1,892,518)
(1,134,274)
(758,244)
66.8%
486,339
(815)
376,687
(933)
109,652
118
29.1%
-12.6%
(1,406,994)
(758,520)
(648,474)
85.5%
The reconciliation of the items of the “reclassified” income statement, commented below, with
those prescribed in accordance with Bank of Italy Circular no. 262.
Key
Net interest income: income statement item 30.
Dividends and profit (loss) from equity investments: income statement items 70 and 240 net of impairment adjustments
(Euro -10,982 thousand at 31 December 2015, Euro -5,309 at 31 December 2014).
Net fee and commission income: income statement item 60.
Net profit from the property portfolios: income statement items 80, 90, 100 and 110, excluding the capital gain from the sale
of the interest in ICBPI (Euro +166,661 thousand at 31 December 2015, absent at 31 December 2014).
Other operating income: income statement items 220, excluding “recovery of stamp duty and other indirect taxes” (Euro
+56,146 thousand at 31 December 2015, Euro +62,728 thousand at 31 December 2014) and “depreciation for expenses on third
party property improvement” (Euro -5,320 thousand at 31 December 2015, Euro -7,033 thousand al 31 December 2014).
Payroll costs: income statement item 180 a).
Other administrative costs: income statement item 180 b) excluding “recovery of stamp duty and other indirect taxes” (Euro
+56,146 thousand at 31 December 2015, Euro +62,728 thousand at 31 December 2014).
Depreciation: income statement items 200 and 210, including “depreciation for expenses on third party property
improvement” (Euro -5,320 thousand at 31 December 2015, Euro -7,033 thousand at 31 December 2014) and excluding
impairment adjustments (Euro -23,806 thousand at 31 December 2015, absent at 31 December 2014).
Net profit from operating activities: “Net operating income” + “Net operating costs” as defined above.
Net impairment adjustments: income statement items 130 and 260, including impairment adjustments on the Equity
investments recognised in item 240 of the income statement (Euro -10,982 thousand at 31 December 2015, Euro -5,309
thousand at 31 December 2014) and impairment adjustments on intangible assets recognised in item 210 of the income
statement (Euro -10,932 thousand at 31 December 2015, absent at 31 December 2014).
Net provisions for risks and charges: income statement item 190.
Gains (losses) on disposal/evaluation of investments: income statement items 250 and 270, including impairment
adjustments on the tangible assets recorded under income statement item 200 (Euro -12,874 thousand at 31 December 2015,
absent at 31 December 2014) and the capital gain from the sale of the equity interest in ICBPI recorded under income
statement item 100 (Euro +166,661 thousand at 31 December 2015, absent at 31 December 2014).
Income tax: income statement item 290.
Minority interests: income statement item 330.
.
- 128 -
B
At 31 December Net interes income
2015, net interest
income amounted to Transactions with banks
Euro 503.9 million, Transactions with customers
Debt securities in issue
down (-1.4%) from Proprietary securities and technical
Euro 511.1 million at mismatches
Hedging derivatives
31 December 2014.
Other
31/12/2015
Interest
income
Interest
expense
4,803
824,114
-
(40,986)
(150,181)
(247,736)
105,263
27,633
223
Net interest
income
31/12/14
(36,183)
673,933
(247,736)
(57,880)
698,748
(320,187)
(1,406)
103,857
112,541
(17,847)
-
9,786
223
77,752
91
The comparison with Total
962,036
(458,156)
503,880
511,065
the previous year
highlights a slight growth in margins deriving from existing accounts with customers, while cost
of funding of interbank deposits and own issue securities declined. On the other hand, the total
contribution of own securities and hedging activities reduced by Euro 76.7 million.
The Group’s net financial income amounted to Euro 551.8 million (+2.1%), and also includes
dividends (Euro 30.6 million, +96.7%, thanks to the valuing of investments in private equity) and
the profit (loss) from equity investments, which amounted to Euro 17.3 million, versus Euro
13.8 million of 31 December 2014. However, that comparison is not completely accurate as in
2015, the associated companies in the insurance segment contributed to the result with 12
months of full operations (last quarter of 2014 and the first nine months of 2015), compared to
only 9 months in 2014. In this regard, please recall that the aforementioned associates approved
their financial statements relating to the year 2014 after the Parent Bank Banca Popolare di
Vicenza approved its separate and consolidated Group financial statements.
At 31 December 2015,
31/12/2015
net
fee
and
Fee and
Fee and
Net fee and
31/12/14
commission income (in thousands of euro)
commission commission commission
amounted to Euro
income
expense
income
322.4 million, up by Guarantees given and received
12,610
(828)
11,782
(1,382)
138,856
(14,895)
123,961
106,803
7% with respect to Management and dealing services
Collection and payment services
38,916
(10,709)
28,207
28,752
Euro 301.3 million at Servicing for securitization transactions
2,439
2,439
1,918
31 December 2014. Provision and management of current
127,843
127,843
138,057
Revenues from asset accounts
Other services
37,497
(9,304)
28,193
27,153
management
and
358,161
(35,736)
322,425
301,301
brokerage
services Total
increased, particularly those relating to consumer credit and to assets under management and
retirement savings. On the cost front, the expenses paid to customers for securities lending and
borrowing decreased and the cost connected to the State guarantee on own bonds was
eliminated, as the bonds were extinguished early in August 2014.
The net profit from the property portfolios, which does not include the capital gain of Euro
166.7 million realised with the sale of the interest held in the Istituto Centrale delle Banche
Popolari, reclassified under “Gains (losses) on disposal/evaluation of investments”, amounted to
Euro 163 million versus Euro 186.8 million at the end of 2014. The contribution of trading
activities, which totalled Euro 33.9 million compared to Euro 96.3 million at 31 December 2014,
was down, mostly due to the reduction in profits on derivatives connected with the change in
the operating procedures for structuring banking book hedges. Instead, the contribution of
banking book hedges grew (Euro 66.4 million, versus Euro 59.8 million of 31 December 2014), as
well as the profits realised by their sale, and in particular by the sale of the equities and of the
mutual fund units classified as “available for sale”. In decline, instead, was the contribution of
debt securities and, in particular, the contribution from the sale of Government bonds.
- 129 -
B
Lastly, the buy-back/measurement of own liabilities and of the correlated “hedging” derivatives
recorded profits of Euro 2.2 million (Euro -16.2 million at 31 December 2014), which also includes
the net capital gain recognised on own bond issues of the fair value option connected to the
change in the Parent Bank’s credit rating as a result of the downgrade announced by rating
agencies during the
year.
31/12/15
31/12/14
Other
operating (in thousands of euro)
income amounted to
Euro 15.3 million, at Operating income
40,477
52,124
31 December 2015, - Expenses recovered from third parties on
19,719
28,773
versus Euro 48.8 current and savings accounts
million
at
31 - Property rental income
5,136
4,744
December 2014. The - Other income
15,622
18,607
reduction in other Operating charges
(25,140)
(3,308)
income reflects the
decreased
Total
15,337
48,816
contribution of “fast
preliminary commission” as well as the elimination of some expense recoveries accounted for on
a one-off basis in the previous year. The increase in other charges instead refers almost entirely
to re-crediting to customers in the first half of the year due to the reversal of commissions and
expense reimbursements charged in past years.
For the aforesaid reasons, the net operating income thus amounted to Euro 1,052.6 million,
down by 2.3% compared to the figure at 31 December 2014.
Net operating costs totalled Euro 754.2 million, up by 12.7% compared to the figure of 2014.
Payroll costs grew by Euro 8.4 million (+2.1%) and include non-recurring charges of Euro 10.4
million due to costs for voluntary personnel redundancy and retention. More significant was the
growth in other administrative costs (+33%, i.e. Euro 76.4 million) affected mostly by the
ordinary and extraordinary contributions paid to the National Resolution Fund, to the Interbank
Deposit Protection Fund and to the Single Resolution Board (totalling Euro 59.2 million) and by
the expenses for professional advisory services required within the scope of the due diligence on
capital and expenses accrued in 2015 pertaining to the transformation into a joint stock company
and Stock Market listing (totalling Euro 11.4 million). Amortisation and depreciation, instead,
were substantially stable (+0.5%). Net of the aforesaid extraordinary components, operating costs
were substantially stable (+0.6%), whilst payroll costs declined by 0.5%.
At 31 December 2015, therefore, net profit from operating activities amounted to Euro 298.5
million, down by 26.9% compared to the end of 2014, with cost/income22 at 71.6%, compared to
62.1% at 31 December 2014.
Net impairment adjustments amounted to Euro 1,826.9 million, versus Euro 1,521.3 million at 31
December 2014.
Of the above adjustments, Euro 1,333.4 million refer to loans and advances (Euro 868.5 million at
31 December 2014) and they reflect both the further increase in non performing loans in 2015, of
which a significant portion refers to loans correlated with the purchase of BPVi shares, as well as
the growth by over 5.5 percentage points in the related average coverage with the cost of credit 23
amounting to 5.29% versus 3.09% in 2014.
22The
indicator is calculated as the ratio between “operating costs” and “operating income” in the
reclassified income statement.
23The indicator is calculated as the ratio between net adjustments to cash loans to customers and net loans
amounted
- 130 -
B
Impairment adjustments to financial assets available for sale and equity investments
amounted to Euro 171.2 million (Euro 36.2 million at 31 December 2014) and were recorded
applying the specific policy adopted by the Group on the process for identifying impairment
losses on financial assets available for sale. These refer for the most part (Euro 142.3 million) to
the Athena, Optimum MS1 and Optimum MS2 funds on which the ECB has found critical
profiles and which, due to the changed time span of the investment, were measured based on the
estimated realisable values of the individual underlying assets instead of using the NAV
valuation communicated by the management company.
This item, lastly, also includes the Euro 323.6 million impairment made on the recorded
goodwill, and the total write-off (Euro 10.9 million) of the residual value of the intangibles
identified within the scope of the Purchase Price Allocation of the former UBI Banca branches.
Said adjustments, were in addition to Euro 600 million already recognised in 2014 and they
determine a residual value of only Euro 6.2 million of the goodwill recognised in the financial
statements at the end of 2015, entirely referred to the Farbanca CGU.
Net provisions for risks and charges were also quite significant (Euro 513.1 million compared to
Euro 18.5 million at 31 December 2014), Euro 489 million of which related to allocations made in
view of risks connected with different critical profiles emerged within the scope of the inspection
by the ECB and to subsequent further analyses carried out, disclosed in the “Inspections”
paragraph of the Report on Operations.
The net profit from the disposal/evaluation of investments amounted to Euro 149 million and
includes the aforementioned capital gain of Euro 166.7 million realised with the sale of the
interest held in the Istituto Centrale delle Banche Popolari. On the contrary, the effects of the
assessment of some own buildings entailed the recognition of impairment adjustments of Euro
12.9 million on properties for business use (absent at the end of 2014) and net capital losses of
Euro 4.7 million connected with the fair value measurement of the investment properties (Euro
2.9 million at 31 December 2014).
Therefore, the gross loss amounted to Euro -1,892.5 million versus last year’s Euro -1,134.3
million.
Income tax was positive by Euro 486.3 million (Euro +376.7 million at 31 December 2014), mainly
by effect of the recognition of deferred taxes on the tax loss in the year and the positive change in
deferred taxes recognised in view of the adjustments recorded on loans and advances deductible
in the coming years, for which the provisions of Italian Law no. 214/2011 apply.
Minority interests, i.e. net income attributable to investments of minority stockholders,
amounted to Euro 815 thousand compared to Euro 933 thousand at 31 December 2014.
The net loss, therefore, amounted to Euro -1,407 million, (Euro -758.5 million at the end of 2014).
- 131 -
B
The table below reports the contribution of the various Group companies to the net result of the
Group.
Individual
results pertaining
to the Group
Net income
(in thousands of Euro)
Banca Nuova
Farbanca
Total banks
Prestinuova
BPV Finance
BPVi Multicredito
Nem Sgr
Fondo Nem Imprese
Fondo Nem Imprese II
Fondo IOF
Total financial companies
Immobiliare Stampa
Servizi Bancari
Monforte 19
Total service companies
Results of the companies carried at equity
Elimination of intercompany dividends
Adjustements to comply with IAS / IFRS
Other intercompany eliminations and
consolidation adjustments
Net income pertaining to the Group
(1,399,393)
(149,183)
2,054
(1,546,522)
10,375
(99,812)
328
1,093
(855)
6,699
4,657
(77,515)
(10,578)
794
(9,784)
17,314
(39,022)
1,425
247,110
(1,406,994)
“Other consolidation eliminations/adjustments” refer primarily to the reversal of value
adjustments recognised by the Parent Bank Banca Popolare di Vicenza on equity investments
consolidated line-by-line or with the equity method.
- 132 -
B
The Parent Bank Banca Popolare di Vicenza
Data and summary indicators
figures
Changes
31/12/2015
31/12/2014
(+/-)
Banking business
- of which goodwill
Total Assets
Equity
Comon Equity Tier 1
Total Capital
CET 1 ratio
Tier 1 ratio
Total Capital Ratio
54,838
19,474
13,235
22,129
-6,849
5,469
5,326
126
37,283
2,465
1,649
2,021
22,666
7.28%
7.28%
8.91%
-11,434
-8,013
-401
-3,020
-5,270
-44
967
-235
-218
-6,139
-1,174
-1,461
-1,421
-3,854
-4.45 p.p.
-4.45 p.p.
-4.07 p.p.
-12.0%
333.8%
-0.8%
22.2%
-65.1%
-100.0%
-14.1%
-32.3%
-47.0%
-41.3%
-14.5%
31/12/2014
(+/-)
Other information and Key performance
indicators
-17.3%
-29.2%
-2.9%
Changes
31/12/2015
Net interest income
Net Operating costs
Net income
369.7
851.8
-645.9
205.9
-1,726.0
-506.6
-1,861.1
-1,399.4
389.6
908.2
-566.7
341.5
-1,530.7
-15.3
-1,204.5
-823.7
%
-19.9
-56.4
-79.2
-135.6
-195.3
-491.3
-656.6
-575.7
-5.1%
-6.2%
14.0%
-39.7%
12.8%
n.a.
54.5%
69.9%
Changes
31/12/2015
31/12/2014
(+/-)
Bank branches
Cost/Income (3)
Credit cost (6)
66,272
27,487
13,636
25,149
-1,579
5,513
4,359
361
218
43,422
3,639
3,110
3,442
26,520
11.73%
11.73%
12.98%
%
4,440
4,233
485
113.6%
15.1 x
75.8%
21.35%
7.66%
42.87%
59.19%
0.76%
5.32%
(4)
4,475
4,229
560
91.5%
11.9 x
62.4%
14.85%
6.09%
37.97%
53.91%
0.78%
3.20%
-35
4
-75
22.1 p.p.
3.2 x
13.4 p.p.
6.50 p.p.
1.57 p.p.
4.90 p.p.
5.28 p.p.
-0.02 p.p.
2.12 p.p.
%
-0.8%
0.1%
-13.4%
Circular no. 262, reference is explicitly made to the “key” provided in the paragraph “Comments to the income statement”, except
for the different numbering of the same items in the individual statement with respect to the consolidated statement.
(1)
(2)
The average number of employees is calculated in accordance with the indications contained in Bank of Italy Circular no. 262.
(3)
The coverage is determined including the so-called “liquidations” that pertain to partial write-offs on loans for which bankruptcy
(4)
(5)
The coverage is determined excluding intra-group transactions, repurchase agreements and guarantee margins.
(6)
The indicator is calculated as the ratio between “net impairment adjustments on: loans and advances” and net loans and advances.
- 133 -
B
Banking products and credit quality
Banking business
Changes
31/12/2015
31/12/2014
(+/-)
%
Total funding
32,709
41,123
-8,414
-20.5%
19,474
27,487
-8,013
-29.2%
13,235
13,636
-401
-2.9%
Loans to cusotmers
22,129
25,149
-3,020
-12.0%
-11,434
-17.3%
Totale
54,838
66,272
At 31 December 2015, the banking business of the Bank, comprising total funding and cash
loans to customers, reached Euro 54,838 million, down by 17.3% compared to Euro 66,272
million at 31 December 2014.
At 31 December 2015 the Bank’s total funding, consisting of the sum of direct funding and
indirect funding, amounted to Euro 32,709 million, down by 20.5% compared to Euro 41,123
million of 31 December 2014.
Direct funding, amounting to Euro 19.5 billion, declined by 29.2% compared to the end of 2014
(-24.3% net of funding repurchase agreements carried out with central counterparties whose
amounts were reduced to zero at the end of 2015), with a decline of all the various forms of
funding and, in particular, of current accounts and unrestricted deposits (-19.4%), of time
deposits (-36.1%) and of bonds (-29%).
Indirect funding (excluding BPVi shares) amounted to Euro 13.2 billion (-2.9%), with assets
under administration declining by 10%, whilst assets under management and retirement savings
grew by 6.3%.
BPVi shares in guarantee and administration deposit with the Bank as at 31 December 2015
amounted to Euro 4,271 million, versus Euro 5,477 million at 31 December 2014 (-22%), reflecting
mainly the effect of the reduction in value of the shares approved by the Stockholders’ Meeting
held on 11 April 2015.
As at 31 December 2015, net cash loans to customers amounted to Euro 22,129 million, a
reduction of 12% with respect to the end of 2014. This aggregate performance reflects both the
reduction of lending repurchase agreements with central counterparties, and the significant net
write-downs made by the Bank in 2015 (nearly Euro 1.2 billion) on loans and advances to
customers.
value at the end of 2014.
By effect of the changes that took place in the aggregate values of direct funding and of the loans,
illustrated above, the “Loans / Deposits Ratio” amounted to 113.6% versus 91.5% of 31
December 2014. Net of repurchase agreements traded with central counterparties (Cassa di
Compensazione e Garanzia) and of the related guarantee margins, the loans/direct funding ratio
at 31 December 2015 amounted to 113%, versus 95.4% at the end of 2014.
At 31 December 2015, the Group's net exposure to the interbank market was negative by Euro
6,849 million, a significant increase compared to Euro -1,579 million at the end of 2014, and it
mostly refers to exposures to central banks.
- 134 -
B
At 31 December 2015, net non performing loans to customers showed an increase in absolute
value of Euro 989.8 million compared to 31 December 2014 (+26.5%). In detail, non-performing
loans grew by 10.7% and unlikely to pay by 50%, whilst past due exposures declined by 56.1%.
Asset quality
31/12/2015
Net
exposures
% net
loans
31/12/2014
% coverage
Net
exposures
% net
loans
% coverage
4,723.8
21.35%
41.12%
3,734.0
14.85%
35.14%
Bad loans
1,694.3
7.66%
56.62%
1,530.4
6.09%
49.96%
Unlikely to pay
2,915.4
13.17%
26.85%
1,943.0
7.73%
19.30%
114.1
0.52%
12.87%
260.6
1.03%
10.48%
Performing loans
17,405.6
78.65%
0.71%
21,414.7
85.15%
0.71%
16,403.6
74.12%
0.76%
19,439.2
77.30%
0.78%
1,002.0
4.53%
0.00%
1,975.5
7.85%
0.00%
Past due exposures
The change in non performing exposures, and in particular in unlikely to pay loans, was
significantly influenced by the Bank’s decision to reclassify among non performing loans a
portion of the loans issued to certain Members/Stockholders and correlated with the purchase of
BPVi shares for which creditworthiness exists. The growth in anomalous loan reflects the
changes in the regulatory framework which modified the concept of non performing exposure,
extending the areas of evaluation of possible critical issues. In this regard, the Bank revised its
internal policies, also in light of the experience gained with the Comprehensive Assessment
exercise carried out by the ECB in 2014, providing for the introduction of new trigger events for a
more objective identification of credit pathologies that could lead to non-performance or even
insolvency.
Overall, the coverage of non performing loans, excluding partial write-offs for bankruptcy
proceedings (so-called “write-offs”) still pending at the end of the year, grew from 35.14% at 31
December 2014 to 41.12% at 31 December 2015. The coverage percentage, including “write-offs”,
was 42.87%, versus 37.97% as at 31 December 2014. The breakdown of non performing loans is as
follows:



net bad loans, representing 7.66% of net loans (6.09% at 31 December 2014), amounted to
Euro 1,694.3 million with a percentage coverage of 56.62% (49.96% at 31 December 2014).
Including “write-offs”, the coverage percentage was 59.19% (53.91% at 31 December
2014);
net unlikely to pay loans, representing 13.17% of net loans (7.73% at 31 December 2014),
amounted to Euro 2,915.4 million with a percentage coverage of 26.85% (19.30% at 31
December 2014);
net past due exposures totalled Euro 114.1 million, with a coverage percentage of 12.87%
(10.48% at 31 December 2014).
Lastly, the “general provision” for performing loans to customers (excluding intragroup
balances, repurchase agreements and guarantee margins) amounted to Euro 124.9 million at 31
December 2015, assuring coverage of 0.76%, slightly lower than 0.78% at 31 December 2014.
At 31 December 2015, the cost of credit on a yearly basis, defined as the ratio between net
adjustments to cash loans to customers and net loans amounted to 5.32%, versus 3.20% in 2014.
- 135 -
B
Equity and Own Funds
At 31 December 2015, the Bank’s equity amounted to Euro 2,465.1 million, versus Euro 3,638.6
million at 31 December 2014.
Equity
Capital stock
Reserves
Valuation reserves
Equity instruments
Treasury shares
Equity
Net income
Total equity
Changes
31/12/2015
31/12/2014
(+/-)
377.2
3,206.6
268.8
36.0
1.4
(25.5)
3,864.5
(1,399.4)
351.9
3,365.1
718.1
49.9
3.2
(25.9)
4,462.3
(823.7)
2,465.1
3,638.6
356.2
61.9
- of which restricted reserves ex art. 2358, c. 6, Civil Code
%
25.3
(158.5)
(449.3)
(13.9)
(1.8)
0.4
7.2%
-4.7%
-62.6%
-27.9%
-56.3%
-1.5%
(597.8)
-13.4%
(575.7)
69.9%
(1,173.5)
-32.3%
The ECB’s review of the capital, referred to in the specific section of the Report on Operations,
brought to light a correlation between acquisitions/subscriptions of BPVi shares and loans
disbursed to certain Members/Stockholders. In this regard, the equity reserves at 31 December
2015 are subject to a restriction making them non-distributable pursuant to Art. 2358, paragraph
6 of the Italian Civil Code, in the amount of Euro 299.2 million. In addition to the aforesaid
amount, there is another non-distributable equity reserve pursuant to Art. 2358, paragraph 6 of
the Italian Civil Code in the amount of Euro 57 million (Euro 61.9 million as at 31 December
2014) relating to the two “ordinary” share capital increase transactions to expand the stockholder
base, which offered new Stockholders the possibility of subscribing BPVi shares with resources
deriving from a loan granted by the Bank, pursuant to Art. 2358 of the Italian Civil Code.
In 2015, the Bank issued a total number of 6,755,797 new shares, mainly by effect of the
completion of the “ordinary” capital increase intended for new members and closed in December
2014 (214,784 new shares), of the conversion of the convertible bond “BPVi 2013-2018
Convertibile”, with a nominal amount of Euro 253 million, issued as part of the capital increase
completed in 2013 (5,777,325 new shares) and of the loyalty bonus to which the subscribers of the
2013 capital increase are entitled (763,100 new shares), the latter free of charge.
Euro 398.7 million was drawn from Additional paid-in capital and Euro 425 million was drawn
from Reserves to cover the loss for the year 2014, as approved by the Stockholders’ Meeting on
11 April 2015.
At 31 December 2015, the Bank’s Own funds amounted to Euro 2,020.5 million, versus Euro
3,442.1 million at the end of 2014 and they reflect the operating loss and the prudential filter
introduced as a result of the findings of the ECB’s inspection and of the activities to survey the
capital structure carried out internally.
The Common Equity Tier 1 Ratio and the Tier 1 Ratio both amount to 7.28%, whilst the Total
Capital ratio is equal to 8.91%.
- 136 -
B
The shares of the Bank, which is one of the Relevant Issuers listed in CONSOB Resolutions
11.768/98 and 11.862/99, are dematerialized and centralized with Monte Titoli, in accordance
with the provisions of Legislative Decree 58/98 and Legislative Decree 213/98. The following
table reports the Bank's purchases and sales of its shares in accordance with art. 18 of the articles
of association.
Number of
shares
Treasury shares
% on Equity
(1)
Treasury shares at 31 December 2014
414,202
0.44%
purchases
sales
495,357
502,032
0.49%
0.50%
Treasury shares at 30 June 2015
407,527
0.41%
1
Percentage determined with reference to the number of shares comprising capital stock at 31 December 2015.
Comments on the income statement
The trends in the principal performance indicators that characterised the year 2015 are discussed
below and compared with those in the prior year.
Reclassified Income Statement
Changes
31/12/2015
31/12/2014
(+/-)
Net interest income
Net Operating costs
%
369.7
389.6
(19.9)
-5.1%
851.8
(645.9)
908.2
(566.7)
(56.4)
(79.2)
-6.2%
14.0%
341.5
(135.6)
-39.7%
(1,726.0)
(1,530.7)
(195.3)
12.8%
(506.6)
(15.3)
(491.3)
n.a.
(1,861.1)
(1,204.5)
(656.6)
54.5%
Net income
(1,399.4)
(823.7)
(575.7)
69.9%
205.9
The 2015 income statement reported a consolidated loss of Euro 1,399.4 million due mainly to the
extraordinary initiatives for the survey of the assets, which led to write-downs and provisions
amounting to more than Euro 2.2 billion.
The net profit from operating activities declined by 39.7% compared to 31 December 2014,
significantly affected by some extraordinary components.
Among the operating income (-6.2%), revenues from core activities grew marginally with the net
interest income and net fee and commission income growing by 0.2%. Also positive was the
performance of dividends (+7.1%), while the contribution of the net profit from the property
portfolios declined (-21.7% excluding the capital gain of Euro 166.7 million realised with the sale
of the interest held in the Istituto Centrale delle Banche Popolari). The other operating income
also declined (-63.4%), mostly as a result of re-crediting to customers in the first half of 2015 due
to the reversal of commissions and expense reimbursements charged in past years.
- 137 -
B
Among operating costs (14%), payroll costs grew (+3.3%); they include non-recurring charges of
Euro 10.4 million due to voluntary redundancy and retention costs and, above all, the other
administrative costs (+30.4%) affected both by the ordinary and extraordinary contributions
paid to the National Resolution Fund and to the Interbank Deposit Protection Fund (Euro 53.7
million) and by the expenses for professional advisory services required within the scope of the
due diligence on capital and expenses accrued in 2015 pertaining to the transformation into a
joint stock company and Stock Market listing (totalling Euro 11.4 million). Net of these
extraordinary components, the growth in operating costs is far smaller (+2.7% over 2014).
Net impairment adjustments amounted to Euro 1,726 million, versus Euro 1,530.7 at 31
December 2014.
These refer to loans and advances to customers (Euro 1,178 million) and they reflect both the
further increase in non performing loans in 2015, of which a significant portion refers to loans
correlated with the purchase of BPVi shares, as well as the growth by almost 6 percentage points
in the relative average coverage with the cost of credit amounting to 5.32% versus 3.20% in 2014.
Adjustments on financial assets available for sale and equity investments also increased (Euro
328.7 million compared to Euro 36.1 million at 31 December 2014), mostly referred to the Athena
and Optimum MS1 funds (totalling Euro 82.5 million) and to the write-down of the subsidiaries
Banca Nuova, Immobiliare Stampa and BPV Finance (Totally Euro 227 million) whose book
value was aligned to the corresponding fraction of equity.
Lastly, adjustments of Euro 229.1 million were also recognised on goodwill and other intangible
assets, in addition to Euro 675.3 million already recognised in 2014, with the goodwill values
written off entirely.
Net provisions for risks and charges were also quite significant at Euro 506.6 million, almost
entirely related to risks connected with different critical profiles emerged within the scope of the
inspection by the ECB and to subsequent further analyses carried out.
Taking into account the aforementioned capital gain connected with the sale of ICBPI (Euro 166.7
million) and the negative effects connected with the evaluation of certain own buildings (Euro -1
million in all between adjustments to the fair value of investment properties and impairment
write-downs on properties for business use), the gross loss for the year amounted to Euro 1,861.1 million.
Income tax was positive by Euro 461.7 million, mainly by effect of the recognition of deferred
taxes on the tax loss in the year and the positive change in deferred taxes recognised in view of
the adjustments recorded on loans and advances deductible in the coming years, for which the
provisions of Italian Law no. 214/2011 apply.
The Bank closed 2015 with a net loss of Euro 1,399.4 million.
Comprehensive income for 2015 was negative by Euro 1,413.4 million.
- 138 -
B
Banca Nuova SpA
figures
Changes
31/12/2015
31/12/2014
(+/-)
Banking business
- of which goodwill
Total Assets
Equity
Comon Equity Tier 1
Total Capital
CET 1 ratio
Tier 1 ratio
Total Capital Ratio
Net interest income
Net Operating costs
Net income
indicators
%
7,546,516
8,192,855
-646,339
-7.9%
3,392,632
3,893,581
-500,949
-12.9%
1,312,244
1,288,516
23,728
1.8%
2,841,640
3,010,758
-169,118
-5.6%
549,280
12,089
853,492
121,121
-304,212
-109,032
-35.6%
-90.0%
12,088
121,121
-109,033
-90.0%
9,267
119,755
-110,488
-92.3%
0
110,000
-110,000
-100.0%
4,161,617
158,213
155,350
185,362
2,305,995
6.74%
6.74%
8.04%
4,818,013
313,537
200,049
230,972
2,432,001
8.23%
8.23%
9.50%
-656,396
-155,324
-44,699
-45,610
-126,006
-1.49 p.p.
-1.49 p.p.
-1.46 p.p.
-13.6%
-49.5%
-22.3%
-19.7%
-5.2%
Changes
31/12/2015
31/12/2014
(+/-)
90,345
142,422
-100,918
41,504
-199,200
-164,336
-149,183
90,079
144,783
-96,673
48,110
-62,345
-16,821
-13,478
%
266
-2,361
-4,245
-6,606
-136,855
-147,515
-135,705
0.3%
-1.6%
4.4%
-13.7%
219.5%
877.0%
1006.9%
Changes
31/12/2015
31/12/2014
(+/-)
%
710
712
-2
-0.3%
Bank branches
694
93
83.76%
26.3 x
704
93
77.33%
15.4 x
-10
6.43 p.p.
10.9 x
-1.4%
0.0%
Cost/Income (3)
70.9%
16.22%
6.55%
66.8%
14.64%
5.38%
4.1 p.p.
1.58 p.p.
1.17 p.p.
43.35%
37.02%
6.33 p.p.
Non-performing loans coverage (%) (4)
60.49%
54.58%
5.91 p.p.
0.70%
0.44%
0.26 p.p.
Credit cost (6)
3.22%
1.99%
1.23 p.p.
(2) The average number of employees is calculated in accordance with the indications contained in Bank of Italy Circular no. 262.
(3) The indicator is calculated as the ratio between “operating costs” and “operating income “of the reclassified income statement.
(4) The coverage is determined including the so-called “liquidations” that pertain to partial write-offs on loans for which bankruptcy
(5) The coverage is determined excluding intra-group transactions, repurchase agreements and guarantee margins.
(1)
(6) The
indicator is calculated as the ratio between “net impairment adjustments on: loans and advances” and net loans and advances.
- 139 -
B
Banca Nuova is 100% directly owned by the Parent Bank Banca Popolare di Vicenza. The
Commercial Network had 107 outlets at the end of 2015 of which 93 branches, while on the same
date there were 710 employees.
At 31 December 2015 the Group’s banking product, comprising direct and indirect funding and
cash loans to customers, amounted to Euro 7,546.5 million, compared with Euro 8,192.9 million
at 31 December 2014 (-7.9%). In detail:
 direct deposits amount to Euro 3,393 million, down by 12.9% from the values of the end
of 2014. The analysis of the trends that characterised the aggregate in question shows that
only time deposits grew (+6.7%) while all other components declined: current accounts
and demand deposits (-9.8%), repurchase agreements (-100%), bonds (-16.2%),
certificates of deposit and other securities (-33.3%) and other payables (-23.1%);
 the market value of indirect funding (excluding the shares of the Parent Bank BPVi)
stood at over Euro 1,312 million, increasing by Euro 23.7 million in absolute terms
(+1.8%), sustained mostly by growth in assets under management and retirement
savings (+9.8%) while assets under administration decreased (-7.2%);
 cash loans to customers, amounting to Euro 2,842 million, fell by approximately Euro 169
million from the previous year (-5.6%), partly as a result of the significant write-downs
made during the year. The decline in gross loans to customers was less significant (-2.1%).
An analysis of the trends that characterised the aggregate under review during the year
highlights an increase in credit cards, personal loans and salary-backed loans (+8.5%),
and other transactions (+3.4%), while declines were experienced by current accounts (10.5%), mortgages (-6.2%) and debt securities (-4.2%).
With reference to the quality of credit, net non performing loans to customers amounted to
Euro 461 million at 31 December 2015 (+4.6% compared to the end of 2014), with an increase of
1.58 percentage points with respect to total net loans, up from 14.64% at the end of 2014 to
16.22% at 31 December 2015. Overall, the coverage of non performing loans, including partial
write-offs for bankruptcy proceedings (so-called “write-offs”) still pending at the end of the year,
grew from 37.02% at 31 December 2014 to 43.35% at 31 December 2015. Net non performing
loans are analysed in more detail as follows:
 net non-performing loans, representing 6.55% of net loans (5.38% at 31 December 2014),
amounted to Euro 186 million (+14.8%), with a coverage percentage, including “writeoffs”, of 60.49% (54.58% at 31 December 2014);
amount to Euro 258.1 million (+20.4%) with a coverage percentage of 20.41% (20.85% at
the end of 2014);
 net past due exposures totalled Euro 16.9 million, with a coverage percentage of 9.68%
(10.86% at 31 December 2014).
Lastly, the general provision for performing loans to customers is Euro 16.8 million at 31
December 2015, providing coverage of 0.70% (0.44% at 31 December 2014).
At 31 December 2015, the Bank’s equity is Euro 158.2 million (Euro 313.5 at the end of 2014).
Own funds at 31 December 2015 amounted to Euro 185.4 million. The Common Equity Tier 1
Ratio and the Tier 1 Ratio both amount to 6.74%, whilst the Total Capital ratio is equal to 8.04%.
The Bank closed 2015 with a net loss of Euro -149.2 million versus a loss of Euro -13.5 million at
the end of 2014 and reflecting the change in impairment writedowns on loans and advances,
which rose by 53% relative to the previous year, as well as the total write-off of goodwill.
- 140 -
B
Analysing the main income data, net interest income amounted to Euro 90.3 million,
substantially unchanged compared to Euro 90.1 million at the end of 2014. Operating income
totalled Euro 142.4 million and were down by 1.6% relative to the end of 2014. Net fee and
commission income grew slightly (+0.4%), whilst the change in the net profit from the property
portfolios was positive, with a change of Euro 5.2 million relative to 2014 by effect of the profits
realised with the investments in Italian Government bonds.
Operating costs amounted to Euro 100.9 million, compared to Euro 96.7 million at 31 December
2014 (+4.4%). Other administrative costs grew (+13.8%) by effect of the costs connected with the
ordinary and extraordinary contributions to the National Resolution Fund and to the Interbank
Deposit Protection Fund. On the other hand, payroll costs declined (-1%) as did amortisation
and depreciation (-20.7%).
As a result of the aforementioned trends, the net profit from operating activities amounted to
Euro 41.5 million, down by Euro 6.6 million (-13.7%) compared to last year. The cost/income
ratio, at 70.86%, worsened by 4 percentage points relative to the end of 2014.
Net impairment adjustments amounted to Euro 199.2 million, (Euro 62.3 million at the end of
2014). They refer to loans and advances to customers (Euro 91.6 million) with the cost of credit
rising to 3.22% versus 1.99% at 31 December 2014. The item also includes the full write-off (Euro
110 million) of the goodwill recorded in the financial statements as a result of the transfer of the
“Local Banks” business unit by the Parent Bank BPVi.
Net provisions for risks and charges also grew, and they amounted to Euro 6.6 million,
compared to Euro 2.6 million at the end of 2014, mostly referred to litigation cases and to the
risks connected with the placement of shares of the Parent Bank, Banca Popolare di Vicenza.
The gross loss for the year therefore amounted to Euro -164.3 million, versus Euro -16.8 million
at the end of 2014. Taking into account that the taxes item is positive by Euro 15.2 million (Euro
+3.3 million at 31 December 2014) by effect of the recording of deferred tax assets on the tax loss
recorded in the year, Banca Nuova ended 2015 with a net loss of Euro -149.2 million (Euro -13.5
million at the end of 2014).
Comprehensive income for 2015 was negative by Euro 151.5 million.
- 141 -
B
Farbanca Spa
figures
Changes
31/12/2015
31/12/2014
(+/-)
Banking business
Total Assets
Equity
Comon Equity Tier 1
Total Capital
CET 1 ratio
Tier 1 ratio
Total Capital Ratio
886,646
325,857
34,147
526,642
-157,452
547,779
60,124
57,217
57,217
384,534
14.88%
14.88%
14.88%
54,278
-1,753
2,147
53,884
-59,476
47,606
-88
182
182
23,052
-0.90 p.p.
-0.90 p.p.
-0.90 p.p.
6.5%
-0.5%
6.7%
11.4%
60.7%
9.5%
-0.1%
0.3%
0.3%
6.4%
Changes
31/12/2015
31/12/2014
(+/-)
Net interest income
Net Operating costs
Net income
indicators
832,368
327,610
32,000
472,758
-97,976
500,173
60,212
57,035
57,035
361,482
15.78%
15.78%
15.78%
%
13,263
15,483
-5,615
9,868
-6,226
3,817
2,902
10,059
12,406
-5,138
7,268
-2,670
4,764
3,168
%
3,204
3,077
-477
2,600
-3,556
-947
-266
31.9%
24.8%
9.3%
35.8%
133.2%
-19.9%
-8.4%
Changes
31/12/2015
31/12/2014
(+/-)
%
34
34
0
0.0%
Bank branches
32
1
161.6%
9.1 x
32
1
144.3%
8.3 x
0
0
17.3 p.p.
0.8 x
0.0%
0.0%
Cost/Income (3)
Bad loans coverage (%)
Performing loans coverage (%)
36.3%
2.92%
1.68%
49.20%
56.16%
0.82%
41.4%
2.76%
0.79%
44.85%
63.83%
0.46%
-5.1 p.p.
0.16 p.p.
0.89 p.p.
4.35 p.p.
-7.67 p.p.
0.36 p.p.
1.19%
0.56%
0.63 p.p.
Credit cost (4)
(1)
(2)
(3)
(4)
- 142 -
B
Farbanca is an on-line bank specialising in the offer of banking services to pharmacies; the Parent
Bank Banca Popolare di Vicenza owns a direct interest of 70.77%.
At the end of 2015, Farbanca’s staff consisted of 34 persons. The commercial structure is based on
the Bologna branch, whilst the Bank has a team of financial promoter employees for door-todoor services, who have been trained in-house to acquire knowledge of this sector and the ability
to serve the bank's pharmacist customers. In addition, the Bank also has 8 administrative offices,
where no commercial activities may be conducted.
At 31 December 2015, Farbanca’s banking product, comprising direct and indirect funding and
cash loans to customers, amounted to Euro 886.6 million, compared with Euro 832.4 million at 31
December 2014 (+6.5%). In detail:
 direct deposits amount to Euro 325.9 million, down by 0.5% from the values of the end of
2014. The analysis of the trends that characterised the aggregate in question during the
year shows that time deposits grew (+4.1%) along with other payables (+90.3%) while
current accounts and demand deposits declined (-13.1%) along with bonds (-0.3%),
which are almost entirely subscribed by the Parent Bank;
 indirect funding (excluding shares of the Parent Bank BPVi), at market values, amounted
to Euro 34.1 million, up by 6.7% compared to 2014, sustained both by the growth in assets
under management and retirement savings (+39.1%) while assets under administration
declined slightly;
 cash loans to customers amount to Euro 526.6 million, up by 11.4% compared to Euro
472.8 million in 2014. An analysis of the trends that characterised the aggregate under
review during the year highlights an increase in mortgages (+11%), in other transactions
(+99.7%) and in credit cards, personal loans and salary- and pension-backed loans
(+29.3%), while current accounts declined (-11.1%).
With reference to credit quality at 31 December 2015, net non performing loans to customers
amounted to Euro 15.4 million, down by Euro 2.4 thousand compared to the end of 2014 with
their proportion of total net loans growing to 2.92%, versus 2.76% last year. Overall, the coverage
of non performing loans rose from 44.85% at 31 December 2014 to 49.20% at 31 December 2015.
Net non perfroming loans are analysed in more detail as follows:
 net non-performing loans, representing 1.68% of net loans (0.79% at 31 December 2014),
amounted to Euro 8.8 million (Euro 3.8 million at the end of 2014), with a coverage
percentage of 56.16% (63.83% at 31 December 2014);
amount to Euro 6.1 million (Euro 9.3 million at 31 December 2014) with a coverage
percentage of 36.78% (29.95% at 31 December 2014);
 net exposures past due amount only to Euro 427 thousand (Euro 4 thousand at 31
December 2014) with a percentage coverage of 5.53% (20% at 31 December 2014).
Lastly, the general provision for performing loans amounted to Euro 4.2 million at 31 December
2015, covering 0.82% of the performing loans portfolio (0.46% at 31 December 2014).
At 31 December 2015, the Bank’s equity was Euro 60.1 million.
The Bank’s Own funds at 31 December 2015 amounted to Euro 57.2 million, entirely referred to
Common Equity Tier 1 capital. The ratios (Common Equity Tier 1 Ratio, Tier 1 Ratio and Total
Capital Ratio) were all equal to 14.88%.
The Bank closed 2015 with net profit of Euro 2.9 million, compared to Euro 3.2 million at the end
of 2014.
- 143 -
B
Analysing the main income data, net interest income amounted to Euro 13.3 million, up 31.9%
compared to Euro 10.1 million at the end of 2014. Operating income totalled Euro 15.5 million
(+24.8%) and show the substantial stability of all other revenue items.
Operating costs totalled Euro 5.6 million versus Euro 5.1 million at 31 December 2014, due to the
increase in payroll costs (+4.5%) and other administrative costs (+15.4%) which also include the
costs connected with the ordinary and extraordinary contributions to the National Resolution
Fund and to the Interbank Deposit Protection Fund.
Net profit from operating activities, therefore, amounted to Euro 9.9 million, up by 35.8%
compared to Euro 7.3 million at the end of 2014. The cost/income ratio is 36.3% (41.4% at the end
of December 2014).
Net impairment adjustments, almost entirely referred to loans and advances to customers,
amounted to Euro 6.2 million, versus Euro 2.7 million at 31 December 2014, and reflected the
growth of coverage of both non perforimng and performing loans. The cost of credit amounted
to 1.19% versus 0.56% the previous year.
Farbanca closed 2015 with net profit of Euro 2.9 million, compared to Euro 3.2 million in the
previous year. Comprehensive income attained the same amount.
- 144 -
B
Prestinuova Spa
figures
Changes
31/12/2015
31/12/2014
(+/-)
Banking business
- of which goodwill
Total Assets
Equity
Tier 1 Capital
Total Capital
Core Tier 1 ratio
Tier 1 ratio
Total Capital Ratio
548,399
165,518
382,881
-165,180
4,076
4,000
391,859
44,392
30,867
30,867
245,629
12.57%
12.57%
12.57%
Cost/Income (3)
Net non-performing loans/net loans
Bad loans coverage (%)
Performing loans coverage (%)
Credit cost (4)
154,918
165,518
-10,600
182,597
-1
-13,740
6,925
520
520
259
0.20 p.p.
0.20 p.p.
0.20 p.p.
39.4%
n.s.
-2.7%
-52.5%
0.0%
0.0%
-3.4%
18.5%
1.7%
1.7%
0.1%
Changes
31/12/2015
31/12/2014
(+/-)
Net interest income
Net Operating costs
Net income
indicators
393,481
393,481
-347,777
4,077
4,000
405,599
37,467
30,347
30,347
245,371
12.37%
12.37%
12.37%
%
19,388
19,063
-4,199
14,864
693
15,414
10,375
10,941
10,525
-4,521
6,004
-536
5,464
3,347
%
8,447
8,538
322
8,860
1,229
9,950
7,028
77.2%
81.1%
-7.1%
147.6%
n.s.
182.1%
210.0%
Changes
31/12/2015
31/12/2014
(+/-)
12
12
8.8 x
22.03%
2.67%
0.00%
20.14%
100.00%
0.15%
-0.18%
13
14
10.8 x
42.95%
2.30%
0.00%
16.61%
100.00%
0.78%
0.14%
-1
-2
-2.0 x
-20.93 p.p.
0.37 p.p.
0.00 p.p.
3.53 p.p.
0.00 p.p.
-0.63 p.p.
-0.32 p.p.
%
-7.7%
-14.3%
(1)
(2)
(3)
(4)
- 145 -
B
The Company is 100% owned by the Parent Bank Banca Popolare di Vicenza. At 31 December
2015, Prestinuova had 12 employees.
The core business of Prestinuova consists of “lending secured against one-fifth of
salary/pension” and loans, particularly to public-sector employees, that are repaid through
withholdings from salaries and pensions, available both for public and private sector employees,
with particular focus on employees of public Agencies and a gradual, well-balanced process of
opening to the segment of employees of private enterprises. Distribution activities are carried out
mainly by the companies of the Group (Banca Popolare di Vicenza, Banca Nuova and the
network of agents of BPVi Multicredito). Partnerships were maintained with Banca Popolare di
Sviluppo, Terfinance, Fincontinuo Finanziaria, M3 Group spa, BCC del Cilento e Lucania Sud
and BCC Chianti and new distribution agreements were stipulated with the Company A&A
Servizi finanziari and BCC Paceco.
At 31 December 2015, cash loans to customers amounted to Euro 382.9 million net of
adjustments, versus Euro 393.5 million at 31 December 2014 (-2.7%) and they are almost entirely
referred to “loans secured against one-fifth of salary” and they also include securitised loans. In
this regard, it is specified that on 1 January 2015 the first securitisation originated by the
subsidiary Prestinuova took effect; it was carried out in accordance with Italian Law no.
130/1999 through the establishment of the special purpose vehicle “Adriano Spv” whose
securitised assets, for a total amount of approximately Euro 310 million, were transferred
without recourse. The securitisation was completed in January 2015 with the issue of Asset
Backed Securities whose senior tranches (Euro 267.6 million in nominal terms) were entirely
placed on the market, whereas the junior tranche (Euro 40 million in nominal terms) was
subscribed by the Company.
With reference to credit quality at 31 December 2015, net non performing loans to customers
amounted to Euro 10.2 million, up compared to Euro 9 million at the end of 2014 and
accounting for 2.67% of total net loans, versus 2.30% last year. Net non performing loans are
analysed in more detail as follows:
 net unlikely to pay loans, equal to 1.60% of net loans, totalled Euro 6.1 million (Euro 4.6
million at 31 December 2014), with a coverage percentage of 12.54%;
 net past due loans amounted to Euro 4.1 million (Euro 4.4 million at 31 December 2014),
with a coverage percentage of 3.94%.
Non-performing loans were also recorded, for a gross amount of Euro 1.5 million (unchanged
from the end of 2014) which were written down in full. Lastly, the general provision for
performing loans amounted to Euro 0.5 million, covering 0.15% of the performing loans
portfolio.
The total debt of the Company amounts to Euro 330.7 million, of which Euro 165.2 million refer
to net exposure to the Group’s banks, while the remaining Euro 165.5 million refer to liabilities
relating to assets sold and not derecognised, as the matching entry of the receivables sold
within the aforementioned own securitisation that do not meet the derecognition requirements
under IAS 39 and therefore were reinstated under asset line item 70 in the statement of financial
position. The aforesaid liabilities, posted net of the cash available to the various special purpose
entities and generated with the periodic collection of the instalments of the securitised loans,
represent the share of the Asset Backed Securities issued by the special purpose entities and
placed on the market.
Equity totalled Euro 44.4 million, while regulatory capital amounted to Euro 30.9 million. As for
the company's capital adequacy ratios, the Tier 1 Capital Ratio and the Total Capital Ratio both
amounted to 12.57%.
The Company reported Euro 10.4 million in net income for 2015 (Euro 3.3 million at 31 December
2014).
- 146 -
B
Analysing the main income data, net interest income amounted to Euro 19.4 million, up 77.2%
compared to the end of 2014; it benefited from the lower cost of funding by effect of the
aforementioned securitisation carried out by the Company. Operating income amounted to Euro
19.1 million (+81.1% compared to the end of 2014) and includes fee and commission income,
substantially unchanged at Euro -0.5 million, charges of Euro 0.1 million connected with the
derivatives subscribed within the securitisation (absent in 2014) and other net income amounting
to Euro 0.4 million, up compared to Euro 0.1 million at the end of 2014.
Operating costs totalled Euro 4.2 million, down compared to Euro 4.5 million in 2014, due to the
lower incidence of all expense items: payroll costs (-5.2%), other administrative costs (-5.8%)
and depreciation and amortisation (-65.2%). The cost/income ratio stood at 22.03%, an
improvement of more than 21 percentage points compared to 42.95% at the end of 2014.
The measurement of the loans entailed the recognition of net write-backs of Euro 0.7 million.
Income for the period before income tax amounted to Euro 15.4 million (Euro 5.5 million at the
end of 2014), while net profit totalled Euro 10.4 million. The total profitability of the Company
instead amounts to Euro 10.1 million and includes the negative change in fair value of
derivatives to hedge the cash flows of the notes issued within the securitisation.
- 147 -
B
BPV Finance (International) Plc
This Irish-registered Company is 100% owned by Banca Popolare di Vicenza and operates out of
Dublin’s International Financial Services Centre. BPV Finance specialises in proprietary trading
and carries out its business by investing in financial instruments, taking a medium-long term
view, and by providing loans to foreign subsidiaries of the Group’s corporate customers in Italy.
As at 31 June 2015 the Company has 5 employees.
The guidelines of the Group’s Business Plan, recently approved by the Board of Directors of the
Parent Bank, call for the simplification of the Group’s operating models and structure and the
exploitation of its role as a commercial bank that has deep local roots and is focused on offering
quality services to enterprises, entrepreneurs and households. Consequently, for the subsidiary
BPV Finance, the decision was made to cease activities through voluntary liquidation by the
Company itself that should be completed in 2016. Therefore, starting from the third quarter of
2015, the Company started to dispose of its own assets.
Statement of Financial Position
- of which Governement Bonds
- of which debt securities issued by financial institutions
- of which other debt securities
- of which asset backet securities originated by the Group
- of which asset backet securities originated by third parties
- of which Equities
- of which Mutual fund
Loans to customers
Total Assets
Equity
Net interest income
Net Operating costs
Net income
Changes
31/12/2015
31/12/2014
(+/-)
441,064
254,903
0
3,054
45,759
12,529
833
123,986
140,015
-517,974
646,825
34,342
1,099,889
574,934
175,076
6,032
55,349
69,187
3,941
215,370
267,363
-1,193,691
1,373,526
153,467
%
-658,825
-320,031
-175,076
-2,978
-9,590
-56,658
-3,108
-91,384
-127,348
675,717
-726,701
-119,125
-59.9%
-55.7%
-100.0%
-49.4%
-17.3%
-81.9%
-78.9%
-42.4%
-47.6%
-56.6%
-52.9%
-77.6%
Changes
31/12/2015
31/12/2014
(+/-)
11,627
18,377
-2,035
16,342
-123,092
-106,750
-99,812
10,443
25,554
-1,868
23,686
660
24,346
21,316
1,184
-7,177
-167
-7,344
-123,752
-131,096
-121,128
%
11.3%
-28.1%
8.9%
-31.0%
n.s.
n.s.
n.s.
The Company’s investment portfolio at 31 December 2015 amounted to Euro 441 million versus
Euro 1.1 billion at the end of 2014 and it mainly comprises Italian Government bonds (Euro 254.9
million), Asset Backed Securities deriving from securitisations originated by the Group (Euro
45.8 million) and units of mutual funds and Sicavs (Euro 124 million).
Loans granted also declined, amounting to Euro 140 million at the end of 2015.
At 31 December 2015, net debt on the interbank market was Euro 518 million of which Euro 400
million referred to net debts to the Parent Bank. The company’s equity amounted to Euro 34.3
million, (Euro 153.5 million at the end of 2014).
The Company closed 2015 with a loss of Euro 99.8 million.
- 148 -
B
As regards the trends in the composition of net income/loss for the year, 2015 highlighted a
growth in net interest income (+11.3%), while the profits realised by trading activities on the
investment portfolio. Overall, income declined by 28.1%. Operating costs, instead, grew (+8.9%)
by effect of the increase in administrative expenses that include the charges tied to the
liquidation of the Company, whilst payroll costs declined. The net profit from operating
activities declined by 31%.
Of significant size were the net impairment adjustments, mainly referred to the Optimum MS2
fund (Euro 59.8 million) and to some loans that became non performing during the year and then
sold to the Parent Bank (Euro 55.6 million).
Nem Sgr Spa
In 2015, the Company, wholly owned by Banca Popolare di Vicenza, continued to manage the
speculative closed-end mutual fund reserved for Professional Investors named “Industrial
Opportunity Fund”, as well as the non-speculative closed-end mutual funds reserved for
Professional Investors named “NEM Imprese” and “NEM Imprese II”.
The Company closed 2015 with net profit of Euro 1,093 thousand (Euro 1,094 thousand in 2014),
and equity of Euro 3.9 million.
It is specified that the three funds managed by the subsidiary Nem Sgr are subject to line-by-line
consolidation being that the prerequisites of “Control” set forth in IFRS 10 are fulfilled.
The total value of the 3 funds amounts to Euro 99.4 million and it is mainly referred to the
investments made (in equities and/or in debt instruments) in some unlisted companies (Euro
65.5 million), and to cash and cash equivalents (Euro 29.8 million) and to tax credits (Euro 3.3
million). The cumulative operating result recorded by them in 2015 was positive by Euro 10.5
million due to gains realised from disposal of investments (Euro 15 million), dividends collected
(Euro 10.5 million) and the relevant interest income (Euro 2 million), only partially offset by
impairment adjustments recognised on assets (Euro -12.3 million) and by operating charges and
taxes (Euro -4.7 million).
Servizi Bancari Scpa
This consortium Company provides back office services to the Group's banks; its stockholders
are Banca Popolare di Vicenza with a 96% controlling interest and Banca Nuova, Farbanca,
Prestinuova and Sec Servizi, with 1% each.
The Company broke even in 2015, as it is a non-profit co-operative.
Immobiliare Stampa Scpa
The Company, 99.92% owned by Banca Popolare di Vicenza, and 0.04% held by Banca Nuova
and Servizi Bancari, respectively, manages the real estate portfolio of the Group, provides real
estate services and carries out administrative activities relating to the management of group
properties leased to third parties and of third-party properties leased by Group banks.
The Company ended 2015 with a loss of Euro 10.6 million, entirely referred to the net
impairment adjustments (Euro 14.7 million), net of tax, carried out on certain own buildings in
order to align their book value to the value of the appraisal made by an independent expert.
- 149 -
B
The company’s equity amounted to Euro 206.1 million. Starting from 1 January 2016, within the
guidelines of the Group’s Business Plan that call for a simplification of the Group’s operating
structure, the Company absorbed Monforte 19 srl.
Monforte 19 Srl
The Company, a subsidiary in which Banca Popolare di Vicenza holds a 99.92% interest and
Banca Nuova and Servizi Bancari, respectively, 0.04%, has the purpose of letting and rental of
own buildings to third parties, as well as the management and administration of the buildings.
Monforte 19 is the owner of two prime properties in Milan, one of which is let to the Parent Bank
and the other one to companies outside the banking group. The Company also owns a property
in Prato, the renovation of which has completed and marketing of the individual property units
has already started, with some units already sold.
The Company closed 2015 with net profit of Euro 794 thousand (Euro 332 million in 2014), and
equity of Euro 3,533 thousand. Starting from 1 January 2016, within the guidelines of the
Group’s Business Plan that call for a simplification of the Group’s operating structure, the
Company was merged by absorption into Immobiliare Stampa Scpa.
BPVi Multicredito – Agenzia in attività finanziaria Spa
The exclusive purpose of the Company, wholly owned by Banca Popolare di Vicenza, is to serve
as a financial agency, pursuant to Article 128-quater of Italian Legislative Decree no. 385/93 and
subsequent amendments and additions.
At 31 December 2015, the Company manages 116 professionals operating in regions in which the
branches of the Parent Bank Banca Popolare di Vicenza are present, who promote specific bank
and BPVi Group products to individual customers and small businesses, such as current
accounts, loans and payment services. Certain insurance products issued by Group investees and
connected to banking products being promoted are also offered.
The company closed 2015 with net profit of Euro 328 thousand and equity of Euro 540 thousand.
- 150 -
B
TRANSACTIONS WITH RELATED PARTIES, SIGNIFICANT NONRECURRING AND ATYPICAL AND/OR UNUSUAL TRANSACTIONS
Related-party transactions, significant and non-recurring events and operations, and positions
and transactions deriving from atypical and/or unusual transactions, as prescribed by CONSOB
Communication no. 6064293 of 28 July 2006, pertaining to “Disclosures by listed issuers and
issuers whose financial instruments are held by the general public pursuant to Article 116 of the
TUF – Requirements pursuant to Article 114 paragraph 5 of Legislative Decree no. 58/98”, the
definitions and qualitative/quantitative criteria set out in the Internal Regulations approved by
the Board of Directors in the course of its meeting of 23 January 2007 for the identification of the
above transactions are presented below.
Related-party transactions
For the definition of related-party transactions, please refer to “Part H - Related-party
transactions” of the Notes to the Separate and Consolidated Financial Statements.
Significant and non-recurring transactions
“Significant and non-recurring” transactions are defined as all transactions that are not repeated
frequently in the ordinary course of the Group’s activities and whose balance sheet and/or
economic value exceeds a certain materiality threshold. In particular:
- Significant transactions:
transactions whose balance sheet and/or economic value exceeds at least one of the following
parameters:
 Capital threshold: 1% of Group equity, as reported in the latest consolidated financial
statements;
 Income threshold: since the separate and consolidated 2014 financial statements closed
with a negative result, the income threshold was conventionally assumed to be equal to
zero.
For the purposes of the above calculation, each transaction must be considered separately; if
transactions are strictly and objectively related as part of the same strategic or operational
plan, the calculation must refer to all the related transactions taken together.
If no consideration is agreed for a transaction, its “normal value” must be determined
beforehand to reflect the price at which the transaction would have taken place between
independent parties on arms’ length terms.
Standard funding, lending and investment activities conducted on normal market terms are
not reported as significant transactions.
- Non-recurring transactions:
transactions that are not repeated frequently in the ordinary course of the Group’s activities.
The frequency of transactions must also be assessed with reference to prior years as well as to
the current year.
No significant and non-recurring transactions were arranged during 2015.
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B
Atypical and/or unusual transactions
These are defined as all “significant” transactions, as defined above, which due to the nature of
the counterparties, the purpose of the transaction, the method of determining the transfer price
or the timing of the event (close to the accounting reference date) may give rise to doubts about
the correctness/completeness of the information reported in the financial statements, possible
conflicts of interest, the safeguarding of assets or the protection of minority stockholders.
Atypical and/or unusual transactions are a subset of significant transactions and are identifiable
from the atypical nature of the counterparty or purpose of the transactions and/or from the
unusual way in which the transfer price is determined or from the timing of the event.
As an example, the following may be atypical and/or unusual transactions:
–
as regards the nature of counterparties: the significant transactions entered into with
Related parties;
–
as regards the object of the transaction: significant transactions involving the transfer of
resources, services or obligations that do not fall within ordinary Group activities;
–
as regards the method for determining the transfer price: significant transactions whose
transfer price is not determined on an arms’ length basis and, in any case, those for which
no consideration is agreed;
–
as regards the timing of the event: significant transactions entered into close to the
accounting reference date or other relevant dates for the purposes of providing information
to the Stockholders and/or the market.
No atypical and/or unusual transactions with a significant effect on the Group’s balance sheet,
financial position and results of operations were carried out during 2015.
- 152 -
B
SIGNIFICANT SUBSEQUENT EVENTS
With regard to information on significant events occurred after the reporting date per Article
2485 no. 5 of the Italian Civil Code, reference is explicitly made to Part A “Accounting policies”,
Section 4 “Subsequent events” of the Explanatory Notes to the Consolidated Financial
Statements.
MAIN RISKS
OPERATIONS
AND
UNCERTAINTIES
AND
OUTLOOK
FOR
2016 opened highlighting some elements of uncertainty both on the macroeconomic and on the
financial front. The weakness of emerging economies, and in particular of China, is hampering
the expansion of worldwide trade and reducing the positive contribution of exports to the
growth of the Italian economy. The relative weakness of macroeconomic conditions is also
attested by the most recent forecasts of the growth of Italian GDP, expected to accelerate in
2016 relative to 2015 (+1.1% year on year in 2016, according to the last estimated by Prometeia of
February 2016, versus +0.6% year on year for 2015), but marginally lower than the estimates
formulated just a few years ago. To the general weakness of the macroeconomic environment
was also added, in these initial months of the year, turbulence on financial markets, with a rise
in the spread on Government bonds and any drops recorded on the international stock markets,
and in particular on the Italian stock market, affected, among other factors, by a generalised
crisis of confidence concerning the soundness of the Italian banking system. To contrast these
trends, the ECB recently intervened, further strengthening the monetary stimulus, reducing by
10 basis points the rate on banks’ deposits with the Eurosystem (currently at -0.3%), extending
the duration of the securities purchase programme at least until March 2017 and expanding the
range of allowable securities.
The expansionary measures of the ECB, together with the slight improvement of the
macroeconomic environment, have already had positive effects on the credit sector, as attested
not only by the performance of loans in Italy already at the end of 2015 (-0.4% 24 year on year in
December 2015, a sharp improvement compared to -1.2% at the end of 2014), but also by the most
recent qualitative surveys25 that highlight an improvement in the credit conditions and an
increase in demand for new loans by households and businesses. On the front of lending
activities in 2016, loans are expected to accelerate with respect to the performance recorded in
2015, consistently with the current economic improvement, and banks’ funding activity is
expected to resume growing, albeit still remaining low as a result of the continued heavy use of
the funds made available by the ECB. The exceptional severity of the recession, instead, will
continue to negatively affect asset quality in 2016 as well, with further growth in the stock of non
performing roles albeit on lower values than in the past, benefiting, inter alia, from the recent
measures launched by the Italian Government that call for a reduction in the times of bankruptcy
and enforcement proceedings.
24
25
Loans to the private sector, Source: “Moneta e Banche” by the Bank of Italy
ECB Bank Lending Survey and ISTAT survey of business confidence
- 153 -
B
In the months to come, the BPVi Group will be engaged in the implementation of the
turnaround it has already started which includes, after the nearly entire replacement of the top
management, the transformation of the Bank into a joint stock company, the capital increase
up to Euro 1.5 billion and listing on the Stock Market. These actions will be submitted for
approval to the next Stockholders’ Meeting called for 5 March 2016. Moreover, the complete
renewal of the Governance of the new Banca Popolare di Vicenza is planned to be carried out by
the month of June.
On the operational management front, in 2016 the BPVi Group will be focused on the
implementation of the actions, most of which have already been started, and the achievement of
the income, capital and financial objectives set out in the 2015-2020 Business Plan, and which
call, for the year 2016, for the achievement of capital ratios and liquidity indicators on values
that amply exceed the minimum regulatory targets (CET 1 ratio expected to be above 12%
versus a minimum regulatory requirement set by the ECB at 10.25% and LCR- Liquidity
Coverage Ratio amply exceeding the regulatory minimum of 70% for 2016), partly because of the
benefits deriving from the planned capital increase. With reference to the evolution of the main
capital aggregates, both loans and, above all, direct funding are expected to grow, in particular
in the second half of the year, after the forecast listing and the capital increase. In terms of the
evolution of the result of operations, operating profits will still be negatively affected by the
trend in volumes recorded in particular at the end of 2015, while operating costs, net of
extraordinary components, are expected to decline. Lastly, with reference to adjustments to
loans, a sharp reduction is expected, while the cost of credit should return to values deemed
physiological.
PROPOSAL TO COVER THE LOSS FOR THE YEAR
Stockholders,
With regard to the 2015 loss of Euro 1,399,393,392.70, we propose to cover said loss in the
following manner:
1. using the portion that became available during the year of the “former equity
instruments” reserve, amounting to Euro 1,142,042.45;
2. by using the available portion of the reserve for purchasing treasury shares, amounting to
Euro 71,944,232.54;
3. for the residual portion, amounting to Euro 1,326,307,117.71, by using the Additional
paid-in capital reserve.
- 154 -
B
GLOSSARY
ABS (Asset backed
securities)
Financial instruments deriving from securitisations whose return and
repayment are secured by a portfolio of the issuer’s assets (collateral).
Examples of assets serving as collateral are mortgages, loans, bonds,
trade receivables, receivables deriving from credit cards, etc.
ALMS
Asset & Liability Management System. This is an instrument for
measuring interest rate risk relating to interest-bearing assets and
liabilities and identifies how changes in rate curves influence the Bank’s
future profit margins. The ALMS is a valid tool for management
allowing it to assess ex-ante at what level of risk the Bank intends to
position itself in expected financial scenarios and to estimate the value of
balance sheet items by discounting future cash flows, thus keeping the
Bank’s value under constant observation.
Euro Area
The group of countries which have adopted the Euro as the single
currency. The Euro area consists of the following countries: Belgium,
Germany, Greece, Spain, France, Ireland, Italy, Cyprus, Luxembourg,
Malta, the Netherlands, Austria, Portugal, Finland, Slovenia, Slovakia,
Estonia, Latvia and, starting from 1 January 2015, Lithuania.
Assessment
An assessment is an evaluation involving an opinion on the likely turn of
the events assessed.
Asset allocation
It consists of identifying asset classes to be included in the portfolio in
order optimally to allocate financial resources, in view of the reference
time horizon, risk-return preferences and the set of existing assets.
Asset management
The management of wealth on behalf of third parties, comprising
collective management (open-end and closed-end mutual funds, real
estate funds, pension funds and SICAVs), endowment assurance
products and individual management (by banks, brokers and trust
companies).
ATM
Automated Teller Machine: automatic apparatus to enable customers to
perform transactions such as withdrawing cash, depositing cash or
cheques, requesting information on the account, paying utilities, topping
up mobile phones, etc. The customer activates the terminal introducing a
card and entering his/her personal identification number.
Back office
In a financial institution, the organisation that deals with all the
reporting, accounting and administrative requirements relating to
transactions carried out by the operating units (front office).
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B
Back-testing
Retrospective analysis to test the reliability of measurements of the
sources of risk associated with asset positions.
Bancassurance
The offer of typically insurance-related products through the operating
network of credit entities.
Banking book
Generally referred to securities and financial instruments in general,
identifying that part of the investment portfolio held for “proprietary”
activities.
Basel 3
The expression ‘Basel 3’ indicates a set of measures approved by the
Basel Committee on Banking Supervision as a consequence of the 200708 financial crisis with the intent to improve the existing prudential
regulations of the banking industry (which in turn are commonly known
as Basel 2), the effectiveness of the supervisory action and the banks’
ability to manage the risks they assume.
β (Beta)
Beta coefficient of an issuer or of a group of comparable issuers,
expression of the inter-relation between the actual return of an equity
and the overall return of the reference market.
Securitisation
A securitisation represents a special issue of bonds with the payment of
coupons and the redemption of principal on maturity funded by the cash
flows deriving from a portfolio of financial assets (mortgages,
commercial paper, leasing contracts) held by the vehicle company (see
definition) issuing the securitisation. Each securitisation is divided into
various tranches of bonds with different ratings (from AAA to BBB or
even lower), depending on the credit risk involved.
CDO (Collateralised Securities issued as part of securitisation transactions, guaranteed by an
Debt Obligations) underlying represented by loans, securities or other financial assets.
Common Equity
Tier 1 (CET 1)
The primary quality capital of Own Funds (or Regulatory Capital), as
defined by Article 4 of Regulation (EU) no. 575/2013 (CRR). It mainly
comprises instruments issued directly by the bank, which meet the
criteria for classification as ordinary shares according to regulations;
share premium accounts related to the instruments allowed in CET1,
retained earnings and revaluation reserves and other visible reserves.
From these elements are subtracted the deductions defined by the
regulations, the main ones being: goodwill and intangible assets and
deferred tax assets (DTA).
For more information, please refer to Regulation (EU) no. 575/2013
(CRR), Part Two, Title I.
Compliance
(function)
The compliance function serves to prevent the risk of non-compliance by
company activity with compulsory regulations and laws or selfregulatory ones (for example, articles of association, codes of conduct,
self-regulatory codes etc.).
- 156 -
B
Confidi (Credit
Guarantee
Associations)
Organisations with co-operative or consortium structure, which provide
collective loan guarantees in favour of member or participating
companies.
CONSOB
The “Commissione Nazionale per le Società e la Borsa” (Italian stock
market regulator), set up under Law no. 216 dated 7 June 1974, is an
independent administrative authority, with a separate legal identity and
full autonomy under Law no. 281/1985, whose activities are aimed at
investor protection, and the efficiency, transparency and development of
the Italian stock market.
Corporate
Customer class consisting of small, medium and large companies.
Cost/income
A performance indicator which expresses in percentage terms the ratio
between a bank’s costs and its income. It is one of the main indicators of
the bank’s operating efficiency: the lower the value expressed by the
indicator, the higher the efficiency of the bank.
Period-on-period
growth
Growth relative to the previous reporting period (for example, the
previous quarter).
Year-on-year growth Growth relative to the same period in the prior year.
Cross selling
This is an indicator of the average number of products held by each
customer; the higher the number of products held, the greater the degree
of customer loyalty and the more profitable the relationship.
Probability of
default (PD)
The probability that a counterparty enters a state of default, even if
temporarily, before the end of the reference period (one year). This
measure is the output of a rating system.
Δ (Delta)
The delta represents the degree of sensitivity of the premium of the
options relative to the performance of the underlying security indicated
in the contract.
ESM
European Stability Mechanism. Permanent crisis management
mechanism, which has replaced the EFSF. The ESM provides financial
support to requesting Euro area member states and it uses the
instruments already available to the EFSF.
Euribor
Euribor (Euro Interbank Offered Rate) is the principal market reference
rate and is calculated as the weighted average of interest rates applied to
financial transactions in euro between prime European banks. It is
published on a daily basis by the European Banking Federation with
quotations for 1 month, 3 month and 6 month maturities.
Fair value
The amount at which an asset could be exchanged, or a liability settled,
between knowledgeable, willing parties in an arm's length transaction.
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B
Financial Stability
Board (FSB)
The Financial Stability Board is an international body in charge of
international coordination of the work of national financial authorities
and the commissions that define international standards. It was
established in April 2009 by the G20, as the successor of the Financial
Stability Forum, and brings together national authorities responsible for
stability (i.e. Central banks, supervisory authorities and Treasury
Departments), international financial institutions, committees of experts
from central banks and international supervisory and regulatory bodies.
Banking spread
Difference between the interest rate applied by the Bank on loans and the
rate recognised on funding.
Governance
The term identifies the set of instruments and rules that regulate
corporate life, with particular reference to the transparency of the
corporate documents and deeds and to the completeness of disclosure to
the market.
House organ
Periodic publication by a business to communicate with its employees
and/or customers.
IAS/IFRS
International Accounting Standards/International Financial Reporting
Standards. These are the international accounting standards issued by
the IASB (International Accounting Standards Board), whose application
is compulsory (under a legislative decree promulgated in November
2004) for the purposes of preparing separate and consolidated financial
statements by a wide array of companies, including banks.
Impairment
In the context of the international accounting standards (IAS),
impairment represents the loss in the value of an asset that is recognised
if its carrying amount exceeds its recoverable value, being the amount
that could be obtained by selling it or using it in the business.
Impairment testing must be performed on all assets, except for those
measured at fair value since, in this case, any losses (or gains) are
implicit in such value.
ISTAT
Italy’s publicly-operated central statistics office. It has been in operation
since 1926 and is the principal producer of official statistics in support of
citizens and public policy-makers.
ISVASS
Istituto per la Vigilanza sulle Assicurazioni (Insurance Supervisory
Authority) is a government agency with separate legal identity that
operates to safeguard the stability of the insurance market and to protect
consumers. Established with Italian Law no. 135/2012 (converting Law
Decree no. 95/12 with amendments), the IVASS took over all of the
ISVAP’s functions, authority and powers.
Joint venture
Agreement between two or more entities to carry out a given economic
activity, usually through the establishment of a joint-stock company.
- 158 -
B
Liquidity Coverage The Liquidity Coverage Ratio (LCR) is a short-term indicator, devised by
the Basel Committee on Banking Supervision, whose purpose is to assure
Ratio
that a bank will maintain an adequate level of unrestricted high quality
liquid assets that can be converted into cash to meet its liquidity
requirements within 30 calendar days in a particularly acute liquidity
stress scenario specified by the supervisory authorities.
Mark-down
Negative differential relative to a reference indicator, normally an
interbank rate, applied to the rate on customer deposits.
Mark-up
Positive differential relative to a reference indicator, normally an
interbank rate, applied to the rate on loans to customers.
Maturity Ladder
Representation of cash inflows/outflows by settlement date, in order to
highlight cash mismatches (exact and/or cumulative), during various
time buckets.
Mezzanine
In a securitisation, it is the tranche with the intermediate subordination
level between the junior tranche and the senior tranche.
MIFID
Markets in financial instruments directive. European regulations
provided by Directive 2004/39/EC to increase investor protection and
assure the greatest possible transparency through mandatory disclosure
to Customers.
E-money
The set of techniques connected with the use of electronic money.
Multi-channel
activities
The offer of retail banking products and services both through the
traditional channel of branches and through other channels (financial
promoters, agents, electronic channels, call centres, etc.).
OTC (Over The
Counter)
Over the counter market (unregulated market). All those “markets” in
which financial assets are traded other than official regulated ones. The
methods of contracting are not standardised and it is possible to agree
“atypical” contracts. Securities traded on an OTC market are generally
less liquid that those traded on official markets.
POS
POS (Points of Sale) are terminals at cash registers in shops and
supermarkets used for making payments with debit or credit cards.
Rating
A rating expresses the creditworthiness of issuers of bonds using letters
that indicate the debtor’s reliability. For example, a triple A (AAA) rating
represents the highest quality investment grade; the scores descend
progressively (AA, A, BBB, BB, B). Triple C (CCC) ratings are awarded to
the least reliable debtors. The rating is assigned by a specialised agency.
Recession
Negative economic situation featuring a reduction in industrial output, a
fall in consumption, and a decrease in household income. Technically a
Country is in recession when its GDP declines for two consecutive
quarters.
- 159 -
B
Risk Appetite
Framework (RAF)
The reference framework defining, consistently with the maximum
assumable risk, the business model and the strategic plan, risk
propensity, tolerance thresholds, risk limits, risk governance policies, the
reference processes needed to define them and implement them.
Sensitivity
The term identifies the situation of higher or lower sensitivity with which
determined assets or liabilities react to changes in rates or other reference
parameters.
SGR
SGRs (Società di Gestione del Risparmio) or asset management
companies are companies authorised to promote, set up, organise and
manage the assets of a mutual fund (collective asset management),
keeping their own assets separate from those of the fund. An SGR can
also manage funds set up by other asset management companies.
Single Supervisory
Mechanism (SSM)
Financial supervision system, wherein, from November 2014 onwards,
the European Central Bank has submitted significant credit institutions to
direct supervision and act in close cooperation with the competent
domestic authorities for the supervision of all credit institutions, carried
out under the overall oversight of the ECB. The degree of significance of
the institution is determined according to specific criteria. Euro Area
countries automatically participate in the SSM, while countries outside
the Euro Area may opt not to.
Small business
Market segment relating to small and very small businesses (typically
tradesmen and shopkeepers).
Spread
This term normally indicates the difference between two interest rates,
the gap between bid and ask prices in securities trading or the additional
amount the issuer of securities recognises over a reference rate.
Stakeholder
Stakeholder. This term is used to indicate all categories of parties which
may influence, be influenced by or hold a stake in the activities of a
business/bank, such as Human Resources, Stockholders, Customers, the
National Community and the State, Suppliers and future generations.
Stagnation
Stagnation is characterised by the persistence, over time, of modest
changes in Gross Domestic Product and per capita income.
Stress test
Simulation used to measure the impact of extreme market scenarios.
Trading Book
Generally referred to securities and financial instruments in general,
identifying that part of the investment portfolio held for trading.
Value at Risk –
VAR
Value at Risk is an estimate of the expected maximum potential loss on a
portfolio of financial instruments in a specified time period, with a
defined level of probability, upon the occurrence of unfavourable market
conditions.
Vega
Coefficient measuring the sensitivity of the value of an option in relation
to a change or an underestimation of volatility.
- 160 -
B
CONSOLIDATED FINANCIAL STATEMENTS
- 161 -
B
BANCA POPOLARE DI VICENZA GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
in thousands of euro
31 DECEMBER 2015
Assets
10.
Cash and cash equivalents
20.
30.
Financial assets designated at fair value
40.
31 DECEMBER 2014
173,506
192,755
3,408,612
7,579,380
7,842
4,260
5,725,818
5,321,059
50.
-
43,374
60.
Loans and advances to banks
2,150,149
2,254,927
70.
Loans and advances to customers
25,178,117
28,110,636
80.
Hedging derivatives
33,024
97,860
90.
Remeasurement of financial assets backed by macro
hedges (+/-)
46,187
87,447
100. Equity method investments
492,736
494,857
120. Property, plant and equipment
598,253
626,373
130. Intangible assets
10,926
of which: - goodwill
140. Tax assets
a) current
b) deferred tax assets
of which: - of L. 214/2011
6,223
347,812
329,862
1,456,621
101,607
1,355,014
706,322
160. Other assets
Total assets
- 162 -162-
948,516
81,437
867,079
734,435
501,579
365,611
39,783,370
46,474,867
B
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Equity and Liabilities
10.
Due to banks
20.
Due to customers
30.
31 DECEMBER 2015
31 DECEMBER 2014
9,973,459
4,757,848
16,272,137
22,157,659
5,199,085
6,668,144
40.
Financial liabilities held for trading
2,771,986
5,956,524
50.
Financial liabilities designated at fair value
471,516
1,547,346
60.
Hedging derivatives
887,624
525,379
80.
Tax liabilities
a) current
b) deferred
317,003
3,456
313,547
100. Other liabilities
110. Provision for severance indemnities
120. Provisions for risks and charges:
a) pensions and similar commitments
b) other provisions
182,170
1,842
180,328
717,771
791,454
72,585
80,132
548,077
4,829
543,248
58,349
5,253
53,096
140. Valuation reserves
157,390
186,831
160. Equity instruments
1,415
3,195
223,949
608,879
3,206,573
3,365,095
190. Capital stock
377,204
351,870
200. Treasury shares (-)
(25,470)
(25,888)
210. Minority interests (+/-)
18,060
18,400
(1,406,994)
(758,520)
39,783,370
46,474,867
170. Reserves
180. Additional paid-in capital
220. Net income (loss) for the year (+/-)
Total Equity and Liabilities
- 163 -163-
B
CONSOLIDATED INCOME STATEMENT
Captions
31 DECEMBER 2015
31 DECEMBER 2014
10.
Interest income and similar revenues
962,036
20.
Interest expense and similar charges
(458,156)
(660,014)
30.
Net interest income
503,880
511,065
40.
Fee and commission income
358,161
357,518
50.
Fee and commission expense
(35,736)
(56,217)
60.
322,425
301,301
70.
Dividend and similar income
30,614
15,564
80.
Net trading income
33,883
96,330
90.
Net hedging gains (losses)
64,192
54,017
100. Gains (losses) on disposal or repurchase of:
1,171,079
233,485
a) loans and advances
b) financial assets available for sale
c) financial assets held to maturity
d) financial liabilities
110. Net change in financial assets and liabilities designated at fair
value
120. Net interest and other banking income
(3,720)
230,122
997
6,086
44,861
299
47,051
(2,489)
(1,856)
(8,370)
1,186,623
130. Net impairment adjustments on:
1,014,768
(1,481,396)
d) other financial transactions
(1,333,363)
(160,227)
12,194
(915,960)
(868,456)
(30,934)
(16,570)
140. Net income from financial activities
(294,773)
98,808
170. Net income from financial and insurance activities
(294,773)
98,808
180. Administrative costs:
(774,569)
a) payroll
b) other administrative costs
(410,374)
(364,195)
190. Net provisions for risks and charges
(696,281)
(401,951)
(294,330)
(513,060)
(18,456)
200. Net adjustments to property, plant and equipment
(38,075)
(24,023)
210. Net adjustments to intangible assets
(16,138)
220. Other operating charges/income
66,163
230. Operating costs
(1,275,679)
240. Profit (loss) from equity method investments
Net gains (losses) arising on fair value adjustments to property,
250.
plant and equipment and intangible assets
260. Adjustments to goodwill
270. Gains (losses) on disposal of investments
290. Income taxes on current operations
(638,746)
6,332
8,501
(4,715)
(2,850)
(323,639)
(600,000)
(44)
280. Profit (loss) on current operations before income taxes
(4,498)
104,512
(1,892,518)
486,339
13
(1,134,274)
376,687
300. Profit (loss) from current operations after tax
(1,406,179)
(757,587)
320. Net income (loss) for the year
(1,406,179)
(757,587)
(815)
(933)
(1,406,994)
(758,520)
330. Net income (loss) attributable to Minority interests
340. Net income (loss) for the year pertaining to the parent bank
- 164 - 164 -
B
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
Captions
31 DECEMBER 2015
10. Net income (loss) for the year
31 DECEMBER 2014
(1,406,179)
(757,587)
Other post-tax components of income without reversal to
income statement
40. Defined-benefit plans
Portion of valuation reserves of equity method investments
60.
carried at equity
Other post-tax components of income with reversal to
income statement
90. Cash-flow hedges
100. Financial assets available for sale
120.
carried at equity
130. Total other post-tax components of income
140. Total comprehensive income (Lines 10. + 130.)
150. Total comprehensive income attributable to minority interests
160.
Total comprehensive income attributable to the parent
bank
- 165 - 165
-
3,993
(4,053)
64
(136)
(367,746)
347,601
(96,167)
250,620
(13,644)
20,209
(29,732)
170,473
(1,435,911)
(587,114)
(820)
(930)
(1,436,731)
(588,044)
- 166 - 166
-
(1)
-
-
-
-
-
-
-
-
-
-
-
-
(398,695)
(359,781)
(359,781)
758,476
-
3,369,021
611,432
504,870
106,562
186,816
3,195
(25,888)
(757,587)
18,400
3,731,462
-
-
-
362,873
Group
reserves
362,873
Balance at
01/01/2015
The “issue of new shares” is stated net of the cancellations recorded during the year.
18,400
Change in
opening
balances
-6-
Minority interests
(757,587)
3,731,462
3,195
Equity instruments
Group Equity
186,816
Valuation reserves
Net income (loss) for the year
106,562
b) other
(25,888)
504,870
a) from earnings
Treasury shares
611,432
3,369,021
Reserves:
-
362,873
a) ordinary shares
b) other shares
362,873
Capital stock:
Balance at
31/12/2014
-
-
-
-
-
-
-
-
-
-
(889)
-
(889)
Dividends
and other
allocations
Allocation of prior year
results
-
-
-
-
-
(26,653)
-
-
-
295
856
(27,804)
(26,948)
Changes in
reserves
(1)
-
265,506
-
-
-
-
-
-
-
240,173
-
25,333
25,333
shares
Issue of new
-
418
-
418
-
-
-
-
-
-
-
-
-
Purchase of
treasury
shares
-
-
-
-
-
-
-
-
-
-
-
-
-
Extraordinary
distribution of
dividends
-
(10)
-
-
(1,780)
-
1,770
-
1,770
-
-
-
-
Change in
equity
instruments
Equity transactions
Derivatives
on treasury
shares
Changes in the year
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY 2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(271)
75
-
-
-
-
74
(37)
37
(63)
-
(170)
(170)
820
(1,436,731)
(1,406,179)
-
-
(29,732)
-
-
-
-
-
-
-
-
2,534,067
(1,406,994)
(25,470)
1,415
157,390
109,218
114,731
223,949
3,206,573
-
377,204
377,204
Group equity
Total
comprehensive at 31/12/2015
Changes in
income at
Stock Options ownership interests
31/12/2015
18,060
-
815
-
-
(11)
44
2,517
2,561
3,863
-
10,832
10,832
Minority
interests at
31/12/2015
B
-- 167
167 -
(1)
20,589
3,647,183
-
-
-
-
-
-
-
-
-
-
-
-
-
20,589
3,647,183
(30,448)
(7,752)
3,332
16,343
104,398
484,270
588,668
2,771,763
-
325,866
325,866
Balance at
01/01/2014
-
-
-
-
-
-
31,619
-
-
-
-
(31,619)
(31,619)
Group
reserves
-
-
-
-
-
-
-
-
-
-
(1,171)
-
(1,171)
Dividends
and other
allocations
Allocation of prior year
results
The “issue of new shares” is stated net of the cancellations recorded during the period.
Minority interests
Group Equity
(30,448)
Treasury shares
3,332
(7,752)
Equity instruments
104,398
b) other
16,343
484,270
a) from earnings
Valuation reserves
588,668
2,771,763
Reserves:
-
325,866
a) ordinary shares
b) other shares
325,866
Capital stock:
Balance at
31/12/2013
Change in
opening
balances
-
-
-
-
-
54,173
-
-
-
-
1,656
52,517
54,173
Changes in
reserves
(1)
-
635,863
-
-
-
-
-
-
-
597,712
-
38,151
38,151
shares
Issue of new
-
(18,136)
-
(18,136)
-
-
-
-
-
-
-
-
-
Purchase of
treasury
shares
-
-
-
-
-
-
-
-
-
-
-
-
-
Extraordinary
distribution of
dividends
-
(137)
-
-
(137)
-
-
-
-
-
-
-
-
Change in
equity
instruments
Equity transactions
Derivatives
on treasury
shares
Changes in the year
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY 2014
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Stock Options
(1,948)
560
-
-
-
-
508
(298)
210
(454)
-
(1,144)
(1,144)
Changes in
ownership
interests
930
(588,044)
(757,587)
-
-
170,473
-
-
-
-
-
-
-
-
3,731,462
(758,520)
(25,888)
3,195
186,831
106,518
502,361
608,879
3,365,095
-
351,870
351,870
Group equity
Total
comprehensive at 31/12/2014
income at
31/12/2014
18,400
-
933
-
-
(15)
44
2,509
2,553
3,926
-
11,003
11,003
Minority
interests at
31/12/2014
B
B
STATEMENT OF CONSOLIDATED CASH FLOWS
Direct method
31 DECEMBER 2015 31 DECEMBER 2014
A. OPERATING ACTIVITIES
1. Cash generated from operations
198,092
- Interest income collected (+)
- Interest expense paid (-)
- Dividends and similar income
- Net fee and commission income (+/-)
- Payroll costs (-)
- Net premium income (+)
- Other insurance income (charges) (+/-)
- Other costs (-)
- Other revenues (+)
- Taxation (-)
798,283
(383,465)
20,079
318,553
(410,584)
(7,233)
(372,717)
247,372
(12,196)
-Costs/income relating to groups of assets held for sale, net of tax effect (+/-)
33,520
1,088,593
(595,752)
15,564
301,301
(402,654)
(294,978)
23,519
(102,073)
-
-
2. Cash generated/used by financial assets
2,365,497
839,209
- Financial assets held for trading
- Financial assets designated at fair value
- Financial assets available for sale
- Loans and advances to customers
- Loans and advances to banks: demand
- Loans and advances to banks: other receivables
- Other assets
986,676
(3,602)
42,476
1,375,746
626,909
(507,219)
(155,489)
(1,042,666)
(4,609)
(847,376)
2,169,695
280,189
258,884
25,092
3. Cash generated/used by financial liabilities
(2,630,239)
(3,575,060)
- Due to banks: demand
- Due to banks: other payables
- Due to customers
- Debt securities in issue
- Financial liabilities held for trading
- Financial liabilities designated at fair value
- Other liabilities
93,918
4,625,620
(5,064,920)
(1,216,990)
15,564
(1,038,571)
(44,860)
(842,332)
(1,453,283)
(906,638)
(289,596)
(15,564)
(186,362)
118,715
(66,650)
(2,702,331)
Net liquidity generated/used by operating activities
Key:
(+) generated
(-) used
- -168
168-
B
B. INVESTING ACTIVITIES
1. Cash generated by
67,004
14,534
- Disposal of equity method investments
- Dividends collected on equity method investments
- Disposal/redemption of financial assets held to maturity
- Disposal of property, plant and equipment
- Sale of intangible assets
- Sale of subsidiary companies and business divisions
6,300
21,552
38,308
844
-
9,476
5,000
58
-
2. Cash used by
(32,557)
(125,696)
- Purchase of equity method investments
- Purchase of financial assets held to maturity
- Purchase of property, plant and equipment
- Purchase of intangible assets
- Purchase of subsidiary companies and business divisions
(18,584)
(11,124)
(2,849)
-
(91,126)
(29,992)
(2,078)
(2,500)
34,447
(111,162)
- Issues/Purchases of treasury shares
- Issues/Purchases of equity instruments
- Distribution of dividends and other purposes
13,854
(11)
(889)
617,728
(137)
(500)
Net liquidity generated/used by funding activities
12,954
617,091
Net liquidity generated/used by investing activities
C. FUNDING ACTIVITIES
TOTAL NET CASH GENERATED/USED IN THE YEAR
(19,249)
(2,196,402)
Key:
(+) generated
(-) used
Reconciliation
Captions
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents resulting from business combination
Net liquidity generated/used in the year
Cash and balances with central banks: effect of change in exchange rates
192,755
(19,249)
173,506
2,389,157
1,145
(2,197,547)
192,755
The statement of consolidate cash flows presented above was prepared using the “direct”
method envisaged by IAS 7 and reports the “cash flows” from the Group’s operating, investing
and financing activities.
--169169 -
B
- 170 -
B
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
PART A – ACCOUNTING POLICIES
PART B – INFORMATION ON THE CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
PART C – INFORMATION ON THE CONSOLIDATED INCOME STATEMENT
PART D – CONSOLIDATED COMPREHENSIVE INCOME
PART E – INFORMATION ON RISKS AND RELATED HEDGING POLICY
PART F – INFORMATION ON CONSOLIDATED EQUITY
PART G – BUSINESS COMBINATIONS
PART H – RELATED-PARTY TRANSACTIONS
PART I – EQUITY-SETTLED PAYMENT ARRANGEMENTS
PART L – SEGMENT INFORMATION
- 171 -
B
A. 1 – GENERAL INFORMATION
Section 1 – Declaration of conformity with IFRS
The financial statements at 31 December 2015 were prepared in accordance with the
International Accounting Standards (IAS) and International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB), endorsed by the
European Commission under the procedure as per art. 6 of Regulation (EC) No. 1606/2002 of the
European Parliament and Council dated 19 July 2002 and in force at the current reporting date,
including the related interpretations of the International Financial Reporting Interpretations
Committee (IFRIC).
The currently applicable international accounting standards (IAS/IFRS), as endorsed by the
European Commission, adopted to prepare the consolidated Financial Statements at 31
December 2015 are as follows:
IFRS 1 First-time adoption of IFRS
IFRS 7 Financial instruments: Disclosures
IFRS 8 Operating segments
IFRS 10 Consolidated financial statements
IFRS 11 Joint arrangements
IFRS 12 Disclosure of interests in other entities
IFRS 13 Fair Value measurement
IAS 1 Presentation of financial statements
IAS 7 Statement of cash flows
IAS 8 Accounting policies, changes in accounting estimates and errors
IAS 10 Events after the reporting period
IAS 12 Income taxes
IAS 16 Property, plant and equipment
IAS 17 Leases
IAS 18 Revenue
IAS 19 Employee benefits
IAS 21 The effects of changes in foreign exchange rates
IAS 23 Borrowing costs
IAS 24 Related party disclosures
IAS 26 Accounting and reporting by retirement benefit plans
IAS 27 Separate financial statements
IAS 28 Investments in associates and joint ventures
IAS 32 Financial instruments: presentation
IAS 33 Earnings per share
IAS 34 Interim financial statements
IAS 36 Impairment of assets
IAS 37 Provisions, contingent liabilities and contingent assets
IAS 38 Intangible assets
IAS 39 Financial instruments: recognition and measurement
IAS 40 Investment property
- 172 -
B
The following table shows the new international accounting standards or the amendments to
accounting standards already in force, with the related endorsing regulations by the European
Commission, that came into force in 2015.
International accounting standards endorsed as at 31 December 2015 and in force since 2015
Regulation
Endorsement
Description
Effective date
634/2014
IFRIC Interpretation 21: Levies
January 1, 2015
First year with start date June 17,
2014 or later
1361/2014
Amendments to IFRS 3 - Business combinations
Amendments to IFRS 13 Fair Value Measurement
Amendments to IAS 40 Investment property
January 1, 2015
First year with start date January 1,
2015 or later
Among the accounting rules that are applicable, mandatorily and for the first time, starting in
2015, of note is IFRIC Interpretation 21 - Levies, endorsed by the European Commission with
Commission Regulation (EU) No 634/2014. This interpretation provides indications on the
methods for recognising liabilities connected with the payment of levies imposed by public
administrations and falling within the scope of IAS 37. In addition, since 2015 the amendments
to IFRS 3 and 13, as well as to IAS 40, endorsed by Regulation (EU) No. 1361/2014, have been
applicable.
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B
The following table, instead, shows the new international accounting standards or the
amendments to accounting standards already in force, with the related endorsing Regulations by
the European Commission, which must be adopted on 1 January 2016 - in the case of financial
statements for calendar years - or on a subsequent date.
International accounting standards endorsed as at 31 December 2015 and to be adopted after 31 December
2015
Regulation
Endorsement
Description
Effective date
28/2015
Amendments to IFRS 2 Share-based payments
Amendments to IFRS 8 Operating segments
Amendments to IAS 16 Property, plant and equipment
Amendments to IAS 24 - Related party disclosures
Amendments to IAS 38 Intangible assets
January 1, 2016
2016 or later
29/2015
Amendments to IAS 19 Employee benefits
January 1, 2016
2016 or later
2113/2015
Amendments to IAS 41 Agriculture
January 1, 2016
2016 or later
2173/2015
Amendments IFRS 11 Joint Arrangements
January 1, 2016
2016 or later
2231/2015
Amendments to IAS 38 Intangible assets
January 1, 2016
2016 or later
2343/2015
Amendments to IFRS 5 non-current assets held for sale and
discontinued operations
Amendments to IFRS 7 - Financial instruments: disclosures
Amendments to IAS 19 Employee benefits
Amendments to IAS 34 Interim financial statements
January 1, 2016
2016 or later
2406/2015
Amendments to IAS 1 – Presentation of financial statements
January 1, 2016
2016 or later
2441/2015
Amendments to IAS 27 Separate Financial Statements
January 1, 2016
2016 or later
Any repercussions that the reporting principles, the amendments and interpretations to be
applied in future may have on financial disclosure are being studied and evaluated.
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B
The following table shows the accounting standards affected by the amendments, with the
specification of the scope or of the object of the changes not yet endorsed by the European
Commission to date.
International accounting standards not yet endorsed as at 31 December 2015
Accounting
Standard/
Interpretation
Description
Publication date
IFRS 9
Financial Instruments
July 24, 2014
IFRS 14
Regulatory Deferral Accounts
January 30, 2014
IFRS 15
Revenue from Contracts with customers
May 28, 2014
Accounting
Standard/
Interpretation
Amendments
Publication date
IFRS 10
Sale or Contribution of Assets between Investor and its
Associate or Joint Venture
September 11,2014
IAS 28
September 11,2014
IFRS 10
Investment Entities: Applying the Consolidation Exception
December 18, 2014
IFRS 12
December 18, 2014
IAS 28
December 18, 2014
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B
Section 2 – Basis of preparation
The consolidated financial statements as at 31 December 2015 comprise the statement of financial
position and the income statement, the statement of comprehensive income, the statement of
changes in equity, the statement of cash flows and these Explanatory notes and they are
accompanied by the Directors’ report on operations.
The consolidated financial statements have been prepared with reference to the formats and
rules specified in Bank of Italy Circular no. 262 of 22 December 2005 and subsequent updates
("Banks’ financial statements: layout and preparation"), issued by the Supervisory Body
exercising its regulatory powers pertaining to the technical forms of bank financial statements, in
accordance with Article 9 of Legislative Decree 38/2005.
As prescribed by Article 5, paragraph 2, of Legislative Decree 38/2005, the consolidated
Financial Statements are prepared using the Euro as the accounting currency and the amounts, in
line with the instructions issued by the Bank of Italy, unless otherwise indicated, are expressed in
thousands of Euro, rounding off as appropriate in accordance with regulatory provisions.
These consolidated Financial Statements were prepared with the intention to provide clear
information and they truth and fair represent the financial position, the income and the cash
flow of the Banca Popolare di Vicenza Group.
In the preparation of the consolidated Financial Statements, general reporting standards have
been adopted, as detailed below, prescribed by IAS 1 “Presentation of financial statements” and
the accounting standards illustrated in part A.2 of these Explanatory notes, in compliance with
the general provisions included in the “Framework for the Preparation and Presentation of
Financial Statements” (the “Framework”) prepared by the International Accounting Standards
Board, with particular regard to the fundamental principle of the prevalence of substance over
form, and to the concept of the relevance and significance of the information.
The general reporting standards prescribed by IAS 1 are summarised below.
Going concern
These consolidated Financial Statements were prepared on a going concern basis.
In this regard, the joint co-ordination committee for IAS/IFRS application between the Bank of
Italy, CONSOB and ISVAP (Italy’s insurance industry regulator) issued its document no. 2 on 6
February 2009 entitled “Disclosures in financial reports on the going concern assumption, financial
risks, tests of assets for impairment and uncertainties in the use of estimates”. This document requires
management to carry out a detailed review in relation to the going concern presumption, in
accordance with the requirements of IAS 1.
In particular, paragraphs 23-24 of IAS 1 establish that: “When preparing financial statements,
management shall make an assessment of an entity’s ability to continue as a going concern. An entity
shall prepare financial statements on a going concern basis unless management either intends to liquidate
the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in
making its assessment, of material uncertainties related to events or conditions that may cast significant
doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties.
When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact,
together with the basis on which it prepared the financial statements and the reason why the entity is not
regarded as a going concern”.
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B
In this regard, the Directors examined the risks and uncertainties connected with the current
macroeconomic environment, as well as specific Group risk factors that emerged in 2015 also with
reference to the capital ratios, which at 31 December 2015 are above the regulatory minimums but
nonetheless fall below the minimum targets set by ECB as part of the Supervisory Review and
Evaluation Process with notice dated 25 November 2015 (at 31 December 2015, the Common
Equity Tier 1 (CET 1) ratio was 6.65% against 10.25% prescribed by the ECB, while the Total
Capital ratio stood at 8.13%), and to the Liquidity Coverage Ratio, which is lower than the
minimum regulatory requirements at 31 December 2015 (LCR 47.5%). The Directors, taking into
account the actions already taken in terms of strong managerial renewal, the decisions made and
the actions already commenced in respect to the process of transformation into a “Joint Stock
Company”, to listing on the Electronic Stock Market managed by Borsa Italiana and to the Parent
Bank’s capital and financial strengthening (whose successful outcome is subordinated presumes,
inter alia, the approval, by the Extraordinary Stockholders’ Meeting convened for 4/5 March 2016,
of the transformation into Joint Stock Company and it is the subject of a “pre-guarantee”
agreement at market terms and conditions), as well as of the indications contained in the 20152020 Group Business Plan, approved last September and revised on 9 February 2016, albeit in the
presence of uncertainties connected with the execution of the transformation and capital
strengthening operation submitted for the approval of the Extraordinary Stockholders’ Meeting
convened for 4/5 March 2016 and to the consequences that non-approval of the transformation to
a joint stock company would bring in relation to the provisions of art. 29, paragraph 2-bis,
Consolidated Law on Banking and Lending, for the reasons indicated below, deem it appropriate
to prepare the present consolidated financial statements as at 31 December 2015 on the basis of
the going concern presumption.
The negative result of the year 2015 was caused, for the most part, by non-recurring valuation
components. The raising of the coverage levels of the credit portfolio and the allocation of risk
provisions to address risks of disputes are an important element supporting the business’s
continuation as a going concern.
The Group’s levels of capitalisation are above the minimum regulatory requirements, although
they are below the targets established by the ECB at the end of the Supervisory Review and
Evaluation Process (SREP), mainly as a result of the impact of the purchase and subscription of
BPVi shares in relation to which, the ECB’s inspection and in-depth analyses conducted by the
Parent Bank highlighted the criticality profiles indicated in the “Inspections” section of the
Report on Operations. The completion of a capital increase up to Euro 1.5 billion (to which are
added Euro 150 million in the service of the over-allocation option and the additional funds that
may result from the exercise, by the stockholders, of the rights to subscribe new shares that will
be assigned to them to gain their loyalty and to provide an incentive to the subscription of the
capital increase), with respect to which the Parent Bank stipulated a preliminary guarantee
agreement with Unicredit Group, at market terms and conditions, pertaining to the subscription
of the shares to be issued for the execution of the capital increase up to the maximum amount of
Euro 1.5 billion, aims to bring the Group’s capital ratios above the ECB targets by the spring of
2016. The capital strengthening plan was preventively submitted to the competent Supervisory
and Control Authorities for approval and it will be submitted to the approval of the
Extraordinary Stockholders’ meeting of the Parent Bank on 4/5 March 2016, together with the
transformation into a Joint Stock Company. Completion of these activities within the scope of the
new 2015-2020 Business Plan, will enable the Group to continuously fulfil the stringent regulatory
requirements and, for the future, to express adequate levels of profitability.
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B
Recognition on an accrual basis
The Consolidated Financial Statements are prepared, with the exception of cash flow disclosure,
according to the principle that costs and revenues are recognised on an accrual basis, regardless
of the time of their actual payment.
Relevance, significance and aggregation
Each relevant class of items, however similar they may be, shall be reported distinctly in the
financial statements. Items with dissimilar nature or destination may be aggregated only if they
are not significant. The presentation and classification of the items of the Consolidated Financial
statements complies with the provisions set out in Bank of Italy Circular no. 262 which bindingly
establishes financial statement formats and the procedures for their completion, as well as the
content of the Explanatory notes.
In accordance with the provisions of the aforesaid Circular no. 262, statements of financial
position, income statements and comprehensive income statements comprise line items
(indicated by numbers), lines (indicated by letters) and additional information details (the “of
which” portions of line items and lines). The line items, the lines and their information details
make up the financial statement accounts. New items may be added to the aforesaid statements,
provided their content is not associated to any of the items already included in the statements
and only if the amounts are relevant. The lines provided by the statements may be grouped
when one of the two following conditions is met: A) the amount of the lines is irrelevant; b)
grouping enhances the clarity of the financial statements; in this case, the explanatory notes
contain distinctly the lines to be grouped.
In this regard, the Group, in preparing the Consolidated Financial statements at 31 December
2015, did not apply the aforesaid provisions that allow to add new items or to group them. Line
items in the statement of financial position, the income statement, the statement of
comprehensive income and the tables included in the Explanatory notes are not presented if their
balance is zero in both years.
Offsetting
Unless otherwise provided or expressly allowed by international reporting standards or by an
interpretation thereof or by the provision of the aforementioned Bank of Italy Circular no. 262,
assets and liabilities as well as costs and revenues may not be mutually offset.
Uniformity of presentation
The standards for the presentation and classification of Financial statement items are kept
constant from one period to the other in order to assure the comparability of information, unless
differently required by an international accounting standard or by an interpretation or if the
need emerges of making the representation of the information more appropriate in terms of
significance. If feasible, the change is adopted retroactively and the nature, the reason and the
amount of the items affected by the change are indicated.
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B
Comparative information
For all amounts posted in the Consolidated Financial Statements of the current year, unless
otherwise prescribed or allowed by an international accounting standard, comparative
information with respect to the previous year is provided and, when relevant for comprehension
of the financial statements for the reference year, also comparative information about comments
and descriptive information. If changes were made to the presentation or classification of line
items, the comparative amounts are reclassified as well, unless reclassification is not feasible.
Non comparability and the adaptation, or its impossibility, are pointed out and commented in
the explanatory notes.
At any rate, when comparing 2015 data against those of the previous year it should be kept in
mind that 2015 was an extraordinary year characterised by strong discontinuity from the past in
terms of economic results, equity, management and regulatory activities, also in connection with
inspections conducted by the ECB during the February-July 2015 period on “Risk Management –
Market Risk management (Proprietary Trading and Governance management), which showed
some critical elements and anomalies related, among other things, to the manner in which capital
increases were carried out in 2013-2014, treasury share transactions and the related legal and
reputational risks.
It should also be noted that as of 1 January 2015, new rules for the classification of non
performing loans came into effect. These rules were issued by the Bank of Italy in its 7th update
of Circular 272 of 30 July 2008 and aim to align the definition of non performing financial assets
with the new notions of “non-performing exposure and forbearance” introduced by the
implementing technical standards relating to harmonised consolidated supervisory statistics
reporting defined by the EBA and approved by the European Commission on 9 January 2015
(ITS). The same update also introduced the definition of “forbearance”, which can be applied to
non performing exposures (“non-performing exposures with forbearance measures”) as well as
performing exposures (“forborne performing exposures”). In particular, while the overall scope
of non performing loans remains the same, as of 1 January 2015 they are broken down into the
categories of bad loans, unlikely to pay and past-due. The sum of these categories corresponds to
the aggregate “non-performing exposures” set forth in the ITS. As of the same date, the
categories of watchlist exposures and restructured exposures are no longer used. As a result, the
comparability of information on non performing loans is somewhat limited. With regard to the
foregoing, it should also be noted that in Part E, Section 1 of the Explanatory notes comparative
information concerning “Credit Quality” for 2014 has been omitted, as allowed in the
promulgation document of the 4th update to Circular no. 262 of 22 December 2005 published by
the Bank of Italy on 15 December 2015. Information on changes in gross exposures and writedowns of “forborne exposures” is also not provided, as such disclosures are required for
financial statements relating to the fiscal year ended at 31 December 2016 or ongoing on that
date.
Lastly, the associate Società Cattolica di Assicurazione was recorded at the equity value reported
in the Interim Report on Operations at 30 September 2015, while the data used for Cattolica Life,
Berica Vita and ABC Assicura were derived from the statements of financial position and income
statements prepared by the three associates to be incorporated in the consolidated financial
statements of the Parent Bank Società Cattolica di Assicurazione ScpA as at 30 September 2015.
This approach was necessary due to the fact that these associates will approve their respective
financial statements at 31 December 2015 on a date subsequent to the Parent Bank’s date of
approval of its own separate financial statements and of the Group’s consolidated financial
statements for 2015. The same approach was adopted in 2014. However, in this regard it should
be noted that the contribution of the aforesaid associates to the BPVi Group’s 2015 operating
results reflects 12 months of operations (last quarter of 2014 and first three quarters of 2015),
while in the past year it only referred to the first 9 months of the associates’ operations.
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B
Estimation uncertainty and risks
As indicated in the specific sections of these explanatory notes, accounting estimates have been
made in support of the carrying amounts for the more significant items requiring measurement
in the consolidated financial statements at 31 December 2015, as required by the current
accounting standards and relevant regulations. This process, which largely involved estimating
the future recoverability of amounts reported in the financial statements in accordance with
current regulations, was performed on a going concern basis without considering forced-sale
values.
Estimates have been primarily used for determining the fair value of financial instruments, for
the valuation of loans and intangible assets, for determining other provisions for risks and
charges and for quantifying current and deferred taxes and estimating the recoverability of
deferred tax assets.
The analysis carried out, also taking into account the impairment losses applied, the outcome of
the probability test performed with reference to the measurement of deferred tax assets and the
indications contained in the 2015-2020 Group Business Plan approved last September and
revised on 9 February 2015, supports the carrying amount of these items at 31 December 2015.
This valuation process was nevertheless particularly complex due to the current macroeconomic
and market conditions. In particular, continuing abnormal volatility in all the financial and nonfinancial parameters used for measurement purposes has rendered it difficult to make short-term
or other forecasts for such financial and non-financial parameters, which can have a significant
influence on estimated values. The parameters and the information used to verify the values
mentioned in the previous paragraphs are therefore significantly influenced by the particularly
uncertain macroeconomic and market environment, which could lead to rapid changes, not
foreseeable today, with consequent effects, which may be significant, on the values reported in
the Consolidated Financial Statements at 31 December 2015.
In addition, as described in the specific section of the Report on Operations dedicated to the
inspections conducted by the ECB and completed in early July, the Group, with the support of
legal, accounting and tax advisors of high standing, has continued a complex and detailed
analysis of the criticality profiles that emerged from said assessments, in particular with
reference to transactions for the purchase and subscription of the Parent Bank’s shares, in order
to identify the legal profile of the various situations, and assess risks and potential impacts on
income and the financial position and the relevant applicable accounting standards. The results
of the analyses carried out to date and of the related assessments are reflected in the consolidated
financial statements as at 31 December 2015 through impairment adjustments on loans and,
specific provisions for risks and charges and also subject to disclosure in the “Inspections”
section of the Report on Operations. The execution of complex estimations on such risks has been
carried out to the best of the information currently available, and taking into account the
applicable accounting principles.
The Directors believe that the results of the analyses carried out to date and of the related
assessments provide a reasonable basis for the preparation of the consolidated financial
statements as at 31 December 2015.
It should also be noted that, with reference to the risks connected with other criticality profiles
that emerged in the ECB inspections, specific value adjustments were made and the appropriate
allocations made to provisions for risks and charges in the Consolidated financial statements as
at 31 December 2015, according to the indications of the aforementioned “Inspections” section of
the Report on Operations.
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B
It should be specified, finally, that the Group will continue to examine these analyses in depth
and fine tune them during 2016 and it cannot be excluded that the future assessments and
estimates may differ from those adopted for the purposes of the 2015 consolidated financial
statements, including as a consequence of the progress of the litigations and claims from
customers and the final inspection reports that will be issued by Consob, the Italian Commission
for Listed Companies and the Stock Exchange.
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B
Section 3 - Scope of consolidation and methodology
The Consolidated Financial Statements of the Banca Popolare di Vicenza Group include the
financial and operating results at and for the period ended at 31 December 2015 of the Parent
Bank Banca Popolare di Vicenza, its direct and indirect subsidiaries, companies under joint
control and associated companies. As required by IAS/IFRS, the scope of consolidation also
includes companies whose activities are dissimilar to those of the rest of the Group. Companies
with individual and cumulative financial statement values that are irrelevant to the Group’s
consolidated financial statements are not included in the scope of consolidation. Equity
investments in these companies were valued at cost.
Subsidiaries are defined as investments in companies and investments in entities over which the
Group exercises control in accordance with IFRS 10. More precisely “an investor controls an
investee when the investor is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee”. The power
requires that the investors have rights that grant it the ability to direct the relevant activities that
significantly affect the investee’s returns. The power is based on an ability that need not
necessarily be exercised in practice. The control is analysed continuously. The Investor must redetermine if it controls an investee when facts and circumstances indicate that there are changes
in one or more elements of control.
Joint operations are defined as a joint arrangement whereby the parties that have joint control of
the arrangement have rights to the assets, and obligations for the liabilities, relating to the
arrangement. These parties are defined parties to the joint arrangement. The participants in the
Joint Operation have rights to the assets, and obligations for the liabilities of the arrangement. A
joint venture is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the arrangement. These parties are defined as joint
venturers. The joint venturers have rights to the net assets of the arrangement.
Associated companies are defined as all those companies not controlled by Banca Popolare di
Vicenza over which the Parent Bank, directly or indirectly, is able to exercise significant
influence. Such influence is presumed to exist for those companies in which the Group holds at
least 20% of the voting rights, or in which it is able to participate in the determination of financial
and operating policies as a consequence of specific legal arrangements.
With regard to the consolidation methods used, subsidiaries are consolidated on a line-by-line
basis, while associated companies and joint ventures are accounted for using the equity method.
Line-by-line consolidation: Under this method, the assets, liabilities, “off-balance sheet”
transactions, income and expenses of Group companies are combined on a “line-by-line” basis.
Following the allocation of the minority interest in equity and the results for the period to
separate captions, the carrying amount of investments is eliminated against the Group’s interest
in their equity at the time of acquisition or initial consolidation; any differences are allocated, as
far as possible, to the assets and liabilities of the consolidated companies concerned and residual
amounts are reported as “goodwill”.
Changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control are
accounted for as equity transactions and, consequentially, any difference between the amount by
which the non-controlling interests are adjusted and the fair value of the consideration paid or
received shall be recognised directly in equity and attributed to the owners of the subsidiary.
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B
Consolidation with the Equity method: Under this method, equity method investments are
initially recognised at cost and subsequently adjusted to reflect changes in the Group’s interest in
their equity. Differences between the cost of an investment and the Group’s interest in its equity
at the acquisition or initial consolidation date are reflected in its carrying amount, if they cannot
be attributed to specific assets or liabilities.
Equity method investments classified as “non-current assets held for sale and discontinued
operations” in compliance with IFRS 5 are carried at the lower of their book or fair value, net of
selling costs.
Dividends distributed within the Group are reversed back to reserves.
Receivables, payables, income and expenses arising from transactions between Group companies
are eliminated, except where insignificant.
The statements of financial position and income statements used for line-by-line consolidation
purposes are those approved by the Boards of Directors of the individual companies at 31
December 2015; those financial statements prepared under IAS/IFRS were used directly while,
for companies that prepared their financial statements under Italian GAAP and accounting
principles applicable to mutual fund reports, statements of financial position and income
statements were prepared in accordance with the accounting policies adopted by the Parent
Bank.
Investments in companies carried at equity, whose financial statements were approved by their
respective Boards of Directors after the date of the present consolidated financial statements, are
stated with reference to the equity reported in their latest approved financial statements or
interim report.
The associate Società Cattolica di Assicurazione was recorded at the equity value reported in the
Interim Report on Operations at 30 September 2015, while the data used for Cattolica Life, Berica
Vita and ABC Assicura were derived from the statements of financial position and income
statements prepared by the three associates to be incorporated in the consolidated financial
statements of the Parent Bank Società Cattolica di Assicurazione ScpA at 30 September 2015.
However, in this regard it should be noted that the contribution of the aforesaid associates to the
BPVi Group’s 2015 operating results reflects 12 months of operations (last quarter of 2014 and
first three quarters of 2015), compared to nine months of 2014 only. In this regard, please recall
that the aforementioned associates approved their financial statements relating to the year 2014
after the Parent Bank Banca Popolare di Vicenza approved its separate and consolidated Group
financial statements.
At 31 December 2015 the “Giada Equity Fund” is recorded on the basis of the latest NAV
reported by the manager on 30 June 2015, while equity investment held in the company San
Marco Srl, classified as unlikely to pay, was written off entirely. In addition, the equity
investment held in the company Magazzini Generali Merci e Derrate SpA, classified among bad
loans, was entirely written off in 2014.
The scope of consolidation does not include any investments in companies under joint control.
Lastly, the income statements of companies joining or leaving the scope of consolidation in the
period (or whose method of consolidation changed during the period) are consolidated from the
date of acquisition or until the date of disposal of the interest held.
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B
1. Equity method investments in fully owned subsidiaries
Name
Headquarters
Registered
office
Nature of
holding (1)
Type of investment
Holder
% interest
held
Majority of
voting rights
% (2)
1.
BANCA POPOLARE DI VICENZA SCpA
VICENZA
VICENZA
Parent Bank
2.
BANCA NUOVA SpA
PALERMO
PALERMO
1
B. Pop. Vicenza
100.00
100.00
3.
FARBANCA SpA
BOLOGNA
BOLOGNA
1
B. Pop. Vicenza
70.77
70.77
4.
MONFORTE 19 Srl
VICENZA
VICENZA
1
5.
IMMOBILIARE STAMPA SCpA
VICENZA
VICENZA
1
B. Pop. Vicenza
B.Nuova
Servizi Bancari
B. Pop. Vicenza
B.Nuova
Servizi Bancari
99.92
0.04
0.04
99.92
0.04
0.04
99.92
0.04
0.04
99.92
0.04
0.04
6.
BPV FINANCE INTERNATIONAL Plc
DUBLINO
DUBLINO
1
B. Pop. Vicenza
100.00
100.00
7.
NEM SGR SpA
MILANO
VICENZA
1
B. Pop. Vicenza
100.00
100.00
8.
BPVI MULTICREDITO SpA
VICENZA
VICENZA
1
B. Pop. Vicenza
100.00
100.00
9.
PRESTINUOVA SpA
ROMA
ROMA
1
B. Pop. Vicenza
100.00
100.00
10. SERVIZI BANCARI SCpA
VICENZA
VICENZA
1
B. Pop. Vicenza
B.Nuova
Farbanca
Prestinuova
96.00
1.00
1.00
1.00
96.00
1.00
1.00
1.00
11. NEM IMPRESE
MILANO
VICENZA
1
B. Pop. Vicenza
95.00
95.00
MILANO
VICENZA
1
B. Pop. Vicenza
Nem Sgr
99.42
0.58
99.42
0.58
MILANO
VICENZA
1
B. Pop. Vicenza
Nem Sgr
98.59
1.41
98.59
1.41
12. NEM IMPRESE II
13. INDUSTRIAL OPPORTUNITY FUND
Key:
(1) Nature of holding:
1 = majority of voting rights at ordinary stockholders’ meeting
2 = dominant influence at ordinary stockholders’ meeting
3 = agreements with other stockholders
4 = other forms of control
5 = coordinated control under art. 26.1 of Legislative Decree 87/92
6 = coordinated control under art. 26.2 of Legislative Decree 87/92
7 = joint control
(2) Number of votes at AGM (effective/potential)
The percentage interest in equity also reflects the voting rights at Ordinary Stockholders’
Meetings.
- 184 -
B
2. Significant judgements and assumptions used in determining the consolidation area
In accordance with the provisions of IFRS 10 “Consolidated Financial Statements”, compliance
with the standard’s requirements was verified in order to determine the consolidation area.
Under IFRS 10, an investor controls an investee if:
 it has power over the investee;
 it is exposed to variable returns from its involvement with the investee;
 it has the ability to use its power over the investee to affect the amount of the investee’s
returns.
Power is defined by the same standard as the exercise of existing rights that give the ability to
direct the investee’s relevant activities. Relevant activities are the activities that significantly
affect the investee’s returns.
Under IFRS 10, the factors to be considered in determining the existence of control include:
 the investment entity’s purpose and design;
 which are its relevant activities and how decisions concerning such activities are made;
 whether the investor’s rights give it the ability to direct the relevant activities.
Verifying purpose and design requires an analysis of the investee’s governance, in order to
understand which are the relevant activities and how they are governed, i.e. who has the power
to direct them. Therefore, the purpose of this analysis is to understand whether the investee’s
governance occurs through the exercise of voting rights in Stockholders’ Meetings or other
corporate bodies, or through other means specified in the investee’s incorporation documents.
Purpose and design considerations should also include any forms of involvement in the
decisions taken at the time of the investee’s incorporation. Although involvement in the
investee’s incorporation does not constitute in itself evidence of control, it may indicate that the
investor had the opportunity to obtain sufficient rights to gain power over the investee.
The identification of relevant activities requires an analysis of the company’s core business in
order to identify the activities it carries out, and in particular the activities that most affect the
entity’s variable returns.
Once purpose and design have been analysed and relevant activities have been identified, it is
necessary to understand the rights that the investor can exercise in order to actually direct these
relevant activities.
These rights, which are influenced by the entity’s governance mechanisms, include:
 the investment entity’s voting rights (or potential voting rights);
 right to appoint, reappoint or remove the investee’s key management personnel who have the
ability to direct the relevant activities;
 right to appoint or remove another entity that carries out the relevant activities;
 right to instruct the investment entity to initiate transactions to the investor’s benefit, or to
prohibit any change to such transactions;
 other rights (e.g. the right to make decisions as specified in a management agreement) giving
the holder of such rights the ability to direct the relevant activities.
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B
Therefore, for the purposes of determining whether control exists it is necessary to consider the
possible existence of potential voting rights incorporated in the agreements entered into, as well
as their substantive nature, i.e. the ability to exercise such rights in practice. For this purpose, the
judgement that is provided should take into account all existing facts and circumstances, and
specifically the identification of any financial, legal and/or operational barriers that may prevent
the exercise of these rights.
In particular, at the time of first-time adoption of IFRS 10, an analysis was conducted to verify
the existence of the control requirement, which concerned investment entities and other entities
with which the Group has contractual relationships of various nature. In detail, analysis macroareas involved Bancassurance companies, mutual funds, equities classified as “Financial assets
available for sale”, vehicle companies and receivables. With reference to the latter, checks were
conducted on contractual and non-contractual terms and conditions (such as pledges, covenants,
etc.) laid out in connection with the granting of new loans and the restructuring of existing
loans, which could create the conditions for de facto control under IFRS 10 over the borrower.
The assessment carried out by the Group in 2014 regarding the impact the aforesaid new
standard revealed a marginal expansion of the scope of consolidation, which now includes the
special purpose vehicles related to the securitisations originated within the Group (the
underlying assets and liabilities are already included in the Group’s scope) and the Funds Nem
Imprese, Nem Imprese II and Industrial Opportunity managed by the subsidiary Nem SGR,
which therefore are consolidated on a line-by-line basis.
It also emerged that the Parent Bank has a significant influence over the Giada Equity Fund; this
investment is therefore accounted for under the equity method.
No impact on the BPVi Group from the new IFRS 11 regarding Joint arrangements (Joint
Ventures and Joint Operations) was observed.
No changes impacting the scope of consolidation occurred in 2015.
- 186 -
B
3. Equity investments in fully owned subsidiaries with significant non controlling interests
3.1 Third-party interests, availability of third-party voting rights and dividends distributed to third
parties
Minority
interests %
Name
1. Farbanca SpA
Voting rights of
third
parties%(1)
Dividends
distributed to
third parties
29.23
889.00
29.23
(1) Voting rights in ordinary
3.2 Subsidiaries with significant non controlling interests: accounting information
Name
1. Farbanca SpA
Name
Cash and cash
equivalents
Total assets
547,779
Financial
assets
68
529,342
Profit (loss) on
current
Operating costs
operations
before income
taxes
1. Farbanca SpA
(5,253)
Property, plant
and equipment
and Intangible
assets
95
Profit (loss)
from current
operations
after tax
3,817
2,902
Financial
liabilities
Net Equity
486,009
Profit (loss)
from disposal
groups, net of
tax
-
60,124
Net income
(loss) for the
year (1)
2,902
There are no significant restrictions under IFRS 12, paragraph 13 to be reported.
There is no other information worthy of disclosure.
- 187 -
13,263
Net interest
and other
banking
income
15,296
Other
Total
components of
comprehensive
income without
income (3)
release to the
=
income statement
(1) + (2)
net of tax (2)
1. Significant restrictions
2. Other information
Net interest
income
10
2,912
B
Section 4 – Subsequent events
No significant events occurred between the reporting date of these Financial statements (31
December 2015) and the date of their approval by the Board of Directors (23 February 2016),
except as indicated below.
Monforte 19 S.r.l., whose merger by absorption, entered into on 21 December 2015, became
effective on 1 January 2016, is a real estate company belonging to the Banca Popolare di Vicenza
Group which manages several prime properties for business use by the Group and other parties.
Monforte 19 S.r.l. has been merged into Immobiliare Stampa S.c.p.a., a real estate company
owned by the Banking Group.
It should be noted that, on 19 January 2016, CONSOB started an inspection targeted at
acquiring the documents and data relating to the capital, banking and financial dealings with
Società Cattolica di Assicurazione Società Cooperativa and an assessment of the equity
investment held by the Bank in Società Cattolica di Assicurazione in the financial statements as
at 31 December 2014 and in the half-yearly report as at 30 June 2015.
Again on 19 January 2016, the ECB sent the Bank the draft decision relating to the inspection
regarding Risk Management – Market Risk (management of Proprietary Trading and Governance). For
details on the observations indicated by the ECB and on the actions taken by the Bank, please
refer to the chapter “Inspections” in the section dedicated to the “Activities of strategic
significance" of the Report on Operations.
economic/capital projections of the 2015-2020 Business Plan, confirming the strategic
guidelines already approved in September. The new economic/capital objectives were updated
to take into account the final results of the financial statements at 31 December 2015 and the
findings of the analysis conducted on loans considered “correlated” to the
2020.
- 188 -
B
notches, from B+ to B-, confirming the short-term rating at B. The downgrade mainly reflects
the weakening of BPVi’s liquidity position following the significant reduction in deposits at 31
2015, due to the Euro 1.4 billion loss and the filters applied to regulatory capital in connection
with capital related to loans granted by the Bank. However, Fitch emphasises that the Bank
announced a plan to strengthen capital, including a Euro 1.5 billion capital increase, which will
be completed in the second quarter of 2016 with the goal of bringing the CET1 ratio above 12%,
the sale of non performing loans and some non-core assets. The Bank’s rating has been
identified as “Rating Watch Negative”, reflecting an increased risk of execution in connection
with the Bank’s ability to implement a successful turnaround and achieve its Business Plan
objectives, including listing and capital increase. With regard to the latter, Fitch is reassured by
the presence of a preliminary subscription agreement with Unicredit, but the Agency also
believes that the current difficulties in the financial markets could potentially result in the
operation being postponed or not being completed successfully.
On 12 February 2016, the company Berica Funding 2016 S.r.l. became a part of the BPVI
Banking Group. On 29 January 2016, this securitisation company completed a securitisation of
mortgage loans originated by Banca Popolare di Vicenza and by the subsidiary Banca Nuova
with a total value of approximately Euro 1.27 billion through the issue of four classes of asset
backed securities in accordance with Italian Law no. 130/99.
On 16 February 2016, the Board of Directors of Banca Popolare di Vicenza called the
order to resolve:




independent auditors.
by Law no. 33/2015 and with the related implementing provisions issued by Bank of Italy (9 th
reimbursement, with the Bank’s own funds, of the shares resulting from any exercise of the
withdrawal right.
- 189 -
B
The shares resulting from the exercise of the withdrawal right shall be offered to the other
stockholders and they may subsequently be offered on the market; if they are not placed, the
residual shares will then be returned to stockholders once the law-mandated procedures are
completed.
During the same meeting of the Board of Directors, moreover, it was decided that, to ensure that
the capital strengthening objectives would be achieved in a complex market environment and
that the interests of all stockholders are safeguarded, up to 45% of the capital increase shall be
reserved to current stockholders, at least 50% of the capital increase shall be reserved to
institutional investors and 5% to retail. Claw-back mechanisms are provided, whereby it will be
possible to reallocate in favour of a tranche any shares not placed in the other tranches. The issue
price of the shares, to be equal for every category of investors, shall be determined at the end of
the placement through the “book building” method, on the basis of the market’s demand for
new shares. Current stockholders shall benefit from specific conditions for participation in
the capital increase. In particular:

price;

On 19 February 2016, the rating agency DBRS lowered the Bank’s long-term rating by one notch,
from BB to BB (low), confirming the short-term rating at R-4. The rating action by DBRS
followed the publication of the results of 2015 by BPVi, with the Bank recording a loss of Euro 1.4
billion, and it took into consideration the deterioration of the Bank’s franchise, position and
liquidity buffer.
on the rating.
- 190 -
B
Section 5 – Other matters
Statutory audit of Consolidated Financial Statements
The consolidated financial statements have been audited by KPMG S.p.A., an independent firm
of auditors, under the engagement for external audit conferred for the nine-year period, from
2010 to 2018 by resolution of the stockholders on 24 April 2010. The consolidated financial
statements are also accompanied by the certification of the Financial Reporting Manager, as
required by art. 154-bis, par. 5, of Legislative Decree 58/98 (Italy's Consolidated Financial
Markets Act – TUF) as amended by Legislative Decree no. 195/2007 implementing the
Transparency Directive.
- 191 -
B
A.2 – PART RELATING TO THE PRINCIPAL FINANCIAL STATEMENT
LINE ITEMS
The accounting standards adopted in the preparation of the consolidated financial statements as
at 31 December 2015 are as follows.
ASSETS
1. Financial assets held for trading
Classification
This line item comprises financial instruments held for trading26 and derivative contracts with a
positive fair value that are not designated as effective hedging instruments. Such financial
instruments must not carry any clause restricting their trading.
Derivative contracts include embedded derivatives which are attached to a primary financial
instrument, known as the “host contract” when they have been recognised separately from the
host and forward transactions in currencies, securities, goods and precious metals. An embedded
derivative is recognised separately from the host contract when all of the following conditions are
satisfied:
 its economic characteristics and risks are not closely related to those of the “host”
contract;
 the separate embedded instrument meets the definition of a derivative;
 the hybrid instrument is not measured at fair value through the income statement.
Financial instruments are designated as financial assets held for trading upon initial recognition,
except if former hedging derivatives with a positive fair value at the reporting date are
reclassified as “financial assets held for trading” after a hedging relationship has become
ineffective.
Recognition
The initial recognition of financial assets held for trading takes place: i) on the settlement date for
debt securities, equity instruments and units in mutual funds; ii) on the subscription date for
derivative contracts.
Financial assets held for trading are initially recognised at their fair value, whereas transaction
costs or income are written off immediately, even if directly attributable to the instrument
concerned.
The initial fair value of a financial instrument is usually the cost incurred in buying it.
Measurement and recognition of income and expense
After initial recognition, financial assets held for trading are stated at fair value and their changes
are recorded in the income statement.
26Positions
held for trading are those intentionally acquired for the purpose of sale in the near term and/or to benefit, in
the near term, from differences between the purchase and sale price, or from other changes in price or interest rates.
“Positions” are those held on own account and those arising from customer services or from market making.
- 192 -
B
For details on the methods used to identify fair value, see paragraph 17.3 below, entitled “Criteria
for determining the fair value of financial instruments”, of “Other information” in part A.2. of this
document.
Gains and losses realised on sale or redemption and unrealised gains and losses deriving from
changes in the fair value of financial assets held for trading are booked to “net trading income” in
the income statement, except for any gains or losses on rating or valuation relating to derivative
contracts linked to the “fair value option”, which are booked to “net change in financial assets
and liabilities at fair value”.
The profits and losses recognised in “Net trading income” in the income statement also include
the differentials collected and paid on trading derivatives, and those accruing up to the reporting
date, while differentials relating to derivative contracts associated with financial assets and
liabilities at fair value and/or with financial assets and liabilities classified in the trading book are
recognised in “interest income” or “interest expense” depending on whether they are positive or
negative, respectively.
Derecognition
Financial assets held for trading are derecognised when the contractual rights over the related
cash flows expire or when the financial asset is transferred together with substantially all the
contractual risks and benefits associated with its ownership.
Classification
This line item comprises monetary financial instruments that are not classified in the other
categories envisaged by IAS 39. It nonetheless includes:
 debt securities and loans for which the holder may not recover substantially all the
initial investment, other than because of deterioration in the issuer’s creditworthiness;
 equities not listed in an active market;
 unharmonised mutual funds;
 junior asset-backed debt securities (ABS) issued by SPVs as part of own or third-party
securitisations, unless classified as “Financial assets at fair value”;
 securities repurchased from customers following complaints/litigation.
Financial instruments are designated to this category upon initial recognition, or following
reclassifications allowed by paragraphs 50 to 54 of IAS 39, as amended by Regulation (EC) No.
1004/2008 of the European Commission issued on 15 October 2008.
Recognition
Financial assets available for sale (AFS) are initially recognised on the settlement date, on the
basis of their fair value, as uplifted by any directly-attributable acquisition costs/revenues. Costs
and revenues with the above characteristics are excluded if they are reimbursable by the borrower
or represent normal internal administrative costs.
- 193 -
B
Subsequent to initial recognition, AFS financial assets are stated at fair value; the profits or losses
deriving from any changes in fair value are recorded in a specific equity reserve, recognised in the
statement of comprehensive income, until the financial assets concerned are derecognised or a
permanent impairment of value is recognised.
document.
These assets are reviewed at the end of each reporting period for objective evidence of any
impairment in accordance with paragraph 58 et seq. of IAS 39. Such objective evidence in the case
of equities quoted in an active market includes a significant or prolonged reduction in fair value
below acquisition cost. In particular, as stated in the Group’s policy for identifying evidence of
impairment of securities classified as financial assets available for sale, a significant reduction in
fair value is defined as more than 50% and a prolonged reduction in fair value is defined as an
unbroken period of more than 30 months. Any losses identified are charged to the income
statement as “net impairment adjustments to financial assets available for sale”. This amount also
includes reclassification to the income statement of fair value gains/losses previously recognised
in the specific equity reserve. If, in a subsequent period, the fair value of the financial instrument
increases and the increase can be objectively related to an event occurring after the impairment
loss was recognised in profit or loss, the impairment loss must be reversed, with the amount of
the reversal recognised in the same line of the income statement as the original impairment in the
case of monetary items (e.g. debt securities) or in equity in the case of non-monetary items (e.g.
equities). Write-backs cannot exceed the cost/amortised cost that the instrument would have had
in the absence of earlier write-downs.
If a financial asset classified in this line item has been reclassified to another category, the related
reserve accumulated up to the date of the reclassification is maintained in equity until such time
that the financial instrument in question is sold, if a non-monetary item is involved; on the other
hand, if a monetary item is involved, the reserve is amortised in the income statement (as
“interest income and similar revenues”) over the residual useful life of the financial instrument to
which it refers.
The interest income on these financial assets is calculated using the effective interest method, with
the associated income recognised in “interest income and similar revenues” in the income
statement.
Gains and losses on the disposal or redemption of such financial assets are booked to the income
statement as “gains (losses) on disposal or repurchase of: financial assets available for sale” and
include any reversal to profit or loss of fair value gains/losses previously recognised in the
specific equity reserve.
Derecognition
Financial assets available for sale are derecognised when the contractual rights over the related
- 194 -
B
3. Financial assets held to maturity
Classification
This line item reports non-structured debt securities, listed in an active market, with fixed
maturity and fixed or determinable payments, which the Group has the positive intention and
ability to hold until maturity.
Financial instruments are designated as financial assets held to maturity upon initial recognition
or following reclassification in accordance with paragraphs 50 to 54 of IAS 39, as amended by
Regulation (EC) 1004/2008 of the European Commission issued on 15 October 2008.
Recognition
Financial assets held to maturity are initially recognised on the settlement date, on the basis of
their fair value, as uplifted by any directly-attributable acquisition costs/revenues. Costs and
revenues with the above characteristics are excluded if they are reimbursable by the borrower or
represent normal internal administrative costs.
Subsequent to initial recognition, financial assets held to maturity are measured at amortised cost.
The interest income on these financial assets is calculated using the effective interest method, with
the associated income recognised in “interest income and similar revenues” in the income
statement. Gains and losses on the disposal or redemption of such financial assets are booked to
the income statement as “gains (losses) on disposal or repurchase of: financial assets held to
maturity".
An impairment test is carried out at the reporting date to check for objective evidence of any loss
in value. Any losses identified are charged to the income statement as “net impairment
adjustments to financial assets held to maturity”. If the reasons for such losses cease to apply due
to events arising subsequent to the write-down, the related write-backs are credited to the same
income statement line item. Write-backs cannot exceed the cost/amortised cost that the
instrument would have had in the absence of earlier write-downs.
Derecognition
Financial assets held to maturity are derecognised when the contractual rights over the related
4. Loans and receivables
4.1. Loans and advances to banks
This line item comprises monetary financial assets with banks, whether disbursed directly or
purchased from third parties, which carry fixed or determinable payments and are not listed in an
active market (current accounts, guarantee deposits, debt securities, etc.).
This balance also includes amounts due from Central Banks, other than unrestricted deposits
which are classified as “cash and cash equivalents”.
Details of the recognition, measurement, derecognition and recording of these loans can be found
in the subsequent note 4.2 on “loans and advances to customers”.
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B
4.2. Loans and advances to customers
Classification
Loans and advances to customers include non-structured monetary financial assets with
customers, whether disbursed directly or purchased from third parties, which carry fixed or
determinable payments and are not listed in an active market (current accounts, mortgage loans,
other kinds of loans, debt securities etc.).
Financial instruments are designated as loans and advances to customers upon initial recognition,
or following reclassifications allowed by paragraphs 50 to 54 of IAS 39, as amended by Regulation
(EC) 1004/2008 of the European Commission issued on 15 October 2008.
Recognition
The initial recognition of a loan takes place on the grant date or, in the case of debt securities, on
the settlement date, with reference to the fair value of the financial instrument, increased by any
directly-attributable acquisition costs/revenues.
Costs and revenues with the above characteristics are excluded if they are reimbursable by the
borrower or represent normal internal administrative costs.
The initial fair value of a financial instrument is usually equal to the amount disbursed or the cost
incurred in buying it.
Subsequent to initial recognition, loans and advances to customers are measured at amortised
cost. This is their initially-recorded value as decreased/increased by repayments of principal,
write-downs/write-backs and the amortisation – determined using the effective interest method –
of the difference between the amount paid out and that repayable on maturity, which typically
represents costs/income directly attributable to the individual loans.
The effective interest rate is the rate that discounts the flow of estimated future payments over the
expected duration of the loan so as to obtain exactly the net book value at the time of initial
recognition, which includes directly-related transaction costs/revenues and all fees paid or
received between the contracting parties. This financial method of accounting distributes the
economic effect of costs/income over the expected residual life of each loan.
Estimates of the flows and the contractual duration of the loan take account of all contractual
clauses that could influence the amounts and due dates (such as early repayments and the various
options that can be exercised), but without considering any expected losses on the loan.
The amortised cost method is not applied to short-term loans, since the discounting effect would
be negligible, and these are therefore stated at cost. The same measurement criterion is applied to
loans without a fixed repayment date or which are repayable upon demand.
At every reporting date an analysis is performed to identify any problem loans for which there is
objective evidence of possible impairment. This category includes loans classified as “bad loans”,
“unlikely to pay” or “past due”, as defined by the supervisory regulations (Circular 272 of 30 July
2008 and subsequent amendments).
The adjustment to the value of each loan represents the difference between its amortised cost (or
cost for short-term and demand loans) at the time of measurement and the discounted value of
the related future cash flows, determined using the original effective interest rate.
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B
Key elements in determining the present value of future cash flows comprise the estimated
realisable value of loans, also taking account of any available guarantees, the expected timing of
recoveries and the forecast loan-recovery costs. Cash flows relating to loans due to be recovered
in the short term (12/18 months) are not discounted.
The approach taken for case-by-case determination of the recoverable value of bad loans depends
on their amount, applying the following criteria:
 up to Euro 25,000: the positions are analysed case-by-case but are not discounted, since they
are frequently not taken to court, but sold after the usual attempts to obtain recovery on an
amicable basis; these loans generally remain in this category for not more than 12/18 months,
representing the short term;
 from Euro 25,000 to Euro 150,000: the positions are analysed on a case-by-case basis to
estimate the amount recoverable, which is discounted over the average recovery period, based
on past experience and statistics;
 amounts exceeding Euro 150,000 are analysed on a case-by-case basis to estimate the amount
recoverable, which is discounted over the likely recovery period, as determined by the
competent corporate functions.
Unlikely to pay includes non performing exposures which, under the previous regulations on
“Credit quality”, were classified as:

“watchlist” loans (subjective and objective), for which recovery is deemed improbable
without recourse to actions such as the enforcement of guarantees,

“restructured” loans, referring to exposures to parties with one or more credit facilities
that meet the definition of “non-performing exposures with forbearance measures”
pursuant to Annex V, Part 2, paragraph 180 of the EBA ITS.
In particular:


“Unlikely to pay - former watchlist” loans exceeding Euro 150,000 are analysed on a case-bycase basis to estimate the amount recoverable, which is discounted over the likely average
recovery period, based on past experience and statistics. The remaining positions of this type
under Euro 150,000 are assessed on a collective basis using the Loss Given Default (LGD)
parameter (differentiated according to the amounts concerned) determined on a historicalstatistical basis, which includes within it both the Danger Rate factor (probability of
classification as non performing) and the discounting effect connected with the average
recovery periods of the exposures.
“Unlikely to pay - former restructured” loans are valued on a case-by-case basis, also
recognising any “implied” loss arising from the restructuring of the position. If the case-bycase analysis does not uncover evidence of loss, the exposures are assessed on a collective
basis using the Loss Given Default (LGD) parameter (differentiated according to
homogeneous credit category) determined on a historical-statistical basis, which includes
within it both the Danger Rate factor (probability of classification as non performing) and the
discounting effect connected with the average recovery periods of the exposures.
Past-due exposures are written down on a collective basis. This test is performed by grouping
loans into categories that reflect a similar degree of credit risk. The related loss percentages are
then determined using the Loss Given Default (LGD) parameter (differentiated according to
homogeneous credit category) determined on a historical-statistical basis, which includes within
it both the Danger Rate factor (probability of classification as non performing) and the
discounting effect connected with the average recovery periods of the exposures.
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B
Loans for which no objective evidence of loss has been individually identified, i.e. performing
loans, are tested for impairment on an overall basis. This test is performed by grouping loans
into categories that reflect a similar degree of credit risk. The related loss percentages are then
estimated with reference to past records, in order to measure the inherent loss for each category
of loan.
Estimated future cash flows are determined using PD - Probability of Default - and LGD - Loss
Given Default - parameters differentiated by homogeneous credit category and determined on a
historical-statistical basis. The LGD parameter includes within it both the Danger Rate factor
(probability of classification as non performing) and the discounting effect connected with the
average recovery periods of the exposures.
No write-downs are recorded in relation to loans represented by “repurchase agreements” and
securities lending, as well as loans to Central Counterparties.
Provisions made for a non performing loan are only reversed if the credit quality has improved
to the extent that timely recovery of the principal and interest, with respect to the original terms
for the loan contract, is reasonably certain, or if the amount actually recovered exceeds the
recoverable amount estimated previously. Only for bad loans, write-backs also include the
positive effect of discounting adjustments made due to the progressive reduction in the
estimated time required to recover the related loans.
Adjustments, net of previous provisions and the partial or total recovery of amounts previously
written down, are recorded in the “net impairment adjustments to loans and advances” line item
of the income statement.
Derecognition
Loans and advances are derecognised as assets when they are deemed to be unrecoverable or are
transferred together with substantially all the related risks and benefits.
5. Financial assets designated at fair value
Classification
This line item comprises monetary financial instruments of a structured kind (meaning that one
or more embedded derivatives is present) and/or those related to trading derivatives entered into
with an external counterparty for the purposes of transferring the risks of the financial asset held
(under the so-called “fair value option”, or FVO), unless classified as “Financial assets held for
trading”.
In particular, the FVO is used when it eliminates or significantly reduces accounting imbalances
deriving from the inconsistent recognition of financial instruments that are related (natural
hedges) or covered by derivative contracts which, due to difficulties and complexities, cannot be
recognised as hedges.
Financial instruments are designated as financial assets designated at fair value upon initial
recognition. They cannot be reclassified subsequently.
Recognition, measurement, derecognition and recording of income and expense
The principles applying to the recognition, measurement, derecognition and recording of income
and expense relating to financial assets designated at fair value are the same as those relating to
“financial assets held for trading”.
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B
changes in the fair value of financial assets/liabilities at fair value are classified as “net change in
financial assets and liabilities at fair value” in the income statement.
6. Hedging transactions
Classification
Hedging transactions are intended to neutralise possible losses on certain elements or groups of
elements due to a given risk (e.g. a rise in interest rates), via the generation of profits from the
hedging instruments if the events associated with that risk should actually occur.
Hedging transactions are conducted solely in the form of derivative contracts with counterparties
outside of the Group to whom the risk is transferred. The use of internal deals is therefore not
permitted.
At the time that a hedging transaction is arranged, it is classified as one of the following types of
hedge:
 fair value hedge of a given asset or liability: the objective is to hedge the exposure to changes
in fair value of an item caused by one or more risks;
 cash flow hedge attributable to a particular asset or liability: the objective is to hedge the
exposure to changes in the future cash flows associated with an item caused by given risks;
 hedge of the effects of an investment denominated in foreign currency: the objective is to
hedge the risks associated with investing in a foreign operation denominated in foreign
currency.
Hedging transactions can refer to individual financial instruments and/or groups of financial
assets/liabilities.
The transaction is classified as a hedge if it has been formally designated as such, there is a
documented relationship between the hedged instrument and the hedging instrument, and it is
highly effective both at the start of the hedge and throughout its life.
A hedge is considered highly effective if changes in the fair value of the instrument being hedged
or of the related expected cash flows are offset by those of the hedging instrument. More
precisely, the hedge is effective when changes in the fair value (or cash flows) of the hedging
instrument neutralise the changes in the hedged instrument, deriving from the risk being hedged,
within an interval of 80%-125%.
The effectiveness of the hedge is assessed at the start of the hedge and throughout its life and, in
particular, on each reporting date, using:


prospective tests that justify the adoption of hedge accounting by showing the expected
effectiveness of the hedge in future periods;
retrospective tests that show the effectiveness of the hedge during the reference period.
If the tests do not confirm the effectiveness of the hedge, the hedge accounting described above is
terminated and the related derivative contract is reclassified among the “financial assets
(liabilities) held for trading”. In addition, hedging transactions are no longer classified as such if:
 the hedge ceases;
 the transaction expires, is sold, terminated or exercised;
 the hedged item is sold, expires or is redeemed;
 the hedge no longer meets the criteria to qualify for hedge accounting.
Recognition
Hedging derivatives are initially recognised at fair value on their subscription date.
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B
Subsequent to initial recognition, hedging derivatives are stated at fair value on the basis
described below:
 in the case of fair value hedges, changes in the value of the hedged item (but only for the
portion attributable to the hedged risk) and the hedging instrument are reflected in the
income statement. In this way, changes in the fair value of the hedged item are substantially
offset against the opposite changes in the fair value of the hedging instrument. Any
difference, representing the ineffective portion of the hedge, therefore represents the net effect
of the hedge on profit or loss, which is booked to “Net hedging gains (losses)”;
 in the case of future cash flow hedges, changes in the fair value of the hedging transaction are
recorded in equity, to the extent that the hedge is effective, and are only released to the
income statement when the related cash flows are actually generated by the hedged item. Any
change in hedge fair value attributable to the total or partial effectiveness of the hedging
relationship is recorded in the income statement as “other operating charges/income”;
 hedges of investments denominated in foreign currency are recorded in the same way as
future cash flow hedges.
Hedging contract differentials are booked to “interest income” or “interest expense” depending
on whether they are positive or negative.
Derecognition
Hedging transactions are derecognised on disposal if all the risks and benefits associated with
them are substantially transferred as a result.
7. Equity method investments
Classification
This line item includes investments in associated companies and joint ventures.
Recognition
Investments in associated companies and joint ventures are accounted for using the equity
method in accordance with IAS 28. Under this method, equity method investments are initially
recognised at cost and subsequently adjusted to reflect changes of the investment in the equity of
the investee. Differences between the cost of an investment and the equity of the investee at the
acquisition or initial consolidation date are reflected in its carrying amount, if they cannot be
attributed to specific assets or liabilities.
Investments in associates held indirectly through mutual funds are measured at fair value in
accordance with the derogation provided by IAS 28, par. 19. For fair value determination, the
investments being solely in companies not listed on an active market, reference was made to the
policies used by investment schemes which provide a valuation at historical purchase cost,
adjusted to reflect deterioration in each investee’s balance sheet, results of operations and
financial position if applicable, or events that can permanently affect the investee’s prospects and
the estimated realisable value.
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B
Measurement
Subsequent to acquisition, the value of investments in associated companies, in entities over
which the Group exercises significant influence and joint ventures is adjusted to reflect changes in
the Group’s interest in their equity value.
Equity method investments are tested for impairment by estimating their recoverable amount,
which takes into account the present value of the future cash flows to be generated by them,
including their final disposal value and/or other factors.
Any resulting impairment adjustments, being the difference between the carrying amount of the
investments concerned and their recoverable value, are charged to “Profit (loss) from equity
method investments” in the income statement.
If the reasons for such impairment cease to apply due to events subsequent to its recognition, the
write-down is reversed through the income statement in the same line item as above, but for no
more than the amount of the original impairment loss.
Derecognition
Equity method investments are derecognised on expiry of the contractual rights over the related
financial flows, or when the investment is sold with the transfer of substantially all the related
risks and benefits of ownership.
Recognition of income and expense
In accordance with IAS 28, the Group’s interest in the results of associated companies, entities
subject to significant influence and joint ventures is recognized in “Profit (loss) from equity
method investments” in the income statement.
Classification
This line item comprises the fixed assets held for the generation of income, for rent or for
administrative purposes, such as land, business property, investment property, installations,
furniture, furnishings, all types of equipment and works of art.
Property, plant and equipment also include leasehold improvements, if they can be separated
from the related assets. If these items are expected to generate future benefits, but are not
functionally and operationally independent, they are classified as “other assets” and depreciated
over the expected useful life of the improvements or the residual lease period, whichever is
shorter.
Amounts paid in advance to acquire and restructure assets not yet used for productive purposes
are capitalised, but not depreciated.
Property, plant and equipment held “for business purposes” is defined as that held for supplying
services or for administrative purposes, while “investment property” is defined as that held to
earn rentals and/or for capital appreciation.
Recognition
Property, plant and equipment are initially recorded at cost, including all directly attributable
costs of bringing them to working condition.
Expenditure that improves an asset or increases the future economic benefits expected from the
asset is allocated to the asset concerned and depreciated over its remaining useful life.
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B
Subsequent to initial recognition, property, plant and equipment held "for business purposes" are
stated at cost, net of accumulated depreciation and any impairment losses, consistent with the
"cost model" described in paragraph 30 of IAS 16. Property, plant and equipment are
systematically depreciated over their useful lives on a straight-line basis, except for:
 land, whether acquired separately or included in the value of buildings, which is not
depreciated since it has an indefinite useful life. With regard to free-standing properties, the
value of the land is separated from the value of the related buildings by reference to internal
and/or independent expert appraisals, unless this information is directly available from the
purchase contract;
 works of art, which are not depreciated since they normally have an indefinite useful life and
their value is likely to increase over time;
 investment properties, which are stated at fair value in accordance with IAS 40.
The depreciation charge for assets acquired during the period is determined on a daily basis from
the time they enter into service. The depreciation charge for assets sold and/or disposed during
the period is determined on a daily basis up to the date of transfer and/or disposal.
At each reporting date, if there is evidence that the value of an asset, other than investment
property, may be impaired, its carrying value is compared with its recoverable value, being either
its fair value net of any selling costs or its value in use, represented by the present value of the
future cash flows to be generated by the asset, whichever is greater. Any adjustments are
recorded as “net adjustments to property, plant and equipment” in the income statement.
If the reasons for recognising an impairment loss cease to apply, the consequent write-back
cannot cause the value of the asset to exceed its net book value (after depreciation) had no
impairment losses been recognised in prior periods.
“Investment properties” covered by IAS 40 are stated at the market value determined by
independent appraisals, with changes in their fair value recorded in “net gains (losses) arising on
fair value adjustments to property, plant and equipment and intangible assets” in the income
statement.
Derecognition
Property, plant and equipment are derecognised upon disposal or when they are retired from use
on a permanent basis and no economic benefits are expected from their disposal.
Classification
This line item reports non-monetary assets without physical form that have the following
characteristics:
 identifiability;
 control over the assets concerned;
 existence of future economic benefits.
If any one of these characteristics is absent, the related purchase or internally-generated cost is
expensed in the period incurred.
Intangible assets include, in particular, application software used over a number of years,
“intangibles” associated with the valuation of customer relationships identified on allocation of
the purchase price paid for lines of business, and other identifiable intangible assets representing
legal or contractual rights.
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B
This line item also includes goodwill, representing the positive difference between the purchase
cost and the fair value of assets and liabilities acquired as a result of business combinations. In
particular, an intangible asset is recorded as goodwill when the positive difference between the
fair value of the net assets acquired and their purchase cost (including related charges) represents
their ability to generate future earnings. If this difference is negative (badwill) or if the goodwill is
not justified by the ability of the acquired assets/liabilities to generate future earnings, the
difference is recorded directly in the income statement.
With reference to the goodwill recognised upon changes in a parent’s ownership interest in
subsidiaries already under control, the changes of a parent’s ownership interest in a subsidiary
(that do not result in loss of control) are accounted for as “equity transactions”. As a result, the
difference between the additional purchase consideration (for a company in which a controlling
interest is already held) and the corresponding share of equity will be accounted for directly as a
decrease in equity.
Recognition
Intangible assets are initially recorded at cost, including any directly-related charges.
Measurement
Subsequent to initial recognition, intangible assets are stated at cost, net of accumulated
amortisation and any impairment losses, in accordance with the “cost model” described in
paragraph 74 of IAS 38.
Intangible assets with a finite useful life are amortised systematically on a straight-line basis over
their estimated useful lives.
The amortisation charge for assets acquired during the period is determined on a daily basis from
the time they enter into service. The amortisation charge for those sold and/or disposed during
the period is determined on a daily basis up to the date of transfer and/or disposal.
If there is evidence that the value of an intangible asset may be impaired, its carrying amount is
compared with its recoverable value. Any adjustments are recorded in “net adjustments to
intangible assets” in the income statement.
If the reasons for such impairment losses cease to apply due to events arising subsequent to the
write-down, the appropriate write-backs are credited to the same income statement line item.
Such write-backs cannot cause the value of the asset to exceed its net book value (after
amortisation) had no impairment losses been recognised in prior periods.
Assets with an indefinite useful life, such as goodwill, are not amortised but their carrying value
is tested periodically for impairment, as required by IAS 36. Any impairment losses, representing
the difference between the carrying value of the asset and its recoverable value, are charged to
"adjustments to goodwill" in the income statement. Impairment losses recognised for goodwill
cannot be reversed in later periods.
Derecognition
Intangible assets are derecognised from the statement of financial position if no future economic
benefits are expected, or on disposal.
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B
10. Non-current assets held for sale and discontinued operations and liabilities associated
with discontinued operations
Classification
These line items comprise all non-current assets/liabilities and discontinued operations held for
sale, as defined by IFRS 5, i.e. those individual assets/liabilities or groups of assets/liabilities held
for sale whose carrying amount will be recovered principally via sale rather than continuous use.
This category also includes “discontinued operations” which, by convention, are also referred to
as “groups of assets/liabilities held for sale”.
Measurement
Non-current assets/liabilities (or discontinued operations) held for sale are measured at the lower
of their carrying amount or their fair value, net of selling costs, except for the following assets
which continue to be valued in accordance with the related accounting policies:
 deferred tax assets;
 assets deriving from employee benefits;
 financial instruments;
 investment property.
Recognition of income and expense
Income (interest income, dividends, etc.) and charges (interest expense, depreciation, etc.)
relating to individual non-current assets (or discontinued operations) held for sale and the
related liabilities are classified in the normal line items, while the income (interest income,
dividends, etc.) and charges (interest expense, depreciation, etc.) relating to discontinued
operations are classified, net of the related current and deferred taxation, in “profit (loss) from
non-current assets held for sale, net of tax” in the income statement. The depreciation of
depreciable assets ceases in the period in which they are classified as non-current assets held for
sale.
11. Current and deferred taxation
Income taxes, calculated in accordance with current fiscal legislation, are recorded in the income
statement on an accrual basis in line with the costs and revenues that generated them, except for
those relating to items debited or credited directly to equity; for consistency, the tax on such items
is also booked to equity.
Income taxes reported in the income statement represent a prudent estimate of the current tax
charge and the related changes in deferred tax assets and liabilities. In particular, deferred tax
assets and liabilities are determined with reference to temporary differences between the book
value of assets and liabilities and their tax bases.
Deferred tax assets are recognised if they are likely to be recoverable, determined with reference
to the Group’s ongoing ability to generate taxable income.
Deferred tax assets and liabilities are recorded in the statement of financial position as,
respectively, “Tax assets” and “Tax liabilities”, on an open account basis without offset.
In the case of current taxes, payments on account for individual taxes are offset against the related
tax payable, with positive balances reported as “current tax assets” and negative balances as
“current tax liabilities”.
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B
In accordance with paragraph 52b of IAS 12, no provision for deferred taxation has been recorded
in relation to the reserves and revaluation surpluses that are in suspense for tax purposes, since
their distribution is not envisaged; in this regard, the Group has not carried out, and has no short
or medium-term plans to carry out, any activities which could give rise to the payment of
deferred taxes.
LIABILITIES AND EQUITY
12. Provisions for risks and charges
12.1 Pensions and similar commitments
IAS 19 classifies pension funds as post-employment benefits, making a distinction between
defined contribution plans and defined benefit plans. The company pension fund for employees
of the former subsidiary Cariprato (absorbed into the Parent Bank Banca Popolare di Vicenza
effective 1 January 2010) is split into two sections:
1) a capitalisation section, qualifying as a defined contribution plan, for which the Bank only has
the obligation to pay an annual amount calculated on the basis of salary paid to fund
participants. This section is not recognized in the statement of financial position, in compliance
with IAS 19. The costs of the annual payment by the Group are recognized in the income
statement;
2) a supplementary section, qualifying as a defined benefit plan, which is recognised in
provisions for risks and charges in the statement of financial position. The benefits are assured
by the return on the investments and by the mathematical reserve, calculated annually by an
independent actuary.
12.2 Other provisions
In accordance with IAS 37, the provisions for risks and charges reflect known obligations (legal or
constructive) deriving from past events, the settlement of which is likely to involve the use of
economic resources whose timing and extent are uncertain, on condition that a reliable estimate
can be made of the amount needed to settle them at the end of the reporting period. Where the
effect of the time value of money is material because the liability’s settlement date is deferred, the
provisions are discounted using current market rates.
Provisions are re-examined at each reporting period and adjusted to reflect the best current
estimate. These are recorded in the appropriate line items of the income statement, depending on
the “nature” of the expense. In particular, provisions for future personnel expenses in connection
with bonuses and other incentive schemes are classified in “payroll” costs, provisions for tax risks
and charges are classified in “income taxes” and provisions for potential losses not directly
attributable to specific line items in the income statement are reported in “net provisions for risks
and charges”.
13. Payables and debt securities in issue
Classification
Amounts due to banks and amounts due to customers include the various forms of interbank and
customer funding (current accounts, restricted and unrestricted deposits, loans, repurchase
agreements, etc.), while debt securities in issue report all the liabilities in respect of the Group’s
own issues (savings certificates, certificates of deposit, bonds not classified as “financial liabilities
at fair value”, etc.).
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B
All the financial instruments issued are reported in the financial statements net of any amounts
repurchased, and include those which have expired at the reporting date but which have not yet
been repaid.
Recognition
These financial liabilities are initially recorded on receipt of the amounts collected or on the issue
of the debt securities.
They are initially recognised at the fair value of the liabilities, as uplifted for any directlyattributable acquisition costs/revenues. Costs and revenues with the above characteristics are
excluded if they are reimbursable by the borrower or represent normal internal administrative
costs.
The initial fair value of a financial liability usually corresponds to the amount received.
If the conditions set out in IAS 32 and 39 are satisfied, any derivatives embedded in the above
financial liabilities are separated and accounted for separately.
Measurement
Following initial recognition, the above financial liabilities are stated at amortised cost using the
effective interest method, except that short-term liabilities continue to be stated at nominal value
since the effect of discounting is negligible.
Derecognition
Financial liabilities are derecognised when they expire or are settled. Derecognition also applies
when issued securities are repurchased, even if such acquisition is only temporary. Any
differences between the book value of the derecognised liability and the amount paid are
recorded as “gains (losses) on disposal or repurchase of financial liabilities” in the income
statement. If, subsequent to repurchase, the securities are placed back in the market, this
transaction is treated as a new issue and the liabilities are recorded at the new placement price.
14. Financial liabilities held for trading
Classification
This line item reports short positions arising from trading activities and derivatives not
designated as effective hedging instruments that have a negative fair value.
host and forward transactions in currencies, securities, goods and precious metals.
An embedded derivative is recognised separately from the host contract when all of the
following conditions are satisfied:
 its economic characteristics and risks are not closely related to those of the “host” contract;
 the separate embedded instrument meets the definition of a derivative;
If the fair value of a derivative contract subsequently becomes positive it is recorded as a financial
asset held for trading.
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B
Financial instruments are designated as financial liabilities held for trading upon initial
recognition, except if former hedging derivatives with a negative fair value at the reference date
are reclassified as “financial liabilities held for trading” after a hedging relationship has become
ineffective. They cannot be reclassified subsequently.
The recognition, measurement, derecognition and recording of the effects on the income
statement of the above financial liabilities are described in the earlier paragraph on “financial
assets held for trading”.
15. Financial liabilities designated at fair value
Classification
This line item reports bonds issued that are related to trading derivatives entered with an external
counterparty for the purposes of transferring one or more risks associated with the liability issued
(fair value option).
Financial instruments are designated as financial liabilities designated at fair value upon initial
recognition. They cannot be reclassified subsequently.
The recognition, measurement, derecognition and recording of the effects on the income
statement of the above financial liabilities are described in the earlier paragraph on “financial
assets designated at fair value”.
16. Transactions in foreign currency
Foreign currency assets and liabilities include not only those denominated in a currency other
than the euro, but also those that carry financial indexation clauses linked to the euro exchange
rate against a specific currency or a specific basket of currencies.
Foreign currency assets and liabilities are split between monetary and non-monetary items for
currency translation purposes.
Recognition
Foreign currency transactions are initially recognised in euro, by translating the foreign currency
amount using the spot exchange rate prevailing on the date of the transaction.
Measurement
At the end of each reporting period:
 foreign currency monetary items are translated using the year-end closing rate;
 non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction;
 non-monetary items that are measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined.
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B
Exchange differences arising from the settlement of monetary items or from the translation of
monetary items using rates other than the initial translation rate, or the closing rate at the end of
the prior period, are recorded in the income statement for the period under “net trading income”,
or if such differences relate to financial assets/liabilities accounted for under the fair value option
permitted by IAS 39, under “net changes in financial assets and liabilities at fair value”.
When gains or losses on non-monetary items are recognised in equity, the exchange differences
on them are also recognised in equity in the same period. Similarly, when gains or losses on nonmonetary items are recognised in the income statement, the exchange differences on them are also
recognised in the income statement in the same period.
17. Other information
17.1 Provision for severance indemnities
According to IFRIC, the provision for severance indemnities is a “post-employment benefit”
qualifying as a “defined benefit plan”, the value of which according to IAS 19 must be
determined on an actuarial basis. As a consequence, the year-end actuarial valuation of this line
item is carried out with reference to earned benefits using the Projected Unit Credit Method. This
method involves the projection of future payments with reference to past trends and statistical
analyses and probabilities, adopting suitable demographic techniques. This makes it possible to
calculate the severance indemnities accruing at a specific date on an actuarial basis, distributing
the cost over the entire remaining service of the current workforce, and no longer presenting them
as a cost payable as if the business were to cease trading on the reporting date. The provision for
severance indemnities has been valued by an independent actuary using the method outlined
above.
17.2 Repurchase agreements and securities loans
“Repurchase agreements”, which obligate the buyer to resell/repurchase the assets of the
transaction (e.g., securities) and “securities loans” wherein the collateral is represented by cash
that returns to be fully available to the bearer, are treated as loans against securities and,
therefore, the amounts received and paid are recorded as payables and loans. In particular, the
aforesaid “repurchase agreements” and “securities loans” completed for funding purposes are
recognised in the financial statements as payables for the amount received, while when
completed for lending purposes they are recognised as receivables for the amount paid. These
transactions do not determine movements in the securities portfolio. Accordingly, the cost of
borrowing and income from lending are recorded as interest in the income statement.
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B
17.3 Criteria for determining the fair value of financial instruments
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants in the principal (or most
advantageous) market, at current market conditions (i.e. a closing price), irrespective of whether
the price is directly observable or is estimated using a valuation technique.
In the case of financial instruments listed in active markets, the fair value is determined on the
basis of the most advantageous market prices to which the Bank/Group has access (using the
official or other equivalent price on the last trading day of the year in question). In this regard, a
financial instrument is considered to be listed in an active market if the transactions related to the
financial instruments take place often and frequently enough to provide information useful to
determine the price on a continuous basis.
In the absence of an active market, fair value is determined using valuation techniques generally
accepted in financial practice aimed at estimating the price at which an orderly sale or transfer of
a liability between market participants would take place at the measurement date, at current
market conditions.
In the hierarchical order in which they are reported, these valuation techniques call for the use of:
1. the latest NAV (Net Asset Value) published by the management companies of harmonised
funds (UCITS - Undertakings for Collective Investment in Transferable Securities), Hedge
Funds and SICAVs;
2. listed prices for the assets or liabilities in inactive markets (e.g., those obtainable from
external info providers such as Bloomberg and/or Reuters or provided by electronictrading platforms not definable as active markets) or prices of similar assets or liabilities
listed in active markets;
3. fair value obtained from valuation models (e.g. Discounted Cash Flow Analysis, Option
Pricing Models), which estimate all of the possible factors that condition the fair value of a
financial instrument (cost of money, credit risk, liquidity risk, volatility, exchange rates,
early repayment, etc.) based on observable market data, also for similar instruments, at the
valuation date. If there are not market references for one or more risk factors, we use
internal parameters based on past experience and statistics (the valuation models are
reviewed periodically to ensure that they are still completely reliable);
4. price indications provided by the issuer, adjusted if necessary to take into account
counterparty and/or liquidity risk (e.g. the unit value communicated by the management
company for closed-end funds reserved for institutional investors or other kinds of mutual
funds other than those mentioned in point 1, the redemption value determined according
to the issue regulations for insurance contracts);
5. for equity instruments, where the valuation techniques mentioned above are not
applicable: i) the transaction prices directed on the same security or on similar securities
observed within a reasonable timescale with respect to the valuation date; ii) the value
shown in independent appraisals, if available; iii) the value corresponding to the portion
of net equity held as shown in the company’s latest approved financial statements; iv) the
cost, adjusted if necessary to take account of material impairment, where the fair value
cannot be reliably determined.
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B
If it is assumed that the initial fair value of a financial instrument is always equal to the price
incurred to purchase the asset or to the price received for the transfer of the liabilities, including
accessory costs/revenues. Nevertheless, when in particular and specifically documented
situations there is a substantial deviation between the transaction price and the related fair value,
the financial instrument must be posted at a value (the fair value) other than the transaction
price.
Given these considerations and in compliance with IFRS 13, the Bank/Group classifies fair value
measurements according to a hierarchy (the Fair Value Hierarchy) that reflects the reliability of
the inputs on which the measurements are based. This hierarchy consists of the following levels:



Level 1 - listed prices (unadjusted) in active markets for identical assets or liabilities that
the entity can access at the measurement date;
Level 2 - inputs other than listed prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. This level also includes the valuation
techniques based on market approaches that mainly use data observable on the market,
prices obtained from external info providers and the valuations of mutual funds based on
the NAV communicated by the management company, the value of which is updated and
published periodically (at least once a month) and represents the amount at which the
position can be wholly or partially liquidated on the investor’s initiative;
Level 3 - inputs that are unobservable for the asset or liability but that reflect the
assumptions that market participants would use when pricing the asset or liability. This
level includes prices provided by the issuer counterparty or derived from independent
appraisals, and those obtained with valuation models that do not use data observable in
the market to estimate significant factors affecting the fair value of the financial
instrument. These also include valuations of unlisted equities corresponding to the
fraction of equity held in the company or derived from direct transactions observed in a
reasonable timescale. Also included are the financial instruments kept at cost.
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B
A.3 - INFORMATION ABOUT TRANSFERS BETWEEN FINANCIALASSET PORTFOLIOS
The market turmoil experienced in the second half of 2008 and the reduced liquidity of certain
financial instruments meant that it has no longer been possible to pursue in the near term the
original intent when classifying them as financial assets held for trading, since such instruments
will now have to be held in the medium/long-term or until maturity. In view of this state of
affairs, in 2008 the Group took up the reclassification option for financial instruments permitted
by the amendments to IAS 39 "Financial instruments: recognition and measurement" and to IFRS
7 "Financial instruments: disclosures" contained in the "Reclassification of Financial Assets"
published by the IASB on 13 October 2008 and endorsed by the European Commission on 15
October 2008 with Regulation EC 1004/2008.
The disclosures required by IFRS 7 par. 12A (b) and (e) relating to the above reclassifications will
now be provided.
A.3.1 - Reclassified financial assets: book value, fair value and effect on comprehensive income
This table reports the disclosures required by paragraph 12A b) and e) of IFRS 7.
Type of financial
instrument
Origination
portfolio
Destination portfolio
Debt securities
Financial assets
available for sale
Loans and receivibles
Book value at Fair value at
31/12/2015
31/12/2015
Total
11,799
10,775
11,799
10,775
Income components in the
Income components booked
absence of transfers (before
during the year (before tax)
tax)
Valuation
Other
1,217
1,217
632
632
Valuation
Other
-
1,180
-
1,180
A.3.2 - Reclassified financial assets: effect on comprehensive income prior to transfer
No financial assets were reclassified during the year. The disclosures required by paragraph 12A
(d) of IFRS 7 are therefore omitted.
A.3.3 – Transfer of financial assets held for trading
(c) of IFRS 7 are therefore omitted.
A.3.4 – Effective interest rate and forecast cash flows from reclassified assets
(f) of IFRS 7 are therefore omitted.
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B
A.4 - INFORMATION ABOUT FAIR VALUE
Qualitative information
A.4.1 Levels of fair value 2 and 3; valuation techniques and inputs used
The Group assigns the maximum priority to prices quoted on active markets27. If prices directly
observable in active markets are not available, valuation techniques that maximise recourse to
information available in the market and that are influenced as little as possible by subjective
valuations or internal assumptions are used. The valuation techniques and the inputs used for
the various types of financial instruments measured/not measured at fair value on a recurrent
basis and for the other assets/liabilities stated at fair value on a recurrent basis for which listed
prices in active markets are not available are described below.
To determine the fair value of the debt securities not listed in an active market, the Group makes
recourse, where available, to prices observed in inactive markets and/or to recent transactions
that took place with similar instruments in active markets (the so-called comparable approach).
For example, the price indications that can be inferred from info providers such as Bloomberg
and Reuters, the “exchange” prices listed in Markets or electronic-trading platforms that cannot
be deemed to be active markets, or quotations of individual contributors specialised in trading
financial instruments subject to valuation are taken into consideration. Fair value determinations
made this way are assigned a Fair Value Hierarchy level 2. If no source of information as
described above is available or the Group deems that the available sources do not reflect the real
fair value of the financial instrument, valuation techniques are used to estimate the possible
factors that condition the fair value of a financial instrument (the so-called model valuation
approach); such techniques predominantly use inputs observable in the market (Interest rate
curve, Volatilities, Credit curve, Spot price, etc.) obtained daily from info providers like
Bloomberg and Reuters. Fair values determined this way are also assumed to be at Fair Value
Hierarchy level 2. If it is impossible to refer to market input data for one or more risk factors, we
use internal parameters based on past experience and statistics which, when material, entail the
assignment of Fair Value Hierarchy level 3. Lastly, only for ABS securities (senior and mezzanine
tranches) subscribed as part of third-party securitisations in which the Bank played the role of
arranger, specific analyses are carried out to determine the likelihood of repayment by the SPV.
The overall valuation of said financial instruments never exceeds the related nominal value
insofar as it refers to highly illiquid securities whose implicit surpluses are very difficult to
achieve.
To determine the fair value of an equity not listed in an active market, the Group uses prices
observed on non-active markets, when available. For example, the price indications that can be
inferred from info providers such as Bloomberg and Reuters, the “exchange” prices listed in
Markets or electronic-trading platforms that cannot be deemed to be active markets. Fair value
determinations made this way are assigned a Fair Value Hierarchy level 2. In the same Fair
Value level are also classified certain equity investments that are not listed but for which
observable “prices” are available such as, for example, the value of the share (or of withdrawal)
established by the Stockholders’ Meeting for co-operative banks or the Bank of Italy’s valuation
determined by law.
27
The Bank considers as “active markets” the List of Regulated Italian Markets authorised by Consob, in the List of Regulated
Markets related to foreign regulated markets recognised pursuant to the European Community law in accordance with art. 67.1 of
Legislative Decree 58/98 and in the List of Regulated Markets recognised pursuant to art. 67.2 of Legislative Decree 58/98 with the
exclusion of the Luxembourg market. This decision was made in consideration of the fact that these markets should ensure volumes
that minimise the so-called bid-ask spreads.
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B
If no information source as described above is available, or the Group deems that available
sources do not reflect the real fair value of the financial instrument, use is made, in the order in
which they are listed, of: (i) the direct transaction prices on the same security or on similar
securities observed within a reasonable timescale with respect to the valuation date; (ii) the value
shown in independent appraisals, if available; (iii) the value corresponding to the portion of net
equity held as shown in the company’s latest approved financial statements, possibly adjusted to
take into account any capital transactions carried out after the reference date of the last approved
financial statements. In no case are adjustments made to the above values. Fair value
determinations made this way are assigned a Fair Value Hierarchy level 3.
In case of unlisted equities with fair value that cannot be reliably determined as described above
and that have an individually immaterial exposure (less than Euro 500 thousand), the decision
was made to present them at cost, adjusted if necessary to take into account impairment writedowns.
To determine the fair value of mutual fund units not listed in an active market, the Group uses
the NAV reported by the management company without making any adjustment to it.
Investments in mutual funds the NAV of which is periodically updated and published (at least
once a month) and that represents the amount at which the position can be liquidated on the
investor's initiative, are classified at Fair Value Hierarchy level 2. In contrast, investments such as
those characterised by material levels of illiquidity (e.g., hedge funds, private equity funds and
more generally closed-end real estate funds) are assigned Fair value Hierarchy level 3. A similar
classification is used also for capitalisation certificates held and measured based on the
redemption value reported by the issuer.
To measure own bond issues, special Discounting Cash Flow-type models are used that call for
the discounting of expected cash flows through the use of a discount curve representing both the
funding spread, established by the issuer in the primary market, and any change in the issuer’s
creditworthiness during the life of the loan.
The funding spread is made equal to the cost of the borrowing determined with the activation of
the “hedge” or, in want thereof, based on the spread with which the “hedge” could have been
stipulated when the bond was issued.
The spread representative of the change in creditworthiness is determined only if a specialised
agency reports a change in the Group’s rating after the issue date of the individual bond. This
change is assumed to be equal to the average cumulative probabilities of default for issuers in the
financial sector having the same rating as the Group (pre- and post-downgrade) identifiable
from the report published annually by the rating agency Standard & Poor’s. The change of the
above PD is then converted into a credit spread equivalent and applied to the individual bond
issues.
This valuation technique (Fair value level 2) is consistent with the quantification of the bond’s
initial fair value that is always recognised in financial statements at the price received for the
transfer of the liability.
- 213 -
B
To determine the fair value of OTC derivatives, the valuation techniques employed use
predominantly material inputs based on observable market parameters (Interest rate curve,
Volatilities, Credit curve, Spot price, etc.) obtained every day from the Reuters info provider.
The adjustment applied to contracts with Corporate and Retail customers that present a positive
market value for the Group is determined on the basis of EL (Expected Loss), obtained by
multiplying the probability of default associated to the counterparty according to the internal
rating system and estimated over a time horizon equal to the duration of each individual
derivative, by the LGD (Loss Given Default) of unsecured loans.
No adjustment of value attributable to counterparty risk arising from a market value positive for
the Group (CVA) or arising from a market value negative for the Group (DVA), is instead made
to OTC derivative instruments traded with market counterparties with which specific bilateral
offsetting agreements collateralised by “credit support annex” contracts which govern the
financial cash collateral have been stipulated. A similar treatment is also observed for the
transactions entered into materially with investee companies of the Group that result in exclusive
control, a situation of significant influence or of joint ventures.
The fair value of investment property is derived from appraisals performed by outside
companies. Fair value determinations made this way are assigned a Fair Value Hierarchy level 3.
For “Loans and advances to banks” (excluding debt securities) and for “Amounts due to banks”
of short duration (coming due within 12 months), by convention, the book value is assumed to
be the fair value, whereas the corresponding medium-long term items are measured based on the
discounted cash flow technique prescribed by contract through the use of risk free curves,
adjusted if necessary to take into account the credit risk of the counterparty or of the bank itself.
Fair value determinations made this way are assigned a Fair Value Hierarchy level 3.
For the “Loans and advances to customers” (excluding debt securities) of short duration (coming
due within 12 months), by convention, the book value is assumed to be the fair value. The
valuation of medium term loans and advances corresponds to the sum of the future cash flows
prescribed by contract, including interest, discounted with reference to a risk-free rate curve. The
expected nominal cash flows are adjusted for expected losses using the probability of default
(PD) within one year and of loss-given-default (LGD) parameters attributed to the specific class
of risk and determined with reference to past experience and statistics. Fair value determinations
made this way are assigned a Fair Value Hierarchy level 3.
For the “Amounts due to customers” of short duration (coming due within 12 months) by
convention, the book value is assumed to be the fair value. The measurement of the mediumlong term liabilities, other than bonds issued, already illustrated, are measured based on the
discounted cash flow technique prescribed by contract, adjusted to take into account the banks
own credit risk if necessary. Fair value determinations made this way are assigned a Fair Value
Hierarchy level 3.
- 214 -
B
A.4.2 Valuation processes and sensitivity
The table below provides indications regarding the valuation techniques used for the Bank’s
financial instruments stated at fair value on a recurrent basis and classified in the Fair Value
Hierarchy level 3.
Assessment techniques used
Assessment techniques
Total
Internal model
Net Assets
Value
Recent
transactions
External
appraisals
Equity
Cost
355
-
-
-
355
-
-
- Derivatives (back to back swap )
355
-
-
-
355
-
-
3,431
3,431
3,431
3,431
-
-
-
-
-
412,981
188,292
120,128
19,900
64,899
10,562
9,201
10,663
10,619
-
-
-
-
44
- Equities unlisted
138,136
-
33,619
19,900
64,899
10,562
9,157
- Mutual funds
236,262
177,673
58,589
-
-
-
-
27,920
-
27,920
-
-
-
-
253
253
-
-
-
-
-
- Debt securities
- Debt securities (Asset Backed Securieties - tranche junior )
- Loans (capitalization certificates)
- Derivatives (back to back swap )
In this regard, under the term “Net Asset Value” a similar classification is also used for
capitalisation certificates held and measured based on the redemption value reported by the
issuer, as well as certain equity investments in vehicle companies purposely formed to manage
private equity investments. Recent transactions include both transactions carried out by investee
companies and trading of equities between stockholders observed in a reasonable period of time.
Among the instruments measured with internal models are:
 the junior security (Euro 10,619 thousand) deriving from the own securitisation called
“Berica Residential Mbs 1”, not “reinstated” in the financial statements because it was
carried out before 1 January 2004, whose fair value was made equal to the nominal value
because the expectation is that, based on the definitive data of the securitisation at 31
December 2015 and given the short residual duration of the securitisation, the exposure
will be repaid in full;
 three mutual fund units (Euro 177,673 thousand) for which, in light of the updated time
span of the investments, it was considered appropriate to replace the NAV communicated
by the Management Company, used previously, with the results of the measurement
conducted internally on the individual assets, which were valued at the estimated
realisable value;
 two bonds subscribed during the year as part of the restructuring of receivables due from
the issuer (Euro 3,431 thousand) that at maturity are convertible, at the initiative of the
issuer and/or of the Bank, into shares of the same issuer which are currently not listed.
Given the above, for most of the financial instruments classified at level 3 in the hierarchy set
forth by IFRS 13 “passive” measurement techniques were used (NAV or redemption values
reported by the various management companies, values derived from the company’s equity or
from independent appraisals obtained by the Bank, etc.) which do not use financial models
based on market data and, therefore, any fair value sensitivity breakdown would have little
meaning.
- 215 -
B
A.4.3 Fair value hierarchy
The techniques for determining the fair value for the various types of financial instruments and
for investment properties are the same as those used in previous years as well, and did not result
in transfers between the various levels of the Fair value hierarchy provided for by IFRS 13.
A.4.4 Other information
Quantitative information
A.4.5 Fair value hierarchy
A.4.5.1 Financial assets and liabilities at fair value on a recurrent basis: breakdown by levels of fair value
Financial assets/liabilities at fair value
31/12/2015
L1
L2
31/12/2014
L3
L1
L2
L3
4. Hedging derivatives
29,110
5,250,409
-
3,379,147
4,411
62,428
33,024
-
355
3,431
412,981
131,441
-
1,088,467
4,540,460
-
6,490,573
4,260
418,073
97,860
-
340
362,526
136,694
-
Total
5,279,519
3,479,010
548,208
5,628,927
7,010,766
499,560
70
-
2,771,663
471,516
887,624
253
-
68,563
-
5,887,961
1,547,346
525,379
-
Total
70
4,130,803
253
68,563
7,960,686
-
Key:
L1= Level 1, L2= Level 2, L3= Level 3
In 2015, certain securities, totalling Euro 4,393 thousand (of which Euro 2,119 thousand of
equities and Euro 2,274 thousand of debt securities) were reclassified from level 1 to level 2 of the
hierarchical scale provided by IFRS 13, because the reference market is illiquid and hence no
longer active with respect to 31 December 2014. In addition, a single debt security of Euro 12,954
thousand was reclassified from level 2 to level 1 of the hierarchical scale provided by IFRS 13
because at 31 December 2015 it was listed on an active market.
The impact of the application of the Credit Value Adjustment (CVA) caused a reduction in the
(positive) fair value of existing OTC derivatives with customers, by Euro 3,653 thousand. On the
contrary, no Debit Value Adjustment (DVA) was applied to reduce the (negative) fair value of
existing OTC derivatives with customers, whose total amount, however, is not significant. As
discussed in paragraph A.4.1 above, no CVA or DVA is instead applied to OTC derivatives
traded with market counterparties or carried out with investees of the Bank.
With regard, instead, to the financial instruments classified at level 3, a description is provided
below for each line item.
- 216 -
B
At 31 December 2014, “financial assets held for trading” included exclusively the back to back
swap deriving from the “Berica Residential Mbs1” securitisation transaction, which at 31
December 2015 is instead included under “financial liabilities held for trading” (Euro 253
thousand) since the measurements performed at the end of the year indicated that the fair value
of that financial instrument is negative. In addition, during 2015 a single equity investment was
reclassified from level 1 to level 3 of the IFRS 13 hierarchy, because its measurement at 31
December 2015 was carried out on the basis of a capital model since the listing market was
particularly illiquid, and hence it is no longer considered active.
“Financial assets designated at fair value” pertain to two convertible bonds.
Level 3 “financial assets available for sale” mainly refer to:

capitalisation certificates (Euro 27,920 thousand), for which the fair value is taken to be
the redemption value reported by the management company;

junior notes (Euro 10,619 thousand) originating from the securitisation transaction called
“Berica Residential Mbs1”;

equity interests not listed in an active market and of material amounts (a total of Euro
95,361 thousand) for which the fair value is determined based on the value deriving from
recent transactions between stockholders, from internal and/or external appraisals or, as
a last resort, the corresponding portion of equity held.

equity interests not listed in an active market held through funds controlled by the Parent
Bank (a total of Euro 8,022 thousand) and interests whose individual amount is
immaterial (a total of Euro 1,135 thousand), whose the fair value is equal to the cost,
adjusted, if necessary, to take material impairment into account;

three mutual fund units (totalling Euro 177,673 thousand) measured based on an internal
model and other mutual fund units (totalling Euro 58,589 thousand) or similar
investments (Euro 33,619 thousand), characterised by significant levels of illiquidity,
whose fair value is determined based on the latest NAV reported by the management
company.
“Property, plant and equipment” pertain to buildings and land held for investment, whose fair
value is determined on the basis of independent appraisals.
- 217 -
B
A.4.5.2 – Annual changes in financial assets at fair value on a recurring basis (level 3)
Financial assets
held for trading
1. Opening balance
2. Increases
2.1. Purchases
2.2. Profits booked to:
2.2.1. Income statement
- of which: realized gains
2.2.2. Equity
2.3. Transfers from other levels
2.4. Other increases
3. Decreases
3.1. Sales
3.2. Reimbursements
3.3. Losses booked to:
3.3.1. Income statement:
- of which: realized losses
3.3.2. Equity
3.4. Transfers to other levels
3.5. Other decreases
4. Closing balance
340
969
X
969
954
8
946
946
946
X
355
FINANCIAL ASSETS
Financial assets
Financial assets
Hedging Property, plant
designated at
available for sale derivatives and equipment
fair value
362,525
136,694
3,602
534,096
1,436
3,602
11,340
1,435
155,301
1
128,170
1
1
X
27,131
352,453
15,002
171
483,640
6,716
268,582
490
43,583
171
165,475
4,716
171
156,502
4,716
171
155,171
4,716
X
8,973
1,510
6,000
3,431
412,981
131,414
Intangible
assets
-
“Transfers from other levels” refer:


for “Financial assets held for trading”, to two equity investments that were measured, at
31 December 2015, on the basis of an internal measurement model because the reference
market was particularly illiquid and hence it was no longer considered active;
for “Financial assets available for sale”, to the Luxembourg Funds Athena and Optimum
in respect of which the ECB, as part of the inspections conducted, highlighted criticality
profiles and which, also in light of the updated time span of the investment, were
evaluated on the basis of the estimated realisable values of the individual underlying
assets, instead of using the NAV valuation communicated by the management company.
- 218 -
B
A.4.5.3 – Annual changes in financial liabilities at fair value on a recurring basis (level 3)
Financial
liabilities
designated at
fair value
Financial
liabilities held
for trading
1. Opening balance
2. Increases
2.1. Issues
2.2. Losses booked to:
2.2.1. Income statement
- of which: realized losses
2.2.2. Equity
2.3. Transfers from other levels
2.4. Other increases
3. Decreases
3.1. Reimbursements
3.2. Repurchases
3.3. Profits booked to:
3.3.1. Income statement:
- of which: realized gains
3.3.2. Equity
3.4. Transfers to other levels
3.5. Other decreases
4. Closing balance
253
253
253
253
X
Hedging
derivatives
-
-
X
-
X
X
253
-
A.4.5.4 – Assets and liabilities not stated at fair value or stated at fair value on a non-recurring basis:
breakdown by levels of fair value
Financial assets/liabilities not valued at fair
value or at fair value on non- recurrent basis
31/12/2015
Book value
L1
L2
L3
Book value
31/12/2014
L1
L2
L3
2. Loans and advances to banks
3. Loans and advances to customers
4. Investiment property
5. Non-current assets held for sale
Total
2,150,149
25,178,117
27,328,266
-
6,324
54,017
60,341
2,150,150
28,065,930
30,216,080
43,374
2,254,927
28,110,636
30,408,937
-
44,153
21,426
315,616
381,195
2,262,052
29,715,704
31,977,756
1. Due to banks
2. Due to customers
3. Debt securities
4. Liabilities associated with assets held for sale
Total
9,973,459
16,272,137
5,199,085
31,444,681
-
5,342,218
5,342,218
9,973,459
16,263,198
131,616
26,368,273
4,757,848
22,157,659
6,668,144
33,583,651
-
6,944,087
6,944,087
4,750,199
22,157,874
135,119
27,043,192
Key:
L1= Level 1, L2= Level 2, L3= Level 3
A.5 – “DAY ONE PROFIT/LOSS” DISCLOSURE
During the year, the Group did not undertake any transactions involving the recognition of “day
one profit/loss”.
- 219 -
B
PART B – INFORMATION ON THE CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
ASSETS
SECTION 1
Cash and cash equivalents – Line item 10
1.1 Cash and cash equivalents: breakdown
31/12/2015
a) Cash
b) Unrestricted deposits with central banks
Total
- 220 -
31/12/2014
173,506
192,755
-
-
173,506
192,755
B
SECTION 2
Financial assets held for trading – Line item 20
2.1 Financial assets held for trading: breakdown by type
31/12/2015
Items/Amounts
31/12/2014
L1
L2
L3
L1
L2
L3
28,097
106,055
-
1,063,006
101,546
-
1.1 Structured securities
12,954
66,105
-
9,707
77,266
-
1.2 Other debt securities
15,143
39,950
-
1,053,299
24,280
-
991
2,715
355
25,432
-
-
3. Mutual funds
-
-
-
-
-
-
4. Loans
-
-
-
-
-
-
4.1 Repurchase agreements
-
-
-
-
-
-
4.2 Other
-
-
-
-
-
-
29,088
108,770
355
1,088,438
101,546
-
22
3,270,377
-
29
6,389,027
340
22
3,206,925
-
29
6,278,772
340
1.2 connected with the fair value option
-
63,452
-
-
110,255
-
1.3 other
-
-
-
-
-
-
-
-
-
-
-
-
2.1 dealing
-
-
-
-
-
-
2.2 connected with the fair value option
-
-
-
-
-
-
2.3 other
-
-
-
-
-
-
Total B
22
3,270,377
-
29
6,389,027
340
Total (A+B)
29,110
3,379,147
355
1,088,467
6,490,573
340
A. Cash assets
1. Debt securities
2. Equities
Total A
B. Derivatives
1. Financial derivatives
1.1 dealing
2. Credit derivatives
Structured securities mainly refer to bonds with payoffs linked to options on interest rate and
inflation on baskets of shares and stock indexes and on currencies.
- 221 -
B
2.2 Financial assets held for trading: breakdown by debtor/issuer
Items/Amounts
31/12/2015
31/12/2014
A. CASH ASSETS
1. Debt securities
134,152
1,164,552
1,037
1,010,808
-
-
c) Banks
78,211
95,271
d) Other issuers
54,904
58,473
4,061
25,432
7
3,983
4,054
21,449
- insurance companies
355
1,875
- financial companies
527
952
3,172
18,622
-
-
3. Mutual funds
-
-
4. Loans
-
-
a) Governments and central banks
-
-
b) Other public entities
-
-
c) Banks
-
-
d) Other issuers
-
-
138,213
1,189,984
2,831,107
5,234,489
439,292
1,154,907
Total B
3,270,399
6,389,396
Total (A+B)
3,408,612
7,579,380
a) Governments and Central Banks
2. Equities
a) Banks
b) Other issuers:
- non-financial companies
- other
Total A
B. DERIVATIVES
a) Banks
- fair value
b) Customers
- fair value
There are no “Equities” issued by parties classified as bad loans or unlikely to pay.
The Group uses bilateral offsetting arrangements relating to operations in over-the-counter
derivatives with principal market counterparties, mainly Banks, giving the option to offset
creditor positions against debtor positions in the event of counterparty default. For the purposes
of mitigating credit risk further, specific Credit Support Annex contracts have been entered with
the Group’s most frequent counterparties with the aim of regulating the provision of cash
collateral financial guarantees.
Exposures in derivatives towards customers also include transactions carried out with financial
companies, habitual market counterparties of the Group in these transactions.
- 222 -
B
SECTION 3
Financial assets designated at fair value – Line item 30
3.1 Financial assets designated at fair value: breakdown by type
31/12/2015
Items/Amounts
L1
31/12/2014
L2
L3
-
4,411
3,431
-
4,260
-
-
4,411
3,431
-
4,260
-
-
-
-
-
-
-
2. Equities
-
-
-
-
-
-
3. Mutual funds
-
-
-
-
-
-
4. Loans
-
-
-
-
-
-
4.1 Structured
-
-
-
-
-
-
4.2 Other
-
-
-
-
-
-
Total
-
4,411
3,431
-
4,260
-
Cost
-
-
-
-
-
-
1. Debt securities
L1
L2
L3
The item refers to three convertible bonds for which the Group invoked the “fair value option”,
of which two were subscribed during the year as part of the restructuring of receivables due
from the issuer which involved various Italian banks.
- 223 -
B
3.2 Financial assets designated at fair value: breakdown by debtor/issuer
Items/Amounts
31/12/2015
1. Debt securities
31/12/2014
7,842
4,260
-
-
-
-
c) Banks
-
-
7,842
4,260
2. Equities
-
-
a) Banks
-
-
b) Other issuers:
-
-
-
-
-
-
-
-
- other
-
-
3. Mutual funds
-
-
4. Loans
-
-
-
-
-
-
c) Banks
-
-
d) Other issuers
-
-
7,842
4,260
d) Other issuers
Total
- 224 -
B
SECTION 4
Financial assets available for sale – Line item 40
4.1 Financial assets available for sale: breakdown by type
31/12/2015
Items/Amounts
L1
31/12/2014
L2
L3
5,231,159
35,660
10,663
4,447,563
12,996
10,664
-
-
-
-
-
-
5,231,159
35,660
10,663
4,447,563
12,996
10,664
17,106
21,009
138,137
88,385
21,808
233,211
17,106
21,009
137,502
88,385
21,808
231,913
-
-
635
-
-
1,298
2,144
5,759
236,261
4,512
383,269
91,628
-
-
27,920
-
-
27,023
5,250,409
62,428
412,981
4,540,460
418,073
362,526
1. Debt securities
2. Equities
2.1 Carried at fair value
2.2 Carried at cost
3. Mutual funds
4. Loans
Total
L2
L3
L1
Line 1. comprises (Euro 18,009 thousand) two senior tranches of ABS securities issued within the
scope of transactions originated by primary Italian players in the consumer credit sector, as well
as the junior tranche (Euro 10,619 thousand) deriving from the Berica Residential Mbs 1
securitisation, not reinstated in the financial statements because it was initiated before 1 January
2004.
Level 2 “Equities” include (Euro 17,175 thousand) the shares held in the capital of the Bank of
Italy.
“Equities carried at cost” refer to certain individually immaterial equity interests, whose fair
value cannot be reliably or verifiably determined and so are reported at cost, as adjusted for any
impairment.
Line 4. “Loans” consists of the capitalisation certificates.
- 225 -
B
4.2 Financial assets available for sale: breakdown by debtor/issuer
Items/Amounts
31/12/2015
31/12/2014
1. Debt securities
5,277,482
4,471,223
5,231,514
4,426,481
5
-
c) Banks
11,517
28,480
d) Other issuers
34,446
16,262
176,252
343,404
26,105
120,388
150,147
223,016
-
-
59,434
50,410
90,713
172,606
-
-
244,164
479,409
27,920
27,023
-
-
-
-
c) Banks
-
-
27,920
27,023
5,725,818
5,321,059
2. Equities
a) Banks
b) Other issuers:
- other
3. Mutual funds
4. Loans
d) Other issuers
Total
“Debt securities” are mainly connected to the Bank’s investments in Italian government
securities, some of which are backed by micro hedges against interest rate risk and inflation, both
as fair value hedges and cash flow hedges.
“Equities” include equity interests issued by parties classified as unlikely to pay for Euro 9,792
thousand.
“Mutual fund” units refer to investments in funds with underlying fund units (Euro 177,673
thousand), in real estate funds (Euro 37,631 thousand) and for the remainder to closed-end funds
reserved for private equity institutional investors, which mainly invest in non-financial
companies and companies not listed on active markets.
- 226 -
B
4.3 Financial assets available for sale with micro hedges
Assets hedged
31/12/2015
1. Debt securities
31/12/2014
3,893,000
3,399,733
2. Equities
-
-
3. Mutual funds
-
-
4. Loans
-
-
3,893,000
3,399,733
Total
Assets hedged refer to inflation linked BTP government securities that had been micro hedged
against interest rate and inflation risk both with cash flow hedging (nominal amount Euro 3,673
million) and with fair value hedging (nominal amount Euro 220 million).
The tests carried out at year end confirmed the effectiveness of the hedges.
- 227 -
B
SECTION 5
Financial assets held to maturity – Line item 50
5.1 Financial assets held to maturity: breakdown by type
31/12/2015
Items/Amounts
31/12/2014
FV
BV
L1
L2
FV
BV
L3
L1
L2
L3
1. Debt securities
-
-
-
-
43,374
-
44,153
-
- structured
-
-
-
-
-
-
-
-
- other
-
-
-
-
43,374
-
44,153
-
2. Loans
-
-
-
-
-
-
-
-
Key
FV = Fair value
BV = Book value
5.2 Financial assets held to maturity: breakdown by debtor/issuer
Items/Amounts
31/12/2015
31/12/2014
1. Debt securities
-
43,374
-
-
-
-
c) Banks
-
38,251
d) Other issuers
-
5,123
2. Loans
-
-
-
-
-
-
c) Banks
-
-
d) Other issuers
-
-
Total
-
43,374
Total fair value
-
44,153
5.3 Financial assets held to maturity with micro hedges
The Group does not have any financial assets held to maturity with micro hedges.
- 228 -
B
SECTION 6
Loans and advances to banks – Line item 60
6.1 Loans and advances to banks: breakdown by type
Type of transaction/Amounts
31/12/2015
31/12/2014
FV
Book value
A. Deposits with central banks
L1
FV
L2
Book value
L3
108,522
1. Time deposits
L1
L2
L3
205,203
-
X
X
X
-
X
X
X
108,522
X
X
X
205,203
X
X
X
3. Repurchase agreements
-
X
X
X
-
X
X
X
4. Other
-
X
X
X
-
X
X
X
2. Compulsory reserve
B. Loans and advances to banks
2,041,627
1. Loans:
2,041,627
1.1 Current accounts and sight deposits
1.2. Time deposits
1.3 Other loans
- Repurchase agreements
2,027,555
184,128
X
X
X
398,947
X
X
X
1,314
X
X
X
15,270
X
X
X
1,856,185
X
X
X
1,613,338
X
X
X
677,359
X
X
X
600,001
X
X
X
-
X
X
X
-
X
X
X
1,178,826
X
X
X
1,013,337
X
X
X
X
- Finance leases
- Other
2,049,724
2. Debt securities
-
22,169
-
X
X
X
-
X
X
-
X
X
X
22,169
X
X
X
2,150,149
-
6,324
2,150,150
2,254,927
-
21,426
2,262,052
Total
Net non performing loans to banks amount to Euro 61 thousand at 31 December 2015, all of
which relate to a loan to a Russian bank, classified as bad loans.
Line A.2. shows the balance of the “management account” with Bank of Italy and includes the
reserve subject to maintenance and the “mobilisable” part of this reserve of the Parent Bank and
subsidiary Banks.
For the determination of the fair value of loans and advances to banks, please see the previous
Section A.4 - “Information about fair value”.
6.2 Loans and advances to banks with micro hedges
There are no loans and advances to banks with micro hedges.
6.3 Finance leases
There are no finance leases with banks.
- 229 -
B
SECTION 7
Loans and advances to customers – Line item 70
7.1 Loans and advances to customers: breakdown by type
Performing
loans
31/12/2015
Book value
Purchased
Other
Fair value
L1
L2
Performing
loans
L3
31/12/2014
Book value
L1
Purchased
Other
Fair value
L2
L3
Loans
1. Current accounts and sight deposits
2,801,868
-
1,291,076
X
X
X
3,855,007
-
915,922
X
X
X
-
-
109,833
X
X
X
606,983
-
-
X
X
X
12,934,362
-
3,233,765
X
X
X
14,689,765
-
2,664,261
X
X
X
507,502
-
19,952
X
X
X
511,082
-
18,337
X
X
X
5. Finance leases
-
-
-
X
X
X
-
-
-
X
X
X
6. Factoring
-
-
-
X
X
X
-
-
-
X
X
X
3,239,713
-
661,979
X
X
X
3,767,861
-
594,244
X
X
X
8. Structured securities
17,376
-
3,588
X
X
X
15,916
-
4,382
X
X
X
9. Other debt securities
357,103
-
-
X
X
X
462,675
-
4,201
X
X
X
19,857,924
-
5,320,193
-
54,017
28,065,930
23,909,289
-
4,201,347
-
315,616
29,715,704
2. Repurchase agreements
3. Mortgages
4. Credit cards, personal loans and wage assignments
7. Other loans
Debt securities
Total
Loans and advances to customers are reported in the financial statements at amortised cost, less
specific and portfolio write-downs recognised in accordance with IAS 39.
The item includes Euro 8,283.9 million (Euro 7,351.2 million at 31 December 2014), of which non
performing loans amounting to Euro 410.8 million (Euro 309.5 million at 31 December 2014), in
assets sold but not derecognised relating to the mortgages sold as part of securitisations
originated by the Group which, since they do not satisfy IAS 39 requirements for derecognition,
have been “reinstated” in the financial statements.
“Other loans” in line 7. report Euro 360,8 million (Euro 131,8 million at 31 December 2014) for the
difference between the reinstatement of assets sold under self-securitisations and the
accompanying elimination of the corresponding liability for the asset-backed securities
subscribed under these loans. The same line also includes operating receivables from customers
for the performance of financial services and guarantee deposits carried out as part of
securitisations originated by the Group.
Line 9 “Other debt securities” includes ABS securities issued as part of transactions originated by
third parties, totalling Euro 189,373 thousand. For further details please refer to Part E,
paragraph C.4 “Banking group - Non consolidated special purpose vehicles for securitisation” in Section
C. “Securitisations” of these Explanatory notes.
For the determination of the fair value of loans and advances to customers, please see the
previous Section A.4 - “Information about fair value”.
- 230 -
B
7.2 Loans and advances to customers: breakdown by debtor/issuer
Performing
loans
1. Debt securities
31/12/2015
Purchased
Performing
loans
Other
31/12/2014
Purchased
Other
374,479
-
3,588
478,591
-
8,583
a) Governments
-
-
-
-
-
-
-
-
-
-
-
-
374,479
-
3,588
478,591
-
8,583
80,448
-
3,588
61,692
-
4,382
294,031
-
-
416,899
-
4,201
-
-
-
-
-
-
- other
-
-
-
-
-
-
19,483,445
-
5,316,605
23,430,698
-
4,192,764
c) Other issuers
2. Loans to:
a) Governments
c) Other issuers
4
-
-
4
-
-
47,716
-
36,397
49,575
-
50,436
19,435,725
-
5,280,208
23,381,119
-
4,142,328
9,520,442
-
3,837,795
12,110,768
-
3,096,747
1,140,606
-
279,598
1,565,436
-
98,891
14,927
-
-
14,949
-
-
8,759,750
-
1,162,815
9,689,966
-
946,690
19,857,924
-
5,320,193
23,909,289
-
4,201,347
- other
Total
7.3 Loans and advances to customers with micro hedges
To manage exposure to the interest rate risk of banking book value, the Group activated hedges
of the cash flows of some portfolios of floating rate mortgages, for a total nominal amount of
Euro 100 million at 31 December 2015 (Euro 2,550 million at 31 December 2014). At the same
date, moreover, hedges of fixed rate mortgages and of floating rate mortgages with maximum
rate were implemented for a total amount of Euro 1,010.8 million (Euro 929 million at 31
December 2014).
7.4 Finance leases
There are no finance leases with customers.
- 231 -
B
SECTION 8
Hedging derivatives – Line item 80
8.1 Hedging derivatives: analysis by type of hedge and level
Fair Value 31/12/2015
L1
L2
NV
31/12/2015
L3
L1
L2
NV
31/12/2014
L3
A. Financial derivatives
-
33,024
-
1,258,239
-
97,860
-
6,242,575
1) Fair value
-
33,024
-
1,258,239
-
44,690
-
1,142,575
2) Cash flows
-
-
-
-
-
53,170
-
5,100,000
3) Foreign investments
-
-
-
-
-
-
-
-
A. Credit derivatives
-
-
-
-
-
-
-
-
1) Fair value
-
-
-
-
-
-
-
-
2) Cash flows
-
-
-
-
-
-
-
-
-
33,024
-
1,258,239
-
97,860
-
6,242,575
Total
Key: NV = notional value; L1: Level 1; L2: Level 2; L3: Level 3
At 31 December 2015, this line item reports derivatives with a positive fair value, taken out to
hedge interest rate risk relating to specific fixed-rate and floating-rate with maximum rate
mortgage books recorded under “Loans and advances to customers” and individual own bond
issues classified as “Debt securities in issue”.
8.2 Hedging derivatives: analysis by hedged portfolio and type of hedge
Fair value
Transactions/Type of
hedge
Cash flows
Specific
Interest rate
risk
1. Financial assets
available for sale
Exchange
risk
Credit risk
-
-
-
2. Loans and advances
13,647
-
-
3. Financial assets held to
maturity
X
-
-
4. Portfolio
X
5. Other transactions
X
X
Price risk
Multiple risk
-
X
X
X
-
X
-
X
X
X
-
X
-
X
X
X
-
-
-
-
-
-
-
-
-
1. Financial liabilities
19,377
-
-
2. Portfolio
X
Total liabilities
19,377
-
X
X
-
Foreign
investments
-
X
X
Generic
X
-
X
Specific
-
13,647
Total assets
Generic
-
X
X
X
X
X
X
2. Portfolio of financial
assets and liabilities
X
X
X
X
X
-
-
X
X
-
X
X
X
X
-
X
-
X
-
-
X
1. Expected transactions
X
X
-
X
-
X
X
X
-
-
Hedge” accounting model for those relating to own-issue bonds, while it used the “Macro Fair
Value Hedge” model for those relating to mortgage loans, with the consequent recognition of the
revaluations of the hedged assets in Asset line item 90 “Remeasurement of financial assets
backed by macro hedges”.
- 232 -
B
SECTION 9
Remeasurement of financial assets backed by macro hedges – Line item 90
9.1 Remeasurement of hedged assets: analysis by hedged portfolio
31/12/2015
31/12/2014
1. Positive fair value
59,415
98,389
1.1 in specific portfolios:
59,415
98,389
59,415
98,389
-
-
-
-
1.2 aggregate
1. Negative fair value
(13,228)
(10,942)
1.1 in specific portfolios:
(13,228)
(10,942)
(13,228)
(10,942)
-
-
-
-
46,187
87,447
1.2 aggregate
Total
This line item reports fair value changes in fixed-rate mortgages and floating-rate mortgages
with maximum rates classified as “Loans and advances to customers” that are hedged by Interest
Rate Swaps and Interest Rate Caps in order to manage exposure of banking book value to
interest rate risk.
The Group has accounted for these hedges using the Macro Fair Value Hedging accounting
model. Consequently, the write-back/write-down of hedged assets in compliance with IAS 39 is
reported in this line item, with the matching entry recognized in “Net hedging gains (losses)”
(income statement line item 90), together with the results of measuring the associated hedging
derivatives.
9.2 Assets backed by macro hedges of interest rate risk
Hedged assets
31/12/2015
31/12/2014
1,167,550
1,060,373
-
-
3. Portfolio
-
-
1,167,550
1,060,373
Total
The amounts shown in the table above refer to the remaining balance of principal due to expire
of the hedged assets.
- 233 -
B
SECTION 10
Equity method investments – Line item 100
10.1 Equity method investments: disclosures
Type of investment
Registered Office
Headquarters
Type of
relationship
Holder
% held
B. Firms under significant influence
1. Società Cattolica di Assicurazione SCpA
Verona
Verona
2
B. Pop. Vicenza
15.07
1
2. Cattolica Life Ltd
Dublin
Dublin
2
B. Pop. Vicenza
40.00
40.00
3. Berica Vita SpA
Vicenza
Verona
2
B. Pop. Vicenza
40.00
40.00
Verona
Verona
2
B. Pop. Vicenza
40.00
40.00
2
B. Pop. Vicenza
46.00
46.00
2
B. Pop. Vicenza
99.00
99.00
2
B. Pop. Vicenza
B.Nuova
Farbanca
Prestinuova
47.95
1.66
0.10
0.10
47.95
1.66
0.10
0.10
Name
Voting
rights %
A. Associated companies subject to significant influence
4. ABC Assicura SpA
Cortina d'Ampezzo Cortina d'Ampezzo
(BL)
(BL)
5. San Marco Srl
6. Popolare Assessoria e Consultoria Ltda
(1)
7. Sec Servizi SCpA
8. Giada Equity Fund
Saint Paul Brazil
Padova
Saint Paul Brazil
Padova
Treviso
Treviso
2
B. Pop. Vicenza
56.67
56.67
Dueville (VI)
Dueville (VI)
2
Nem Imprese
33.25
33.25
10 Boato Holding SpA
Bologna
Bologna
2
Nem Imprese
23.75
23.75
11 Corvallis Holding SpA
Padova
Padova
2
Nem Imprese II
43.50
43.50
12 Orogroup SpA
Padova
Padova
2
Nem Imprese II
42.90
42.90
9. Teplast SpA
13 Doreca SpA
Roma
Roma
2
Nem Imprese II
13.56
13.56
Modena
Modena
2
Nem Imprese II
37.00
37.00
15 Meta-Fin S.p.A.
Reggio Emilia
Reggio Emilia
2
Nem Imprese II
21.50
21.50
16 Braccialini SpA
Scandicci (FI)
Scandicci (FI)
2
Industrial
22.22
22.22
Milano
Milano
2
Industrial
30.37
30.37
Grottammare (AP)
Grottammare (AP)
2
Nem Imprese II
25.04
25.04
Vicenza
Vicenza
2
B. Pop. Vicenza
25.00
25.00
14 Energon Esco SpA
17 Maccorp Italiana SpA
18 Menowatt GE SpA
19 Magazzini Generali Merci e Derrate SpA
(1)
99%-owned company carried at cost in consideration of its immaterial nature with respect to the values in the
Group’s consolidated financial statements.
The equity interest percentage shown also reflects the voting rights at stockholders’ meetings,
except in the case of Società Cattolica di Assicurazione S.C.p.A., under whose by-laws each
member has just one vote regardless of the size of holding (principle of “per capita voting”).
With reference to the equity investment in the aforesaid company, although the interest of the
Group amounts to less than 20% of the capital, the circumstances provided by Paragraph 6 of
IAS 28 for the existence of significant influence exist, e.g. representation in the board of directors
of the company, participation in the decision-making process, including decisions concerning
dividends or other types of profit distribution, the occurrence of significant transactions between
the investor and the investee and the interchange of executive personnel.
At 31 December 2015 the equity investment held in the company San Marco Srl was written off
entirely. Said equity method investment is classified as unlikely to pay.
In addition, the equity method investment held in the company Magazzini Generali Merci e
Derrate SpA, classified among bad loans, was entirely written off in 2014.
The scope of consolidation does not include any investments in companies under joint control.
- 234 -
B
10.2 Significant equity mehtod investments: book value, fair value and collected dividends
Name
Book Value
Total
Dividends
received
Fair Value
394,740
193,743
9,194
394,740
193,743
9,194
There are no equity investments in companies under joint control.
10.3 Significant equity method investments: accounting information
Name
Cash and cash
balances
Financial assets
X
19,540,017
Non financial
assets
Financial
liabilities
Non financial liabilites
Net interest
income
Total earnings
1,946,142
18,634,724
Total profit or loss Total profit or loss Profit (Loss) after
before tax from
after tax from
tax from
continuing
continuing
discontinued
operations
operations
operations
Net losses /
recoveries on
impairment
Name
3,228,934
5,862,566
Net profit or loss
for the year (1)
Other
comprehensive
income after tax
(2)
107,122
65,937
X
Comprehensive
income (3)
=
(1) + (2)
X
212,877
107,122
-
173,059
The amounts in the table refer to the consolidated financial statements at 30 September 2015 (Net
profit or loss for the year, other comprehensive income after tax and comprehensive income refer
only to the part attributable to the Parent Bank).
10.4 Non significant equity method investments: accounting information
Name
Investments'
book value
Total assets
Total liabilities
Total earnings
Total profit or Profit (Loss) after
loss after tax
tax from
Net profit or loss
from continuing
discontinued
for the year (1)
operations
operations
Other
comprehensive
income after tax
(2)
Comprehensive
income (3)
=
(1) + (2)
1. Cattolica Life Ltd
10,753
928,072
906,557
183,823
2,268
-
2,268
-
2,268
2. Berica Vita SpA
32,305
1,458,902
1,389,610
368,455
9,159
-
9,159
-
9,159
7,115
59,928
48,738
12,546
1,232
-
1,232
-
10
12,793
3,841
2,835
626
5,120
3,000
1,856
6,200
3,000
542
6,000
2,000
5,185
8,265
91
68,430
6,916
17,433
18,490
18,142
22,462
182,887
70,789
16,529
66,617
34,031
4,698
8,401
22,129
50
42,746
19
13,197
9,872
9,510
17,604
139,200
778
9,000
52,984
3,005
3,994
179
320
136,997
23,558
624
260
949
182,667
35,890
6,508
60,117
25,340
3,663
(2,224)
(14,283)
0
(3,024)
297
16
4
(2,107)
(10,857)
34,906
732
(3,631)
(988)
62
-
(2,224)
(14,283)
0
(3,024)
297
16
4
(2,107)
(10,857)
34,906
732
(3,631)
(988)
62
3. ABC Assicura SpA
4. Magazzini Generali Merci e Derrate SpA
5. San Marco Srl
6. Popolare di Vicenza Assessoria e Consultoria Ltda
7. Sec Servizi SCpA
8. Giada Equity Fund
9. Taplast SpA
10. Boato Holding SpA
11. Corvallis Holding SpA
12. Orogroup SpA
13. Doreca SpA
14. Meta-Fin S.p.A.
15. Energon Esco SpA
16. Braccialini SpA
17. Maccorp SpA
18. Menowatt GE SpA
53
-
1,232
(2,224)
(14,283)
0
53
(3,024)
297
16
4
(2,107)
(10,857)
34,906
732
(3,631)
(988)
62
The amounts refer to the latest available financial statements or statement of financial position.
- 235 -
B
10.5 Equity method investments: changes during the year
31/12/2015
A. Opening balance
31/12/2014
494,857
384,967
14,501
120,485
2,000
91,126
B.2 Writebacks
-
-
B.3 Revaluations
-
-
B.4 Other changes
12,501
29,359
C. Decreases
16,622
10,595
-
-
10,982
5,309
5,640
5,286
492,736
494,857
E. Total revaluations
-
-
F. Total adjustments
37,094
26,112
B. Increases
B.1 Purchases
C.1 Sales
C.2 Adjustments
C.3 Other changes
D. Closing balance
“Purchases” reported in line B.1 refer to the acquisition of interest by the Fund Nem Imprese II in
the company Menowatt GE SpA.
“Other changes” reported in lines B.4 and C.3 include the effects of equity accounting for
companies over which significant influence is exercised.
As required by the accounting standards, checks were carried out to identify the existence of
indications that an asset may have been impaired. These checks highlighted the following
impairment losses, reported in line C.2. “Adjustments”, which already include write-downs
totalling Euro 1.4 million carried out in the consolidated half-year financial statements at 30 June
2015:





Euro 852 thousand to the equity investment in Boato Holding SpA (owned by the Nem
Imprese Fund);
Euro 6,300 thousand to the equity investment in Meta-Fin SpA (owned by the Nem
Imprese II Fund);
Euro 666 thousand to the equity investment in Orogroup SpA (owned by the Nem
Imprese II Fund);
Euro 930 thousand to the equity investment in Doreca SpA (owned by the Nem Imprese
II Fund);
Euro 2,234 thousand to the equity investment in Braccialini SpA (owned by the Industrial
Opportunity Fund);
Concerning the equity investment in Cattolica Assicurazioni, it should be pointed out that the
impairment test carried out at 31 December 2015, with the support of a leading consulting firm,
did not identify the existence of any impairment loss indicators.
- 236 -
B
In particular, at 31 December 2015 the equity method investment was measured using the "sum
of the parts" valuation method, aimed at considering both its stand-alone value and the value of
synergies arising from the partnership agreement executed with the company. Based on the
aforesaid method, the recoverable value of the equity method investment was determined as the
sum:

of the Equity Value of Cattolica Assicurazioni determined using the Dividend Discount
Model in the sense of the Excess Capital taking as a reference the quarterly report of
Cattolica at 30 September 2015 and the economic-capital projections in the Brokers’ reports
pertaining to the Cattolica security.

the net present value of revenue synergies by capitalizing to infinity the commission passed
back to the BPVi Group on the placement of loss and protection insurance products.
The analysis carried out on the basis of the above confirmed the carrying amount of the equity
method investment.
It should be pointed out that the information and parameters used to evaluate the equity method
investments are influenced by the uncertainty of the macroeconomic and market environment,
which may evolve in unforeseen ways.
10.6 Judgements and assumptions used in determining the existence of joint control or significant
influence
See Section 3 “Scope of consolidation and methodology” in Part A of these Explanatory Notes.
10.7 Commitments relating to equity investments in companies under joint control
There are no equity investments in companies under joint control.
10.8 Commitments relating to equity method investments in companies subject to significant influence
There are no commitments worthy of disclosure relating to equity method investments in
companies subject to significant influence.
10.9 Significant restrictions
There are no significant restrictions on equity method investments in companies subject to
significant influence, with the exception of an insurance investee whose interest was pledged to
guarantee own liabilities.
10.10 Other information
- 237 -
B
SECTION 11
Technical reserves borne by reinsurers – Line item 110
This Section is not relevant.
- 238 -
B
SECTION 12
Property, plant and equipment – Line item 120
12.1 Property, plant and equipment used for business purposes: analysis of assets carried at cost
Assets/Values
31/12/2015
1. Owned asstes
31/12/2014
455,775
478,265
83,264
78,078
b) buildings
272,529
297,734
c) furniture
17,165
20,729
4,649
6,084
78,168
75,640
11,037
11,414
-
-
b) buildings
11,037
11,414
c) furniture
-
-
d) IT equipment
-
-
e) other
-
-
466,812
489,679
a) land
d) IT equipment
e) other
2. Purchased under finance leases
a) land
Total
Property, plant and equipment for business purposes are systematically depreciated in each year
on a straight-line basis using rates that reflect the residual useful lives of the related assets.
The value of land associated with free-standing property has been separated from the value of
the building and is not depreciated since it has an indefinite useful life, as do works of art.
12.2 Investment property: breakdown of assets carried at cost
There is no investment property carried at cost.
- 239 -
B
12.3 Property, plant and equipment used for business purposes: breakdown of the revalued assets
There is no revalued property, plant and equipment used for business purposes.
12.4 Investment property: breakdown of assets carried at fair value
31/12/2015
Assets/Values
Level 1
31/12/2014
Level 2
Level 3
Level 1
Level 2
Level 3
1. owned
-
-
131,441
-
-
a) land
-
-
27,108
-
-
27,461
b) buildings
-
-
104,333
-
-
109,233
2. Purchased under finance leases
136,694
-
-
-
-
-
-
a) land
-
-
-
-
-
-
b) buildings
-
-
-
-
-
-
-
-
131,441
-
-
136,694
Total
Investment property is stated at the market value determined by independent appraisals, with
changes in their fair value recorded in “net gains (losses) arising on fair value adjustments to
property, plant and equipment and intangible assets” in the income statement. The above
appraisals are updated on an annual basis, at 31 December of each year.
- 240 -
B
12.5 Property, plant and equipment used for business purposes: changes during the year
Land
A. Opening gross amount
Buildings
Furniture
IT equipment
Other
Total
78,078
410,299
112,879
86,480
174,714
862,450
-
101,151
92,150
80,396
99,074
372,771
78,078
309,148
20,729
6,084
75,640
489,679
5,190
3,926
1,139
1,581
8,794
20,630
B.1 Purchases
-
1,154
1,133
1,570
8,764
12,621
B.2 Capitalized improvement expenditure
-
1,262
-
-
-
1,262
B.3 Writebacks
-
-
-
-
-
-
B.4 Fair value increases booked to:
-
-
-
-
-
-
a) equity
-
-
-
-
-
-
b) income statement
-
A.1 Total net reductions in value
A.2 Opening net amount
B. Increases
-
-
-
-
-
B.5 Positive exchange rate adjustments
-
-
-
-
-
-
B.6 Transfers from investment property
-
1,510
-
-
-
1,510
5,190
-
6
11
30
5,237
43,497
B.7 Other changes
C. Decreases
4
29,508
4,703
3,016
6,266
C.1 Sales
-
-
18
11
85
114
C.2 Depreciation
-
11,448
4,610
2,997
6,146
25,201
C.3 Impairment writedowns booked to:
12,874
4
12,870
-
-
-
a) equity
-
-
-
-
-
-
b) income statement
4
12,870
-
-
-
12,874
C.4 Fair value increases booked to:
-
-
-
-
-
-
a) equity
-
-
-
-
-
-
b) income statement
-
-
-
-
-
-
C.5 Negative exchange rate adjustments
-
-
-
-
-
-
C.6 Transfers to:
-
-
-
-
-
-
a) investment property
-
-
-
-
-
-
b) assets held for sale
-
-
-
-
-
-
-
5,190
75
8
35
5,308
83,264
283,566
17,165
4,649
78,168
466,812
-
112,599
96,760
83,393
105,220
397,972
83,264
396,165
113,925
88,042
183,388
864,784
-
-
-
-
-
-
C.7 Other changes
D. Closing net amount
D.1 Total net reductions in value
D. Closing gross amount
E. Carried at cost
Line C.3 shows the impairment writedowns of properties for business use recognised under
income statement item 200 “Net adjustments to property, plant and equipment”.
- 241 -
B
12.6 Investment property: changes during the year
Total
Assets/Values
Land
A. Opening balance
Buildings
27,461
109,233
B. Increases
-
1,463
B.1.Purchases
-
1,435
B.2 Capitalized improvement expenditure
-
-
B.3 Positive changes in fair value
-
1
B.4 Writebacks
-
-
-
-
B.6 Transfers from property, plant and equipment used
for business purposes
-
-
B.7 Other changes
-
27
353
6,363
C.1 Sales
-
490
C.2 Depreciation
-
-
353
4,363
C.4 Impairment writedowns
-
-
-
-
C.6 Transfers to:
-
1,510
a) property used for business purposes
-
1,510
b) non-current assets held for sale
-
-
-
-
27,108
104,333
C. Decreases
C.3 Negative changes in fair value
C.7 Other changes
D. Closing balance
E. Measurement at fair value
Lines B.3 and C.3 show the changes in the fair value of investment property recognised under
income statement item 250 “Net gains (losses) arising on fair value adjustments to property,
plant and equipment and intangible assets”.
12.7 Commitments to purchase property, plant and equipment
There are no commitments at the reporting date for the purchase of property, plant and
equipment that warrant disclosure.
- 242 -
B
SECTION 13
Intangible assets – Item 130
13.1 Intangible assets: analysis by type of asset
Assets/Values
31/12/2015
Finite life
31/12/2014
Indefinite life
Finite life
Indefinite life
A.1 Goodwill
X
6,223
X
329,862
A.1.1 attributable to the group
X
6,223
X
329,862
A.1.2 attributable to minority interests
X
-
X
-
A.2 Other intangible assets
4,703
-
17,950
-
A.2.1 Carried at cost:
4,703
-
17,950
-
-
-
-
-
4,703
-
17,950
-
a) Other intangible assets: generated internally
b) Other assets
A.2.2 Carried at fair value:
-
-
-
-
a) Other intangible assets: generated internally
-
-
-
-
b) Other assets
-
-
-
-
4,703
6,223
17,950
329,862
Total
The carrying value of goodwill has been tested for impairment in accordance with IAS 36 and
written down by Euro 323,639 thousand, since it represents an intangible asset with an indefinite
useful life.
The results of these tests are discussed in the specific paragraph later on in this section.
At 31 December 2015, this line consists of the difference arising on consolidation of the
subsidiary Farbanca SpA.
At 31 December 2014, "Other intangible assets" (line A.2) includes Euro 12,578 thousand in
“intangibles” associated with the valuation of customer relationships, identified as part of the
Purchase Price Allocation (PPA) process relating to the acquisition of 61 branches from the UBI
Group at the end of 2007. As at 31 December 2015, the residual value of said intangibles
(amounting to Euro 10,932 thousand) was fully written off.
The other intangible assets classified in line A.2 “Other intangible assets” mainly refer to
proprietary software and user licenses.
- 243 -
B
Disclosure about impairment testing of goodwill and intangible assets with an indefinite useful life (IAS
36, par. 134-137)
IAS 36 defines the principles for accounting for and providing disclosures on the impairment of
certain asset types, including goodwill. It describes the principles that a company should follow
to ensure that the carrying amount of its assets does not exceed the recoverable amount.
IAS 36 defines the recoverable amount as the higher of:
-
-
Fair value less costs of disposal - value understood as the amount that can be obtained,
net of disposal costs, from the sale of an asset in an orderly transaction between market
participants;
Value in use - equal to the present value of future cash flows that the company expects to
raise from continuous use of a specific asset or a CGU.
IAS 36 requires a comparison to be made between the carrying amount of goodwill and its
recoverable amount (impairment test) any time it is believed that the asset may have undergone
impairment (trigger events) and in any case at least once per year, when the annual financial
statements are drafted.
The verification of the existence of trigger events and impairment testing must relate to a specific
asset or a Cash Generating Unit (CGU). A CGU is the smallest identifiable group of assets
generating cash inflows largely independent of the cash inflows generated by other assets, or
groups of assets with respect to which the Group prepares independent reporting of results
through management reporting systems. The recoverable amount of goodwill is estimated with
reference to the CGUs since goodwill is not capable of generating independent cash flows.
In relation to the provisions of IAS 36, on the basis of the considerations set forth above, the
goodwill recognised in the Group’s consolidated financial statements is subject to impairment
tests both at the time of preparation of the half-year report (solely for CGUs for which trigger
events have been identified) and at 31 December 2015. The analysis conducted on both occasions
included the following activities:
1) Identification of CGUs and allocation of goodwill to the CGUs identified
2) Determination of the recoverable amount of the CGUs
3) Impairment test results
1) Identification of CGUs and allocation of goodwill to the CGUs identified
At 31 December 2015, the following CGUs (Cash Generating Units) were tested to verify the
sustainability of the carrying amount of goodwill, goodwill arising on consolidation classified in
goodwill, and goodwill arising on application of the equity method allocated to equity
investments:





Banca Nuova CGU (same as the legal entity);
Farbanca CGU (same as the legal entity);
Prestinuova CGU (same as the legal entity);
Cattolica Life CGU (same as the legal entity);
Cattolica Assicurazioni CGU.
- 244 -
B
In checking the consistency of the assumption that the legal entities were the CGUs to be tested
for impairment, reference was made to the principles set out in IAS 36, also taking into account
the fact that, amongst the various justifications, the long-term and annual system of management
reporting to the Group’s Board of Directors is organised by legal entity, and that bank branches
acquired in the past are now fully integrated within the individual banks and individual legal
entities are given responsibility for achieving results, and there is such a significant loss of
income streams in those branches that the earnings of individual business units acquired in the
past are no longer autonomous and perfectly independent of those from other groups of assets.
At the time of preparing the half-year report at 30 June 2015, the analysis conducted to identify
the existence of trigger events highlighted some elements that made it necessary to verify the
adequacy of the value of the goodwill booked to the financial statements as at 31 December 2014,
relating to the BPVi CGU (corresponding to the legal entity Banca Popolare di Vicenza, net of
investments held and of the consequent effects on equity and income) and the Banca Nuova
CGU, leading the company to believe that these may have suffered impairment and therefore
that it was necessary to estimate their recoverable value.
In particular, the prospects for the development of activities also related to the growing attention
on the capitalisation levels required by the Supervisory Authorities, the negative results recorded
in the first half of 2015, the significant deviation of these results from the budget forecasts and
the preparation of the 2015-2020 Strategic Plan during that period by the Parent Company’s new
Management, led the company to believe it was necessary carry out impairment testing on the
goodwill relating to the BPVi CGU and the Banca Nuova CGU.
As a result of the results obtained from the valuation, an impairment loss of Euro 268.8 million
was recognised on goodwill at consolidated level, with the full write-down of the goodwill of the
BPVi CGU (Euro 213.8 million) and a write-down of Euro 55.0 million on the goodwill of the
Banca Nuova CGU.
The elements that led to these results are mainly attributable:

for the BPVi CGU, to the impacts on capital relating to the outcomes of the inspection
visit carried out by the ECB which recorded criticality profiles in capital management,
with subsequent effects on capital ratios and, in addition, to the revision of the economic
projections which, in the last explicit forecast year, highlight a negative differential with
respect to the corresponding value considered in the impairment test as at 31 December
2014;

for the Banca Nuova CGU, to the revision of the economic projections with a reduced net
income in the last explicit forecast year with respect to the figure envisaged in the
projections used as at 31 December 2014.
As the goodwill attributable to the BPVi CGU was entirely written off on that occasion, no
analysis needs to be performed on the aforesaid CGU in the year-end financial statements,
whereas, following the analysis carried out to identify the existence of trigger events with
reference to the Banca Nuova CGU at 31 December 2015, the need has emerged to conduct a
further impairment test on the goodwill allocated to said CGU. In fact, deviations were recorded
on the final 2015 balance and on the 2016 budget figure with respect to the projections used for
the purposes of the impairment tests as at 30 June 2015. These deviations are primarily
attributable to events that concerned the Group, especially in the last four months of the year and
which impacted, in particular, the evolution in volumes, as well as the worsening in the context
and the forecasts in particular, with reference to the development in interest rates.
- 245 -
B
More specifically, negative deviations were recorded both with reference to the net income as at
2015 (with respect to the estimated projections for the purposes of impairment testing in the halfyearly report), and between the net income forecast in the 2016 budget and the corresponding
figure taken into consideration by the projections used for the impairment test as at 30 June 2015
in relation, in particular, to the interest margin and the value adjustments on loans.
The following table reports the value of goodwill allocated to the various CGUs and the equity
differences recognised under Equity method investments of the companies over which
significant influence is exercised at 31 December 2015, as resulting from checks on the
sustainability of the carrying amount performed during the year:
Goodwill arising on
consolidation
Farbanca
Goodwill arising on
application of the equity
method
6,223
-
Cattolica Assicurazioni
-
94,045
Cattolica Life
-
2,121
ABC Assicura
-
417
Total
6,223
96,583
2) Determination of the recoverable amount of the CGUs
The Group’s goodwill was tested for impairment by identifying the value in use as the
recoverable amount of the individual CGUs.
In testing the CGU for impairment, and therefore in determining the value in use, Banca
Popolare di Vicenza received assistance from PricewaterhouseCoopers Advisory S.p.A.
Only the value in use was determined for the aforementioned CGU since, due to the substantial
lack of comparable transactions in the last 5 years, a fair value determined based on M&A
transaction multiples would not be significant. In addition, consistently with the previous years,
it was decided not to apply Stock Market multiples.
In any event, this approach is consistent with IAS 36, which prescribes that the book value of a
CGU shall be compared with the higher amount between the value in use and the market/sale
value, and the latter is deemed not suitable for the reasons set out above.
In compliance with best practices and the most widespread valuation practices used to
determine the general value of economic capital of financial companies, the value in use of the
CGUs was determined using the Dividend Discount Model - DDM method, in its "Excess
Capital" variant, which establishes that the economic value of a financial company is given by
discounting a stream of expected dividends determined on the basis of minimum capital
requirements dictated by the Supervisory Authority.
With regard to the sustainability check of the carrying amount of goodwill carried out at 31
December 2015, the point of departure for the DDM Excess Capital variant was the preliminary
data at 31 December 2015 and the 2016-2020 projections developed by the Management based on
the guidelines of the 2015-2020 Strategic Plan and the risk limits set forth in the Risk Appetite
Framework.
- 246 -
B
The Excess Capital variant of the DDM method determines the value in use as the sum of the
present value of the maximum dividend that may be distributed in the explicit planning period
(2016-2020), in compliance with the target capitalisation requirements assumed for valuation
purposes, and the Terminal Value, calculated based on the net income expected for the last year
of explicit projection (2020) plus the estimated long-term inflation rate, i.e. 1.34%.
The same valuation method was also adopted for the checks carried out at 30 June 2015. On that
occasion, data at 30 June 2015 and 2015-2020 projections were taken into account. For the
purpose of determining the Terminal Value, the assumed long-term inflation rate was 1.50%.
With the awareness that although the macroeconomic indicators are showing signs of partial
recovery, there is still much uncertainty, and as required by regulations, the results were tested
for their sensitivity to changes in specific parameters in the economic and financial forecasts.
2.a Valuation parameters
In line with the approach adopted for previous impairment tests, to apply the Excess Capital
variant of the DDM method, the cost of capital (Ke) was estimated based on the Capital Asset
Pricing Model (CAPM) determined as follows:
Ke = i + β * MRP
Where:
i:
risk free rate, assumed to be equal to the gross return of ten-year Italian Treasury Notes
at the date of assessment;
β:
beta coefficient, measuring the volatility of an asset’s return in relation to the market;
MRP:
Market Risk Premium, i.e. the compensation for an investment whose risk exceeds the
one expressed by a risk-free asset.
In this case, at 31 December 2015:



the rate i was determined taking as a reference the gross average return of ten-year Italian
treasury notes in the 1 July 2015 - 31 December 2015 time interval (six-month average), and is
assumed to be 1.8%.
β is determined based on historical data relating to listed companies identified as
comparable. In particular, the observation period for calculation of the coefficient is 5 years
from 31 December 2015 and the reporting frequency is monthly;
MRP is assumed to be 5.5%, up by 50 basis points from the last impairment tests, taking into
account the latest risk premium estimates provided by Damodaran.
Overall Ke, determined according to the method adopted in recent years, is 8.2% for bank CGUs,
and the same estimate was extended to Prestinuova.
In testing BPVi and Banca Nuova CGUs for impairment at 30 June 2015, the parameters
considered for Ke determination were as follows:



the rate i is determined taking as a reference the gross average return of ten-year Italian
treasury notes in the 1 January 2015 - 30 June 2015 time interval (six-month average);
β is equal to 1.2 and is determined based on historical data relating to listed companies
identified as comparable. In particular, the observation period for calculation of the
coefficient is 5 years from 30 June 2015 and the reporting frequency is monthly;
the MRP was assumed to be 5.0%.
- 247 -
B
It was determined that the Ke obtained from the valuation at 30 June 2015, equal to 7.5% for BPVi
and Banca Nuova CGUs, should be subject to an add-on of 50 bps and 100 bps respectively. The
use of this add-on was meant to reflect, for reasons of prudence, the uncertain context triggered
by the volatile macroeconomic scenario, the estimated capital targets with respect to the
minimum levels set forth by Basel 3, the financial position of the CGUs and of the Group, and its
impacts on the expected evolution of business. In continuity with that approach, it was deemed
appropriate to calculate a 1.0% add-on on the Ke determined at 31 December 2015 for Banca
Nuova CGU only.
As at 31 December 2015, the expected long-term growth rate (g) was assumed, in line with longterm inflation forecasts provided by the International Monetary Fund, to be 1.34% (1.50% as at 30
June 2015).
The factors determining the cost of capital (Ke) and the growth rate (g) used in the valuations of
the CGUs as at 31 December 2015 and 30 June 2015 are shown below:
CGU
CGU BPVi
CGU Banca Nuova
CGU Farbanca
CGU Prestinuova
CGU Cattolica Assicurazioni
CGU Cattolica Life
Impairment Test 31/12/2015
Risk
Capital
Add on
Premiu
cost KE
Gross
free risk
Beta
n.a.
1.8%
1.8%
1.8%
1.8%
1.8%
n.a.
1.2
1.2
1.2
1.0
1.2
n.a.
5.5%
5.5%
5.5%
5.5%
5.5%
n.a.
1.0%
-
n.a.
9.2%
8.2%
8.2%
7.3%
8.4%
g
Gross
free risk
n.a.
1.3%
1.3%
1.3%
1.3%
1.3%
1.70%
1.70%
Impairment Test 30/06/2015
Risk
Capital
Add on
Premiu
cost KE
Beta
1,2
1,2
5.0%
5.0%
0.5%
1.0%
8.0%
8.5%
g
1.5%
1.5%
For comparison purposes, the factors determining cost of capital used for the various CGUs at 31
December 2014 are shown below:
CGU
Gross
Capital
Beta
Risk
Premium
Add on
2.4
1.12
5.0%
-
8%(1)
2.4
1.12
5.0%
-
8.0%
2.4
2.4
2.4
1.12
1.03
1.26
5.0%
5.0%
5.0%
-
8.0%
7.6%
8.7%
free risk
cost KE
rate
CGU BPVi
CGU Banche (Banca Nuova,
Farbanca)
CGU Prestinuova
CGU Cattolica Assicurazioni
CGU Cattolica Life
(1) For the BPVi CGU, a cost of capital of 8.5% was used
The investment held in in Cattolica Assicurazioni was tested for impairment at 31 December
2015, as required by the accounting standards.
For this purpose, a "sum of the parts" valuation method was used, aimed at considering both its
stand-alone value and the value of synergies arising from the partnership agreement executed
with the company.
The recoverable value of the equity method investment was determined as the sum:

of the Equity Value of Cattolica Assicurazioni determined using the Dividend Discount
Model, in the sense of the Excess Capital, taking as a reference the quarterly report of
Cattolica at 30 September 2015 and the economic-capital projections in the Brokers’ reports
pertaining to the Cattolica security;
- 248 -
B

the Net Present Value of revenue synergies by capitalising to infinity the commission
passed back to the BPVi Group on the placement of loss and protection insurance products.
In line with previous years, PwC assessed the Cattolica Life CGU on the basis of the earnings
method, using the operating and financial position at 30 September 2015 as the starting point,
and the plan agreed upon with Cattolica Assicurazioni for the period from Q4 2015 to end 2020,
with expected earnings prudentially reduced compared to the plan estimates set out in the 2012
agreement.
In addition to the method described above, a valuation of the CGU was performed by applying
the Appraisal Value method.
2.b Development of forecast data
 Impairment test at 30 June 2015
At the time of preparing the half-year report at 30 June 2015, the point of departure for the DDM
method in determining the value in use of the CGUs was the preliminary data as at 30 June 2015
and the estimated economic/capital and financial evolution for future years developed by the
Management based on the guidelines of the 2015-2020 Strategic Plan and the criteria laid out by
IAS to estimate future cash flows in order to conduct impairment testing.
The outlook estimates had been determined based on the following main criteria:
-
for the second half of 2015, the estimate had been based on data at 30 June 2015;
-
for subsequent years, the latest Prometeia estimates contained in the forecast report
update of July 2015 (bank balance sheets) were considered after being appropriately
adjusted to take into account the guidelines of the 2015-2020 Strategic Plan, the risk
appetite framework and the specific characteristics of the financial statements of Banca
Popolare di Vicenza and Banca Nuova.
The assumptions of growth of the activities and operations of the two CGUs were reflected in the
adjustment, over the time period of the plan, of the necessary capitalisation levels, in compliance
with regulatory and legal rules in force, the capitalisation targets set forth, also taking into
account ECB requirements, and the completion of the capital strengthening plan prepared by the
new Management, assuming that certain points of concern in the current operating and financial
position will be remedied.
The economic/capital and financial projections took into account a market rate scenario that is
consistent with the forecasts published by Prometeia for the 2015-2017 period, and the annual
spreads implicit in the yield curve surveyed at the end of July 2015, for the two subsequent years.
For the details of the considerations made with reference to the assumptions pertaining to the
evolution of the main quantities considered in the estimation of the projections, please refer to
the Half-year report at 30 June 2015.
 Impairment test at 31 December 2015
At 31 December 2015, the point of departure for the DDM Excess Capital variant for the
determination of the value in use of CGUs was the preliminary data at 31 December 2015 and the
2016-2020 projections developed by the Management based on the guidelines of the 2015-2020
Strategic Plan and the risk limits set forth in the Risk Appetite Framework.
As part of the impairment test analysis, the 2016-2020 projections were determined on the basis
of the data shown below, taking into account for all CGUs a market rate scenario that is
consistent with the forecasts published by Prometeia for the 2016-2018 period, and the annual
spreads implicit in the yield curve surveyed at the end of December 2015, for the two subsequent
years.
- 249 -
B
Banca Nuova CGU
The assumptions for the operating volumes for the forecast years (2016-2020) are that:

net loans will grow, taking Prometeia's assumption into consideration, at an average rate of
+3.4%. 15-18 CAGR is +2.9%, slightly higher than indicated by Prometeia (15-18 CAGR
+2.6%). This growth includes a trend in gross bad loans with an expected 15-18 CAGR of
+9.2%, higher than Prometeia’s forecast (+5.9%);
 the average change in direct funding is 3.6%. 15-18 CAGR is +3.7%, higher than indicated by
Prometeia (15-18 CAGR +1.2%). These levels, higher than the Prometeia forecasts, reflect the
Group’s need to guarantee an adequate liquidity profile and compliance with regulatory
limits;
 the 15-20 CAGR of indirect funding is 9.2%. This growth is supported by the market effect as
well as the continuing shift in private savings towards the assets under management and
retirement savings segment.
With regard to income statement line items:
 net interest income was determined based on the expected growth of lending and deposit
volumes. Rates and spreads were estimated on the basis of the rate scenario used. With
reference to loans, the evolution in rates to customers takes into account the contractual
indexing of the different forms of loan and of the application of spreads determined in a riskadjusted perspective, on the basis of the models developed by the Parent Bank. As regards the
evolution of “sight” deposits, considering the contractual characteristics of the aggregate, it
was assumed that borrowing rates would rise. With respect to the evolution of bond funding,
it was assumed that the spreads applied to new issues would gradually decrease in line with
the gradual improvement of the issuer’s credit rating. Overall, the 15-20 CAGR of net interest
income is +1.2%. The 15-18 CAGR is +0.4% lower than forecast by Prometeia (+1.3% 15-18
CAGR), as a result of the decreasing contribution of ALM strategies and the securities
portfolio, in the presence of a greater contribution of income from customer;
 the overall 15-20 CAGR of net fee and commission income is 5.2%. The average growth rate in
the 2015-2018 period is +5.2%, higher than indicated by Prometeia (15-18 CAGR +3.8%). The
projections assume, inter alia, an increase in indirect funding, reflecting the continuation of
the shift in private savings towards assets under management and retirement savings
products, an increase in third-party loans and growth in other revenues from services.

adjustments to loans are assumed to converge gradually towards a cost of credit of
approximately 0.85%. The evolution of the cost of credit is consistent with the average
portfolio PDs expected over the plan period and the specific transition matrices of Banca
Nuova;

payroll costs were estimated assuming, among other things, a substantially inertial evolution
in costs arising from application of the new National Collective Labour Agreement and
considering personnel management policies, and show an overall 15-20 CAGR of -0.6%;


the other administrative costs record an overall 15-20 CAGR of -+3.7% (15-18 CAGR of -5.8%,
vs. an average rate of +1.3% forecast by Prometeia). This reduction is attributable to the cost
management activities to be carried out during the Plan period;
income taxes were calculated according to current tax laws and regulations.
- 250 -
B
Farbanca CGU

net loans will grow at an average rate of +5.3% (+6.7% in the 2015-2018 period). In any case,
issues of loans in the medium to long term are substantially in line with 2015;

the average change in direct funding in the 15-20 period is +11.8%, reflecting the Group’s
need to guarantee an adequate liquidity profile and compliance with regulatory limits.

net interest income was determined based on the expected growth of lending and deposit
volumes. Rates and spreads were estimated on the basis of the rate scenario used. With
reference to loans, the evolution in rates to customers takes into account the contractual
indexing of the different forms of loan and of the application of spreads determined in a riskadjusted perspective, on the basis of the models developed by the Parent Bank. Overall, the
15-20 CAGR of net interest income is +6.6%;

the evolution in net fee and commission income is substantially in line with the growth
forecast by Prometeia (Farbanca 15-20 CAGR +4%, compared to Prometeia’s 15-18 CAGR of
+3.8%)

adjustments to loans are assumed to converge gradually towards a cost of credit of
approximately 0.52% in 2020. The evolution of the cost of credit is consistent with the average
portfolio PDs expected over the plan period and the specific transition matrices of Farbanca;

considering personnel management policies, and show an overall 15-20 CAGR near 0%;

the other administrative costs record an overall CAGR for 15-20 of +0.3%;

Prestinuova CGU

loan issues will grow by an average of +10% in the 2015-2020 period;

net loans will grow, taking Prometeia's assumption into consideration, at an average rate of
+4.1% (15-20 CAGR);

direct funding will increase in 2016 as a result of a new revolving securitisation;

the remaining new funding requirements will be covered by the Parent Bank.
 net interest income was determined based on the expected growth of lending and deposit
volumes. Rates and spreads were estimated on the basis of the rate scenario used. Overall, the
15-20 CAGR of the net interest income is +0.8%;
 fee and commission income is correlated to loan issues and as such, in compliance with
accounting standards, are stated at amortised cost in the interest income;
 adjustments to loans are estimated on the assumption that the cost of credit will remain
constant over the projection years (0.12%);
- 251 -
B

considering personnel management policies, and show an overall 15-20 CAGR near +0.4%;

the other administrative costs record an overall 15-20 CAGR of -10.9%; This reduction is
attributable to the cost management activities to be carried out during the Plan period;

3) Impairment test results
Whereas, as pointed out, the BPVi and Banca Nuova CGUs were subject to impairment testing
and write-down as at 30 June 2015, at 31 December 2015, the average value in use of all analysed
CGUs is higher than the value to be tested, except for Banca Nuova CGU.
As a result of the valuation performed, the further impairment loss on goodwill generated at
consolidated level, compared to 30 June 2015, is approximately Euro 54.8 million, corresponding
to a full write-down of the goodwill of the Banca Nuova CGU.
It should be noted that the elements that led to this result primarily relate to the economic,
financial and equity projections which, updated in light of the year-end results and the new
reference scenario, highlighted negative variations with respect to those used for the impairment
test as at 30 June 2015, and a higher cost of capital (Ke) (+70 basis points) connected with the
updating of the risk-free rate, the market risk premium and the rate ‘g’’; for details please refer to
paragraph 2.a. “valuation parameters”.
With the awareness that although the macroeconomic indicators are showing signs of partial
recovery, there is still much uncertainty, and as required by regulations, the valuations at 31
December 2015 were tested for their sensitivity to changes in specific parameters in the economic
and financial forecasts, with regard to:
1. cost of capital – Ke (+/- 0.25%) and growth rate – g (+/- 0.25%),
2. cost of capital – Ke (+/- 0.25%) and growth rate – g (+/- 0.25%) along with:
I.
the change in terms of 2015-2020 CAGR (+/- 0.50%) of the banking income
associated with a change in the cost of credit (+/- 0.05%) in the last year of the
plan (i.e. of the terminal value), OR
II.
maintenance of a minimum cost of credit over the 2015-2020 Plan period, equal to
1.0% for the Banca Nuova CGU, 0.7% for the Farbanca CGU and 0.25% for the
Prestinuova CGU.
Based on the sensitivity analyses conducted, the differential with respect to the value of the
Banca Nuova CGU to be tested is comprised in the range between Euro –110.5 million and Euro –
2.2 million, while for the other CGUs analysed the estimated minimum recoverable value
expressed by the range is still higher than the value to be tested.
At the time of preparing the half-year report at 30 June 2015, impairment tests were only
performed on the BPVi and Banca Nuova CGUs, for which the value in use was estimated to be
lower than the value to be tested. As a result, at consolidated level, an impairment loss of Euro
268.8 million was recognised on goodwill, with the full write-down of the goodwill of the BPVi
CGU (Euro 213.8 million) and a write-down of Euro 55.0 million on the goodwill of the Banca
Nuova CGU.
- 252 -
B
For the Banca Nuova CGU, a sensitivity analysis was carried out on the results of the valuation,
also when performing the impairment test at 30 June 2015. On that occasion, the parameters
analysed for sensitivity included the cost of capital – Ke (+/- 0.5%), the growth rate – g (+/0.5%), and the cost of credit (+/- 0.05) in the last year of the plan (i.e. terminal value) and the
average annual growth rate (+/- 0.5%) of banking income in the last year of the plan (i.e.
terminal value). Lastly, a specific stress test was conducted on the cost of credit, assuming a level
of 1.0% in the 2015-2020 planning period. This analysis resulted in a range of values with a
differential varying between Euro -111.2 million and Euro –21.6 million compared to the value to
be tested.
The value in use of the BPVi CGU was also analysed for sensitivity at 30 June 2015 in relation to
the change in the Ke/g parameters only. This analysis showed a range of values with a negative
differential with respect to the value to be tested that was always higher than the impairment
loss recognised.
Overall, in 2015 the write-downs on consolidated goodwill amounted to Euro 323.6 million, of
which Euro 213.8 million attributable to the BPVi CGU (fully written off at 30 June 2015), and
Euro 109.8 million pertaining to the Banca Nuova CGU (written down by Euro 55 million at 30
June 2015 and by the remaining Euro 54.8 million at 31 December 2015).
It is worth recalling that the assessments made for the purposes of the impairment test were
particularly complex in consideration of the macroeconomic and market environment, of the
new regulatory framework and standards for the Italian banking system, and by the consequent
difficulty and uncertainty tied to long-term income forecasts, which has a predominant effect on
the value in use when the Excess Capital variant of the DDM method is used.
Therefore, the estimates, projections and parameters used for the impairment tests could evolve
in different directions in the future from those assumed, possibly to a significant extent.
- 253 -
B
13.2 Intangible assets: changes during the year
Other intangible assets:
generated internally
Goodwill
FIN
A. Opening balance
INDEF
Other intangible
assets: other
FIN
Total
INDEF
1,152,818
-
-
37,244
-
1,190,062
A.1 Total net reductions in value
822,956
-
-
19,294
-
842,250
A.2 Opening net amount
347,812
329,862
-
-
17,950
-
B. Increases
-
-
-
2,891
-
2,891
B.1 Purchases
B.2 Increases in internally generated intangible assets
X
-
-
2,891
-
-
2,891
-
B.3 Writebacks
X
-
-
-
-
-
-
-
-
-
-
B.4 Fair value increases booked to:
a) equity
X
-
-
-
-
-
b) income statement
X
-
-
-
-
-
-
-
-
-
-
-
B.6 Other changes
-
-
-
-
-
-
323,639
-
-
16,138
-
339,777
C. Decreases
C.1 Sales
-
-
-
-
-
-
323,639
-
-
16,138
-
339,777
- Amortization
X
-
-
5,206
-
5,206
- Writedowns
323,639
-
-
10,932
-
334,571
+ equity
X
-
-
-
-
-
+ income statement
323,639
-
-
10,932
-
334,571
-
-
-
-
-
-
-
-
-
-
C.2 Adjustments
C.3 Fair value increases booked to:
a) equity
X
b) income statement
X
-
-
-
-
-
C.4 Transfers to discontinued operations due for disposal
-
-
-
-
-
-
-
-
-
-
-
-
C.6 Other changes
-
-
-
-
-
-
D. Closing net amount
6,223
-
-
4,703
-
10,926
D.1 Total net value adjustments
1,146,595
-
-
35,432
-
1,182,027
E. Closing gross amount
1,152,818
-
-
40,135
-
1,192,953
-
-
-
-
-
-
F. Carried at cost
Key:
DEF: definite life
INDEF: indefinite life
The opening balance of “Other intangible assets” does not include those assets which had been
fully depreciated at the end of the prior year.
The “Adjustments” of line C.2 refer (Euro 323,639 thousand) to the impairment on goodwill
recognised in the income statement under item 260 “Adjustments to goodwill” and (Euro
10,932 thousand) to the write-down of the residual value of the intangibles identified within the
PPA process of the price paid for the acquisition of the 61 branches of the UBI Group completed
at the end of 2007, recognised in the income statement under item 210 “Net adjustments to
intangible assets”.
- 254 -
B
It is reported that:

no intangible assets have been revalued under paragraph 124 b) of IAS 38;

there are no intangible assets that have been acquired under government concession;

no intangible assets have been given as security against the Bank's debts;

there are no commitments for the purchase of intangible assets that warrant disclosure;

there are no intangible assets under finance leases.
As for the allocation of goodwill between cash-generating units, reference should be made to
the information contained in the specific paragraph earlier in the present section.
- 255 -
B
SECTION 14
Tax assets and liabilities – Asset line item 140 and Liability line item 80
14.1 Deferred tax assets: breakdown
Deferred tax assets
31/12/2015
Deferred tax assets through the income statement
- Tax losses
- of which DTA convertible Law 214/2011
- Goodwill subject to impairment and franking
- Adjustments to loans to customers
- Provisions for risks and charges
- Other
Deferred tax assets through equity
- Revalutations of financial asset available for sale
- Hedging derivatives (CFH) of assets/liabilities at fair
value
- Hedging derivatives (CFH) of assets/liabilities at
amoritzed cost
- Actuarial variations of defined benefit pension plans
- Other
Total
31/12/2014
1,102,356
769,201
221,015
8,507
1,328
8,507
261,282
335,454
259,329
335,454
447,064
392,057
445,665
390,474
141,159
18,789
31,836
14,394
252,658
97,878
1,035
26,418
248,549
68,036
1,190
-
403
1,914
1,481
1,510
1,355,014
867,079
14.2 Deferred tax liabilities: breakdown
Deferred tax liabilities
31/12/2015
Deferred tax liabilities through the income statement
- Goodwill (depreciation)
- Gains in installments
- Other
Deferred tax liabilities through equity
- Revalutations of financial asset available for sale
- Profit (loss) from CFH discontinuing
- Other
Total
- 256 -
31/12/2014
29,769
43,563
-
12,188
2,412
5,077
27,357
26,298
283,778
136,765
261,648
13,996
8,134
100,084
28,548
8,133
313,547
180,328
B
14.3 Change in deferred tax assets (through the income statement)
31/12/2015
31/12/2014
1. Opening balance
769,201
450,042
2. Increases
477,852
378,153
2.1 Deferred tax assets recorded during the year
477,376
375,294
a) relating to prior years
-
938
b) due to changes in accounting policies
-
-
c) writebacks
-
-
477,376
374,356
-
-
d) other
2.2 New taxes or increases in tax rates
2.3 Other increases
3. Decreases
3.1 Deferred tax assets reversing during the year
a) reversals
476
2,859
144,697
58,994
10,242
53,958
9,576
53,958
b) written down as no longer recoverable
-
-
-
-
666
-
d) other
3.2 Reduction in tax rates
3.3 Other decreases
a) transformation in tax credits pursuant to Law 214/2011
b) other
4. Closing balance
-
-
134,455
5,036
133,683
4,468
772
568
1,102,356
769,201
14.3.1 Change in deferred tax assets per Italian Law 214/2011 (through the income statement)
31/12/2015
31/12/2014
1. Opening balance
734,435
424,586
2. Increases
106,275
357,505
3. Decreases
134,388
47,656
3.1 Reversals
316
42,917
133,683
4,468
125,176
4,468
3.2 Trasformation in tax credits
a) resulting from operating losses
8,507
-
3.3 Other decreases
b) arising from tax losses
389
271
4. Closing balance
706,322
734,435
- 257 -
B
14.4 Change in deferred tax liabilities (through the income statement)
31/12/2015
1. Opening balance
31/12/2014
43,563
120,019
2. Increases
2,382
21,010
2.1 Deferred tax liabilities recorded during the year
2,382
16,220
-
-
-
-
2,382
16,220
-
-
2.3 Other increases
-
4,790
3. Decreases
16,176
97,466
3.1 Deferred tax liabilities eliminated during the year
16,163
97,464
16,163
97,464
-
-
c) other
-
-
-
-
3.3 Other decreases
13
2
4. Closing balance
29,769
43,563
c) other
a) reversals
- 258 -
B
14.5 Change in deferred tax assets (through equity)
31/12/2015
1. Opening balance
31/12/2014
97,878
75,253
2. Increases
186,473
69,461
2.1 Deferred tax assets recorded during the year
186,473
69,461
-
-
-
-
186,473
69,461
-
-
2.3 Other increases
-
-
3. Decreases
31,693
46,836
3.1 Deferred tax assets reversing during the year
31,693
46,119
31,659
46,114
b) written down as no longer recoverable
-
-
-
-
34
5
-
-
3.3 Other decreases
-
717
4. Closing balance
252,658
97,878
d) other
a) reversals
d) other
- 259 -
B
14.6 Change in deferred tax liabilities (through equity)
31/12/2015
31/12/2014
1. Opening balance
136,765
21,514
2. Increases
189,805
120,950
2.1 Deferred tax liabilities recorded during the year
189,804
120,900
-
-
-
-
189,804
120,900
-
-
2.3 Other increases
1
50
3. Decreases
42,792
5,699
3.1 Deferred tax liabilities eliminated during the year
42,792
5,657
42,792
5,657
-
-
c) other
-
-
-
-
3.3 Other decreases
-
42
4. Closing balance
283,778
136,765
c) other
a) reversals
Disclosure about deferred taxes
With respect to Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL) recorded in the
financial statements at 31 December 2015, as detailed in the tables of the Section in question, the
following information is provided.
Concerning deferred taxes recorded as offsetting entries against equity, the total amount of
deferred tax liabilities (Euro 283,778 thousand) is higher than the amount of the deferred tax
assets (Euro 252,658 thousand). Moreover, a significant portion of the deferred tax assets
recorded as offsetting entries against equity (Euro 248,549 thousand, i.e. approximately 98% of
deferred tax assets recorded as offsetting entries against equity) refers to the capital losses
recorded in the dedicated equity reserve in relation to the change in the fair value of cash flow
hedge derivatives used as micro hedges of the inflation risk of Italian government bonds
recorded under “Financial assets available for sale”. The aforesaid deferred tax assets are in fact
balanced by the deferred tax liabilities (Euro 255,795 thousand) recorded as offsetting entries
against equity in view of the capital gain recognised on Government bonds micro hedged
against the inflation risk through the aforesaid cash flow hedge derivatives.
- 260 -
B
Therefore, in relation to deferred tax assets recorded as offsetting entries against equity it seems
reasonable to expect that the related deductible temporary differences will be reversed and/or
deleted in the same years when the taxable temporary differences are expected to be released
and/or zeroed, with a balanced effect on the taxable income of future years. For this reason, the
conditions prescribed by IAS 12 for recording the aforementioned deferred tax assets are deemed
to exist.
With regard to deferred tax assets recorded as offsetting entries in the income statement, the
following information is provided:
 Euro 706,322 thousand (approximately 64% of total deferred tax assets recorded as offsetting
entries in the income statement) are IRES and IRAP DTA that fulfil the requirements of Italian
Law no. 214/2011. These DTA can be transformed into tax receivables when the Bank records
an operating loss or a tax loss, within the limits prescribed by pertinent provisions;
 Euro 219,687 thousand refer to IRES DTA recorded in view of the tax loss accrued in 2015,
which according to current regulations (Article 84 of Italian Presidential Decree no. 917/86)
may be computed as a reduction of the income of the tax periods of future years, without time
limits;
 Euro 146,578 thousand refer to the imbalance between DTA and DTL, both IRES and IRAP,
relating to cases other than the above ones. The most significant amount of the IRES DTA
(Euro 124,118 thousand) refers to the deferred tax assets recorded in view of provisions for
risks and charges allocated in relation to the legal risks connected with “BPVi capital
transactions” and with the other critical issues emerged in the course of the ECB’s inspection.
With regard to “DTA per Law no. 214/2011”, for said deferred tax assets, in accordance with the
joint document by Bank of Italy/Ivass/Consob of 15 May 2012, the “probability test” is deemed
to be automatically met because it is certain that they will be entirely recovered in all
circumstances.
With regard to the DTA, other than those per Law no. 214/2011, the considerations on the basis
of which the conditions for recording them according to IAS 12 are deemed to be met are
described below. In particular, in the verification prescribed by the aforementioned accounting
standard for recording the DTA, the following elements were taken into account:
 the Board of Directors approved a Business Plan for the 2015-2020 time interval, which
forecasts profits starting from the year 2017, with a net income target of over Euro 200 million
in 2018 and over Euro 300 million in 2020;
 according to current tax regulations, the IRES tax loss may be computed as a reduction of the
income of the tax periods of future years, without time limits;
 a significant component of the DTA recorded in the 2015 Financial Statements (Euro 220
million) refers to the deferred tax assets recorded in view of the tax loss deriving from the
adjustments recognised in the year with regard to the loans “correlated” to the BPVi capital
and to the provisions for risks and charges allocated in relation to the legal risks connected
with the “BPVi capital transactions” and with the other critical issues emerged in the course of
the ECB’s inspection. In assessing the probability of achieving, in the future, sufficient taxable
income to absorb the deferred tax assets recorded in the financial statements, in accordance
with IAS 12, the aforesaid DTA were deemed to have identifiable causes that are unlikely to
be repeated.
- 261 -
B
Based on the above considerations, as a result of the assessments made it was deemed likely that
future taxable income will be available in view of which it will be possible to use the IRES DTA
deriving both from the tax loss of the year and from the other deductible temporary differences.
In this regard, on the basis of the analyses carried out, the IRES DTA recorded in the financial
statements will be recovered beyond the explicit horizon of the 2015-2020 Business Plan,
assuming that the profit of the years following the last one in the time interval of the plan is at
least equal to that of the last explicit year of the Plan.
With regard to the IRAP DTA, with the exception of the year 2016 for which a negative taxable
income is forecast, for all other years under the 2015-2020 Group Business Plan the value of the
estimated IRAP taxable value of production is always positive and sufficient to reabsorb the
IRAP DTA that will expire in the years included in the explicit time horizon of the Plan. It should
also be pointed out that over 94% of the IRAP DTA refers to “DTA per Law no. 214/2011”, for
which - as specified above - the probability test is deemed to be automatically met because it is
certain that they will be entirely recovered in all circumstances.
Lastly, it should be pointed out that the elements considered above for probability test purposes
present the following reasons for uncertainty:
 risk that changes to tax regulations, not foreseeable today, may in the future limit the
possibility to recognise the IRES tax loss, reduce the tax rates with a consequent reduction in
the amount of the recoverable DTA or entail even significant impacts on the taxable income of
upcoming years;
 risk that, for any reason not currently foreseeable, the economic results (and the consequent
future taxable income) are lower than those estimated by the Business Plan.
The occurrence of the aforesaid circumstances could lead in upcoming years even to significant
adjustments in the accounting values of the deferred tax assets recorded in the Financial
Statements.
Current tax assets at 31 December 2015 totalled Euro 101,607 thousand (Euro 81,437 thousand at
31 December 2014).
In compliance with the Bank of Italy Circular no. 262 of 22 December 2005 as amended, “Tax
assets” (asset line item 140) and “Tax liabilities” (liability line item 80) in the statement of
financial position only include those tax assets and liabilities (current and deferred) recognised
in accordance with IAS 12 (governing income taxes), while other tax credit/debit balances are
reported in “Other assets” (asset line item 160) and “Other liabilities” (liability line item 100) of
the statement of financial position.
In compliance with IAS 12, payments on account for individual taxes have been offset against the
related tax payable, with net positive balances reported as "Tax assets: current" and net negative
balances as "Tax liabilities: current".
- 262 -
B
SECTION 15
Non-current assets held for sale and associated liabilities – Asset line item 150 and
liability line item 90
This Section has not been completed since the Group does not have any non-current assets held
for sale and discontinued operations and associated liabilities within the meaning of IFRS 5.
- 263 -
B
SECTION 16
Other assets – Line item 160
16.1 Other assets: breakdown
31/12/2015
1. Miscellaneous debits in transit
31/12/2014
11,279
14,069
1,210
605
172,488
207,108
4. Checks drawn on third parties sent for collection
4,074
11,042
5. Accrued income and prepaid expenses not allocated to
specific accounts
4,000
4,604
6. Leasehold improvements
11,123
14,275
7. Items awaiting allocation
1,140
757
97,506
67,960
194,344
43,887
4,415
1,304
501,579
365,611
2. Miscellaneous security transactions
3. Amounts recorded on the last day of the year
8. Other fiscal items
9. Other miscellaneous items
10. Differences on elimination
Total
“Leasehold improvements” consist of improvement expenditure that cannot be separated from
the assets themselves, meaning that it cannot be separately recognised in property, plant and
equipment. These costs are amortised over the period they are expected to benefit or the residual
duration of the lease, whichever is shorter.
“Amounts recorded on the last day of the year” refer to items almost all of which settled in the
first few days of the new year.
The increase in "Other miscellaneous items" mainly refers to receivables related to the sale of
certain equity investments, for which it has been agreed deferred payment of a portion of the
sale price.
Tax liabilities in the table, in compliance with the Bank of Italy Circular no. 262 of 22 December
2005, as amended, report the tax liabilities that do not fall under the scope of IAS 12 (governing
income taxes).
- 264 -
B
LIABILITIES AND EQUITY
SECTION 1
Due to banks – Line item 10
1.1 Due to banks: breakdown by type
Type of transaction/Members of the group
31/12/2015
31/12/2014
1. Due to central banks
6,651,137
1,749,074
2. Due to other banks
3,322,322
3,008,774
2.1 Current accounts and sight deposits
280,879
594,794
2.2 Time deposits
650,714
428,115
2,203,483
1,613,863
1,528,535
1,194,330
674,948
419,533
-
-
187,246
372,002
Total
9,973,459
4,757,848
Fair value - level 1
-
-
-
-
9,973,459
4,750,199
Total fair value
9,973,459
4,750,199
2.3 Loans
2.3.1 repurchase agreements
2.3.2 other
2.4 Payables for commitments to repurchase own equity
instruments
2.5 Other payables
In item 1. “Due to central banks” shows refinancing operations in which the Bank participated
by forming a pool of assets eligible as collateral. In particular, at 31 December 2015, there are two
three-year refinancing operations in place within the scope of the ECB’s initiative called TLTRO
(Targeted Longer Term Refinancing Operations), of which Euro 1,249 million carried out in 2014
and Euro 600 million carried out in 2015. The remainder is represented by ordinary refinancing
operations through participation in the weekly auctions (“MRO”).
Line 2.3.1 also includes funding “repurchase agreements” using securities obtained under
lending “repurchase agreements”.
For the determination of the fair value of due to banks, please see Section A.4 - “Information
about fair value”.
1.2 Details of the Line item 10 “Due to banks”: subordinated debt
There is no subordinated debt with banks.
1.3 Details of the Line item 10 “Due to banks”: structured debt
There is no structured debt with banks.
1.4 Due to banks with micro hedges
There are no amounts due to banks with micro hedges.
1.5 Finance lease payables
There are no finance leases with banks.
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B
SECTION 2
Due to customers – Line item 20
2.1 Due to customers: breakdown by type
Type of transaction/Members of the group
31/12/2015
1. Current accounts and sight deposits
31/12/2014
11,414,960
13,963,241
1,710,223
2,578,264
850,590
2,437,714
-
1,760,085
850,590
677,629
-
-
2,296,364
3,178,440
Total
16,272,137
22,157,659
-
-
-
-
16,263,198
22,157,874
Total Fair value
16,263,198
22,157,874
2. Time deposits
3. Loans
3.1 repurchase agreements
3.2 other
4. Payables for commitments to repurchase own equity
instruments
5. Other payables
“Other payables” at 31 December 2015 include Euro 2,052.1 million (Euro 2,880.1 million at 31
December 2014) in liabilities for assets sold but not derecognised, as the matching entry to the
mortgages sold under certain securitisations originated by the Group which do not qualify for
derecognition under IAS 39 and so have been “reinstated” in the statement of financial position
in “Loans and advances to customers” (asset line item 70).
For the determination of the fair value of payables due to customers, please see Section A.4 “Information about fair value”.
2.2 Details of Line item 20 “Due to customers”: subordinated debt
There is no subordinated debt with customers.
2.3 Details of Line item 20 “Due to customers”: structured debt
There is no structured debt with customers.
2.4 Due to customers with micro hedges
There are no amounts due to customers with micro hedges.
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B
2.5 Finance lease payables
There are no finance leases with customers.
Time distribution of residual debt to lease companies
31/12/2015
31/12/2014
up to 1 year
227
218
1 to 5 years
1,006
966
over 5 years
1,992
2,259
Total
3,225
3,443
720
720
Total
3,945
4,163
surrender value
Asset
Residual debt
Buildings
Total
Residual debt
3,945
4,163
3,945
4,163
In 2011, the subsidiary Immobiliare Stampa took over the finance lease agreement pertaining to a
high-value building, located in Venice, paying Euro 6,691 thousand. The principal value of the
residual payments of the lease agreement, expiring in July 2027, amounts to Euro 3,945 thousand
- 267 -
B
SECTION 3
Debt securities in issue – Line item 30
3.1 Debt securities in issue: breakdown by type
31/12/2015
Book value
Level 1
31/12/2014
Fair value
Level 2
A. Securities
5,199,085
-
5,342,218
1. Bonds
5,067,469
-
5,342,218
85,272
-
86,925
4,982,197
-
5,255,293
131,616
-
-
1.1 structured
1.2 other
2. other securities
2.1 structured
-
-
131,616
-
-
-
5,199,085
-
2.2 other
Total
5,342,218
Book value
Level 3
131,616
Level 1
Fair value
Level 2
Level 3
6,668,144
-
6,944,087
-
6,533,067
-
6,944,087
-
-
342,681
-
373,224
-
-
6,190,386
-
6,570,863
135,077
-
-
131,616
-
-
131,616
-
135,077
-
-
-
131,616
6,668,144
-
6,944,087
135,119
135,119
135,119
135,119
The Item 1.1 “Structured bonds” is related to bond issues convertible into Parent Bank shares.
More specifically, said bond is convertible by bond holders into ordinary shares of Banca
Popolare di Vicenza from 1 November 2016 to 30 November 2016, in a ratio of 1 share of par
value Euro 3.75 each for every bond of nominal value Euro 64.50. Bondholders are entitled to
convert early in the event of extraordinary operations involving capital, except for mergers with
other companies in the Banca Popolare di Vicenza Group or with companies controlled by the
Bank.
Line 1.2 “Other bonds” also includes repurchase agreements with underlying own issue
securities amounting to Euro 335,555 thousand (Euro 301,119 thousand at 31 December 2014).
Line 2.2 “Other securities” comprises certificates of deposit and own cheques in circulation.
For the determination of the fair value of debt securities in issue, please see Section A.4 “Information about fair value”.
3.2 Details of line item 30 "Debt securities in issue”: subordinated securities
31/12/2015
713,437
31/12/2014
768,498
More information about subordinated liabilities can be found in Part F, Section 2 of these
Explanatory notes.
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B
3.3 Details of line item 30 "Debt securities in issue”: securities backed by micro hedges
Type of security/Amounts
31/12/2015
A. Securities
1. Bonds
264,505
1.1 structured
-
1.2 other
264,505
31/12/2014
400,124
400,124
2. other securities
-
-
2.1 structured
-
-
2.2 other
-
-
Total
264,505
400,124
The amounts shown in the table above refer to the nominal value of fixed-rate bonds subject to
micro hedges.
- 269 -
B
SECTION 4
Financial liabilities held for trading – Line item 40
4.1 Financial liabilities held for trading: breakdown by type
31/12/2015
Type of transaction/
Members of the group
31/12/2014
FV
NV
L1
L2
FV*
L3
FV
NV
L1
L2
FV*
L3
A. Cash liabilities
1. Due to other banks
-
-
-
-
-
-
-
-
-
-
2. Due to customers
-
-
-
-
-
65,106
68,563
-
-
68,563
3. Debt securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.1.1 Structured
-
-
-
-
X
-
-
-
-
X
X
-
-
-
-
X
-
-
-
-
-
-
-
-
3.1 Bonds
3.1.2 Other bonds
-
-
-
-
3.2 Other securities
-
-
-
-
3.2.1. Structured
-
-
-
-
X
-
-
-
-
X
-
-
-
-
3.2.2 Other
Total A
-
-
-
X
-
-
-
-
X
65,106
68,563
-
-
68,563
-
B. Derivatives
-
70
2,771,663
253
-
5,887,961
-
70
2,771,168
253
X
X
-
5,885,529
-
X
495
-
X
X
-
2,432
-
X
-
-
X
X
-
-
-
X
-
-
-
-
-
-
X
-
-
-
X
X
-
-
-
X
X
-
-
-
X
X
-
-
-
X
X
-
-
-
X
X
-
-
-
X
1.1 Dealing
X
1.2 Connected with fair value option
X
-
1.3 Other
X
-
2. Credit derivatives
-
2.1 Dealing
2.2 Connected with fair value option
2.3 Other
-
-
-
-
-
Total B
X
70
2,771,663
253
X
X
-
5,887,961
-
X
Total (A+B)
X
70
2,771,663
253
X
X
68,563
5,887,961
-
X
Key:
FV = Fair value
FV* = Fair value calculated excluding the differences in value due to changes in the issuer’s credit rating since the issue date
NV = Nominal or notional value
L1 = Level 1
L2 = Level 2
L3 = Level 3
At 31 December 2014, “Cash liabilities” referred to short positions on Italian Government bonds,
no longer present at 31 December 2015.
There are no derivatives with underlying own liabilities.
4.2 Details of Line item 40 “Financial liabilities held for trading”: subordinated liabilities
There are no subordinated liabilities.
4.3 Details of Line item 40 “Financial liabilities held for trading”: structured debt
There is no structured debt.
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B
SECTION 5
Financial liabilities designated at fair value – Line item 50
5.1 Financial liabilities designated at fair value: breakdown by type
31/12/2015
1. Due to banks
1.1 Structured
1.2 Other
31/12/2014
Fair value
NV
L1
L2
FV*
L3
-
-
-
-
-
-
-
-
X
X
-
-
-
-
2. Due to customers
-
-
-
-
2.1 Structured
-
-
-
-
-
-
-
-
2.2 Other
3. Debt securities
3.1 Structured
3.2 Other
Total
460,123
-
471,516
-
Fair value
NV
-
X
X
476,100
L1
L2
FV*
L3
-
-
-
-
-
-
-
-
X
-
-
-
-
X
-
-
-
-
-
-
-
-
-
-
-
1,495,456
-
-
X
-
X
1,547,346
-
1,551,738
X
33,322
-
33,490
-
X
49,847
-
50,449
-
426,801
-
438,026
-
X
1,445,609
-
1,496,897
-
X
460,123
-
471,516
-
1,495,456
-
1,547,346
-
1,551,738
476,100
Key:
FV = Fair value
FV* = Fair value calculated excluding the differences in value due to changes in the issuer’s credit rating since the issue date
NV = Nominal value
L1 = Level 1 L2 = Level 2 L3 = Level 3
This line item includes own bonds correlated with derivative contracts that hedge interest rate
risk, valued by applying the fair value option, as allowed by IAS 39 (natural hedges).
Structured securities relate mainly to liabilities containing an optional part linked to the
performance of interest rates.
5.2 Details of line item 50 "Financial liabilities designated at fair value”: subordinated liabilities
31/12/2015
Debt securities
31/12/2014
-
107,452
More information about subordinated liabilities can be found in Part F, Section 2 of these
Explanatory notes.
- 271 -
B
SECTION 6
Hedging derivatives - Line item 60
6.1 Hedging derivatives: analysis by type of hedge and levels
L1
A. Financial derivatives
L2
NV
31/12/2015
L3
L1
L2
L3
NV
31/12/2014
-
887,624
-
4,375,835
-
525,379
-
5,960,332
1) Fair value
-
117,137
-
459,935
-
264,273
-
815,332
2) Cash flows
-
770,487
-
3,915,900
-
261,106
-
5,145,000
3) Foreign investments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1) Fair value
-
-
-
-
-
-
-
-
2) Cash flows
-
-
-
-
-
-
-
-
B. Credit derivatives
Total
-
887,624
-
4,375,835
-
525,379
-
5,960,332
Key: NV = nominal value; L1 = Level 1; L2 = Level 2; L3 = Level 3
This line item reports derivatives with a negative fair value, taken out to hedge interest rate risk
on specific fixed-rate mortgage portfolios classified as “Loans and advances to customers” and
on specific debt securities classified as “Financial assets available for sale”.
This line item also reports derivatives with a negative fair value, taken out to hedge cash flows
relating to specific floating-rate mortgage books recorded under “Loans and advances to
customers” and inflation-indexed debt securities recorded under “Financial assets available for
sale”.
6.2 Hedging derivatives: breakdown by type of hedged portfolio and type of hedge
Fair value
Transactions/Type of hedge
Cash flows
Specific
Interest Exchang
rate risk
e risk
Generic
Foreign
investments
Multiple
Price risk
risk
-
-
-
X
766,849
X
X
63,848
-
-
X
-
X
3,152
X
X
-
-
X
-
X
-
X
X
4. Portfolio
X
X
-
117,137
-
2. Portfolio
Specific
53,289
Total assets
Credit
risk
Generic
X
Total liabilities
X
X
-
-
-
-
-
-
-
-
-
-
X
-
X
-
-
X
-
X
X
X
-
X
X
X
X
X
X
X
2. Portfolio of financial assets and liabilities
X
X
X
X
X
X
-
-
X
486
X
X
X
X
-
X
-
770,001
486
-
-
1. Expected transactions
-
X
X
X
-
X
-
X
X
X
-
-
Hedge” accounting model for those relating to investments in debt securities, while it used the
“Macro Fair Value Hedge” model for those relating to mortgage loans, with the consequent
recognition of the revaluations of the hedged assets in Asset line item 90 “Remeasurement of
financial assets backed by macro hedges”.
- 272 -
B
SECTION 7
Remeasurement of financial liabilities backed by macro hedges - Line item 70
This section has not been completed since there are no financial liabilities backed by macro
hedges.
SECTION 8
Tax liabilities – Line item 80
Current tax liabilities at 31 December 2015 totalled Euro 3,456 thousand (Euro 1,842 thousand at
31 December 2014).
Deferred tax liabilities are discussed in asset Section 14.
In compliance with IAS 12, payments on account for individual taxes have been offset against
the related tax payable, with net positive balances reported as "Tax assets: current" and net
negative balances as "Tax liabilities: current".
It should be noted that, in compliance with the Bank of Italy Circular no. 262 of 22 December
2005 as amended, “Tax assets” (asset line item 140) and “Tax liabilities” (liability line item 80) in
the statement of financial position only include those tax assets and liabilities (current and
deferred) recognised in accordance with IAS 12 (governing income taxes), while other tax
credit/debit balances are reported in “Other assets” (asset line item 160) and “Other liabilities”
(liability line item 100) of the statement of financial position.
- 273 -
B
SECTION 9
Liabilities associated with non-current assets held for sale – Line item 90
This Section has not been completed since the Group does not have any liabilities associated with
non-current assets held for sale.
- 274 -
B
SECTION 10
Other liabilities –Item 100
10.1 Other liabilities: breakdown
31/12/2015
31/12/2014
1. Miscellaneous security transactions
27,177
22,378
2. Employee salaries and contributions
25,139
28,244
3. Due to suppliers
28,784
28,916
4. Transactions in transit
178,429
168,326
5. Adjustments for non-liquid balances relating to the portfolio
242,918
246,261
10,746
22,940
6,059
7,461
31,640
41,129
166,879
225,799
717,771
791,454
6. Allowance for risks on guarantees and commitments
7. Accrued expenses and deferred income not allocated to specific accounts
8. Other fiscal items
9. Other miscellaneous items
Total
“Transactions in transit” refer to positions taken in the last few days of the year, almost all of
which settled in the first few days of the new year.
Tax liabilities in the table, in compliance with the Bank of Italy Circular no. 262 dated 22
December 2005, as amended, report the tax assets that do not fall under the scope of IAS 12
(governing income taxes).
- 275 -
B
SECTION 11
Provision for severance indemnities – Line item 110
11.1 Provision for severance indemnities: changes during the year
31/12/2015
A. Opening balance
31/12/2014
80,132
75,298
1,424
8,459
1,398
1,846
26
8,971
6,613
695
3,625
C.1 Payments made
3,519
3,354
C.2 Other decreases
5,452
271
72,585
80,132
B. Increases
B.1 Provisions
B.2 Other increases
- of which business combination
C. Decreases
D. Closing balance
According to IFRIC, the provision for severance indemnities is a “post-employment benefit”
qualifying as a “defined benefit plan”, the value of which according to IAS 19 must be
determined on an actuarial basis. As a consequence, the year-end valuation of this amount was
carried out by an independent actuary using the projected unit credit method with reference to
earned benefits. This method involves the projection of future payments with reference to past
trends and statistical analyses and probabilities, adopting suitable demographic techniques. This
makes it possible to calculate the severance indemnities accruing at a specific date on an actuarial
basis, distributing the cost over the entire remaining service of the current workforce, and no
longer presenting them as a cost payable as if the business were to cease trading on the reporting
date.
Line B.1 “Provisions” includes, in addition to the actual provisions for the year determined in
accordance with current laws and with the National Collective Labour Agreement, also the
adjusting effect of the actuarial measurement recognised in the income in accordance with IAS
19.
Line B.2 “Other increases” includes the effect of the actuarial measurement, recognised as a
balancing entry of the specific equity valuation reserve, in accordance with IAS 19.
The actuarial valuation of severance indemnities produced under the above method is Euro 2,708
thousand less than the amount calculated in accordance with prevailing law and collective
payroll agreements (whereas in 2014 it had been in deficit by Euro 7,666 thousand).
- 276 -
B
The demographic and financial assumptions used by the actuary to value the provision for
severance indemnities at 31 December 2015 compared to those at 31 December 2014 are shown
below.
Demographic assumptions
31/12/2015
Mortality rate
Disability
Age of retirement
31/12/2014
RG48
RG48
INPS tables by age and gender
Achievement of compulsory
general insurance requirements
INPS tables by age and gender
Achievement of compulsory
general insurance requirements
31/12/2015
31/12/2014
Financial assumptions
Annual discounting rate
Annual inflation rate
2.03%
1.54%
1,50% 2016
0,60% 2015
1,80% 2017
1,20% 2016
1,70% 2018
1,50% 2017 and 2018
1,60% 2019
2,00% from 2019 onawards
Rate of severance indemnity increase
2,625% 2016
Annual frequency of turnover and severance indemnity advances
Advances (main rate)
Turnover (main rate)
- 277 -
1,95% 2015
2,850% 2017
2,40% 2016
2,775% 2018
2,625% 2017 e 2018
2,700% 2019
31/12/2015
31/12/2014
1.00%
1.00%
1.00%
1.00%
B
SECTION 12
Provision for risks and charges – Line item 120
12.1 Provisions for risks and charges: breakdown
Items/Amounts
31/12/2015
1. Post-retirement benefits
2. Other provisions for risks and charges
2.1 legal disputes
2.2 personnel expenses
2.3 other
Total
31/12/2014
4,829
5,253
543,248
53,096
40,318
38,658
1,426
3,871
501,504
10,567
548,077
58,349
“Post-retirement benefits” refer to the Supplementary Section of the Pension fund, a defined
benefit plan of the former subsidiary Cariprato, merged into Banca Popolare di Vicenza on 31
December 2010, more details of which can be found in note 12.3 below. The Capitalisation
Section of this fund is a defined contribution plan and so is not reported in the statement of
financial position, in compliance with IAS 19.
12.2 Provisions for risks and charges: changes during the year
Total
Post-retirement
Other provisions
benefits
Items/Amounts
A. Opening balance
5,253
53,096
117
511,929
116
510,495
B.2 Changes due to the passage of time
-
-
B.3 Changes due to variations in the discount rate
-
933
B.4 Other increases
1
501
541
21,777
541
20,943
C.2 Changes due to variations in the discount rate
-
-
C.3 Other decreases
-
834
4,829
543,248
B. Increases
B.1 Provisions
C. Decreases
C.1 Utilizations during the year
D. Closing balance
- 278 -
B
12.3 Defined benefit pension funds
1. Illustration of the characteristics of the provisions and of the related risks
The Bank operates a supplementary pension fund for employees under an agreement signed on
30 June 1998 between Cariprato, merged into BPVi in December 2010, and the employees’
unions. This Fund, restricted under article 2117 of the Italian Civil Code and governed by
specific regulations, is divided into two Sections:

the Capitalisation Section, which guarantees supplementary pension benefits on a defined
contribution basis, requiring the Bank to pay an annual amount calculated with reference
to the taxable base used for determining severance indemnities;

the defined benefit Supplementary Section, which is described in this note.
The Supplementary Section represents the continuation, under current rules, of the original Fund
set up under an in-house agreement dated 27 June 1972 to supplement the benefits payable by
INPS. Its participants comprise personnel of the former subsidiary Cariprato who were already
pensioners as of 1 July 1998, as well as the employees of the bank at 1 May 1981 who opted to
remain in the Supplementary Section on 1 July 1998.
The Fund guarantees pension benefits to members that supplement those paid by INPS under
the obligatory national scheme. These benefits can represent up to 75% of the last pensionable
salary received (after 35 years of service).
At 31 December 2015, the Supplementary Section’s participants comprise 2 employees still in
service and 53 entitled to supplementary or substitute benefits greater than zero.
2. Change in the year of the net defined benefit liabilities (assets) and of the rights to reimbursement
The opening and closing balances of the present value of the defined benefit obligation are
reconciled below, indicating the effects of changes during the year:
Description
Mathematical reserve
Mathematical reserve at 31/12/2014
5,253
Net earnings of the Fund
184
Benefit paid
(541)
Payments made
8
Actuarial loss - 2015
(75)
Mathematical reserve at 31/12/2015
4,829
At 31 December 2015, the size of the Fund was aligned to the mathematical reserve calculated on
the same date, since the Bank, in accordance with Article 8 of the Fund Regulations, had settled
the deficit of Euro 116 thousand (versus a deficit of Euro 211 thousand in the previous year)
resulting from the actuarial valuation.
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B
The Fund's assets, all invested in cash and cash equivalents with Banca Popolare di Vicenza,
decreased from Euro 5,253 thousand at 31 December 2014 to Euro 4,829 thousand at 31 December
2015. The decreases during the year derive from the payment of Euro 541 thousand in pensions,
whilst the increases comprise Euro one thousand from interest income for the remuneration of
the invested cash and Euro 116 thousand from the payment made to settle the Fund deficit and
make its size match the mathematical reserve.
3. Disclosures on the fair value of plan assets
The present value of the defined benefit obligation and the fair value of the plan assets and the
plan’s surplus or deficit are presented for the current year and four previous ones:
year
Present value
Fair value of assets
Surplus or (Deficit)
2011
6,361
6,505
144
2012
5,923
5,838
(85)
2013
5,681
5,268
(414)
2014
5,253
5,042
(211)
2015
4,829
4,713
(116)
At 31 December 2015, the Bank allocated a provision of Euro 116 thousand to make the size of
the Fund match the Mathematical Reserve.
There are no differences between the present value of plan assets and the assets and liabilities
reported in the statement of financial position since all the fund’s resources are invested in liquid
assets.
4. Description of principal actuarial assumptions
The amount of the supplementary Fund in relation to the obligations to its participants is
reviewed once a year by an independent actuary.
The principal actuarial assumptions adopted for the latest calculation of the mathematical
reserve at 31 December 2015 are set out below.
This valuation was made using the demographic, economic and financial assumptions described
below.
Demographic assumptions
The following criteria were adopted:
 probability of death of current employees and pensioners: mortality rates applying to the Italian
population published by ISTAT in 2014;
 probability of termination of service for absolute and permanent disability: probabilities adopted
by the Treasury Ministry’s Pension Institutes, published in the report for 1969, reduced to
75% of the original amount;
 age of retirement: it was assumed that active employees who do not “die in service” or
“retire for intervening disability” stop working as soon as they reach the minimum
pensionable age/length of service established by current retirement legislation in Italy.
No person may receive benefits unless they also qualify for a pension payable by INPS;
- 280 -
B


calculation of indirect expenses and of reversibility: the calculation refers to the composition of
the average surviving family unit, depending on the employee’s sex and age on death,
and the number of years since death. The probabilities of marriage (by sex and age) and
the probabilities of fertility (by age of the female and by order of birth of the children)
were taken from the ISTAT “Marriage tables” (1971) and from the ISTAT “Female fertility
survey” (1974), with appropriate adjustments to take account of social changes in the past
twenty years. In order to take account of the changes introduced by Law 335/1995 on the
accumulation of surviving spouse pensions and beneficiary income, the pension payable
by INPS to surviving spouses has been reduced to 66% (based on information obtained in
relation to a major bank);
types of remuneration: these were taken, with suitable standardisation, from actual statistics
relating to the staff of a bank at 31 December 1995, split between the four categories:
managers and officials, male middle managers and clerical staff, female middle managers
and clerical staff, subordinate and auxiliary staff. Due to the limited number of employees
of Cassa, the data which can be directly identified by examining its experience is
immaterial.
Economic and financial assumptions
The following rates have been adopted:
 technical rate: 2.5% (3.5% at 31 December 2014).
 annual inflation rate: 1.50% for 2016; 1.80% for 2017; 1.70% for 2018; 1.60% for 2019; 2% for
2020 and the following years (2% at 31 December 2014);
 annual rate of salary increases: 1% (2.25% at 31 December 2014).
5. Information on amount, timing and uncertainty of cash flows
On the basis of assumptions reported in the earlier paragraph, the calculation of charges the
Fund must deal with in the future gave the following results.
Pensioners
Average present value of integrated pension (Euro)
Males
direct
24,178,244
indirect and survivors' pensions
total
24,178,244
Females
4,132,450
4,132,450
Total
24,178,244
4,132,450
28,310,694
Average present value of INPS pension (Euro)
direct
total
Males
20,463,026
20,463,026
Average present value of supplementary pension (Euro)
Males
direct
3,715,218
total
3,715,218
- 281 -
Females
3,093,205
3,093,205
Females
1,039,246
1,039,246
Total
20,463,026
3,093,205
23,556,231
Total
3,715,218
1,039,246
4,754,464
B
Active
Average present value of treatments accrued (Euro)
integrated pension
pension INPS
1,362,394
supplementary pension
1,288,086
74,308
As regards timing, for the 53 pensioners, the average age is around 78 years for males and 80
years for females.
As regards current employees, it was assumed they will continue to keep up the same percentage
of work activity in future as they have done up till now.
6. Multi-employer plans
This paragraph has not been completed, since there is just one employer.
7. Defined benefit plans that spread risks among entities under common control
This paragraph has not been completed since there are no risks spread among entities under
common control.
12.4 Provisions for risks and charges – other provisions
Items/Amounts
31/12/2015
1. Legal disputes
1.1 Civil litigation
1.2 Bankruptcy claims
2. Personnel expenses
3. Other
3.1 transactions on BPVi capital
3.2 Other
Totale
31/12/2014
40,318
38,658
36,303
29,605
4,015
9,053
1,426
3,871
501,504
10,567
488,959
-
12,545
10,567
543,248
53,096
The provision for legal disputes relates to contingencies associated with claims against the Bank
(other than those relating to transactions on BPVi capital) and from the liquidators of bankrupt
companies.
The provision for employment costs refers to the lawsuits connected with the employees.
The other provisions for risks and charges relate (Euro 488,959 thousand) to “BPVi equity
transactions” and address legal risks associated with the different criticality profiles emerged in
the course of the inspection by the ECB and the subsequent internal analyses carried out and
disclosed in the “Inspections” paragraph of the Report on Operations and (Euro 12,545
thousand) to lawsuits connected with fiscal disputes and other sundry charges.
The lawsuit for bankruptcy claims and litigation against the Bank (other than cases relating to
the transactions on BPVi capital) has been discounted to present value, while the other
provisions refer to contingencies that are likely to be settled within the next 12/18 months.
Consequently, these liabilities have not been discounted since the effect would not be significant.
- 282 -
B
SECTION 13
Technical reserves – Line item 130
SECTION 14
Redeemable shares – Line item 150
This Section has not been completed because the Group has not issued any redeemable shares.
- 283 -
B
SECTION 15
Group equity – Line items 140, 160, 170, 180, 190, 200 and 220
15.1 “Capital stock” and “Treasury shares”: breakdown
Items/Amounts
31/12/2015
- Total number of shares
- Nominal value
31/12/2014
100,587,829
93,832,032
Euro 3.75
Euro 3.75
15.2 Capital stock – Number of shares issued by the parent bank: changes during the year
Items/Amounts
Ordinary
A. Shares issued at the beginning of the year
- fully paid
- not fully paid
A.1 Treasury shares (-)
A.2 Outstanding shares: opening balance
Other
93,832,032
-
93,832,032
-
-
-
414,202
-
93,417,830
-
B. Increases
7,257,829
-
B.1 New issues
6,755,797
-
- payment:
5,992,697
-
-
-
5,777,913
-
-
-
214,784
-
763,100
-
- to employees
-
-
- to directors
-
-
763,100
-
502,032
-
-
-
495,357
-
- business combinations
- conversion of bonds
- exercise of warrant
- other
- bonus:
- other
B.2 Sale of treasury shares
B.3 Other changes
C. Decreases
C.1 Elimination
-
-
495,357
-
C.3 Disposal of companies
-
-
C.4 Other changes
-
-
100,180,302
-
C.2 Purchase of treasury shares
D. Outstanding shares: closing balance
D.1 Treasury shares (+)
D.2 Shares at the end of the year
- fully paid
- not fully paid
407,527
-
100,587,829
-
100,587,829
-
-
-
The “New issues - conversion of bonds” of line B.1 relate almost entirely to the new shares
issued by effect of the conversion of the convertible bond “BPVi 2013-2018 Convertible” of a
nominal amount of Euro 253 million issued within the scope of the capital increase completed in
2013.
The “New issues - bonus - other” of line B.1 refer to the assignment, to entitled shareholders, of
the loyalty bonus in shares provided within the scope of the capital increase completed in 2013.
- 284 -
B
15.3 Capital stock: other information
As a result of bonus issues in previous years, capital stock includes the following revaluation
reserves in suspense for tax purposes:






Reserve under Law 74 dated 11.02.1952 for Euro 24 thousand;
Reserve under Law 72 dated 19.03.1983 for Euro 13,005 thousand;
Reserve under Law 576 dated 02.12.1975 for Euro 553 thousand;
Reserve under Law 413 dated 30.12.1991 for Euro 28,054 thousand.
15.4 Reserves from earnings: other information
As is better described in the “Inspections” paragraph of the Report on Operations, the review of
the capital carried out by the ECB brought to light a correlation between
acquisitions/subscriptions
of
BPVi
shares
and
loans
disbursed
to
certain
Members/Shareholders. In this regard it is pointed out that the equity reserves are subject to a
restriction making them non-distributable pursuant to Art. 2358, paragraph 6 of the Italian Civil
Code, in the amount of Euro 304.4 million. In addition to the amount mentioned above there is
another non-distributable equity reserve pursuant to Art. 2358, paragraph 6 of the Italian Civil
Code in the amount of Euro 57 million relating to two “ordinary” share capital increase
transactions to expand the shareholder base, which offered new Shareholders the possibility of
subscribing BPVi shares with resources deriving from a loan granted by the Bank, in compliance
with the provisions of Art. 2358 of the Italian Civil Code.
- 285 -
B
SECTION 16
Minority interests – Line item 210
16.1 Breakdown of line item 210 “Minority interests”
Entity name
31/12/2015
31/12/2014
Investments in consolidated firms with significant minority interests
1. Farbanca SpA
17,572
17,888
479
9
504
8
18,060
18,400
Other investments
1. Nem Imprese
2. Servizi Bancari SCpA
Total
16.2 Equity instruments: breakdown and changes during the year
This Section has not been completed since there are no equity instruments pertaining to minority
interests included in equity.
- 286 -
B
OTHER INFORMATION
1. Guarantees given and commitments
Operations
31/12/2015
1) Financial guarantees
31/12/2014
873,404
434,638
27,568
47,977
845,836
386,661
552,886
644,015
38,872
67,222
514,014
576,793
952,802
1,176,959
5,242
35
5,242
35
-
-
947,560
1,176,924
3,126
1,139
944,434
1,175,785
4) Commitments underlying credit derivatives: protection sold
-
-
5) Assets lodged to guarantee the commitments of third parties
9,397
-
19,732
42,515
2,408,221
2,298,127
a) Banks
b) Customers
2) Commercial guarantees
a) Banks
b) Customers
3) Irrevocable commitments to make loans
a) Banks
i) certain to be called on
ii) not certain to be called on
b) Customers
i) certain to be called on
ii) not certain to be called on
6) Other commitments
Total
- 287 -
B
2. Assets pledged to guarantee own liabilities and commitments
Portfolio
31/12/2015
31/12/2014
61,196
743,761
-
-
4,745,765
2,245,071
-
43,374
1,089,726
925,778
9,869,960
7,377,739
18,887
-
The assets pledged as security shown in the table refer mainly:

for assets held for trading, to own securities pledged in repurchase agreements;

for financial assets available for sale, to securities transferred in the pooling of assets pledged
as security for refinancing operations carried out with the ECB, as well as those pledged in
repurchase agreements or deposited to secure own liabilities;

for loans and advances to banks, to cash collateral in view of the exposures deriving from
operations involving OTC derivatives and/or Repo/bond buy sell back, regulated by
international standards (CSA/GMRA) subscribed on existing ISDA contracts with the
various counterparties that regulate such operations;

for loans and advances to customers, to the securitised loans reported for an amount
proportional to the portion of the related ABS securities placed directly on the market or
subscribed by the Group and subsequently re-employed in funding operations, such as
repurchase agreements for funding and/or refinancing with the ECB. Also included are the
loans in place with customers and connected with financing obtained from multilateral
development banks and from other institutional counterparties as well as those transferred
into the pooling of assets pledged as security for refinancing operations carried out with the
ECB.

for tangible assets, to a property under a finance lease and a property purchased in previous
years, encumbered by a mortgage in favour of third parties.
It should be noted that, in addition to the information reported in the table, also the interest held
in an insurance investee was pledged as security for own liabilities. Lastly, for a total of Euro
1,085 million, also guarantees not recorded in the financial statements and received within
security lending and/or repurchase agreement transactions were pledged as security for own
liabilities. They were transferred into the pooling of assets pledged as security for refinancing
operations with the ECB or re-employed in repurchase agreement transactions
3. Information on operating leases
There are no material operating leases.
4. Composition of investments for unit-linked and index-linked policies
The Group does not have any unit-linked and index-linked policies.
- 288 -
B
5. Administration and trading on behalf of third parties
Type of service
31/12/2015
1. Orders executed on behalf of customers
31/12/2014
814,937
528,129
698,806
437,473
692,206
436,471
6,600
1,002
116,131
90,656
115,315
89,475
816
1,181
161,039
185,877
a) individual
61,616
93,185
b) collective
99,423
92,692
28,395,061
31,663,904
-
-
1. securities issued by consolidated companies
-
-
2. other securities
-
-
14,837,475
18,732,929
3,615,563
6,144,995
11,221,912
12,587,934
c) third-party securities on deposit with third parties
14,395,926
18,147,052
d) own securities on deposit with third parties
13,557,586
12,930,975
-
-
a) purchases
1. settled
2. unsettled
b) sales
1. settled
2. unsettled
2. Portfolio management
3. Custody and administration of securities
a) third-party securities on deposit: associated with activities as a custodian bank
(excluding portfolio management)
b) third party securities in custody (excluding portfolio management): other
1. securities issued by consolidated companies
2. other securities
6. Financial assets offset in the financial statements, or subject to framework offsetting agreements or
similar agreements.
7. Financial liabilities offset in the financial statements, or subject to framework offsetting agreements or
similar agreements.
The Group has no outstanding financial assets and liabilities that are offset in accordance with
IAS 32 par 42. The related tables are therefore omitted.
It should be noted that the Group uses bilateral offsetting arrangements relating to operations in
over-the-counter derivatives with principal market counterparties, mainly Banks, giving the
option to offset creditor positions against debtor positions in the event of counterparty default.
These agreements have not entailed the offsetting of assets against liabilities in the financial
statements.
- 289 -
B
8. Securities lending
The fair value at 31 December 2015 of the securities received in securities loans with customers is
set out below. The transactions are without cash guarantee or with cash guarantee that is not
within the full availability of the lender. Therefore, they are not included among the assets and
liabilities of the statement of financial position.
Fair value
Non-financial
Financial companies
institutions
Type
Debt securities
Other debt securities
Total
161,376
156,789
6,921
26,415
168,297
183,204
All borrowed securities were pledged to guarantee own financing transactions of the
Eurosystem.
9. Disclosure on joint operations
The Bank does not own any joint operations.
- 290 -
B
PART C – INFORMATION ON THE CONSOLIDATED INCOME
STATEMENT
SECTION 1
Interest – Line items 10 and 20
1.1 Interest income and similar revenues: breakdown
Debt
securities
Items/technical forms
Total
Total
Other
transactions 31/12/2015 31/12/2014
Loans
9,400
-
27,633
37,033
47,854
92
-
-
92
44
80,759
972
-
81,731
104,368
1,306
-
-
1,306
1,797
361
4,803
-
5,164
7,553
12,373
824,114
-
836,487
974,974
X
X
-
-
34,398
8. Other assets
X
X
223
223
91
27,856
962,036
1,171,079
Total
104,291
829,889
The line item at issue includes late-payment interest on loans relating to bad loans to customers
for Euro 111.5 thousand (Euro 34 thousand at 31 December 2014).
1.2 Interest income and similar revenues: differentials relating to hedging transactions
31/12/2015
31/12/2014
A. Positive differentials relating to hedging transactions
-
76,982
B. Negative differentials relating to hedging transactions
-
(42,584)
C. Balance (A-B)
-
34,398
1.3 Interest income and similar revenues: other information
1.3.1 Interest income on foreign currency financial assets
31/12/2015
a) on foreign currency assets
7,889
1.3.2 Interest income on finance leases
There was no interest income on finance leases.
- 291 -
31/12/2014
7,099
B
1.4 Interest expense and similar charges: breakdown
Items/technical forms
Payables
1. Due to central banks
2. Due to banks
3. Due to customers
4. Debt securities in issue
Total
Total
Other
transactions 31/12/2015 31/12/2014
Securities
(2,134)
X
-
(2,134)
(4,936)
(38,852)
X
-
(38,852)
(59,035)
(150,181)
X
-
(150,181)
(265,281)
(211,513)
-
(211,513)
(259,054)
X
-
(1,406)
-
(1,406)
(10,575)
-
(36,223)
-
(36,223)
(61,133)
-
7. Other liabilities and provisions
X
X
X
X
Total
(191,167)
(249,142)
-
(17,847)
(17,847)
(17,847)
(458,156)
(660,014)
1.5 Interest expense and similar charges: differentials relating to hedging transactions
31/12/2015
31/12/2014
A. Positive differentials relating to hedging transactions
27,415
-
B. Negative differentials relating to hedging transactions
(45,262)
-
C. Balance (A-B)
(17,847)
-
1.6 Interest expense and similar charges: other information
1.6.1 Interest expense on foreign currency liabilities
31/12/2015
a) on foreign currency liabilities
(1,141)
31/12/2014
(1,580)
1.6.2 Interest expense on finance leases
31/12/2015
a) on finance leases
(165)
- 292 -
31/12/2014
(125)
B
SECTION 2
Commissions – Line items 40 and 50
2.1 Fee and commission income: breakdown
Type of service/Amounts
31/12/2015
a) guarantees given
31/12/2014
12,610
13,959
-
-
138,856
121,365
1. trading in financial instruments
1,114
738
2. foreign currency trading
1,994
1,813
805
1,146
805
1,146
-
-
2,090
2,620
-
-
57,761
48,726
7. acceptance and transmission of orders
9,193
9,881
8. advisory services
2,897
5,960
-
-
2,897
5,960
63,002
50,481
371
349
1
2
370
347
9.2. insurance products
33,757
30,769
9.3. other products
28,874
19,363
38,916
40,109
2,439
1,918
f) services for factoring transactions
-
-
g) tax collection services
-
-
h) multilateral trading systems management
-
-
127,843
138,057
37,497
42,110
358,161
357,518
b) derivatives on loans
c) management, dealing and consultancy services:
3. portfolio management
3.1. individual
3.2. collective
4. custody and administration of securities
5. custodian bank
6. placement of securities
8.1. for investments
8.2. for financial structure
9. distribution of third party services
9.1. portfolio management
9.1.1. individual
9.1.2. collective
d) collection and payment services
e) servicing for securitization transactions
i) provision and management of current accounts
j) other services
Total
- 293 -
B
2.2 Fee and commission expense: breakdown
Services/Amounts
31/12/2015
a) guarantees received
31/12/2014
(828)
b) derivatives on loans
-
(15,341)
-
c) management and dealing services:
(14,895)
(14,562)
1. trading in financial instruments
(2,699)
(2,464)
2. trading in foreign currency
(236)
(164)
3. portfolio management
(126)
(223)
3.1. own portfolio
(126)
(223)
3.2. third-party portfolio
-
4. custody and administration of securities
5. placement of financial instruments
6. door-to-door distribution of financial instruments,
products and services
d) collection and payment services
e) other services
Total
-
(84)
(69)
(690)
(700)
(11,060)
(10,942)
(10,709)
(11,357)
(9,304)
(14,957)
(35,736)
(56,217)
At 31 December 2014 line a) included the cost of the guarantee received from the State for the
possibility of lodging own liabilities with the ECB (Article 8 of Law Decree 201/2011). This
guarantee was extinguished during the year.
- 294 -
B
SECTION 3
Dividend and similar income – Line item 70
3.1 Dividend and similar income: breakdown
31/12/2015
31/12/2014
Items/Income
Income from
Dividends
mutual
Income from
Dividends
funds
A. Financial assets held for trading
B. Financial assets available for sale
C. Financial assets designated at fair value
D. Equity method investments
Total
- 295 -
mutual
funds
706
-
616
-
7,450
11,923
10,920
4,028
-
-
-
-
10,535
X
18,691
11,923
11,536
X
4,028
B
SECTION 4
Net trading income – Line item 80
4.1 Net trading income: breakdown
Trading
Gains
Transactions/Income items
profits
(A)
(B)
Losses
Trading
(C)
losses (D)
Net profit
(loss) [(A+B) (C+D)]
1,963
9,576
(4,432)
(10,495)
(3,388)
1,771
6,343
(3,509)
(8,777)
(4,172)
192
3,233
(923)
(1,718)
1.3 Mutual funds
-
-
-
-
-
1.4 Loans
-
-
-
-
-
1.5 Other
-
-
-
-
-
-
5,604
-
2.1 Debt securities
-
-
-
2.2 Payables
-
5,604
-
2.3 Other
-
-
-
1.1 Debt securities
1.2 Equities
3. Other assets and financial liabilities:
exchange differences
4. Derivatives
4.1 Financial derivatives:
- On debt securities and interest rates
X
4.2 Credit derivatives
Total
(258)
X
5,346
(12,490)
4,768,020
(761,494)
(4,640,225)
44,415
660,081
4,768,020
(761,494)
(4,640,225)
44,415
659,648
4,762,462
(761,309)
(4,634,252)
26,549
433
5,558
(185)
(5,973)
X
- Other
X
-
5,346
660,081
- On equities and equity indices
- On currency and gold
X
(258)
784
X
X
X
(167)
18,033
-
-
-
-
-
-
-
-
-
-
662,044
4,783,200
(765,926)
(4,650,978)
33,883
Trading profits (losses) and valuation gains (losses) relating to financial derivatives are
presented on a gross basis for each individual financial instrument.
- 296 -
B
SECTION 5
Net hedging gains (losses) – Line item 90
5.1 Net hedging gains (losses): breakdown
Income items/Amounts
31/12/2015
31/12/2014
A Income relating to:
A.1 Fair value hedges
187,714
368,766
28,454
178,637
7,933
2,772
79,151
2,308
A.5 Foreign currency assets and liabilities
-
-
Total income from hedging activities (A)
303,252
552,483
(187,613)
(444,316)
A.2 Hedged financial assets (fair value)
A.3 Hedged financial liabilities (fair value)
A.4 Cash-flow hedges
B. Charges from:
B.1 Fair value hedges
B.2 Hedged financial assets (fair value)
(51,447)
-
B.3 Hedged financial liabilities (fair value)
-
B.4 Cash-flow hedges
-
-
B.5 Foreign currency assets and liabilities
-
-
Total charges from hedging activities (B)
C. Net hedging gains (losses) (A - B)
(54,150)
(239,060)
(498,466)
64,192
54,017
At 31 December 2015, there are hedges of interest rate risk on specific fixed-rate and floating rate
with maximum rate mortgage portfolios classified as “Loans and advances to customers”, on
certain debt securities classified as “Financial assets available for sale” and on individual ownissue bonds recorded among “Securities in issue”.
The measurements carried out at the end of the year, in accordance with IAS 39, confirmed the
effectiveness of existing hedges and led to the recording, in the line item in question, of a net
expense of Euro 18,238 thousand (Euro 9,659 thousand at 31 December 2014), which represents
partial ineffectiveness, which in any case remains within the range allowed by IAS 39.
The item also includes Euro 78,323 thousand (Euro 68,348 thousand at 31 December 2014) in net
expenses mainly connected to the early termination of certain hedges on debt securities recorded
among "Financial assets available for sale".
- 297 -
B
SECTION 6
Gains (losses) on disposal or repurchase – Line item 100
6.1 Gains (losses) on disposal or repurchase: breakdown
31/12/2015
Items/income items
Profits
31/12/2014
Net profit
Losses
(loss)
Profits
Net profit
Losses
(loss)
Financial assets
25
(180)
(155)
-
7,481
(11,046)
(3,565)
300
(1)
299
231,605
(1,483)
230,122
47,097
(46)
47,051
20,964
(836)
20,128
43,084
(37)
43,047
202,076
(72)
202,004
1,611
-
1,611
8,565
(575)
7,990
2,402
(9)
2,393
3.1 Debt securities
3.2 Equities
3.3 Mutual funds
3.4 Loans
Total assets
-
-
-
-
-
-
-
-
997
-
997
-
-
-
227,399
47,397
240,108
(12,709)
(47)
47,350
Financial liabilities
-
-
-
-
-
-
2. Due to customers
1,932
-
1,932
-
-
-
7,286
(3,132)
4,154
1,508
(3,997)
(2,489)
9,218
(3,132)
6,086
1,508
(3,997)
(2,489)
1. Due to banks
Total liabilities
The gains and losses from “Financial assets available for sale” include the “release” to income of
the positive and negative valuation reserves, recorded separately under equity at 31 December
2014, as a result of selling assets during the year.
- 298 -
B
SECTION 7
Net change in financial assets and liabilities designated at fair value – Line item 110
7.1 Net change in financial assets and liabilities designated at fair value: breakdown
Gains
(A)
Gains on
disposals (B)
Losses
(C)
Losses on
disposals (D)
Net profit
(loss)
[(A+B) (C+D)]
1. Financial assets
59
-
(171)
-
(112)
1.1 Debt securities
59
-
(171)
-
(112)
1.2 Equities
-
-
-
-
-
1.3 Mutual funds
-
-
-
-
-
1.4 Loans
-
-
-
-
-
10,033
12,645
(121)
(100)
22,457
2.1 Debt securities
10,033
12,645
(121)
(100)
22,457
2.2 Due to banks
-
-
-
-
-
2.3 Due to customers
-
-
-
-
-
3. Foreign currency financial assets
& liabilities: exchange differences
4. Credit and financial derivatives
Total
X
X
X
X
-
1,238
977
(11,333)
(15,083)
(24,201)
11,330
13,622
(11,625)
(15,183)
(1,856)
Trading profits (losses) and valuation gains (losses) relating to financial derivatives are
presented on a gross basis for each individual financial instrument.
The net losses recorded in the line item in question on financial liabilities include the pull to par
effect connected to the reduction, due to the passing of time, in profits deriving from the change
in the Parent Bank’s creditworthiness recorded in previous years on its bonds measured at fair
value.
- 299 -
B
Net impairment adjustments – Line item 130
8.1 Net impairment adjustments to loans and advances: breakdown
Adjustments
Writebacks
Specific
Write-offs
Specific
Portfolio
Other
A
Portfolio
B
31/12/2015
A
31/12/2014
B
-
(237)
-
-
-
-
-
(237)
(2)
- Loans
-
(237)
-
-
-
-
-
(237)
(2)
- Debt securities
-
-
-
-
-
-
60,713
109,387
-
19,229
A. Due from banks
B. Loans to customers
-
(14,902)
(1,503,831)
(3,722)
(1,333,126)
(868,454)
Purchased non performing loans
- Loans
-
-
X
-
-
X
X
-
-
- Debt securities
-
-
X
-
-
X
X
-
-
60,713
109,387
-
19,229
(1,333,126)
(868,454)
60,713
109,387
-
19,229
(1,328,629)
(862,451)
Other loans
(14,902)
(1,503,831)
- Loans
(14,902)
(1,503,056)
- Debt securities
C. Total
(14,902)
(3,722)
-
(775)
(3,722)
-
-
-
-
(4,497)
(6,003)
(1,504,068)
(3,722)
60,713
109,387
-
19,229
(1,333,363)
(868,456)
Key:
A = interest B = other
8.2 Net impairment adjustments to financial assets available for sale: breakdown
Adjustments
Writebacks
Specific
Write-offs
Specific
Other
A
31/12/2015 31/12/2014
B
A. Debt securities
-
(4)
-
-
(4)
B. Equities
-
(10,870)
X
X
(10,870)
(20,502)
C. Mutual funds
-
(149,353)
X
-
(149,353)
(13,078)
D. Loans to banks
-
-
-
-
-
-
E. Loans to customers
-
-
-
-
-
-
F. Total
-
-
-
(160,227)
(160,227)
2,646
(30,934)
Key:
Impairment adjustments to equities relate to stocks listed on an active market which exceeded
the materiality and/or durability threshold set forth in the internal policy for “identifying
impairment losses on financial assets available for sale” and to certain equity interests held in
unlisted companies for which an impairment loss was deemed to exist.
The value adjustments for impairment of mutual fund units relate in particular to the
Luxembourg Funds Athena and Optimum in respect of which the ECB, as part of the inspections
conducted, highlighted criticality profiles and which, also in light of the updated time span of
the investment, were evaluated on the basis of the presumed realisable values of the individual
underlying assets, in place of the valuation at the NAV communicated by the management
company.
- 300 -
B
8.3 Net impairment adjustments to financial assets held to maturity: breakdown
This table has not been completed because the Group did not recognise net impairment losses on
financial assets held to maturity.
8.4 Net impairment adjustments to other financial transactions: breakdown
Adjustments
Specific
Write-offs
Writebacks
Specific
Portfolio
Other
A. Guarantees given
-
(3,538)
B. Derivatives on loans
-
-
C. Commitments to disburse funds
-
-
D. Other transactions
-
-
E. Total
-
(3,538)
A
(623)
Portfolio
B
A
31/12/2015
31/12/2014
B
-
16,304
-
51
12,194
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,304
-
51
12,194
(623)
(16,570)
(16,570)
Key:
“Adjustments” are connected with the valuation of the guarantees issued by the Group.
“Specific writebacks” refer to the release to the income statement of the provisions allocated in
previous years in view of possible interventions of the Interbank Deposit Protection Fund
(F.I.T.D.) in favour of certain participant banks. Following the entry into force of Italian
Legislative Decrees no. 180 and 181 of 16 November 2015, the National Resolution Fund was
established; it is replenished by ordinary and extraordinary contributions paid annually by the
banks and recorded under item 150 “other administrative costs - other”.
SECTION 9
Net premium income – Line item 150
SECTION 10
Other insurance income (charges) – Line item 160
- 301 -
B
SECTION 11
Administrative costs – Item 180
11.1 Payroll costs: breakdown
Type of expense/Segments
31/12/2015
1) Employees
31/12/2014
(399,638)
(391,083)
(278,795)
(279,231)
(73,549)
(71,440)
(24)
(80)
(659)
(506)
(1,398)
(1,846)
(946)
(805)
- defined contribution
(755)
(608)
- defined benefit
(191)
(197)
(24,474)
(21,359)
(24,474)
(21,359)
a) wages and salaries
b) social security contributions
c) severance indemnities
d) pension costs
e) provision for severance indemnities
f) provision for pensions and similar commitments:
g) payments to external supplementary pension funds:
- defined contribution
- defined benefit
-
h) costs deriving from equity-settled payment
arrangements
-
(465)
(19,793)
(15,351)
2. Other personnel
(1,791)
(1,833)
3. Directors and Statutory Auditors
(8,095)
(8,046)
(850)
(989)
(410,374)
(401,951)
i) other personnel benefits
4. Retired personnel
Total
- 302 -
B
11.2 Average number of employees by grade
31/12/2015
1. Employees
31/12/2014
5,258
5,275
99
97
b) Middle managers
2,280
2,265
c) Other employees
2,879
2,913
2. Other personnel
15
20
5,273
5,295
a) Managers
Total
The average number of employees is calculated as the weighted average number of employees
(with permanent and other employment contracts, including staff from other non-Group
companies who are seconded to Group companies and excluding Group company employees
who are seconded to other non-Group companies), where the weighting is given by the number
of months worked in the year.
“Other employees” include staff working under contracts other than permanent employment
ones, such as temporary or project contracts.
11.3 Defined benefit pension funds:
At 31 December 2015, the Parent Bank, in accordance with Article 8 of the Fund Regulations, had
settled the deficit of Euro 116 thousand resulting from the actuarial valuation, realigning the size
of the Fund to the mathematical reserve calculated on the same date.
The above mentioned cost has been recorded for Euro 191 thousand under income statement line
150 a) "Payroll" and for Euro 75 thousand under line item 40 “Actuarial gains (losses) on definedbenefit plans” of the statement of comprehensive income.
11.4 Other employee benefits
There are no other employee benefits worthy of disclosure.
- 303 -
B
11.5 Other administrative costs: breakdown
31/12/2015
1. Indirect taxes
31/12/2014
(65,719)
(72,379)
(112,915)
(107,547)
(11,972)
(12,675)
2.2. security and valuables transportation
(7,916)
(8,108)
2.3. electricity, heating and water
(8,592)
(8,944)
2.4. transport
(3,206)
(2,992)
2.5. hire of programs and microfiches
(5,096)
(4,198)
(69,430)
(63,635)
2.7. stationery and printing
(1,960)
(2,237)
2.8. cleaning of premises
(4,743)
(4,758)
3. Professional services
(45,362)
(32,087)
4. Rentals
(36,499)
(38,374)
(35,215)
(36,764)
(1,284)
(1,610)
(10,827)
(10,751)
(2,989)
(3,269)
(89,884)
(29,923)
7.1. surveys, searches and subscriptions
(6,726)
(6,242)
7.2. membership fees
(4,510)
(2,861)
7.3. advertising and entertainment
(9,247)
(11,521)
7.4. other miscellaneous expenses
(69,401)
(9,299)
(364,195)
(294,330)
2. Non-professional products and services
2.1. postage, telephone charges
2.6. data processing
4.1. rent of buildings
4.2. machine lease installments
5. Maintenance of furniture and installations
6. Insurance premiums
7. Other expenses
Total
The increase of the costs for professional services is mainly connected with the advisory services
required within the “due diligence” on the capital and with the costs connected with the
transformation into “Joint Stock Company” and with listing on the Electronic Stock Market
organised and managed by Borsa Italiana.
Line 7.4 “other miscellaneous expenses” at 31 December 2015 includes the ordinary and
extraordinary contributions paid to the National Resolution Fund and the ordinary ex ante
contribution paid to the Interbank Deposit Protection Fund, totalling Euro 58.2 million.
- 304 -
B
SECTION 12
Net provisions for risks and charges – Line item 190
12.1 Net provisions for risks and charges: breakdown
31/12/2015
a) Provisions for legal disputes and other charges
b) Provision for other risks and charges
Total
31/12/2014
(20,760)
(17,558)
(492,300)
(898)
(513,060)
(18,456)
More details on provisions for risks and charges can be found in Part B, Liabilities Section 12 of
these Explanatory notes.
- 305 -
B
SECTION 13
Net adjustments to property, plant and equipment – Line item 200
13.1 Net adjustments to property, plant and equipment: breakdown
Depreciation
(a)
Assets/Income items
Impairment
adjustments (b)
Net result
Writebacks
(c)
(a + b - c)
A. Property, plant and equipment
A.1 Owned
- for business purposes
- for investment purposes
(24,825)
(12,874)
-
(37,699)
(24,825)
(12,874)
-
(37,699)
-
-
-
-
A.2 Held under finance leases
(376)
-
-
(376)
- for business purposes
(376)
-
-
(376)
-
-
- for investment purposes
Total
(25,201)
(12,874)
-
(38,075)
Impairment adjustments refer to the write-down of certain business properties carried out in
order to adjust their carrying amount to the appraisal prepared by a third-party independent
expert.
- 306 -
B
SECTION 14
Net adjustments to intangible assets – Line item 210
14.1 Net adjustments to intangible assets: breakdown
Amortization
(a)
Assets/Income items
Impairment
adjustments (b)
Net result
Writebacks
(c)
(a + b - c)
A. Intangible assets
A.1 Owned
(5,206)
- internally generated
-
- other
(5,206)
A.2 Held under finance leases
Total
(5,206)
(10,932)
(10,932)
(10,932)
-
(16,138)
(16,138)
(16,138)
Impairment adjustments refer to the total write-off of the residual value of the “intangibles”
identified as part of the purchase price allocation process relating to the acquisition of 61
branches from the UBI Group at the end of 2007.
- 307 -
B
SECTION 15
Other operating charges/income – Line item 220
15.1 Other operating charges: breakdown
31/12/2015
1. Amortization of leasehold improvements
2. Other charges
Total
31/12/2014
(5,320)
(7,033)
(25,140)
(3,308)
(30,460)
(10,341)
The amount in line 1. relates to the amortisation of leasehold improvements that cannot be
separated from the related assets and which, accordingly, are not reported separately under
property, plant and equipment. These costs are amortised over the period they are expected to
benefit or the residual duration of the lease, whichever is shorter.
The increase in the line “Other charges” refers mostly to re-crediting to customers during the
year due to the reversal of commissions and expense reimbursements charged in past years.
15.2 Other operating income: breakdown
31/12/2015
1. Expenses recovered from third parties on current and savings accounts
31/12/2014
19,719
28,773
5,136
4,744
3. Recovery of stamp duty and other indirect taxes
56,146
62,728
4. Other income
15,622
18,608
96,623
114,853
2. Property rental income
Total
The reduction in “Other income” reflects the decreased contribution of “fast preliminary
commission” as well as the elimination of some expense recoveries accounted for on a one-off
basis in 2014.
- 308 -
B
SECTION 16
Profit (Loss) from equity method investments - Line item 240
16.1 Profit (Loss) from equity method investments: breakdown
Income item/Segments
31/12/2015
31/12/2014
1) Companies under joint control
A. Income
-
-
1. Revaluations
-
-
2. Profit from disposals
-
-
3. Writebacks
-
-
4. Other income
-
-
-
-
1. Writedowns
-
-
2. Impairment writedowns
-
-
3. Loss from disposals
-
-
4. Other charges
-
-
-
-
20,172
15,274
1. Revaluations
-
-
2. Profit from disposals
-
-
3. Writebacks
-
-
20,172
15,274
B. Charges
Net profit (loss)
2) Companies subject to significant influence
A. Income
4. Other income
B. Charges
(13,840)
1. Writedowns
-
2. Impairment writedowns
(10,982)
3. Loss from disposals
-
4. Other charges
(6,773)
(5,309)
-
(2,858)
(1,464)
Net profit (loss)
6,332
8,501
Total
6,332
8,501
“Other income” and “Other charges” refer to the results for the year of equity method
investments consolidated using the equity method.
The “Impairment writedowns” in line B.2 refer to impairment losses recorded in relation to
investees held indirectly through funds controlled by the Parent Bank; for further details please
refer to Section 10.5 of part B of these Explanatory notes.
- 309 -
B
SECTION 17
Net gains (losses) arising on fair value adjustments to property, plant and equipment and
intangible assets - Line item 250
17.1 Net gains (losses) arising on adjustments to the fair value (or restated value) of property, plant and
equipment and intangible assets: breakdown
Exchange differences
Assets/Income item
A. Property, plant and equipment
A.1 Owned:
Revaluations
Writedowns
(a)
(b)
Positive
Negative
(c)
(d)
Net profit
Net profit
(loss)
(loss)
(a-b+c-d) at (a-b+c-d) at
31/12/2015
31/12/2014
1
(4,716)
-
-
(4,715)
(2,850)
1
(4,716)
-
-
(4,715)
(2,850)
-
-
-
-
- For business purposes
-
- For investment purposes
1
A.2 Held under finance lease:
-
-
-
-
-
-
- For business purposes
-
-
-
-
-
-
- For investment purposes
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
B.1.1 Internally generated
-
-
-
-
-
-
B.1.2 Other
-
-
-
-
-
-
-
-
-
-
-
B. Intangible assets
B.1 Owned:
B.2 Held under finance lease
(4,716)
Total
1
(4,716)
(4,715)
(2,850)
(4,715)
(2,850)
Revaluations/writedowns refer to changes in the fair value of property owned for investment
purpose.
SECTION 18
Adjustments to goodwill – Line item 260
31/12/2015
a) Adjustments to goodwill
(323,639)
31/12/2014
(600,000)
“Adjustments to goodwill” refer to the impairment determined as a result of the impairment
test on the carrying amount in accordance with the provisions of IAS 36. The results of these
tests are discussed in the specific paragraph in Section 12 “Intangible assets” of Part B of these
Explanatory notes.
- 310 -
B
SECTION 19
Gains (losses) on disposal of investments – Line item 270
19.1 Gains (losses) on disposal of investments: breakdown
31/12/2015
A. Buildings
- Profit from disposals
31/12/2014
27
-
27
-
-
-
- Loss from disposals
B. Other assets
(71)
13
- Profit from disposals
47
27
- Loss from disposals
(118)
(14)
(44)
13
Net profit (loss)
The profits and losses reported above relate to the sale and/or retirement of certain property,
plant and equipment and intangible assets.
SECTION 20
Income taxes on current operations – Line item 290
20.1 Income taxes on current operations: breakdown
31/12/2015
1. Current income taxes (-)
31/12/2014
(2,531)
2. Change in prior year income taxes (+/-)
(32,242)
635
6,349
-
-
3.bis. Reduction in current taxes for tax credits pursuant to
Law 214/2011
133,683
4,468
4. Change in deferred tax assets (+/-)
340,771
316,868
13,781
81,244
486,339
376,687
3. Reduction in current taxes (+)
5. Change in deferred tax liabilities (+/-)
6. Income taxes for the year (-) (-1+/-2+3+3 bis+/-4+/-5)
The net change in deferred tax assets for the year was positive by Euro 340,771 thousand and it is
equal to the imbalance between the positive change connected with the deferred tax assets
recognised in the year and the negative change connected with the decreases in the deferred tax
assets recorded in previous years.
- 311 -
B
The deferred tax assets recognised in the year amounted to Euro 484,427; their main components
are described in detail below:
 Euro 219,687 thousand refer to the deferred tax assets recorded in view of the IRES tax loss
recognised in the year, which according to current regulations may be computed as a
reduction of the income of the tax periods of future years, without time limits;
 Euro 7,321 thousand refer to the portion of the IRES tax loss recognised in the year, which is
immediately recovered in offset with the taxable income of the subsidiaries that exercised the
option to file for tax on a group basis;
 Euro 107,244 thousand refer to the deferred tax assets recorded in view of the adjustments on
loans recognised in the year for which the provisions of Italian Law no. 214/2011 apply with
regard to their transformability into tax receivables in certain cases;
 Euro 150,175 thousand refer to the deferred tax assets recorded in relation to temporary
differences, relating to cases other than the previous ones, deductible in upcoming years. The
most significant amount of this positive change refers to the deferred tax assets, amounting to
Euro 124,118 thousand, recorded in relation to allocations to provisions for risks and charges
recognised in view of the legal risks connected with the “BPVi capital transactions” and with
the other critical issues emerged in the course of the ECB’s inspection.
The decreases in deferred tax assets total Euro 143,656 thousand, of which Euro 133,683 thousand
refer to the transformation into current tax receivables of a portion of the deferred tax assets
recorded in the Financial Statements at 31 December 2014, as a result both of the loss for the year
2014 and of the IRES tax loss of 2014, in accordance with Italian Law no. 214/2011, and Euro
9,973 thousand refer to the reclassification of the deferred tax assets recorded in previous years
or to other changes (of which Euro 1,458 thousand relating to cancellation of DTAs in accordance
with Law no. 214/2011).
With regard to the existence of the requirements for recording the deferred tax assets, please
refer to Part B, Section 13.7 of these Explanatory Notes.
- 312 -
B
SECTION 21
Profit (Loss) from disposal groups, net of tax – Line item 310
This Section has not been completed since the Group does not have disposal groups of
assets/liabilities.
SECTION 22
Net income (loss) attributable to Minority interests – Line item 330
22.1 Breakdown of line item 330 “Net income (loss) attributable to Minority interests”
31/12/2015
31/12/2014
Consolidated investments with significant minority interests
1. Farbanca SpA
Other investments
1. Nem Imprese
848
941
-
-
(33)
Total
815
(8)
933
SECTION 23
Other information
There is no other information worthy of disclosure in addition to that established by
international financial reporting standards and by the instructions in Bank of Italy Circular no.
262 of 22 December 2005 and subsequent revisions.
- 313 -
B
SECTION 24
Earnings per share
The disclosure required by IAS 33 (paragraphs 68, 70 a), b), c), and d) and 73 will now be
provided.
24.1 Average number of ordinary shares on dilution of capital stock
31/12/2015
Weighted average number of ordinary shares
97,105,531
85,155,806
-
-
97,105,531
85,155,806
Dilution adjustment
Weighted average number of ordinary shares (fully diluted)
31/12/2014
The weighted average number of ordinary shares outstanding is calculated with reference to the
number of ordinary shares outstanding at the start of the year, as adjusted by the number of
ordinary shares cancelled or issued during the year multiplied by the number of days such
shares were in circulation in proportion to the total number of days in the year. Treasury shares
are not included in the total number of shares outstanding.
At 31 December 2015 there are no dilution adjustments. In this regard, it should be noted that the
potential dilutive effects associated with the “Loyalty Bonus” provided as part of the capital
increase made by the Bank in 2014 were not taken into account.
The weighted average number of ordinary shares (fully diluted) is calculated by adding to the
weighted average number of ordinary shares outstanding the additional ordinary shares that
would have been outstanding had all potential ordinary shares with a dilutive effect been
converted. Since at 31 December 2015 there are no dilutions adjustments, the weighted average
of ordinary shares on dilution of capital stock matches with the weighted average of ordinary
shares.
31 December 2015
Share of profit
(Euro)
Basic earnings/losses per share
Diluted earnings/losses per share
(1,406,994)
(1,406,994)
Weighted
average
number of
ordinary shares
97,105,531
97,105,531
31 December 2014
EPS
(Euro)
(14.489)
(14.489)
Share of profit
(Euro)
(758,520)
(758,520)
Weighted
average
number of
ordinary shares
85,155,806
85,155,806
EPS
(Euro)
(8.907)
(8.907)
Basic earnings/losses per share are determined by dividing the results attributable to the holders
of the Parent Bank’s ordinary equity instruments (the numerator) by the weighted average
number of ordinary shares outstanding during the year (the denominator).
Diluted earnings/losses per share are determined by adjusting both the results attributable to the
holders of ordinary equity instruments and the weighted average number of shares outstanding,
to take account of the potential dilution associated with bonds convertible into ordinary shares
issued by the Parent Bank, still in existence at the reference date.
Since at 31 December 2015 there are no dilutive effects, the diluted earnings/loss per share
coincide with the basic earnings/losses per share.
- 314 -
B
PART D – CONSOLIDATED COMPREHENSIVE INCOME
Statement of consolidated comprehensive income
Gross
amount
Line items
10.
Income tax Net amount
(1,892,518)
486,339
(1,406,179)
Other components of income without release to the income statement
20.
-
-
-
30.
Intangible assets
-
-
-
40.
Defined-benefit plans
50.
Non-current assets held for sale and discontinued operations:
60.
carried at equity
5,505
89
(1,512)
(25)
80.
90.
Hedges of foreign investments:
64
-
Other components of income with release to the income statement
70.
3,993
-
-
-
a) changes in fair value
-
-
-
b) release to the income statement
-
-
-
c) other changes
-
-
-
-
-
-
-
-
-
-
-
-
c) other changes
-
-
Exchange differences:
Cash-flow hedges:
-
(549,449)
181,703
(367,746)
(413,801)
136,844
(276,957)
(135,648)
44,859
(90,789)
c) other changes
-
100. Financial assets available for sale:
(188,961)
347,601
718,343
(196,455)
521,888
3,085
- profits/losses on disposals
c) other changes
110. Non-current assets held for sale and discontinued operations:
-
536,562
(177,753)
- impairment writedowns
-
6,980
413
(170,773)
3,498
(180,838)
6,567
(174,271)
(4,028)
514
(3,514)
-
-
-
-
-
-
-
-
-
c) other changes
-
-
-
120.
carried at equity
(19,602)
5,958
(13,644)
(17,533)
5,992
(11,541)
1,094
(373)
- impairment writedowns
6,884
(2,365)
4,519
- gains/losses on disposal
(5,790)
1,992
(3,798)
c) other changes
(3,163)
130. Total other components of income
(26,895)
140. Comprehensive income (Lines 10+110)
150. Comprehensive income attributable to minority interests
160. Comprehensive income attributable to the parent bank
- 315 -
339
(2,837)
721
(2,824)
(29,732)
(1,919,413)
483,502
(1,435,911)
(1,077)
257
(820)
(1,920,490)
483,759
(1,436,731)
B
SECTION 1
Risks of the Banking Group
Introduction
The current regulations for internal controls define the Internal Control System (ICS) as a
fundamental element of the comprehensive bank governance system; it assures that activities are
carried in accordance with corporate strategies and policies and in compliance with the
standards of sound and prudent management.
The controls involve, with different roles, the Corporate bodies, the Governance Committees and
all Group personnel and they are an integral part of day to day activities. These “controls” must
be identified with the goal of mitigating the inherent risks existing in corporate processes and,
consequently, assuring the correct execution of corporate operations.
The Internal Controls structure comprises the following three tiers:
 line controls, whose purpose is to ensure the correct execution of operations, also by
applying a control involving a check of the regular execution of the processes. They are
carried out by the operating structures themselves (e.g. hierarchical, system-wide and
sampling controls) also through different units reporting to the heads of the operating
structures, or performed within the back office activities; insofar as possible, they are
included in IT procedures. Line controls, be they carried out by real persons or through IT
procedures, can be further distinguished into:
a) First level line controls: these are carried out directly by those who perform a certain
activity, or by the IT procedures supporting that activity;
b) Second level line controls: they are carried out by persons who do not actually perform
the operations but are tasked with supervising them (“risk owners). In particular, the latter
are divided into:
o Second level - functional controls: carried out by corporate structures separate from
the operating structures; they include the functional controls carried out within the
scope of specialist back-office or support activities (e.g., controls carried out by
back office units on Network operations);
o Second level - hierarchical controls: carried out by corporate roles hierarchically
above those responsible for the operation (e.g. controls carried out by Network
Managers on operations carried out by the operators reporting hierarchically to
them).
 risk management controls serve the purpose of ensuring, inter alia:
a) the correct implementation of the risk management process;
b) compliance with the operating limits assigned to the various Functions;
c) the corporate operations’ compliance with regulations.
The Functions tasked with performing these controls are separate from the productive
functions; they contribute to the definition of the risk governance policies and of the risk
management process. Specifically, these controls are carried out by the Corporate risk
management Control Functions, as defined by Bank of Italy (Compliance, Risk
Management, Anti Money Laundering and Validation) and by the Functions that,
according to provisions of law, regulations, articles of association or self-regulation, have
prevalent control duties (Financial Reporting Manager).
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B

These controls have the following objectives:
o to contribute to the definition of methodologies for the measurement of risk, check
compliance with the limits assigned to the various operational functions and check
the consistency of the transactions carried out by each production unit with the
assigned risk/return targets (Risk Management),
o to concur in monitoring the performance and stability of the first pillar internal risk
management systems used to calculate capital requirements (Validation);
o to concur in the definition of methods for measuring/assessing the risk of noncompliance with regulations, verifying that corporate processes are capable of
preventing the violation of externally imposed regulations (laws, regulations, etc.)
and voluntarily adopted regulations (codes of conduct, codes of ethics, etc.)
(Compliance);
o to concur in the prevention of risks connected with use of the financial system for
the purpose of laundering the revenues from criminal activities and financing
terrorism, in accordance with the reference regulations (Italian Legislative Decree
no. 231/07) (Anti-money laundering);
o certify corporate accounting information in accordance with legal requirements
(Financial Reporting Manager);
Internal audit: the Internal Audit activity serves the purpose of identifying violations of
procedures and regulations, as well as periodically assessing the completeness,
functionality, adequacy (in terms of efficiency and effectiveness) and the reliability of the
Internal Control System. Another purpose of the activity performed by the Internal Audit
Function is to bring potential improvements to the attention of the corporate Bodies, with
particular reference to risk governance policies, to the risk management process and to
risk measurement and control instruments. Based on the results of its own controls, the
Internal Audit Function submits intervention requests to corporate structures.
The aforesaid levels of control (line, risk management, internal audit) constitute a single
integrated system activated by different Functions, but complementary in its aims, in the
characteristics of its approach and in the operating rules.
There is a significant link between the Risk Management and Internal Audit Functions, which
must have an integrated vision of all corporate operations, recognising, with shared and
complementary assessment criteria, the issues connected with correct control of corporate risks
and with the effective and efficient operation of the “operating machine”, in relation to the
evolving external and internal context.
With particular reference to the Risk Management Function, it should be pointed out that, in
compliance with the model applied by the Banca Popolare di Vicenza Group, the Parent Bank’s
Risk Management Offices carries out these activities centrally on a Group level. This Function
reports hierarchically to the Managing Director and General Manager of the Parent Bank and
functionally to the Board of Directors of the Parent Bank through the Risk Committee. It is the
duty of the Risk Management Function, inter alia, to:
-
develop and/or maintain, in a systematic and continuous way, the risk management
models and instruments used also in light of regulatory changes and indications having
an impact on risk management activities;
-
define and develop models and tools for the measurement and control of risks at Group
level, including those connected with advanced approaches;
-
coordinate the collection of the information necessary to feed the Group’s risk
management system from all Group Banks and Companies, overseeing and promoting
the actions aimed at filling any gaps noted;
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B
-
measure the Group’s exposure to the different risk profiles, verifying their compliance
with the limits established by the Body with management function, providing the
corporate Bodies and Functions with reports about the different risk profiles;
-
propose to the Parent Bank’s strategic supervision Body the Risk Appetite Framework
parameters (objectives, tolerance and capacity), continuously verifying its adequacy after
its passage through the Risk Committee and coordinating, when necessary, with other
competent functions;
-
participate in the internal committees that involve risk assumption/management
processes at the individual level and at the Group level.
In addition, the Risk Management Function is responsible for managing the assessment of the
internal capital levels adapted to address all the risks associated with the activities carried out
(ICAAP), in compliance with the legislation that came into force on 1 January 2007, originated in
the Second Pillar of Basel II, subsequently revised with Basel III. It should be emphasised that the
preparation of the ICAAP Report is one of the best opportunities to disseminate the risk culture
within the Group, starting with the Board of Directors, that approves the Report itself and that
every quarter receives updates on the main content thereof, and continuing on to the various
functional units, involved in risk self-assessment focused on creating the so-called “Risk Map”
compiled on a Group level.
Another opportunity to disseminate the risk culture occurs when defining the so-called Risk
Appetite Framework in a Statement, approved as a minimum on an annual basis by the Board of
Directors and continuously monitored by the competent structures. It should be emphasised that
most of the Group’s activity, from the process of defining operational and strategic planning
goals to daily operations, takes place in compliance with the system of risk objectives (appetite)
and limits (tolerance, capacity and risk) defined within the Risk Appetite Framework. In 2015,
the definition of the Risk Appetite Statement saw an even closer cooperation of the Risk
Management Function with the Strategic Planning Division and the operating functions with
competence for each individual aspect; moreover, the results were also endorsed by the
subsidiaries, together with the risk management regulations, each with reference to significant
risk profiles, as obtained through the ICAAP process.
Consistently with the above described approach, staff training also gives due consideration to
risk-associated issues: the number of training days dedicated to risk in 2015 (including issues
such as security, transparency, anti-money laundering, protecting investors), also including the
issues regarding credit in general (including aspects pertaining to the AIRB - Advanced Internal
Rating Based - Project, directed at the introduction of the internal models in the determination of
the requirement in view of the credit risk), represented approximately one quarter (23%) of the
total.
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B
1.1 CREDIT RISK
QUALITATIVE INFORMATION
1.General aspects
Credit Risk is the risk of losses due to non-performance by the counterparty (specifically the
obligation to repay loans) or, more broadly, the failure of customers or their guarantors to meet
their obligations.
The credit exposure risks also include the “Country Risk” (i.e. the risk of losses caused by events
occurring in a country other than Italy; the country risk concept is broader than sovereign risk
because it refers to all exposures, regardless of the nature of the counterparties, be they natural
persons, entities, banks or public administrations) and the “Transfer Risk” (i.e. the risk that the
Group, exposed to a party that finances itself in a currency other than the one in which its main
sources of income are denominated, realises losses due to the debtor’s difficulty in reconverting
its own currency into the currency of the exposure).
Lending by the BPVi Group has always aimed to support both the borrowing needs of
households and the development and consolidation of businesses, especially small and mediumsized firms, which typify the local economies where the Group’s banks operate.
In keeping with prior years, the lending policy adopted by the Group’s different businesses seeks
to respond to the needs of individuals and firms, while paying particular attention to the difficult
economic situation, credit risk and an adequate level of guarantees.
With reference to “individual” customers, the development of activities has focused on the
longer-term segment with the granting and/or renegotiation of home mortgages and personal
loans either directly via the Group’s banks or via other companies.
Development activities in relation to “small businesses” have mainly focused on short-term
lending, where the risk is spread widely, using technical forms that are supported by
underwriting syndicates wherever possible. Medium-term lending has been expanded to
medium and large businesses, with a special focus on those with secured guarantees. In all cases,
special care has been taken in the selection of economic sectors from which borrowers come, in
order to give preference to lower risk activities. Sector analysis has become increasingly
important in the credit management process and involves the examination of internal data and
external data provided by specialist Italian companies.
The Group is not active in the field of credit derivatives.
Lastly, the Pillar 3 disclosures are published in the “Investor Relations” section of Banca
Popolare di Vicenza’s website (www.popolarevicenza.it).
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B
2. Credit risk management policies
2.1 Organisational Aspects
The Group’s regulations for the Management of Credit, contained in its Credit Manual, establish
a prudent approach to risk assessment. At the preliminary stage, borrowers are required to
provide all the documentation needed for an adequate assessment of their credit rating. Such
documentation must allow assessment of whether the amount requested, the technical form of
the loan and the project to be financed are all consistent; it must also allow the characteristics and
qualities of borrowers to be identified, having regard for all forms of relationship with them.
The risks associated with individual customers from the same Group must be considered
separately. If there are legal or economic relations between individual customers, these parties
form a unit in risk terms and represent a Group (economic group or risk group).
When granting and/or renewing lines of credit, it is necessary to verify the exposure by the
entire BPVI Group to borrowers and that to any groups to which they belong.
Pricing and/or income from the relationship cannot be a factor when evaluating credit rating
and agreeing a loan.
The preliminary process depends on the type of customer concerned. For “individual” customers
and small businesses, the granting or otherwise of credit for relatively small amounts is dealt
with at branch or Area level. This follows a simplified process using internal rating models, an IT
tool that checks credit rating at the time new lines of credit are granted, using both internal and
external sources of information. For better control over the process of granting credit to
“individual” customers and small businesses, stricter limits have been introduced on decisionmaking powers, identified on the basis of the risk profile attributed to the counterparty by the
internal rating system.
The granting of credit to companies/entities follows a more complex process: proposed lending
to such customers must be supported by a technical opinion from Area or Head Office credit
analysts depending on the amount of credit requested.
Account managers monitor and administer loans day by day and are responsible for their
granting. If customer risk increases, the operating objective is to contain the bank’s risk by
promptly adopting all the necessary measures.
The Group has adopted a process which, as far as property securing loans is concerned,
constantly checks and updates its estimated value, also by using statistical methods based on
geo-referenced systems.
2.2 Management, measurement and monitoring systems
The credit process is organised as follows:



Granting of credit, which involves: investigation, assessment, decision, formalisation of
the credit and any guarantees;
Management of credit, which involves: uses, monitoring, facility revision, management of
anomalies;
Management bad loans and recovery of loans.
The BPVi Group uses an internal rating system to assess customer ratings and to grant and
monitor credit.
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B
In 2014, within the AIRB project, whose goal is to validate the internal models on credit risk, a
new internal rating system was activated, replacing the one that had already been active since
2008. It should be recalled that the internal ratings summarise the assessment of the customer’s
credit quality expressed as a probability that the counterparty may become insolvent within 12
months. Rating models cover the types of counterparties on which the Group operates
structurally and on which it is most exposed, i.e. non-financial companies, small businesses and
individuals, the remaining customers being a marginal fraction of the entire portfolio. The
adoption of the new rating system has been accompanied both by a more structured and
comprehensive preparatory phase of the credit process, and a new procedure for assigning the
rating. In addition, the calculation of the Risk Adjusted Pricing was automated, using the
developed AIRB metrics.
After introducing such internal ratings into the credit management process, a series of “Credit
Policies” were defined and approval limits were revised according to the level of counterparty
risk.
The “Credit Policies” govern the way in which the Group means to assume credit risk with
customers, by fostering balanced growth in loans to counterparties with higher “credit ratings”
and regulating/limiting the grant of credit to riskier customers.
This also includes the regulations for “critical sectors”, i.e. the sectors that, based on assessments
made on data outside and inside the Bank, exhibit such systemic risk elements that companies in
the sectors should be more carefully scrutinised when granting credit and managing. Credit to
companies in these sectors is regulated by more stringent limits than ordinary ones, with a
restriction of decision-making powers and inhibiting growth-oriented credit policies. The
definition of the scope of critical sectors is revised annually by the Risk Management
Department, with the collaboration of the Loans Division, considering the probability of default,
the deterioration rate and market indicators.
The Credit Management application (GdC) plays an important role in the monitoring and
management of borrowers, allowing account managers to check on changes in the credit status of
customers and quickly identify any deterioration in the standing of borrowers. This instrument
was developed with the objective of implementing an advanced credit portfolio management
model based on predefined strategies (objectives, actions and timelines) that are consistent with
the customer’s risk level.
Within the Loans Department of the Parent Bank and Banca Nuova, there are Credit Surveillance
units to improve the management of customers showing initial signs of distress; the unit’s
specific tasks involve providing support to account managers for specific anomalous positions,
reviewing the effectiveness of actions taken and spreading a general culture focused on
safeguarding against credit risk and reducing it.
Within the scope of the credit risk monitoring and management activity, management reporting
is carried out; in particular, on a quarterly basis the loans portfolio’s risk Profile Report is
prepared; it provides fundamental information support for the Risk Committee: the reporting
contains detailed credit risk reports at the consolidated and individual level (portfolio
distribution by administrative statuses, rating classes and expected losses, transition matrices,
deterioration rates), with analyses differentiated by Group banks, management segments,
industry and technical forms.
Also available is an instrument for reporting to the network, characterised by various views of
the loans portfolio, with different hierarchical levels of aggregation (branch, area, general
Management, bank, group) and visibility.
Lastly, in compliance with the Bank of Italy’s instructions relating to Basel II and “groups of
connected customers”, the Bank uses rules relating to the management of economic groups to
increase the level of objectivity and process repetition regarding their composition.
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B
2.3 Credit risk mitigation techniques
The credit risk associated with individual counterparties or group is mitigated by obtaining
security (pledges, mortgages and special privileges) and/or personal guarantees (sureties,
endorsements, credit mandates and letters of patronage).
The degree of mitigation attributed to each guarantee is governed by specific regulations that
take account of the varying nature of the guarantees obtained.
The value of property is periodically reassessed and updated on the basis of the statistical
databases of a primary operator in the industry and the initiatives directed at renewing the
appraisals are activated.
Analysis of these guarantees does not reveal a special degree of concentration within the various
technical forms of cover/guarantee since, except with regard to general sureties, they are
essentially “specific” to each position. In addition, overall, there are no contractual restrictions
that might undermine the legal validity of the guarantees obtained.
2.4 Non performing financial assets
The main instrument used for the recognition of non performing loans is the aforementioned
GDC (Management of Credit) procedure, based on the Early Warning anomalies reporting
system, which classifies customers in increasing risk statuses.
Non perfoming loans not classified as bad loans monitored not only by the commercial network
but also by specific organisational units, whose mission is to “prevent default”. These units,
which report hierarchically and functionally to the Loans Division, operate at Head Office and in
the territorial Credit Offices responsible for the branch network.
Account managers are required to adopt an operational approach aimed at eliminating
anomalies and limiting risks.
Concerning positions within the category of “unlikely to pay”, two situations are distinguished:
- The first one regards the positions for which, as a result of recognised financial hardships,
a measure of forbearance was granted, i.e. a change, favourable to the debtor, to the
conditions relative to the original ones (forborne exposure). This category includes the
positions involved in debt restructuring in its various forms, including restructuring
agreements under art. 67 or art. 182 of the bankruptcy law. For them, management is
addressed to verifying compliance with the agreed restructuring plan.
Forborne exposures also include positions not involved in debt restructuring processes
defined within the bankruptcy law, but which, starting from a previous default state,
were subjected to measures such as the suspension of payment of the instalment or of the
principal amount. In this case, the management entails punctual monitoring of the
situation, in particular of the absence of overdrafts exceeding thirty days on the ratio to
be measured or on ratios connected thereto, especially starting from the time when the
effectiveness of the suspension measure expires.
‐
The second situation pertains to the positions that, according to the previous regulatory
dispositions, would have been classified as “watchlist loans”: for them, the activity gives
priority to friendly, even if gradual, recovery of credit or at least to the mitigation of any
negative effects in the event of default.
The classification of exposures as “bad loans” is based on the criteria laid down in the
supervisory regulations. Accordingly, this category comprises loans to parties that are insolvent
or in similar circumstances, even if not confirmed by a judge, the recovery of which is the subject
of court action or other suitable measures.
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B
Management of bad loans and recovery of loans is the responsibility of specific units within the
Loans Division and the Legal Affairs Department.
These units consist of internal lawyers and personnel who carry out administrative and
accounting activities in relation to the bad loans concerned. The accounting processes adopt an
IT procedure used by all the companies belonging to the Sec Servizi consortium.
Recovery activities are carried out on a pro-active basis, with a view to optimizing the legal
procedures and maximizing the outcome in economic and financial terms. In particular, when
evaluating the steps to take, internal lawyers prefer to take out-of-court action with recourse to
settlements that accelerate recoveries and contain the level of costs incurred. Where this route is
not applicable, and especially with regard to larger amounts and when higher recoveries can be
expected, external lawyers are instructed to take legal action since this represents both a method
of putting legitimate pressure on the debtor and a way to resolve disputes.
Small loans that are uncollectible or difficult to collect are generally grouped together and sold
without recourse, given that legal action would be uneconomic in cost/benefit terms.
For financial reporting purposes, bad loans are analysed on a case-by-case basis to determine the
provisions required to cover expected losses. The extent of the loss expected from each
relationship is determined with reference to the solvency of the debtor, the nature and value of
the guarantees obtained and the progress made by recovery procedures. Estimates are always
made on a prudent basis, taking into account the actual realisation values deriving from the
personal and/or corporate capital of the debtor and of the guarantors; moreover, in accordance
with the international accounting standards (IAS 39), the assessment includes the effects of
discounting. Discounting is effected, for each position, on the basis of the original rate of the
individual loan.
This complex evaluation process is facilitated by subdividing the total loan book into similar
categories and years of origin, taking account of the realisable value of the personal and/or
corporate assets of the debtor and the guarantors.
Lastly, the proper performance of the task of administering and evaluating bad loans is assured
by both periodic Internal Audit Department and by external verification activities, carried out by
the Board of Statutory Auditors and the Independent Auditors.
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B
QUANTITATIVE INFORMATION
A. CREDIT QUALITY
A.1 PERFORMING AND NON PERFORMING EXPOSURES: SIZE, ADJUSTMENTS, TRENDS,
ECONOMIC AND TERRITORIAL DISTRIBUTION
A.1.1 Breakdown of financial assets by portfolio and credit quality (book values)
Non
Portfolio/Quality
Unlikely to
Bad loans
performing
Pay
past due
exposures
Performing
Other
past due
performing
exposures
exposures
Total
-
-
-
-
5,305,402
5,305,402
-
-
-
-
-
-
61
-
-
-
2,150,088
2,150,149
1,889,197
3,295,539
135,457
737,991
19,119,933
25,178,117
-
-
-
-
7,842
7,842
6. Financial assets being sold
-
-
-
-
-
-
1,889,258
3,295,539
135,457
737,991
26,583,265
32,641,510
Total at 31/12/2015
For the “Loans and advances to customers” portfolio, for performing exposures, the breakdown
of past-due loans is provided below.
Portfolio/Age of the pastdue exposures
Loans and advances to
customers
Until 3 months
Gross
exposure
for more than 3 months until 6 months
Adjustments Net exposure
488,986
(5,144)
483,842
Gross
exposure
142,156
For more than 6 months until 1 year
(1,209)
140,947
Gross
exposure
95,582
For more than 1 year
(1,091)
94,491
Gross
exposure
Total
18,777
(66)
18,711
Gross
exposure
745,501
(7,510)
737,991
A.1.2 Distribution of financial assets by portfolio and credit quality (gross and net values)
Non perfoming exposures
Portfolio/Quality
Performing exposures
Total
Gross
Specific
exposure
adjustments
-
-
Net exposure
-
Gross
Portfolio
exposure
adjustments
5,305,402
-
(net exposure)
Net exposure
5,305,402
5,305,402
-
-
-
-
-
616
(555)
61
2,150,088
-
2,150,088
2,150,149
8,962,603
(3,642,410)
5,320,193
20,004,757
19,857,924
25,178,117
7,842
(146,833)
-
-
-
X
X
7,842
6. Financial assets being sold
-
-
-
-
-
-
-
5,320,254
27,460,247
27,321,256
32,641,510
Total at 31/12/2015
8,963,219
(3,642,965)
- 324 -
(146,833)
B
Portfolio/Quality
Low credit standing assets
Other assets
Accumulated
losses
Net exposure
Net exposure
979
10,928
3,393,623
-
-
33,024
979
10,928
3,426,647
Total at 31/12/2015
A.1.3 Banking group - Cash and off-balance sheet exposures to banks: gross values, net values and bands
of past due loans
Gross exposure
Non performing exposures
for more
than 3
months
until 6
months
Type of exposure/Amounts
Until 3
months
For more
than 6
For more
months
than 1 year
until 1 year
Specific
Portfolio
adjustements adjustements
Performing
exposures
Net
exposure
A. CASH EXPOSURES
a) Bad loans
- of which: exposures with forbearance measures
b) Unlikely to pay
c) Non performing past due exposures
d) Performing past due exposures
e) Other performing exposures
TOTAL A
-
-
-
616
X
X
61
-
-
-
-
X
-
X
-
-
-
-
-
X
-
X
-
-
-
-
-
X
-
X
-
-
-
-
-
X
-
X
-
-
-
-
-
X
-
X
-
X
X
X
X
-
X
-
-
X
X
X
X
-
X
-
-
X
X
X
X
2,239,816
X
-
2,239,816
X
-
X
-
X
-
X
-
616
2,239,816
(555)
X
(555)
-
2,239,877
B. OFF-BALANCE SHEET EXPOSURES
a) Non performing
b) Performing
-
-
-
-
X
-
X
-
X
X
X
X
1,280,456
X
-
1,280,456
TOTAL B
-
-
-
-
1,280,456
TOTAL (A + B)
-
-
-
616
3,520,272
- 325 -
(555)
-
1,280,456
-
3,520,333
B
A.1.4 Banking group - Cash exposures to banks: changes in gross non perofrming loans
Categories
Bad loans
Unlikely to
pay
Non
performing
past due
exposures
A. Opening gross exposure
616
-
-
of which: sold but not derecognized
-
-
-
B. Increases
-
-
-
B.1 transfers from performing loans
-
-
-
B.2 transfers from other categories
of non performing exposure
-
-
-
B.3 other increases
-
-
-
C. Decreases
-
-
-
C.1 transfers to performing loans
-
-
-
C.2 write-offs
-
-
-
C.3 collections
-
-
-
C.4 proceeds from disposals
-
-
-
C.5 losses from disposals
-
-
-
C.6 transfers to other categories
-
-
-
C.7 other decreases
-
-
-
D. Closing gross exposure
616
-
-
-
-
-
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B
A.1.4 bis Banking group – Cash exposures to banks: changes in gross granted loans distinguished by
credit quality
This table has not been completed.
A.1.5 Banking group - Non performing cash exposures to banks: changes in total write-downs
Categories
Bad loans
Unlikely to
pay
Non
performing
past due
exposures
A. Opening total adjustments
318
-
-
-
-
-
B. Increases
237
-
-
B.1 adjustments
237
-
-
B.2 loss from disposals
-
-
-
-
-
-
B.4 other increases
-
-
-
C. Decreases
-
-
-
C.1 writebacks on valuation
-
-
-
C.2 writebacks due to collections
-
-
-
C.3 profit from disposals
-
-
-
C.4 write-offs
-
-
-
-
-
-
C.6 other decreases
-
-
-
D. Total closing adjustments
555
-
-
-
-
-
- 327 -
B
A.1.6 Banking group - Cash and off-balance sheet exposures to customers: gross values, net values and
bands of past due loans
Gross exposure
Non - performing
for more
than 3
months
until 6
months
Until 3
months
For more
than 6
months
For more
than 1 year
Performing
Specific
Portfolio
Net exposure
adjustements adjustements
until 1 year
A. CASH EXPOSURES
a) Bad loans
-
36,415
290,635
4,042,370
X
(2,480,223)
X
-
4,550
48,344
92,015
X
(53,950)
X
90,959
1,778,609
142,242
788,153
1,729,867
X
(1,143,332)
X
3,295,539
735,069
74,639
239,744
501,685
X
(253,485)
X
1,297,652
31,822
57,662
58,216
6,612
X
(18,855)
X
135,457
1,357
5,413
5,975
1,082
X
(1,121)
X
X
X
X
X
745,502
X
X
X
X
X
190,880
X
(2,382)
188,498
X
X
X
X
24,616,923
X
(139,322)
24,477,601
b) Unlikely to pay
c) Non performing past due exposures
d) Performing past due
e) Other performing exposures
TOTAL A
X
X
X
X
617,952
1,810,431
236,319
1,137,004
5,778,849
25,362,425
(3,642,410)
(8,298)
(7,511)
X
1,889,197
12,706
737,991
(8,676)
609,276
(146,833)
30,535,785
B. OFF-BALANCE SHEET EXPOSURES
a) Non performing
208,858
-
-
-
X
X
X
X
X
2,358,832
2,358,832
(8,298)
(1,991)
2,557,401
236,319
1,137,004
5,778,849
27,721,257
(3,650,708)
(148,824)
33,093,186
b) Performing
TOTAL B
208,858
TOTAL (A + B)
2,019,289
-
-
-
X
X
(1,991)
200,560
2,356,841
For complete disclosure cash exposure to customers classified as bad loans including partial
write-offs for bankruptcy proceedings in progress at the reporting date (“memorandum
accounts”) is set out below.
Gross
exposure
Collective
allowances
Specific
for incurred
allowances
losses but
not reported
4,644,347
(2,755,150)
A. Cash exposures
a) Bad loans
- 328 -
X
Net
exposure
1,889,197
B
A.1.7 Banking group - Cash exposures to customers: changes in gross non performing loans
Categories
A. Opening gross exposure
Unlikely to
pay
Bad loans
Non
performing
past due
exposures
3,401,681
2,704,088
367,790
139,766
215,367
19,366
1,124,804
2,845,855
383,496
88,594
2,306,883
355,455
883,425
483,776
13,928
B.3 other increases
152,785
55,196
14,113
C. Decreases
157,065
1,111,072
596,974
217
25,043
59,497
C.2 write-offs
49,899
14,024
259
C.3 collections
98,150
202,055
23,556
5,747
3,854
-
-
-
B. Increases
B.1 transfers from performing loans
C.1 transfers to performing loans
C.4 proceeds from disposals
C.5 losses from disposals
999
2,051
865,645
513,433
2
451
229
4,369,420
4,438,871
154,312
215,865
269,846
14,542
C.7 other decreases
D. Closing gross exposure
As a result of the change to the definitions of non performing financial assets introduced by the
Bank of Italy starting from 1 January 2015 in order to align them to the new notions of “Non
Performing Exposures” and “Forbearance” defined by the European Banking Authority, the
exposure as at 31 December 2014 of the former watchlist and restructured positions was
conventionally included under sub-item A “Opening gross exposure” of unlikely to pay.
A similar procedure was followed for the total write-downs indicated in table A.1.8 below.
A.1.7 bis Banking group - Cash exposures to customers: changes in gross granted loans distinguished by
credit quality
- 329 -
B
A.1.8 Banking group - Non performing cash exposures to customers: changes in total provisions
Categories
A. Opening total adjustments
Bad loans
Unlikely to
pay
Non
performing
past due
exposures
1,705,410
528,308
38,494
47,354
15,381
2,228
B. Increases
933,269
811,750
570
B.1 adjustments
707,413
810,805
515
B.2 loss from disposals
B.4 other increases
C. Decreases
999
-
-
136,540
54
3
88,317
158,456
891
196,726
52
20,209
C.1 writebacks on valuation
79,503
40,304
19,896
C.2 writebacks due to collections
24,578
5,819
-
3,462
-
-
49,899
14,024
259
-
136,543
54
C.3 profit from disposals
C.4 write-offs
C.6 other decreases
D. Total closing adjustments
1,014
36
2,480,223
1,143,332
18,855
72,846
15,786
793
- 330 -
-
B
A.2 CLASSIFICATION OF EXPOSURES BASED ON EXTERNAL AND INTERNAL RATINGS
A.2.1 Banking group - Breakdown of cash and “off-balance sheet” exposures by external rating class
External rating class
Exposures
Class 1
A. Cash exposures
Class 2
272,912
Class 3
Class 4
Class 5
Class 6
Unrated
Total
1,073,140
6,130,978
4,914,491
654,318
650,306
19,323,681
33,019,826
B. Derivatives
-
38,113
11,273
27,738
4,094
3,528
377,043
461,789
B.1 Financial derivatives
-
38,113
11,273
27,738
4,094
3,528
377,043
461,789
B.2 Credit derivatives
-
-
-
-
-
-
C. Guarantees given
-
243,024
113,143
156,389
13,340
4,216
896,178
1,426,290
-
992,736
D. Commitments to grant finance
E. Other
Total
-
-
77,099
63,520
147,630
70,104
59,920
574,463
210,551
1,018
13,430
696
1,151
-
730,196
957,042
483,463
1,432,394
6,332,344
5,246,944
743,007
21,901,561
36,857,683
717,970
For classifying customers by external ratings, the Group uses:
 the ratings provided by DBRS Ratings Limited with regard to the supervisory portfolio
“Exposures to or guaranteed by central governments and central banks”;
 the ratings supplied by Standard & Poor’s Rating Services, Moody’s and Fitch Ratings
with regard to the “Securitisations” supervisory portfolios;
 the ratings provided by Cerved Group with regard to the “Exposures to companies and
other parties”.
The mapping tables for the rating classes published by each of the above rating agencies are
provided below (source: Bank of Italy).
Risk weighting coefficients
Credit class
1
2
3
4
5
6
Central governments and
banks
0%
20%
50%
100%
100%
150%
Supervised
intermediaries,
public sector
Multi-lateral
development
entities, territorial
entities
banks
20%
50%
100%
100%
100%
150%
20%
50%
50%
100%
100%
150%
DBRS
Ratings Limited
from AAA to AAL
from AH to AL
from BBBH to BBBL
from BBH to BBL
from BH to BL
CCC
In accordance with the Circular entitled “New prudential supervisory instructions for banks”,
the categories “Supervised intermediaries”, “Public-sector entities” and “Territorial entities”
must make reference to the credit class in which exposures to “Central government” are
classified in the country in which these parties are headquartered.
- 331 -
B
Ecai
Credit class
Exposures deriving from
securitizations
Standard & Poor's
Fitch Ratings
Moody's
1
2
3
4
5
20%
50%
100%
350%
1250%
da AAA a AAda A+ a Ada BBB+ a BBBda BB+ a BBB+ and below
da AAA a AAda A+ a Ada BBB+ a BBBda BB+ a BBB+ and below
da Aaa a Aa3
da A1 a A3
da Baa1 a Baa3
da Ba1 a Ba3
B1 and below
Credit class
1
2
3
4
5
6
Companies and other parties
Cerved Group
20%
50%
100%
100%
150%
150%
from A1.1 to A3.1
B1.1
from B1.2 a B2.2
from C1.1
from C1.2 to C2.1
A.2.2 Banking group - Breakdown of cash and “off-balance sheet” exposures by internal rating class
Internal rating classes
Exposures
Class 1
A. Cash exposures
Class 2
Class 3
Class 4
Class 5
Class 6
Class 7
Class 8
Class 9
Class 10
Class 11
Class 12
Class 13
Unrated
Total
197,203
834,405
297,123
1,853,403
3,052,979
2,899,120
2,366,565
1,905,244
1,539,536
876,322
251,774
550,169
485,878
7,718,249
24,827,970
B. Derivatives
267
51
774
6,486
4,999
4,489
9,834
10,643
3,919
1,868
223
614
984
176,460
221,611
B.1 Financial derivatives
267
51
774
6,486
4,999
4,489
9,834
10,643
3,919
1,868
223
614
984
176,460
221,611
B.2 Credit derivatives
-
-
-
-
-
-
-
-
-
-
-
-
-
C. Guarantees given
29,373
15,783
53,144
103,142
106,363
93,594
94,627
80,395
72,692
20,925
2,275
29,827
7,958
649,752
1,359,850
D. Commitments to grant finance
813
13,223
21,844
44,417
38,043
35,370
86,427
75,019
38,733
14,143
948
21,822
19,110
260,145
670,057
E. Others
-
-
-
-
-
-
-
-
-
-
-
-
Total
227,656
863,462
372,885
2,007,448
3,202,384
3,032,573
2,557,453
2,071,301
1,654,880
913,258
255,220
602,432
513,930
-
8,804,606
-
27,079,488
The Group uses internal ratings, split into 13 classes of decreasing credit quality (with class 1
representing the least risky customers and class 13 the most risky), solely for managing customer
credit risk. Non performing assets are all classified as “Unrated”.
The models developed by the Group cover the types of counterparty with whom it operates
structurally and to whom it is most exposed (Individuals, Small Business, Small Corporate, Mid
Corporate and Corporate). This table therefore does not include exposures arising from treasury
activity (loans and advances to Banks) or investment activity (debt securities, equities, mutual
funds, derivatives with institutional counterparties).
The internal ratings are not used for calculating capital adequacy requirements.
- 332 -
B
A.3 DISTRIBUTION OF GUARANTEED EXPOSURES BY TYPE OF GUARANTEE
A.3.1 Banking group – Guaranteed exposures to banks
Unsecured guarantees
(2)
Secured guarantees
(1)
Credit derivatives
Amount of net exposure
Buildings
financial leasing
Buildings
1. Guaranteed
cash exposures:
1.1 fully guaranteed
- of which: non performing exposure
1.2 partially guaranteed
2. Guaranteed "off-balance sheet"
exposures:
Securities
Other secured
guarantees
Guarantees
Other derivatives
C
L
N
Governments
Other public
and central
entities
banks
GovernOther public
ments and
entities
Other issuers central banks
Banks
Total
(1)+(2)
Banks
Other issuers
686,488
-
-
676,133
176
-
-
-
-
-
-
-
950
-
677,259
311,614
-
-
310,488
176
-
-
-
-
-
-
-
950
-
311,614
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
227,106
-
-
-
212,380
-
-
-
-
-
-
-
-
-
53,824
-
-
-
53,824
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
374,874
-
173,282
-
365,645
158,556
-
365,645
212,380
53,824
158,556
-
A.3.2 Banking group – Guaranteed exposures to customers
Unsecured guarantees
(2)
Secured guarantees
(1)
Credit derivatives
Amount of net exposure
Buildings
1. Guaranteed
cash exposures:
2. Guaranteed "off-balance sheet"
exposures:
Buildings
financial leasing
Securities
Other secured
guarantees
Guarantees
Other derivatives
C
L
N
Governments
Other public
and central
entities
banks
Banks
GovernOther public
ments and
entities
Other issuers central banks
Total
(1)+(2)
Banks
Other issuers
17,888,713
14,202,089
-
267,299
146,317
-
-
-
-
-
1,462
124,713
6,116
2,771,198
17,519,194
16,852,564
14,016,303
-
175,846
106,167
-
-
-
-
-
1,402
56,236
4,800
2,491,810
16,852,564
3,706,705
3,071,026
-
24,635
16,978
-
-
-
-
-
-
6,274
219
587,573
3,706,705
1,036,149
185,786
-
91,453
40,150
-
-
-
-
-
68,477
1,316
279,388
666,630
410,960
120,866
-
21,274
13,006
-
-
-
-
-
-
7,695
296
120,195
283,332
519,350
97,145
-
23,466
126,936
-
-
-
-
-
-
130
1,999
199,521
449,197
197,364
1,649
-
11,848
29,118
-
-
-
-
-
-
130
1,001
153,618
197,364
9,840
520
-
347
913
-
-
-
-
-
-
-
-
321,986
95,496
-
11,618
97,818
-
-
-
-
-
-
-
17,437
2,212
-
349
240
-
-
-
-
-
-
-
60
8,060
9,840
998
45,903
251,833
-
12,186
14,987
The 4th revision of Circular no. 262 of the Bank of Italy changed the procedures for representing
the guarantees in the above table, providing that their value may be no higher than the book
value of the guaranteed exposures.
- 333 -
B
B. DISTRIBUTION AND CONCENTRATION OF CREDIT
B.1 Banking group - distribution by sector of cash and "off-balance sheet" exposures to customers (book
value)
Governments
Exposures/Counterparts
Net exposure
A. Cash exposures
A.1 Bad loans
- of which: exposures with forbearance
measures
A.2 Unlikely to pay
measures
A.3 Non performing past due exposures
measures
A.4 Other performing exposures
measures
TOTAL A
B. "Off-balance sheet" exposures
B.1 Bad loans
B.2 Unlikely to pay
B.3 Other non perfoming exposures
B.4 Other performing exposures
TOTAL B
Total (A + B) at 31/12/15
Total (A + B) at 31/12/14
Other public entities
Specific
Portfolio
adjustments adjustments
-
-
X
-
-
X
21,078
-
-
X
-
-
X
-
-
-
X
36,388
(17,361)
X
-
-
X
36,388
(17,361)
X
33,343
(34,188)
X
-
-
X
10
-
X
1,952
(264)
X
(68,875)
-
256,568 (201,479)
X
X
X
-
-
X
-
-
X
-
-
5,232,555
X
-
47,721
X
-
1,501,986
X
(14,012)
-
X
-
-
X
-
33,655
X
(416)
5,232,555
-
-
84,119
(17,361)
-
1,781,584 (270,618)
(14,012)
2,370
2,370
5,234,925
5,840,993
X
-
X
X
X
-
10,002
10,002
94,121
102,207
X
(17,361)
(4,463)
X
X
X
(2)
(2)
(2)
(3)
(10)
716,827
X
716,827
(10)
2,498,411 (270,628)
2,390,990 (107,856)
X
X
X
(810)
(810)
(14,822)
(7,489)
Insurance companies
Exposures/Counterparts
Net exposure
A. Cash exposures
A.1 Bad loans
measures
A.2 Unlikely to pay
measures
measures
measures
TOTAL A
B.1 Bad loans
B.2 Unlikely to pay
TOTAL B
Total (A + B) at 31/12/15
Total (A + B) at 31/12/14
Financial companies
Portfolio
Specific
Portfolio
Specific
Net exposure
adjustment Net exposure adjustmen adjustment
adjustments
s
ts
s
Non-financial institutions
Specific
Portfolio
adjustments adjustments
X
Other issuers
Portfolio
Specific
Portfolio
Specific
Net exposure
adjustment Net exposure adjustmen adjustment
adjustments
s
ts
s
-
-
X
1,365,628
(1,936,668)
X
-
-
X
68,766
(46,603)
X
-
-
X
2,403,372
(588,822)
-
-
X
1,016,708
(176,484)
-
-
X
72,384
-
-
X
5,837
43,060
X
(4)
9,630,520
X
(7,347)
X
X
599,211 (335,670)
X
X
211,213
(25,452)
X
(9,595)
X
61,111
(8,996)
X
(660)
X
6,869
(461)
X
X
(99,270)
(7,896)
22,193
8,759,750
X
304,792
X
X
(33,547)
-
X
-
43,060
-
(4)
13,471,904
(2,535,085)
(99,270)
9,922,563 (819,346)
(33,547)
47,547
47,547
90,607
63,908
X
-
X
X
X
(70)
(70)
(74)
(27)
5,783
181,310
1,886
1,230,146
1,419,125
14,891,029
16,924,579
(1,825)
X
(6,428)
X
(2)
X
X
(1,079)
(8,255)
(1,079)
(2,543,340) (100,349)
(1,714,860) (126,963)
15
2,981
(20)
8,585
(13)
349,949
X
361,530
(33)
10,284,093 (819,379)
11,238,274 (450,277)
X
X
X
(30)
(30)
(33,577)
(37,201)
- 334 -
459,327
502,491 (474,680)
(2,746)
B
B.2 Banking group - Geographical distribution of cash and "off-balance sheet" exposures to customers
(book value)
ITALY
Exposures/Geographical area
Net exposure
OTHER EU COUNTRIES
Total
adjustments
Net exposure
AMERICA
Total
adjustments
Net exposure
ASIA
Total
adjustments
REST OF THE WORLD
Total
adjustments
Net exposure
Net exposure
Total
adjustments
A. Cash exposures
A.1 Bad loans
1,888,008
(2,469,655)
1,043
(7,234)
146
(637)
-
A.2 Unlikely to pay
3,168,999
(1,083,873)
126,321
(59,448)
217
(10)
-
(2,697)
-
-
-
2
(1)
132,444
(18,414)
342
(55)
2,671
(386)
-
24,976,206
(145,632)
174,783
(862)
38,507
(101)
8,718
(81)
17,378
-
(157)
-
TOTAL
30,165,657
(3,717,574)
302,489
(67,599)
41,541
(1,134)
8,718
(2,778)
17,380
(158)
B.1 Bad loans
5,798
(1,835)
-
-
-
-
-
-
-
-
184,291
(6,448)
-
-
-
-
-
-
-
-
10,471
(15)
-
-
-
-
-
-
-
-
2,235,408
(1,991)
112,901
-
32
-
-
-
8,500
-
TOTAL
2,435,968
(10,289)
112,901
-
32
-
-
-
8,500
Total at 31/12/2015
32,601,625
(3,727,863)
415,390
(67,599)
41,573
(1,134)
8,718
(2,778)
25,880
(158)
Total at 31/12/2014
35,888,006
(2,424,188)
601,672
(21,757)
39,023
(697)
7,050
(2,315)
25,200
(182)
B.2 Unlikely to pay
-
B.3 Banking group - Geographical distribution of cash and "off-balance sheet" exposures to banks (book
value)
ITALY
Exposures/Geographical area
OTHER EU COUNTRIES
AMERICA
Net exposure
Total
adjustments
Total
adjustments
Net exposure
A.1 Bad loans
-
-
61
A.2 Unlikely to pay
-
-
-
-
-
-
-
450,593
-
1,757,319
TOTAL
450,593
-
1,757,380
B.1 Bad loans
-
-
-
B.2 Unlikely to pay
-
-
-
-
-
618,303
TOTAL
ASIA
Net exposure
Total
adjustments
-
-
REST OF THE WORLD
Net exposure
Total
adjustments
Net exposure
Total
adjustments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,836
-
15,413
-
6,655
-
9,836
-
15,413
-
6,655
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
203,984
-
3,638
-
21,785
-
7,008
-
618,303
-
203,984
-
3,638
-
21,785
-
7,008
-
Total at 31/12/2015
1,068,896
-
1,961,364
(555)
13,474
-
37,198
-
13,663
-
Total at 31/12/2014
1,442,866
-
1,806,221
(318)
20,394
-
45,634
-
13,858
-
A. Cash exposures
(555)
(555)
- 335 -
B
B.4 Significant exposures
31/12/2015
a) Book value
9,020,001
b) Weighted value
1,472,914
c) Number
6
On the basis of current supervisory instructions, a “significant exposure” is one whose amount is
equal or greater than 10% of the admissible Capital (equal to the Group’s own funds).
At 31 December 2015, none of the above-referenced “significant exposures” are connected to the
Group’s lending to customers. These relate to the exposure to the Italian State (nominal value of
Euro 5,558.8 million and weighted value of Euro 149 thousand) connected mainly to direct and
indirect investments in Government bonds as well as to exposures to five leading worldwide
bank groups (total nominal value of Euro 3,461.2 million and weighted value of Euro 1,472.8
million). In this regard, at 31 December 2015, exposure to one of the aforesaid bank groups
exceeded, both at the individual level and at the consolidated level, the limit set by Article 395 of
Regulation (EU) no. 575/2013 (CRR) on Significant Exposures. However, in January 2016 actions
were initiated to reduce exposure to the counterparty to the limit prescribed by the relevant
regulations.
- 336 -
B
C. SECURITISATIONS
C.1 SECURITISATIONS
Objectives, strategies and processes underlying securitisations
The Banca Popolare di Vicenza Group has identified securitisations as the main source of
collection to meet funding requirements. All these securitisations form a strategic part of the
Group’s expectations of further growth in the mortgage sector and the general process of
expanding bank lending, which requires adequate liquidity to be raised in advance to meet
future loan applications. More specifically, the securitisations carried out met the following
objectives:

to free up resources on the asset-side of the statement of financial position, whilst improving
the treasury position;

to reduce maturity mismatching between deposits and long-term lending;

to reduce the ratio of long-term lending to total lending.
These are also the purposes of “self-securitisations”, carried out with the intent of having
available usable securities for funding activities with the European Central Bank or with major
market counterparties.
At the date of the financial statements, the following fourteen securitisations existed:
- Berica Residential MBS 1 Srl;
- Berica 5 Residential MBS Srl;
- Berica ABS Srl;
- Berica ABS 2 Srl;
- Berica PMI Srl;
- Piazza Venezia Srl:
- Berica ABS 3 Srl;
- Adriano SPV Srl;
- Berica ABS 4 Srl;
- Berica PMI 2 Srl.
On 1 January 2015 the first securitisation originated by the subsidiary Prestinuova took effect; it
was carried out through the establishment of a special purpose vehicle (“Adriano Spv”) to which
securitised assets (salary-backed and pension-backed loans and loans with delegation of
payment on salary and pension) were transferred without recourse. The securitisation was
completed in January 2015 with the issue of Asset Backed Securities whose senior tranche was
entirely placed on the market, while the junior tranche was subscribed by Prestinuova.
On 1 May 2015, the Berica ABS 4 securitisation took effect, in which the originators (the Parent
Bank BPVi and the subsidiary Banca Nuova) assigned a portfolio of performing residential
mortgages. The transaction was completed in July, with the issue of Asset Backed Securities by
the special purpose entity; these were entirely subscribed by the originators.
- 337 -
B
On 1 November 2015, the Berica PMI 2 securitisation took effect, in which the originators (the
Parent Bank BPVi and the subsidiary Banca Nuova) assigned a portfolio of performing
residential mortgages. This transaction is currently in the warehousing phase since the relative
Asset Backed Securities have not yet been issued by the vehicle company.
The securitisations, all of which are multioriginator with the exception of Adriano Spv Srl,
originated by the subsidiary Prestinuova only, were carried out in accordance with Italian Law
130/1999. The aforesaid securitisations involved, in addition to the Parent Bank, also the former
subsidiaries Cassa di Risparmio di Prato S.p.A. (merged by absorption on 31 December 2010) and
Banca Nuova S.p.A. and Farbanca S.p.A. (for the operation named Piazza Venezia only).
With the only exception of the securitisation called Berica Residential MBS 1 S.r.l., the Group
owns pro rata the junior securities issued within the aforesaid securitisations (therefore the
related mortgages are “reinstated” in the financial statements).
For a complete disclosure, the details relating to the last three securitisations originated by the
Group and executed in 2015 are provided below.
- Vehicle company:
- Date of sale of loans:
Berica ABS 4 srl
01/05/2015
- Type of loans sold:
Mortgage loans
- Quality of loans sold:
Performing loans
- Guarantees on loans sold:
First mortgage
- Geographical area of loans sold:
- Economic status of debtors sold:
- Number of loans sold:
of which: Banca Popolare di Vicenza
Italy
Individuals
8,016
6,848
of which: Banca Nuova
- Price of loans sold:
- Value of loans sold:
- Interest accrued on loans sold:
1,168
946,962,867
823,879,424
123,083,443
946,610,020
823,571,850
123,038,171
352,847
307,575
45,273
With the aforesaid securitisation, the ABS 4 set out below were issued; they were subscribed by
the originators in proportion to the transferred receivables portfolio. In detail:

Euro 728,900 thousand in senior notes (of which Euro 634,100 thousand subscribed by
BPVi and Euro 94,800 thousand subscribed by Banca Nuova) with external rating
assigned by Fitch (“AA+”) and DBRS (“AA”) with yield tied to the 3-month Euribor plus
80 bps;

Euro 75,700 thousand in mezzanine notes (of which Euro 65,900 thousand subscribed by
BPVi and Euro 9,800 thousand subscribed by Banca Nuova) with external rating assigned
by Fitch (“A”) and DBRS (“A”) with yield tied to the 3-month Euribor plus 110 bps;
- 338 -
B

Euro 47,300 thousand in mezzanine notes (of which Euro 41,200 thousand subscribed by
BPVi and Euro 6,100 thousand subscribed by Banca Nuova) with external rating assigned
by Fitch (“BBB”) and DBRS (“BBB”) with yield tied to the 3-month Euribor plus 210 bps;

EUR 94,711 thousand in unrated junior notes (of which Euro 82,400 thousand subscribed
by BPVi and Euro 12,311 thousand subscribed by Banca Nuova) with yield tied to the 3month Euribor.
- Vehicle company:
Adriano SPV srl
01/01/2015
Wage assignments
Performing loans
Insurance against risk of death
and lost of work
Italy
Individuals
25,512
309,608,603
307,641,142
1,948,131
With the aforesaid securitisation, the ABS securities set out below were issued. In detail:


Euro 201,739 thousand at 31 December 2015 (Euro 267,640 thousand at the date of issue)
in unrated senior notes with a yield tied to the 3-month Euribor plus 135 bps;
Euro 40,000 thousand in unrated junior notes entirely subscribed by Prestinuova, with 10
bps yield.
- 339 -
B
- Vehicle company:
Berica PMI2 srl
01/11/2015
Unsecured loans and mortgage loans
in favor of small and medium- size
companies
Performing loans
First mortgage
di cui: Banca Nuova
di cui: Banca Nuova
di cui: Banca Nuova
di cui: Banca Nuova
Italy
Individuals
5,804
4,319
1,485
1,175,018,480
1,006,299,653
168,718,826
1,171,264,918
1,002,904,427
168,360,491
3,208,188
2,992,535
215,653
The securitization is currently in the warehousing phase since the relevant Asset Backed
Securities have not yet been issued by the vehicle company.
For each own securitisation, the originator Banks have signed specific servicing contracts with
the respective vehicle companies for the coordination and supervision of the management,
administration and collection of the securitised loans, as well as for recovery activities in the
event of borrower default. These contracts require the payment of an annual servicing fee as well
as recompense for each position requiring recovery activities. The function of servicer is carried
out by specific structures within the company, whose work has been duly organised and is
checked by the Bank’s internal auditors, who verify the propriety and conformity of its conduct
with respect to the terms of the servicing contract.
In the case of the Piazza Venezia, Berica ABS 4 and Berica PMI 2 securitisations, since the first
two transactions are self-securitisations (the originator banks have subscribed all issued assetbacked securities in proportion to the size of the loan portfolio sold) and the third one, as
described in the previous point, is in the warehousing phase, they do not fall under the
disclosure requirements applicable to the present Section.
- 340 -
B
Servicer and arranger activities
For all the securitisations, the originator Banks have signed specific servicing contracts with the
respective vehicle companies for the coordination and supervision of the management,
administration and collection of their specific securitised loans, as well as for recovery activities
in the event of borrower default.
These contracts require the payment of an annual servicing fee as well as recompense for each
position requiring recovery activities. The function of servicer is carried out by specific specially
organised structures within the company, whose work is subject to control by internal auditors,
who verify the propriety and conformity of their conduct with respect to the terms of the
servicing contract.
Lastly, the originator banks also act as the administrative servicer for all the above
securitisations, receiving a contractually-agreed fee from the special purpose vehicles for
providing this service.
Accounting treatment of outstanding positions relating to securitisations
With regard to the above securitisations, for the first securitisation, set up before 1 January 2004,
the securitised assets were not reinstated on the first-time adoption of IAS-IFRS, as allowed by
par. 27 of IFRS 1.
The other securitisations, arranged subsequent to 1 January 2004, do not meet the derecognition
requirements of IAS 39. Accordingly, the portion of residual securitised assets relating to loans
sold by the Group has been reinstated at the statement of financial position date and the
corresponding asset-backed securities eliminated.
In particular, the securitised assets and related liabilities have been “reinstated” in the statement
of financial position, with the residual securitised loans reported in the asset line item “Loans
and advances to customers” and the associated liabilities in the liability line item “Due to
customers”, while the corresponding portion of asset-backed securities relating to these
securitisations has been eliminated from the Group’s portfolio. If said elimination results in a
negative imbalance, said amount is recorded under “Loans and advances to customers”.
“Interest income and similar revenues” and “interest expense and similar charges” arising
during the year in relation to the above assets and liabilities have been recognised, and an overall
assessment of the reinstated securitised loans has also been performed with any write-downs
reported in “net impairment adjustments to: loans and advances”. The securitised assets
reported in the statement of financial position have been valued using the same principles as for
the Group’s own assets.
- 341 -
B
Internal systems for the measurement and control of risk
The residual risk for each bank in relation to the total insolvency of borrowers represents, for the
own securitisations not reinstated, the value of the junior notes (highest degree of subordination)
held.
The Group’s banks monitor changes in the key credit and financial variables relating to each
securitisation.
With a view to controlling risk, special attention is focused on the performance of the trigger
ratios, of performance indicators on default and delinquent loans, as well as the performance of
the excess spread that represents the return on the junior notes held by the Group. The Board of
Directors of each bank receives a summary and detailed statement about the securitisations at
least every six months.
Concurrently with the issue of the ABS, several back-to-back swaps were arranged in the form of
Interest Rate Swaps (IRS), in order to shield the special purpose vehicle (SPV) from interest rate
risk.
These instruments are measured at fair value, as discussed below, and are included in the
periodic Asset & Liability Management (ALM) analysis which is performed every quarter.
As regards the organisational structure which oversees the securitisation transactions, the Parent
Bank, through a dedicated operating unit, monitors the trend in securitisations originated by the
Banca Popolare di Vicenza Group.
Results from positions relating to securitisations
The risk relating to the first four own securitisations, not reinstated, is represented by the junior
notes held and the related back-to-back swaps arranged by the Parent Bank. The fair value of
these financial instruments is measured with reference to analysis performed using a financialmathematical model, developed together with an external firm of consultants, that evaluates the
performance of the assets underlying the securities concerned. These evaluations are based on
the results of the individual underlying transactions at the reference date, using specific
assumptions about the principal variables that affect performance (rate of early loan repayments,
rate of recognition of bad loans, percentage of expected losses, etc.).
- 342 -
B
The last seven multi-originator securitisations arranged by the Group have been “reinstated” in
the statement of financial position, with the residual securitised loans reported in “Loans and
advances to customers” (asset line item 70) and the associated liabilities in “Due to customers”
(liability line item 20), while the corresponding junior, mezzanine and senior ABS subscribed
under these securitisations have been derecognised. “Interest income and similar revenues” and
“interest expense and similar charges” arising during the year in relation to these securitisations
have been recognised, and an overall assessment of the reinstated securitised loans has also been
performed with any write-downs reported in “net impairment adjustments to: loans and
advances”.
Rating agencies
The following rating agencies were engaged to perform due diligence work on the above
transactions and assign ratings to the related Asset-Backed Securities:
-
Berica Residential MBS 1 Srl: Standard & Poor’s and Fitch Ratings;
Berica 5 Residential MBS Srl: Standard & Poor’s and Fitch Ratings;
Berica 6 Residential MBS Srl. Standard & Poor’s, Fitch Ratings and Moody’s Investors
Service Inc.;
Berica 8 Residential MBS Srl: Fitch Ratings and Moody’s;
Berica 9 Residential MBS Srl: Fitch Ratings and Moody’s;
Berica 10 Residential MBS Srl: Moody’s and DBRS;
Berica ABS Srl: Moody’s and DBRS;
Berica ABS 2 Srl: Fitch Ratings and DBRS;
Berica PMI Srl: Fitch Ratings and DBRS;
Piazza Venezia Srl: Fitch Ratings;
Berica ABS 3 Srl: Fitch Ratings and DBRS;
Berica ABS 4 Srl: Fitch Ratings and DBRS.
- 343 -
B
C.1 Banking group - Exposures deriving from the principal “own” securitisations analysed by type of
asset securitised and type of exposure
Cash exposures
Senior
Type of asset
securitized/Exposure
Book value
Guarantees given
Mezzanine
Writedowns/
writebacks
Junior
Writedowns/
Book value
writebacks
Book value
Senior
Writedowns/
Book value
writebacks
Credit lines
Mezzanine
Writedowns
/writebacks
Book value
Junior
Writedowns
/writebacks
Book value
Senior
Writedowns
/writebacks
Book value
Mezzanine
Writedowns
/writebacks
Book value
Junior
Writedowns
/writebacks
Book value
Writedowns
/writebacks
A. Fully
derecognized
- mortgages
16,919
-
19,896
-
11,219
37,963
-
1,221,059
-
1,301,263
197
-
-
-
780,991
-
-
-
-
40,000
(879)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
B. Partially
derecognized
C. Not derecognized
- mortgages
- Unsecured loans and mortgage loans in favor of small and
medium- size companies
- Assignments of one-fifth of salary
C.2 Banking group - Exposures deriving from the principal “third-party” securitisations analysed by type
of asset securitised and type of exposure
Cash exposures
Type of asset
securitized/Exposure
Senior
Book value
- performing and not performing receivables of Palermo
Chamber of Commerce (annual fees)
- performing and non perfoming receivables of Impresa Spa
(technical reserves)
- loans agricultural and zootechnics
- credit for consuption
- technical reserves arising from contracts originated by the
public administration
- other loans
Guarantees given
Mezzanine
Writedowns/
Junior
Writedowns/
Book value
writebacks
writebacks
Senior
Writedowns/
Book value
writebacks
Credit lines
Mezzanine
Book value
Writedowns
/writebacks
Book value
Junior
Writedowns
/writebacks
Senior
Book value
Writedowns
/writebacks
Mezzanine
Book value
Writedowns
/writebacks
Book value
Junior
Writedowns
/writebacks
Book value
Writedowns
/writebacks
2,954
-
12,019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
73,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,801
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,009
(8,767)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
58,609
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42,291
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
C.3 Banking group - Holdings in special purpose vehicles for securitisation
Assets
Securitization/SPV
Registered office
Consolidation
Loans and
advances
Berica Residential MBS 1 S.r.l.
Berica 5 Residential MBS S.r.l.
Berica ABS S.r.l.
Berica ABS 2 S.r.l.
Berica PMI S.r.l.
Berica ABS 3 S.r.l.
Adriano Spv S.r.l.
Vicenza
Vicenza
Vicenza
Vicenza
Vicenza
Vicenza
Vicenza
Vicenza
Vicenza
Vicenza
Milan
No
No
No
No
No
No
No
No
No
No
No
Liabilities
Debt securities
99,114
179,159
442,691
587,077
642,997
608,744
885,165
613,961
779,684
798,283
226,896
- 344 -
-
Other
15,180
17,788
129,520
106,541
66,601
44,267
42,815
51,120
91,796
45,493
36,604
Senior
54,164
107,674
423,528
370,509
127,569
193,508
584,424
201,739
Mezzanine
35,308
43,932
419,536
441,444
395,495
110,000
280,100
93,900
-
Junior
10,526
34,293
1,000
174,950
193,200
184,382
327,468
179,959
588,027
115,012
40,000
B
C.4 Banking group - Non consolidated special purpose vehicles for securitisation
The table below shows the information required by paragraph 26 of IFRS 12 for exposures in
debt securities held by the Group at 31 December 2015 relating to third-party securitisations.
The Group did not sponsor special purpose vehicles for securitisation.
Isin Code
IT0004678949
IT0004792195
IT0004890528
IT0004953953
IT0004991425
IT0004999675
IT0005041279
IT0005055469
IT0005074601
IT0004841372
IT0005144172
XS1177802102
IT0005022915
IT0005092470
IT0004495609
Description
Tranche
KALOS FIN 3% .MEZ.21
PROSPERO FIN.2,5% 22
ALTAIR FIN.SRL 2% 23
GIRONDA 3,031% CL.A
NAUSICAA SPV SRL C.A
TRITONE SPV 2% 14-35
TAMIGI SPV 3,15% CLA
TIMAVO SRL 6% 14-24
EGEO SRL 2,00% CL.A
AQUARIUS TM CL.A
RENO SPV 3,00% CL.A
COMPARMENT ATENA
BNT PORTFOLIO TV 42
QUARZO CL.A TV 15-30
SUNRISE SRL TV 09-31
mezzanine
mezzanine
mezzanine
senior
senior
senior
senior
senior
senior
senior
senior
senior
one tranche
senior
senior
Maturity
31/12/2021
31/12/2022
31/12/2023
30/11/2030
31/12/2024
31/12/2035
30/07/2040
30/12/2024
31/12/2027
30/07/2030
30/11/2040
30/05/2025
09/02/2042
15/11/2030
27/08/2031
Maximum
Geographical
Securitized assets
distribution
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Luxembourg
Italy
Italy
Italy
Rating
Book value
exposure to the
Assets' accounting portfolio
risk of loss
Annual fees Chamber of Commerce
Technical Reserves
Loans
Technical Reserves
Commercial loans
Technical Reserves
Technical Reserves
Technical Reserves
Commercial loans
Loans agricultural and zootechnics
Credit for consuption
Credit for consuption
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
3,585
3,738
4,696
17,598
2,954
26,731
21,283
3,031
34,619
18,506
40,103
12,529
70,801
16,867
1,142
3,585
3,738
4,696
17,598
2,954
26,731
21,283
3,031
34,619
18,506
40,103
12,529
70,801
16,867
1,142
C.5 Banking group - Servicer activities - own securitisations: collection of securitised loans and
redemption of securities issued by the special purpose vehicle for securitisation
Securitized assets
31/12/2015
Servicer
SPV
Loans collected during the
year
Percentage of securities redeemed 31/12/2015
Senior
Non
performing
loans
Mezzanine
Junior
BPVi/Banca Nuova
Berica Residential MBS 1 S.r.l.
Non
Performing
Performing
Non
Non
Non
performing
Performing
Performing
Performing
loans
loans
performing
performing
performing
loans
assets
assets
assets
assets
assets
assets
95,839
40,971
0.00%
90.21%
0.00%
0.00%
0.00%
60.49%
BPVi/Banca Nuova
-
171,876
-
78,876
0.00%
82.96%
0.00%
0.00%
0.00%
3.13%
BPVi/Banca Nuova
-
442,691
-
83,739
0.00%
100.00%
0.00%
66.83%
0.00%
78.26%
BPVi/Banca Nuova
-
587,078
-
170,847
0.00%
65.29%
0.00%
0.00%
0.00%
0.00%
BPVi/Banca Nuova
-
642,997
-
135,196
0.00%
39.00%
0.00%
0.00%
0.00%
0.00%
BPVi/Banca Nuova
-
608,744
-
96,333
0.00%
32.65%
0.00%
0.00%
0.00%
0.00%
BPVi/Banca Nuova
Berica ABS S.r.l.
-
885,165
-
133,311
0.00%
42.37%
0.00%
0.00%
0.00%
0.00%
BPVi/Banca Nuova
Berica ABS 2 S.r.l.
-
613,960
-
104,576
0.00%
25.45%
0.00%
0.00%
0.00%
0.00%
BPVi/Banca Nuova
Berica PMI S.r.l.
-
779,684
-
248,983
0.00%
48.33%
0.00%
0.00%
0.00%
0.00%
BPVi/Banca Nuova
Berica ABS 3 S.r.l.
-
798,283
-
174,624
0.00%
8.49%
0.00%
0.00%
0.00%
0.00%
Prestinuova
Adriano Spv S.r.l.
-
226,896
-
82,275
0.00%
24.62%
0.00%
0.00%
0.00%
0.00%
C.6 Banking group - Consolidated special purpose vehicles for securitisation
exist with regards to the special purpose vehicles used by the Group in its securitisation
irrelevant with respect to those of the group and that the assets securitised are already included
in the Group financial statements, the prerequisites prescribed by IAS 39 for the so-called
“derecognition” not applying for the various transactions carried out28.
With the exception of the Berica Residential Mbs 1 transaction which was carried out before 1 January 2004, and for
which the securitised assets were not “reinstated” on the first-time adoption of IAS-IFRS, as allowed by IAS 1.
28
- 345 -
B
D. DISCLOSURE ON STRUCTURED ENTITIES (OTHER THAN SPECIAL PURPOSE VEHICLES
FOR SECURITISATION)
D.1 Consolidated structured entities
The BPVi Group’s scope of consolidation includes among its “subsidiaries” the three mutual
funds managed by the subsidiary Nem Sgr named “Nem Imprese”, “Nem Imprese II” and
“Industrial Opportunity Fund”. With reference to these mutual funds, at 31 December 2015 the
Parent Bank’s residual commitment to make further payments amounts to Euro 60,703 thousand.
For a complete disclosure, it is reported that the “associate” companies over which the Group
exercises significant influence includes the Giada Equity Fund.
The risks associated to the Group’s investments in the above-mentioned funds are those typical
of an investment in private equity funds, mainly consisting of liquidity and market risk.
Key information on the aforesaid funds subject to line-by-line consolidation and on the Giada
Equity Fund is provided below.
Industrial Opportunity Fund
The Fund, which invests principally through mezzanine financing transactions also in support of
corporate acquisitions with financial partners, typically private equity funds, or industrial in
companies operating in Italy, started operations on 4 July 2008.
Its equity at 31 December 2015 amounts to Euro 42 million, divided into 140 Class A units and 2
Class B units with a nominal value of Euro 500,000 each (entirely held by the Group).
Existing investments amount to Euro 20 million, all relating to unlisted companies, and have
been made both through equity and through forms of debt such as loans and convertible bonds.
Cash equivalents amounted to Euro 18.9 million. The 2015 operating result was positive by Euro
4.7 million due to gains realised from disposal of investments (Euro 8.7 million) and the relevant
interest income (Euro 1.5 million), only partially offset by impairment adjustments recognised on
assets (Euro -3.6 million) and by operating charges and taxes (Euro -1.9 million).
Nem Imprese Fund
The Fund, which invests in the small and medium enterprise sector mainly through minority
equity investments, started operations on 13 May 2005.
Its equity at 31 December 2015 amounts to Euro 9.7 million, divided into 120 units with a
nominal value of Euro 250,000 each (of which 114 held by the Group).
Existing investments amount to Euro 9 million, all relating to unlisted companies, and have been
made both through equity and through loans. Cash equivalents amounted to Euro 0.2 million.
The operating result for 2015 was negative by Euro 0.9 million, almost entirely due to
impairment adjustments recognised on assets.
Nem Imprese II Fund
The Fund, which invests in the small and medium enterprise sector mainly through minority
equity investments, started operations on 9 February 2010.
Its equity at 31 December 2015 amounts to Euro 47.7 million, divided into 4.600 Class A units
and 27 Class B units with a nominal value of Euro 25,000 each (entirely held by the Group).
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B
Existing investments amount to Euro 36.5 million, all relating to unlisted companies, and have
been made both through equity and through convertible bonds. Cash equivalents amounted to
Euro 10.7 million. The 2015 operating result was positive by Euro 6.7 million due to gains
realised from disposal of investments (Euro 6.4 million), dividends collected (Euro 10.5 million)
and the relevant interest income (Euro 0.3 million), only partially offset by impairment
adjustments recognised on assets (Euro -7.9 million) and by operating charges and taxes (Euro 2.6 million).
Giada Equity Fund
The fund, established in September 2002, is a closed-end mutual fund reserved for qualified
investors, managed by 21 Investimenti Sgr SpA with a total capital of Euro 75 million, divided
into 300 units with a nominal value of Euro 250,000.
The Fund’s duration was originally planned for 10 years from the subscription closing date (26
September 2002), but was extended by two year and subsequently by an additional year to 26
September 2015 in order to complete the disposal of investments. In the course of 2015, the
Management Company with the consent of the subscribers amended the management
regulations, setting the end date of the Fund’s duration at 25 September 2017 (without the option
of further extensions).
The Fund carried out 17 investment transactions calling all of the commitments subscribed,
amounting to Euro 75.0 million. With reference to disposals, the Fund sold 14 investments and
distributed to participants a total of Euro 78.4 million or 104.5% of the subscribed capital (Euro
181.5 million).
The breakdown of the Fund’s total assets at 30 June 2015 was as follows: 11.02% shares and units;
86.88% other unlisted financial instruments (debt securities); 2.10% cash equivalents and other
assets.
At 31 December 2015 the Fund contributed to the consolidated income statement with a loss of
Euro 826 thousand. Adjustments relating to write-downs due to impairment losses, recorded in
the income statement based on IAS 36, have been entered in the Parent Bank’s separate financial
statements.
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B
D.2 Structured entities unconsolidated for accounting purposes
D.2.1 Structured entities consolidated for supervisory purposes
The Group does not consolidate structured entities for supervisory purposes other than those
consolidated for accounting purposes.
D.2.2 Other structured entities
The disclosures required by paragraph 26, 27(a), 30, 31, B25 and B26 of IFRS 12, concerning the
Group’s key investments in mutual funds is provided below.
The Group did not sponsor unconsolidated structured entities.
Athena Capital Balanced Fund 1
This fund was subscribed by Banca Popolare di Vicenza on 28 November 2012 for a total
commitment of Euro 100 million, fully paid up. On 30 October 2015 the Fund carried out a partial
distribution of Euro 70 million.
The Investment Advisor is “Edmond Capital Partners LLP”, an independent company
authorised by the “United Kingdom Financial Services Authority”.
The fund operates as part of a plafond of investments in funds managed by professionals of the
sector with specific expertise, with a view to achieving satisfactory long-term returns through
direct investments in funds and other assets characterised by a limited risk level (such as
European sovereign debt, equities of European financial institutions, and other residual
investments aimed at optimising and taking advantage of specific market situations). The fund
can borrow up to 100% of its NAV.
Under the Fund’s regulations, the value of each unit is calculated and published by the Sgr on a
weekly basis.
Optimum Evolution Funds Sif Sicav
This fund, reserved for institutional investors and registered with the “Registre de Commerce et
des Sociétés” of Luxembourg, was subscribed by Banca Popolare di Vicenza on 28 November
2012 for a total commitment of Euro 100 million fully paid up.
The fund operates as part of a plafond of investments in funds managed by professionals of the
sector with specific expertise, with a view to implementing a multi-asset strategy to achieve
steady long-term returns through a wide range of direct and indirect investments in bonds,
equities, real estate, hedge funds, funds of funds, private equity, and structured bonds. The fund
may use financial leverage for direct and/or indirect investments in line with the market
practices adopted for the different subfunds.
The Board of Directors is responsible for the fund’s management, administration and
investments, and is composed of at least three members.
Optimum Asset Management (Luxembourg) S.A., registered with the “Luxembourg trade and
companies register”, is the fund management company responsible for asset management,
distribution and sale services.
Under the Fund’s regulations, the value of each unit is calculated and published by the Sgr on a
monthly basis.
- 348 -
B
Agris
Agris is a closed-end real estate mutual fund with mixed contribution reserved for institutional
investors, managed by Prelios SGR from (previously by IDeA FIMIT SpA.)
In 2012, the Parent Bank acquired fund units for approximately Euro 20 million.
The fund started operations on 29 December 2011 through the assignment of real estate assets
mainly for production use by companies operating in the agricultural industry, and has a
duration of 10 years. It plays a strategic role for this sector, as it is the only investment product
dedicated to supporting, in a real estate perspective, the development of the agricultural sector in
Italy. The fund was established through the assignment by several agricultural consortia of the
right of ownership on real estate complexes and units with a value of approximately Euro 107
million at June 2015.
On 25 June 2012, BPVi acquired 376 units of the Agris fund for a total of Euro 19,987 thousand.
Except in case of early liquidation, the Fund’s duration is ten years, with expiry on the closing
date of the first Annual Report subsequent to the tenth anniversary of the closing date of the first
subscription period (31 December 2012), with the option to extend duration for a further two
years.
The value of each unit is calculated and published by the Sgr on a half-year basis.
ILP III S.C.A.
ILP III S.C.A. is a SICAR (“société d’investissement en capital à risque”) registered in Luxembourg
and dedicated exclusively to investment activities, comparable to a closed-end fund operating in
the private equity sector.
As such, the entity has no operational structure and its business is managed by the advisor J.
Hirsh & Co. International Sàrl and by the Luxembourg-based manager ILP III Sàrl.
The total commitment subscribed by investors amounts to Euro 252 million, of which Euro 211
million was called at 30 September 2015.
BPVi subscribed a commitment for a total of Euro 25 million, of which to date approximately
Euro 21 million has been called, with the aim to achieve satisfactory returns through a vehicle for
investing in companies with high growth potential.
The fund’s investment period, originally set to expire on 12 April 2012, has been extended for
two years in order to complete ongoing investments.
Toscana Venture
Toscana Venture is a closed-end real estate mutual fund reserved for qualified investors,
managed by S.I.C.I. S.p.A.
The Bank subscribed a commitment for up to Euro 7 million, fully called at 31 December 2015,
with the aim to achieve satisfactory returns through a vehicle for investing in mostly Italian
small to medium sized companies with attractive growth potential.
Established in 2003, the fund focuses on small to medium sized enterprises within the Tuscan
regional economic environment, and operates by acquiring portions of the companies’ voting
right capital and supporting their owners or managers in implementing the business and
financial plan. In 2015, the Fund focused on managing its equity investment portfolio and on
seeking the best divestment opportunities.
- 349 -
B
Copernico Fund
The fund was subscribed by BPV Finance on 21 December 2010 for a commitment of up to Euro
10 million fully paid up. On 23 December 2013, BPV Finance made a further investment of Euro
8.2 million. At 31 December 2015 there are no residual payment commitments.
Copernico is a closed-end speculative real estate fund reserved for qualified investors. It is
managed by Finanziaria Internazionale Investments Sgr SpA, based in Conegliano (TV). The
Company is registered with Bank of Italy’s Investment Management Companies Register.
The fund invests in renewable energy sources with a focus on solar energy through financial
lease contracts, real estate rights and real estate equity investments.
In particular, Copernico invests in companies operating in the real estate sector and that produce
electricity from renewable sources or biomass. The investments aim to achieve both a constant
cash flow as well as capital gains from the sale of these positions.
Quadrivio Q2 Fund
The fund was subscribed by BPV Finance on 21 May 2013 for a total commitment of Euro 15
million. At 31 December 2015, the residual payment commitment amounted to Euro 3.9 million.
Quadrivio Q2 is a closed-end fund reserved for qualified investors managed by Quadrivio Sgr
SpA, an investment management company based in Milan and registered with Bank of Italy’s
Register of Investment Management Companies. The fund specialises in investments in medium
capitalisation companies and aims for international growth and consolidation of the position.
The fund may not invest in start-ups or companies requiring high turnaround. Sector focus is on
companies operating in the Food & Beverage sector, design product manufacturers and
distributors (excluding the fashion industry), and providers of business-to-business services,
financial services, distribution modernisation, niche consumer goods and specialised equipment.
Geographic focus is mainly on the Italian market.
For this reason, the fund targets companies that offer the highest return on invested capital and
require limited investments in fixed assets (the fund does not invest in start-ups): value is created
by acting directly on the company’s organisational and financial structure, including
management incentive mechanisms.
Optimun Evolution Fund SIF – Multistrategy II
The fund was subscribed by BPV Finance on 7 August 2013 with a commitment up to Euro 150
million fully paid up.
Optimum Evolution Fund SIF – Multi Strategy II is a specialised investment fund reserved for
qualified investors, established in the legal form of a Luxembourg SICAV. It is registered with
the Luxembourg “Registre de Commerce et des Societes”.
The fund is managed by Optimum Asset Management (Luxembourg) SA, a company registered
with the “Luxembourg trade and companies register” with number B158100 and having its
registered office in J.F. Kennedy 46a, Luxembourg.
The fund pursues a multi-asset investment strategy with the aim to achieve long-term returns,
investing in harmonised and non-harmonised fixed-income, equity, real estate and speculative
funds, funds of funds, closed-end and open-end funds, listed and unlisted investment vehicles,
private equity and structured bond funds.
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B
Argenta Value Fund Limited
The fund was subscribed by BPV Finance on 8 January 2015 for a commitment of up to Euro 3.5
million fully paid up.
Argenta Value Fund Ltd is a hedge fund organised in the form of limited liability company based
in the Cayman Islands.
The Fund aims to increase the value of the invested capital with limited risk exposure. The Fund
invests through its main fund Argenta Master Fund Ltd in an equity portfolio with long and
short positions in companies operating mainly in Europe.
Smart Energy Fund
The fund was subscribed by BPV Finance on 14 November 2014 for a commitment of Euro 5
million, of which Euro 250 thousand paid up. At 31 December 2015, the residual payment
commitment amounted to Euro 4.75 million.
Finint Smart Energy Fund is a closed-end real estate mutual fund reserved for qualified
investors.
It is managed by Finanziaria Internazionale Investments Sgr SpA, based in Conegliano (TV). The
Company is registered with Bank of Italy’s Investment Management Companies Register.
The fund invests by acquiring equity in E.S.Co. (Energy Service Companies), through joint
ventures or otherwise, to create a balanced, diversified portfolio.
Items/type of structured entity
Assets' accounting portfolio
Total assets (A)
Liabilities'
accounting
portfolio
Total liabilities
(B)
Net book value
(C=A-B)
Difference
Maximum
between exposure
exposure at loss
at loss risk and
risk (D)
book value
(E=D-C)
1. SPV
2. Mutual funds
OPTIMUM MULTI STRATEGY II
OPTIMUM MULTI STRAT.
ATHENA CAP.BIOTECHN.
FONDO COPERNICO
AGRIS CL.A PORTATORE
ILP III SICAR CL.A
QUADRIVIO Q2
FININT SMART ENERGY
ARGENTA VALUE FUND LIMITED LTD
Financial assets available
for sale
for sale
for sale
for sale
for sale
for sale
for sale
for sale
for sale
90,186
-
-
90,186
90,186
-
44,519
-
-
44,519
44,519
-
42,968
-
-
42,968
42,968
-
16,716
-
-
16,716
16,716
-
15,802
-
-
15,802
15,802
-
6,533
-
-
6,533
9,785
3,252
4,320
-
-
4,320
8,290
3,970
175
-
-
175
4,925
4,750
5,527
-
-
5,527
5,527
-
Maximum exposure to the risk of loss was determined by adding the residual commitment to the
book value, gross of the negative reserve if any.
- 351 -
B
E. DISPOSALS
A. Financial assets sold but not derecognised in full
Qualitative information
Financial assets sold but not derecognised and all liabilities relating to assets sold but not
derecognised in the tables set out in this section mainly refer to receivables reinstated in the
financial statements relating to securitisations set up by the Group, outlined in the previous
section C.1 “Securitisations”, as well as to repurchase agreements carried out on property
securities.
Quantitative information
E.1 Banking group - Financial assets sold but not derecognized: book value and full value
Financial assets at fair value
Technical forms/Portfolio
A
B
C
A
B
C
A
B
C
A. Cash assets
60,159
-
-
-
-
-
71,651
-
-
1. Debt securities
60,159
-
-
-
-
-
71,651
-
-
2. Equities
-
-
-
-
-
-
-
-
-
3. Mutual funds
-
-
-
-
-
-
-
-
-
4. Loans
-
-
-
-
-
-
-
-
-
B. Derivatives
-
-
-
X
X
X
X
X
X
60,159
-
-
-
-
-
71,651
-
-
-
-
-
-
-
-
-
-
-
13,337
-
-
-
-
-
2,439,341
-
-
-
-
-
-
-
-
-
-
-
Total at 31/12/2015
of which: non performing exposures
Total at 31/12/2014
Total
Technical forms/Portfolio
A
B
C
A
B
C
A
B
31/12/2015 31/12/2014
C
A. Cash assets
-
-
-
-
-
-
5,932,084
-
-
6,063,894
9,306,494
1. Debt securities
-
-
-
-
-
-
-
-
-
131,810
2,687,561
2. Equities
X
X
X
X
X
X
X
X
X
-
-
3. Mutual funds
X
X
X
X
X
X
X
X
X
-
-
-
-
-
-
-
-
5,932,084
-
-
5,932,084
6,618,933
X
X
X
X
X
X
X
X
X
-
-
-
-
-
-
-
5,932,084
-
-
6,063,894
338,246
4. Loans
B. Derivatives
Total at 31/12/2015
Total at 31/12/2014
X
-
-
-
-
-
-
338,246
-
-
43,683
-
-
22,169
-
-
6,787,964
-
-
X
9,306,494
X
-
-
-
-
-
-
261,462
-
-
X
261,462
Key: A = Financial assets sold and recognized in full (book value); B = Financial assets sold and recognized in part (book value); C =
Financial assets sold and recognized in part (full value)
- 352 -
B
E.2 Banking group - Financial liabilities relating to financial assets sold but not derecognised: book value
Liabilities/Assets portfolio
1. Due to customers
a) for assets recognized
in full
b) for assets recognized
in part
2. Due to banks
in full
in part
in full
in part
Financial assets
Financial assets
held for trading
at fair value
Financial assets
Financial assets
available for sale held to maturity
Loans and
advances to
banks
Loans and
advances to
customers
Total
-
-
-
-
-
2,061,030
2,061,030
-
-
-
-
-
2,061,030
2,061,030
-
-
-
-
-
-
-
44,326
-
432,577
-
-
1,002,938
1,479,841
44,326
-
432,577
-
-
1,002,938
1,479,841
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total at 31/12/2015
44,326
-
432,577
-
-
3,063,968
3,540,871
Total at 31/12/2014
10,490
-
2,128,295
32,500
17,059
3,642,302
5,830,646
The amounts “Due to customers” in respect of “Loans and advances to customers” refer to the
liabilities associated with receivables sold as part of securitisations originated by the Group,
which do not qualify for derecognition under IAS 39 and so are “reinstated” in the financial
statements.
E.3 Banking group - Sales with liabilities having recourse exclusively on the sold assets: fair value
The fair value of sales with liabilities having recourse exclusively on the sold assets does not
have substantial differences from the book value. Therefore, the table has not been completed.
E.4 Banking group - Covered bond transactions
The Group has not carried out any covered bond transactions.
- 353 -
B
F. BANKING GROUP - MODELS USED FOR MEASURING CREDIT RISK
Since the end of April 2008, new internal rating models for retail customers (individuals and
small businesses), small corporate customers (turnover from Euro 517 thousand to Euro 2.5
million), and mid corporate customers (turnover from Euro 2.5 to Euro 50 million) have been
adopted by the commercial network of Banca Popolare di Vicenza and since the beginning of
June for Banca Nuova too. In June 2009, these models were followed by the corporate module,
directed at assigning ratings not only to companies with turnover above Euro 50 million, but also
to Financial and investment Holding companies (regardless of turnover) and to parent
companies with turnover above Euro 50 million.
In January 2013, the Board of Directors of the Parent Bank decided to launch the initiative to
adopt advanced credit risk measurement methods ("Advanced Internal Ratings Based" system AIRB) as prescribed by the supervisory regulations in compliance with Basel 2 principles. The
purpose of the initiative is further to strengthen and integrate, through the development of
processes, procedures and models for credit risk control, the company processes and controls
pertaining to credit management, monitoring and granting and the strategic and operational
planning processes.
In the broader context of the project, in January 2014 the new models for the segments of
Corporate business became operational, whilst the models relating to the retail segments
(individuals and small businesses), which form the majority of FarBanca’s customer base, were
activated in the course of 2014. Activities continued in 2015 with the consolidation of the AIRB
system, in particular through the use of the metrics produced by Basel II models in major
corporate processes. Among other things, in addition to defining the governance for Risk
Adjusted Pricing (RAP), the calculation of the RAP was automated in the Information System,
through a specific algorithm that uses the AIRB metrics developed.
It will be recalled that the SGR monitoring system (Sistema di Gestione dei Rischi or risk
management system) has been in use at the Parent Bank since October 2004 and at Banca Nuova
since April 2005. It is used mainly to provide early warnings to alert account managers of the
existence of problems with certain customers and to make them take corrective action against the
higher risk situations, in accordance with precisely defined procedures.
The system underwent a revision in 2009 to make this monitoring tool more effective in quickly
identifying anomalies, and involved the definition of a new model and calculation algorithm for
performance scoring (called EW = Early Warning), as well as interfacing the system with the
internal ratings models.
Within the scope of the AIRB Project, during 2014, this monitoring system was revised, to adjust
it to new rating models and, especially, to give greater significance to the latter by means of
appropriate risk indicators, in monitoring borrowers.
- 354 -
B
1.2 – BANKING GROUP - MARKET RISKS
1.2.1 INTEREST RATE RISK AND PRICE RISK – TRADING BOOK FOR SUPERVISORY
PURPOSES
A. General aspects
Interest rate risk represents the risk of incurring losses due to adverse trends in the rates of
return on debt securities and other interest rate related instruments.
Three types of interest rate risk can be identified:



level. The risk associated with an absolute change in the forward structure of risk-free
interest rates (parallel shifts in the yield curve);
curve and fundamental. The first identifies the risk deriving from a relative change in the
structure of interest rates. The second derives from the imperfect correlation of the
elements of a position, particularly with reference to hedging strategies;
credit spread. Risk deriving from changes in the prices of bonds and credit derivatives
associated with unexpected changes in the issuer’s credit rating.
Price risk represents the risk associated with changes in the value of equity portfolios due to
fluctuations in market prices. This risk is distinguished between:


generic risk. Change in the price of an equity instrument following fluctuations in the
market concerned;
specific risk. Change in the market price of a specific equity instrument due to revised
market expectations about the financial strength or prospects of the issuer.
The investment policy adopted by the Group focuses on optimizing operating results and on
reducing their volatility.
B. Management and measurement of interest rate risk and price risk
The Board of Directors of the Parent Company is responsible for defining propensity to market
risk, and hence implicitly the aforementioned sub-risks that comprise it, and the guidelines for
the management of such risk, with the support of the Finance and ALMs Committee and the
corporate divisions in charge of operational and strategic management of risk.
Specifically, for market risk management:

the Board of Directors approves the strategic guidelines and operating limits and is
periodically informed (at least once a quarter) about changes in exposure to market risk
and its operational management;

the Finance and ALMs Committee serves in a consultative role for the Parent Bank’s
Board of Directors;
the Finance Division has operational management duties for activities regarding trading
in financial instruments, in compliance with the risk limits and powers assigned;
the Risk Management Department monitors risk limits at the Parent Company level and
at individual Subsidiary level and, with the support of the Finance Division (Financial
Monitoring & Documentation Office), operating and stop-loss limits at the Parent
Company level.


- 355 -
B
The Board of Directors of the Parent Bank approved the “Investment policy: Investment guidelines
for 2015” already discussed by the Finance and ALMs Committee.
The Board of Directors also resolved that investment strategies must be executed in line with the
propensity to risk and the resulting operating limits generally or specifically approved, in
relation to the assigned powers, by the competent corporate bodies, as well as with the
risk/return targets negotiated during budget planning.
Briefly, these guidelines establish that the trading book investment strategy for 2015 shall be
conducted through market-making and trading by the Finance Division; this activity primarily
translates into the process of managing financial instruments held for trading and treasury
purposes, also in support of the branch Network’s flow business (positions held to create the
underlying for repo transactions with customers, secondary markets for issues by the Bank or
placed by the Bank etc.).
The control of financial risk management is, therefore, centralised for Group Banks (including
BPV Finance Plc) under the Parent Bank’s Risk Management Department. This activity involves
the daily monitoring of the observance of the VaR limits approved by the Board of Directors.
Operating and stop loss limits are also used to guide the activity of individual desks, with
responsibility for monitoring and controlling these limits lying with the Financial Control office
in the Finance Division of Banca Popolare di Vicenza.
Monitoring of market risk of the BPVi Group is based on:


defining a system for delegating powers in line with the risk limits and identifying the
related escalation procedures in the event of overruns of these limits;
controlling observance of the limits and powers.
For the Group’s book (HFT), the BPVi Group has defined a risk-based system for delegating
powers in line with the risk-appetite targets resolved by the Board of Directors. Specifically, the
Board may delegate powers to the General Manager of the Parent Company, on hearing the
opinion of the Finance and ALMs Committee, for the definition of operating powers of the
Finance Division.
The Board of Directors approved the following limits for 2015:


VaR limit: measure of the maximum potential loss over a given period of time for a
predefined confidence level;
monthly and yearly stop-loss limit: measure of the maximum accumulated loss over a
specified period of time, allowed at a given level in the hierarchy without the need to take
specific action.
As part of the “Operating limits of the Finance Division”, issued by the General Manager under
the authority of the Board of Directors, a set of operating limits will be monitored for the Banca
Popolare di Vicenza Group based on the following indicators:
 Sensitivity (interest rate risk): change in profit or loss that would occur in the event of a
parallel shift in the reference curve by one basis point);
 Sensitivity (inflation risk): change in profit or loss that would occur in the event of a shift
in the reference inflation curve by one basis point.
 Vega (interest rate risk): change in profit or loss that would occur in the event of a 1%
change in volatility (or in the volatility curves) for the financial instrument;
 Vega (equity risk): change in profit or loss that would occur in the event of a 1% change
in volatility (or in the volatility curves) for the financial instrument;
 Vega (exchange rate risk): change in profit or loss that would occur in the event of a 1%
change in the volatility of the exchange rate;
- 356 -
B





Delta in cash terms (exchange rate risk): cash equivalent position for spot, forward and
exchange rate derivative portfolios;
Delta equivalent (equity risk): market value of shares and cash equivalent position;
Maximum invested amount (position): book value of cash securities/funds (gross of the
derivatives’ delta) to ensure that assets and liabilities are balanced within the assigned
budget limits. The above limits do not apply to government bonds (or bonds guaranteed
by government entities) or supranational bonds of euro-zone members, the United
Kingdom and the United States, with the same rating as Italy or higher (if more than one
agency has given a rating, the following rule shall apply: if two ratings have been given,
the worse of the two shall be selected; if there are more than two ratings, the two best are
taken, from which the lower one shall be selected);
Concentration: maximum limit, in percentage or absolute terms, on an asset that can be
held in the portfolio (by instrument or issuer). The above concentration limits do not
apply to government bonds (or bonds guaranteed by government entities) or
supranational bonds of euro-zone members, the United Kingdom and the United States,
with the same rating as Italy or higher (if more than one agency has given a rating, the
following rule shall apply: if two ratings have been given, the worse of the two shall be
selected; if there are more than two ratings, the two best are taken, from which the lower
one shall be selected);
Credit Risk Sensitivity (credit risk): change in profit or loss that would occur in the event
of a shift in the reference credit curve by one basis point.
Additionally, operating limits were defined with respect to transactions in options with
underlying BTP/BTPei Government bonds (both outright and in asset swap) which are
monitored by the Risk Management Department that also carries out a reporting activity to the
Finance and ALMs Committee.
Value at Risk (VaR) is a statistical measure that indicates the maximum potential loss on an
investment in a given period of time. VaR is calculated by simulating past trends and estimates
portfolio risks on the basis of:



past market movements;
holding period of 1 day;
99% confidence level.
The VaR limit refers to overall operations of the Global Markets aggregate, but it entails
monitoring the level of risk applying to the individual strategies (desks) identified by the
portfolio tree in the Murex application and resolved by the Parent Bank’s Board of Directors.
The Parent Bank’s Risk Management Department is responsible for reporting VaR. This analysis
is performed on a daily basis, partly to check that the VaR remains within the parameters
established and defined by the Board of Directors in line with the propensity to risk resolved by
the Board.
The calculation of VaR concerns the trading book for supervisory purposes of the Parent
Company and the HFT and AFS portfolios of the subsidiary BPV Finance Plc.
For the purposes of having a standard representation of the underlying risk factors and a
consistent method of calculation, the Group uses a single risk calculation system based on the
VaR program by Murex. This has the benefit not only of enabling the use of the same position
keeping system for managing and measuring risks, but also of producing important operational
synergies. In addition, operational risks have also been reduced as a result of no longer having to
replicate in an external system the positions and deals contained in the Group’s official system.
In addition to monitoring VaR limits, the Risk Management Department carries out back-testing
and stress testing on a daily basis.
- 357 -
B
As regards back-testing the model’s results, a clean back-testing approach was used, which
compares the VaR calculated at time t for estimating the expected loss in time t+1 with the profit
& loss change computed using market parameters between time t and time t+1 for the same
portfolio.
The stress test, instead, measures potential vulnerability upon the occurrence of exceptional
events that are nonetheless possible. The analysis is carried out on a daily basis and the scenarios
used represent 8 levels of extreme, symmetrical variations regarding stock markets, parallel
shifts in rate curves, trends in exchange rates, volatility and credit spreads.
In defining stress scenarios, the following assumptions have been made regarding correlation
between risk factors:


rises in the stock market are accompanied by downward movements in government
securities, meaning that shares and risk-free rates rise at the same time;
declines in the stock market are followed by a collapse in the corporate bond market
(high correlation between equities and credit spreads), meaning credit spreads rise when
stock markets fall.
Apart from the scenarios just described - which simulate a specifically defined hypothetical
market situation - two stress tests are also conducted based on actual market crashes in the past,
involving the reproduction:


of the market shifts reported after the World Trade Center Attack on 11 September 2001;
of the market shifts reported after Lehman Brothers filed for bankruptcy under Chapter
11 on 15 September 2008.
The VaR models are used solely for management control purposes and are not used for the
calculation of capital adequacy requirements. The trends in VaR for the Group’s trading book are
described in point 3 below.
- 358 -
B
1. Trading book for supervisory purposes: distribution by residual maturity (repricing date) of cash
financial assets and liabilities and financial derivatives
Type/Residual duration
Up to 3 months
Sight
6 to 12 months
3 to 6 months
5 to 10 years
1 to 5 years
Over 10 years
Unspecified
duration
1. Cash assets
-
25,815
41,729
28,917
36,163
991
-
-
- with early redemption
option
-
-
-
-
-
-
-
-
- other
-
25,815
41,729
28,917
36,163
991
-
-
-
-
-
-
-
-
-
-
2.1 Repurchase agreements
-
-
-
-
-
-
-
-
2.2 Other liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.1 Debt securities
1.2 Other assets
2. Cash liabilities
3.1 With underlying security
- Options
-
(1,020)
25
+ long positions
-
+ short positions
-
(1,045)
-
13,121
4,450
667
2,277
175
-
-
+ long positions
-
29,732
4,450
710
2,308
217
-
-
+ short positions
-
(16,611)
(42)
-
-
- Other
-
(43)
(32)
3.2 Without underlying security
57,367
11,180
44,524
18,611
69,060
27,626
-
+ long positions
366,568
1,267,588
990,718
1,638,965
8,641,563
3,714,685
3,283,122
-
+ short positions
(572,428)
(1,210,221)
(979,538)
(1,594,441)
(8,622,951)
(3,645,625)
(3,255,496)
-
- Options
- Other
+ long positions
+ short positions
(205,859)
459,591
(369,791)
69,308
22,389,239
(6,334,810)
(17,185,615)
69,384
47,634,229
2,844,783
3,998,769
23,548,600
16,902,590
(25,244,990)
(9,179,594)
(21,184,384)
(23,089,009)
(17,272,381)
(76)
- 359 -
973,267
-
10,054,717
-
(9,081,450)
-
B
2. Trading book for supervisory purposes: distribution of the exposures in equities and stock indices by
principal Country and market of listing
Listed
Type of transaction/Listing index
Unlisted
Great Britain
Italy
A. Equities
- long positions
3,812
1
-
-
-
-
- long positions
-
-
-
- short positions
-
-
-
- long positions
958
-
-
- short positions
(21)
- short positions
B. Transactions not yet settled on
equities
C. Other derivatives on equities
(7,571)
-
D. Derivatives on equity indices
- long positions
-
-
-
- short positions
-
-
-
- 360 -
B
3. Trading book for supervisory purposes: internal models and other methods of sensitivity analysis
Trends in VaR and stress tests on Banca Popolare di Vicenza and BPV Finance’s trading books in
2015 are shown separately below. For the Parent Bank, the back-testing results are also shown.
VAR – STRESS TEST SCENARIO – BACK-TESTING OF ENTIRE TRADING BOOK OF BANCA POPOLARE DI
VICENZA
During the period under review, the 1-day 99% Value at Risk of BPVi’s Global Markets aggregate
averaged Euro 1.36 million. In terms of the tolerance limit absorption, set at Euro 4 million, this
averaged 34.02% (in 2015, the 1-day 99% VaR of the book analysed amounted to Euro 2.38
million, with tolerance limit absorption of approximately 59.55%).
BPVi - GLOBAL MARKETS
120%
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
VaR/Tolerance
Tolerance
The Global Markets aggregate excludes Covered Call operations, pertaining to sales of bond
options and equity options with underlying securities in the banking book. In 2015, the average
VaR amounted to Euro 1.61 million. In terms of the tolerance limit absorption, set at Euro 15
million, this averaged 10.79% (in 2015, the maximum 1-day 99% VaR of the book analysed
amounted to Euro 3.59 million, with tolerance limit absorption of approximately 23.96%).
- 361 -
B
BPVi - COVERED CALL
120%
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
VaR/Tolerance
Tolerance
STRESS TEST SCENARIO
As mentioned above, the stress test analysis is carried out on a daily basis and the scenarios used
represent 8 levels of extreme, symmetrical variations regarding stock markets, parallel shifts in
rate curves, trends in exchange rates, volatility and credit spreads.
The changes assumed in each of the eight scenarios for the variables considered are described
below.
Variabile
Equity
Equity Volatility
Fx Spot
FX Volatility
Swaption Volatility
Market Rate
Cap Floor Volatility
Smile
Credit Derivatives
Market Rates
Inflation
Scenario
1
-40%
40%
-40%
40%
40%
-40%
2
-30%
30%
-30%
30%
30%
-30%
3
-20%
20%
-20%
20%
20%
-20%
4
-10%
10%
-10%
10%
10%
-10%
5
10%
-10%
10%
-10%
-10%
10%
6
20%
-20%
20%
-20%
-20%
20%
7
30%
-30%
30%
-30%
-30%
30%
8
40%
-40%
40%
-40%
-40%
40%
40%
30%
20%
10%
-10%
-20%
-30%
-40%
40%
30%
20%
10%
-10%
-20%
-30%
-40%
-40%
-30%
-20%
-10%
10%
20%
30%
40%
- 362 -
B
During 2015, the maximum theoretical loss of the Global Markets aggregate under stress would
have been Euro 21.81 million, while the maximum loss at 31 December 2015 would have reached
Euro 1.89 million.
Scenario 1
Max
Min
Average
Profile at 31/12/ 2015
Scenario 2
Scenario 3
Scenario 4
Scenario 5
Scenario 6
Scenario 7
Scenario 8
Scenario 9
94,970
57,139
30,853
10,366
12,925
26,908
39,441
50,281
-1,863
-474
-21,807
-16,276
-11,174
-5,392
116
1,012
2,827
4,366
-7,572
Scenario 10
-3,514
23,889
12,311
4,858
588
3,356
7,109
10,992
14,782
-4,829
-1,730
46,911
27,520
13,919
4,749
1,775
4,340
7,501
10,891
-1,893
-1,028
Scenario 1
Scenario 2
Scenario 3
Scenario 4
Scenario 5
Scenario 7
Scenario 8
Scenario 9
Scenario 10
8,891
7,512
5,746
3,377
0
0
0
0
5,360
156
0
0
0
0
-4,865
-11,031
-17,500
-23,812
0
-392
3,455
2,983
2,352
1,433
-2,060
-4,601
-7,430
-10,416
2,351
0
0
0
0
0
0
0
0
0
0
0
Amounts in €/000
BPVi - COVERED CALL
Max
Min
Average
Scenario 6
Amounts in €/000
BACK-TESTING
The following chart presents the results of back-testing with reference to the Global Markets
aggregate during 2015.
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
-2,500
Clean P&L 1 Day
4,000
VaR 99% 1 Day
-VaR 99% 1 Day
BPVi - COVERED CALL
3,500
3,000
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
-2,500
-3,000
-3,500
-4,000
Clean P&L 1 Day
VaR 99% 1 Day
- 363 -
-VaR 99% 1 Day
B
During 2015, there were 3 cases of negative P&L exceeding VaR in the Global Markets aggregate.
With regard to the Covered Call aggregate, there were 2 cases of negative P&L exceeding VaR.
VAR – STRESS TEST SCENARIO OF ENTIRE TRADING BOOK OF BPV FINANCE
During the period examined, the 1-day 99% Value at Risk of BPV Finance averaged Euro 673
thousand. In terms of the tolerance limit absorption, set at Euro 2.5 million, this averaged 26.92%
(in 2015, the 1-day 99% VaR of the book analysed amounted to Euro 991 thousand, with
tolerance limit absorption of approximately 39.64%).
BPV Finance
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Tolerance
VaR/Tolerance
Noting that stress test scenarios for BPV Finance were produced in line with those applicable to
the Parent Bank, the stress tests demonstrated a maximum “theoretical” loss at 31 December 2015
of Euro 26.26 million, while the maximum loss for the year in question would have been Euro
2.01 million.
BPV FINANCE
Max
Min
Average
Scenario 1
Scenario 2
Scenario 3
Scenario 4
Scenario 5
Scenario 6
Scenario 7
Scenario 8
Scenario 9
-2,098
-1,574
-1,050
-525
5,820
11,649
17,509
23,403
-397
-49
-23,259
-17,476
-11,671
-5,842
526
1,052
1,579
2,107
-9,445
-1,398
-14,291
-10,729
-7,157
-3,580
3,573
7,153
10,748
14,361
-5,669
-808
-2,098
-1,574
-1,050
-525
526
1,052
1,579
2,107
-601
-50
Amounts in €/000
- 364 -
Scenario 10
B
1.2.2 INTEREST RATE RISK AND PRICE RISK – BANKING BOOK
A. General aspects, management and measurement of interest rate risk and price risk
The banking book comprises all the positions other than those included in the trading book for
supervisory purposes.
The interest rate risk incurred by the BPVi Group in relation to the banking book mainly derives
from the activity of transforming maturities. It particularly arises from the mismatch of interestbearing assets and liabilities in terms of amount, due date and interest rates.
As regards price risk, the banking book comprises minority holdings in equities classified as
available for sale (AFS) and mutual funds. Investments in associates and subsidiaries are also
included.
The process of measuring and controlling interest rate risk on the banking book, with the aim of
effectively managing the medium/long-term economic and financial equilibrium of the BPVi
Group, is governed by a specific policy, revised in July 2014 and again in December 2015.
Responsibility for managing interest rate risk lies with the Parent Bank’s Board of Directors,
which uses the Finance and ALMs Committee and relevant company functions for the strategic
and operational management of the same both at the level of the Group and of individual legal
entities. In particular, the governance of interest rate risk involves the following Parent Bank
bodies:





the Board of Directors approves the strategic guidelines and operating limits and is
periodically informed (at least once a quarter) about changes in exposure to interest rate
risk and its operational management;
the Finance and ALMs Committee serves in a consultative role for the Parent Bank’s
Board of Directors;
the Managing Director and General Manager of the Parent Bank, having heard the
opinion of the Finance and ALMs Committee, having assessed the potential impacts on
the Group’s multi-year net interest income deriving from the proposed strategies for
managing the interest rate risk, formally defines the actions which the Finance Division
implements in matters of interest rate risk both in the short and in the medium to long
term, observing the guidelines defined by Board of Directors;
the Risk Management Department is responsible for reporting and monitoring operating
limits, and prepares the topics of discussion in meetings of the Finance and ALMs
Committee;
the Finance Division has direct responsibility for the operational management of interest
rate risk.
The Asset & Liability Management methods adopted by the Group largely respond to the need
to monitor exposure of all interest-earning assets and interest-bearing liabilities to interest rate
risk when market conditions change. A report is produced once a month for the purpose of
analysing interest rate exposure of both net interest income and the economic value of the
banking book.
- 365 -
B
Interest rate risk is monitored using the following models:




repricing gap analysis: estimates repricing mismatches and expected change in net
interest income following a sudden, parallel shock to rate curves (+50 bps and +100 bps);
refixing gap analysis: estimates refixing mismatches (split by benchmark, such as to
ensure monitoring of lags and basis risks) for floating-rate positions;
maturity gap analysis fixed rate: estimates mismatches between fixed-rate statement of
financial position items in the banking book, and the corrective effects of any hedging
strategies;
duration gap analysis and sensitivity analysis: estimates market value, duration,
sensitivity, bucket sensitivity of the economic value of the banking book following a
sudden, parallel shock to rate curves of +100 bps and +200 bps.
The analyses performed are static and therefore exclude assumptions about future changes in the
structure of assets and liabilities, in terms of volumes and product mix. Sight positions with
customers are managed using a specific internal model, which makes it possible to model the
stickiness of the rate applied to such transactions, as well as of the duration of such positions.
The inclusion of this “behavioural” model in static ALM analyses completes the collection of
methods used to estimate the interest rate risk of the banking book, thereby going beyond the
assumption of full and immediate repricing of such positions when market rates change and of
the assumptions of the Bank of Italy’s simplified model.
For 2015, the BPVi Group defined a system of internal limits for monitoring the interest rate risk
of the banking book, consistently with the risk-appetite targets set by the Board of Directors.
The variables to be monitored are those generated by the static Asset & Liability Management
analyses with the “outlook for current profits” and with the “outlook for market values”
approach. The system of limits for 2015 approved by the Board of Directors is organised to
identify percentage thresholds, i.e. the change in the economic value of assets and liabilities
following an immediate parallel shock to the rate curves of +200 basis points (with respect to the
inertia situation), as a percentage of consolidated Own Funds at the measurement date. Other
limits were set to monitor the Net Market Value of the entire portfolio of derivatives pertaining
to the Macro Cash Flow Hedge strategy on homogeneous portfolios of medium-long term
floating rate loans.
Furthermore, “attention thresholds” were monitored for the expected change of the net interest
income over a time span of one year following a parallel and sudden shock of the rate curves of
+100 basis points and regarding the representation of bucket sensitivity +100 bps (with declining
thresholds for each significant time bucket interval) and with regard to the Net Market Value of
the entire portfolio of derivatives pertaining to the Group’s Micro Fair Value Hedge strategy on
homogeneous portfolios of medium-long term fixed rate loans.
The Group’s strategic and operating decisions regarding the banking book aim to minimise the
volatility in net interest income expected in the gapping period (12 months) or rather to minimise
the volatility in total economic value when interest rates change.
- 366 -
B
B. Fair value hedges
The Group has arranged specific hedges for fixed-rate or fixed step up multicallable, bonds,
which are reported using the Fair Value Option.
In detail, in 2015, the Hedge Accounting strategies in the Bank’s books can be classified as
follows:
 Active Fair Value Hedge for specific clusters of similar medium to long-term fixed-rate
loans;
 Active Fair Value Hedge applied to investments in BTP and inflation linked BTP securities
of the Parent Bank and Subsidiaries;
 Passive Fair Value Hedge applied to fixed rate bonds of the Parent Bank;
 Passive Fair Value Option directed to fixed rate bonds of the Parent Bank;
 Active Fair Value Hedge on floating-rate loans with embedded interest rate caps;
 Active Fair Value Option on convertible bonds.
C. Cash flow hedges
The Bank defined the instruments and processes for Hedge Accounting for homogeneous
clusters of medium-long term floating-rate loans (Macro Cash Flow Hedge).
In detail, in 2015, the Hedge Accounting strategies in the Bank’s books can be classified as
follows:
 Active Cash Flow Hedge applied to investments in inflation linked BTP securities,
previously hedged with Fair Value Hedges;
 Passive Cash Flow Hedge for homogeneous clusters of medium-long term floating-rate
loans;
 Passive Cash Flow Hedge for floating rate notes.
D. Hedges of foreign investments
The Group does not undertake hedges of foreign invetements.
- 367 -
B
1. Banking book: distribution by residual duration (repricing date) of financial assets and liabilities
Sight
Up to 3 months
3 to 6 months
6 to 12 months
1 to 5 years
5 to 10 years
Over 10 years
Unspecified
duration
1. Cash assets
1.1 Debt securities
305
4,757,575
258,607
-
369,010
113,181
164,713
-
- with early redemption option
- other
305
4,757,575
258,607
-
369,010
113,181
164,713
-
1.2 Loans to banks
1,275,643
162,646
268,660
113,547
329,653
-
-
-
1.3 Loans to customers
7,535,824
12,435,164
548,658
652,297
2,127,761
540,819
987,447
-
- current accounts
3,674,182
20,146
7,916
124,477
252,479
14,269
-
-
- other loans
- other
3,861,642
2,105,126
1,756,516
12,415,018
11,919,699
495,319
540,742
345,926
194,816
527,820
143,369
384,451
1,875,282
672,332
1,202,950
526,550
362,268
164,282
987,447
586,686
400,761
-
(22,798)
-
2. Cash liabilities
2.1 Due to customers
(14,378,108)
(973,773)
(299,140)
(362,725)
- current accounts
(11,170,869)
(4,654)
(1,317)
(120)
(3,207,239)
(3,207,239)
(969,119)
(969,119)
(297,823)
(297,823)
(362,605)
(362,605)
(59,916)
(59,916)
(681,241)
(5,274,658)
(1,383,977)
(73,436)
(2,560,147)
- other payables
- other
2.2 Due to banks
- current accounts
- other payables
2.3 Debt securities
- other
2.4 Other liabilities
- other
(11,573)
-
-
-
(59,916)
-
-
(669,668)
(5,274,658)
(1,383,977)
(73,436)
(2,560,147)
(3,880)
(3,880)
(686,618)
(686,618)
(209,649)
(209,649)
(510,879)
(510,879)
(3,697,685)
(3,697,685)
(165,518)
(165,518)
(165,518)
(22,798)
(22,798)
-
-
-
-
-
-
-
-
-
-
(444,188)
(444,188)
(5,178)
(5,178)
-
-
-
-
-
-
-
-
-
3.1 With underlying security
- Options
-
-
-
-
-
-
-
-
+ long positions
-
-
-
-
-
-
-
-
+ short positions
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
+ long positions
-
-
-
-
-
-
-
-
+ short positions
-
-
-
-
-
-
-
-
- other
3.2 Without underlying security
- Options
87,557
+ long positions
115,097
+ short positions
- other
+ long positions
+ short positions
4. Other off-balance sheet operations
+ long positions
+ short positions
(2,292)
(2,313)
11,297
(69,806)
24,778
(49,219)
-
144,633
126,270
261,396
1,565,557
1,445,399
1,599,939
-
(27,540)
(146,925)
(128,583)
(250,099)
(1,635,363)
(1,420,621)
(1,649,158)
-
(1,012)
(3,606,879)
(26,150)
(57,337)
1,377,019
2,253,399
60,959
-
157,371
155,541
1,663,969
2,321,896
167,951
-
(183,521)
(212,878)
(286,950)
(68,497)
(106,992)
-
14,523
-
363,432
-
178,387
-
71,232
-
-
17
(1,029)
23,364
(663,576)
642,809
(4,249,688)
2,576
-
10,061
-
- 368 -
B
2. Banking book: internal models and other methods of sensitivity analysis
As mentioned earlier, the BPVi Group uses a static ALM model to measure the sensitivity of the
banking book’s financial and economic equilibrium to changes in interest rates.
The effects of interest rate fluctuations on expected profitability are estimated using the classic
textbook approaches:


the “outlook for current profits” approach estimates the impact of interest rate fluctuations
on net interest income for the year, over a short-term period;
the “outlook for market values” approach estimates the impact of interest rate fluctuations
on the banking book’s economic value, over a long-term period.
Stress testing represents the set of qualitative and quantitative techniques used by the Group to
assess its vulnerability to adverse market conditions. The Group periodically carries out stress
tests to measure and control the interest rate risk of the banking book. Stress tests look at target
variables with a view to the “outlook for current profits” and the “outlook for market values”.
Stress tests are conducted for the following purposes:


to highlight the risk generated by any mismatches between interest-earning assets and
interest-bearing liabilities, and so clearly define what actions are needed to mitigate and
keep interest rate risk within the established limits;
to produce measures of sensitivity to monitor the operating limits on interest rate risk.
The scenarios used to measure the exposure of the banking book’s economic value to risk assume
that rate curves shift by +50 basis points and +100 basis points. The scenarios used to measure
the exposure of the banking book’s economic value to risk assume that rate curves shift by +100
basis points and +200 basis points. In each of these scenarios, all the risk factors experience the
same shock.
As stated before, the estimates are made under the assumption that the structure of the statement
of financial position remains unchanged in terms of volumes and product mix. The stickiness
and persistency of sight positions with customers are managed using a specific internal model.
The principal indicators of the banking book’s interest rate risk at 31 December 2015 are set out
below (in Euro).
∆ MI +50 bp
euro
% MI
20.382.054
4,0%
∆VA +100 bp
euro
% PV
-202.642.200
-10,0%
∆ MI +100 bp
euro
% MI
48.119.104
9,5%
∆VA +200 bp
euro
% PV
-338.083.176
-16,7%
The need to assess the Group’s vulnerability to exceptional but plausible events, said scenarios
are supplemented by more complex, detailed scenarios, substantially associated with curve
steepening, flattening and inversion movements.
- 369 -
B
1.2.3 EXCHANGE RATE RISK
A. General aspects, management and measurement of exchange rate risk
Exchange rate risk represents the risk associated with changes in the value of positions
denominated in foreign currencies deriving from unexpected variations in the cross rates.
Exchange rate risk is principally generated by the support provided for commercial activity in
foreign currencies and by trading in foreign securities.
Automatic network systems interfaced with a single position-keeping system enable the Finance
Division to monitor constantly, in real time, the currency flows that are processed
instantaneously on the interbank forex market. In addition, a specific unit within the Finance
Division is responsible for managing own account positions and products relating to the
exchange derivatives needed to meet the various investment and hedging requirements of Group
customers.
An advanced position keeping system assures the efficient management of spot and forward
flows within a specific framework of limits set by the competent corporate bodies.
B. Hedging of exchange rate risk
Currency investment and hedging of exchange rate risk involve transactions that minimise
currency exposure (purchase and sale of currency on the interbank market) as well as
management of the derivatives book within precise risk and position limits.
- 370 -
B
1. Breakdown by currency of assets, liabilities and derivatives
Currency
Line items
US Dollars
Japanese
Yen
Sterling
Canadian
Dollars
Swiss
Francs
Other
currencies
A. Financial assets
200,930
8,063
2,283
4,080
3,755
10,213
A.1 Debt securities
594
-
-
-
-
-
A.2 Equities
A.3 Loans to banks
A.4 Loans to customers
A.5 Other financial assets
B. Other assets
C. Financial liabilities
C.1 Due to banks
C.2 Due to customers
C.3 Debt securities
C.4 Other financial liabilities
D. Other liabilities
E. Financial derivatives
- Options
+ long positions
+ short positions
- Other derivatives
+ long positions
+ short positions
Total assets
Total liabilities
Net balance (+/-)
203
1
-
-
-
-
13,274
1,612
1,175
3,996
837
10,213
186,859
6,450
1,108
84
2,918
-
-
-
-
-
-
-
25,118
1,403
(105,316)
(25,297)
(80,019)
-
(7,270)
(1,363)
(5,907)
-
(3,007)
(31)
(111,097)
63,476
215,717
(152,241)
(174,573)
234,752
(409,325)
(966)
2,091
2,091
(3,057)
2,864
(5,921)
267
(1,018)
(1,018)
302
(7,930)
22,747
(30,677)
8,232
18,337
(10,105)
413
(4,487)
(4,487)
(1)
(111)
(111)
(111)
1,096
1,855
(3,595)
(3,595)
-
(3,298)
(266)
(3,032)
-
-
(3)
(1,924)
(1,924)
(1,924)
5,623
(106,458)
41,072
(147,530)
112,081
152,900
(40,819)
676,517
14,421
43,634
4,493
4,851
206,040
(669,889)
(13,222)
(41,800)
(4,599)
(5,519)
(191,650)
1,199
1,834
(106)
(668)
6,628
14,390
2. Internal models and other methods of sensitivity analysis
The exchange rate risk generated by the trading book and the banking book is monitored using
the VaR model described in detail in section 1.2.1 “Interest rate risk - Trading book for
supervisory purposes”, to which reference is made. With regard to the estimation of exchange
rate risk, reference is made to the tables included in the quantitative information for that Section.
- 371 -
B
1.2.4 DERIVATIVE INSTRUMENTS
A. FINANCIAL DERIVATIVES
A.1 Trading book for supervisory purposes: period-end and average notional amounts
Underlyings/Type of derivatives
1. Debt securities and interest rates
31/12/2015
Central counterOTC
parties
31/12/2014
Central counterparties
OTC
111,943,644
470,000
152,844,960
670,100
8,046,151
-
20,478,528
-
103,897,493
-
132,366,432
-
c) Forward
-
-
-
-
d) Futures
-
470,000
-
670,100
e) Other
-
-
-
-
32,500
10,317
23,508
8,293
32,500
2,746
23,508
1,990
b) Swaps
-
-
-
-
c) Forward
-
-
-
-
d) Futures
-
7,571
-
6,303
e) Other
-
-
-
-
2,014,182
-
1,566,980
-
1,305,293
-
985,819
-
-
-
-
-
609,240
-
496,475
-
-
-
-
-
99,649
-
84,686
-
4. Commodities
-
-
-
-
5. Other underlyings
-
-
-
-
113,990,326
480,317
154,435,448
678,393
a) Options
b) Swaps
2. Equities and equity indices
a) Options
3. Currency and gold
a) Options
b) Swaps
c) Forward
d) Futures
e) Other
Total
- 372 -
B
A.2 Banking book: period-end and average notional amounts
A.2.1 For hedging
31/12/2015
Central counterOTC
parties
31/12/2014
OTC
5,634,075
-
12,202,908
-
967,440
-
5,840,201
-
4,666,635
-
6,362,707
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
-
-
-
-
-
-
a) Options
-
-
-
-
b) Swaps
-
-
-
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
-
-
-
-
-
-
a) Options
-
-
-
-
b) Swaps
-
-
-
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
-
-
4. Commodities
-
-
-
-
-
-
-
-
5,634,075
-
12,202,908
-
a) Options
b) Swaps
Total
- 373 -
B
A.2.2 Other derivatives
31/12/2015
Central counterOTC
parties
31/12/2014
OTC
964,830
-
2,679,636
-
a) Options
260,040
-
279,540
-
b) Swaps
704,790
-
2,400,096
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
-
-
-
-
2,250
-
a) Options
-
-
2,250
-
b) Swaps
-
-
-
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
-
-
-
-
-
-
a) Options
-
-
-
-
b) Swaps
-
-
-
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
-
-
4. Commodities
-
-
-
-
-
-
-
-
964,830
-
2,681,886
-
Total
- 374 -
B
A.3 Financial derivatives: gross positive fair value – breakdown by product
Portfolio/Type of derivatives
A. Trading book
a) Options
31/12/2015
Central counterOTC
parties
3,206,925
22
31/12/2014
6,279,112
29
OTC
78,317
22
123,366
29
3,120,866
-
6,144,089
-
c) Cross currency swaps
-
-
-
-
d) Equity swaps
-
-
-
-
6,621
-
11,478
-
-
-
-
-
1,121
-
179
-
33,024
-
97,860
-
a) Options
13,647
-
12,414
-
b) Interest rate swaps
19,377
-
85,446
-
-
-
-
-
d) Equity swaps
-
-
-
-
e) Forward
-
-
-
-
f) Futures
-
-
-
-
g) Other
-
-
-
-
63,452
-
110,255
-
944
-
1,595
-
62,508
-
108,660
-
-
-
-
-
d) Equity swaps
-
-
-
-
e) Forward
-
-
-
-
f) Futures
-
-
-
-
g) Other
-
-
-
-
3,303,401
22
6,487,227
29
e) Forward
f) Futures
g) Other
B. Banking book - hedging
C. Banking book - other derivatives
a) Options
Total
- 375 -
B
A.4 Financial derivatives: gross negative fair value – breakdown by product
Portfolio/Type of derivatives
A. Trading book
a) Options
31/12/2015
Central counterOTC
parties
(2,771,423)
(68)
(76,441)
(2,689,005)
(68)
-
31/12/2014
Central counterOTC
parties
(5,885,529)
(154,075)
-
(5,719,213)
-
-
-
-
-
d) Equity swaps
-
-
-
-
e) Forward
(5,918)
f) Futures
-
g) Other
B. Banking book - hedging
a) Options
-
(10,460)
-
-
(59)
-
(1,781)
-
(887,624)
-
(525,379)
-
-
(46,105)
-
-
(479,274)
-
-
-
(887,624)
-
-
-
-
d) Equity swaps
-
-
-
-
e) Forward
-
-
-
-
f) Futures
-
-
-
-
g) Other
-
-
-
-
C. Banking book - other derivatives
a) Options
(495)
-
(495)
-
(2,432)
-
-
(4)
-
-
(2,428)
-
-
-
-
-
d) Equity swaps
-
-
-
-
e) Forward
-
-
-
-
f) Futures
-
-
-
-
g) Other
-
-
-
-
Total
(3,659,542)
- 376 -
(68)
(6,413,340)
-
B
A.5 OTC financial derivatives: trading book for supervisory purposes: notional values, gross positive and
negative fair values by counterparty, contracts not forming part of clearing agreements
Governments
and central
banks
Other public
entities
- Notional value
-
-
7,376,131
455,608
-
1,246,388
- Positive fair value
-
-
-
23,495
-
55,481
- Negative fair value
-
-
- future exposure
-
-
22,485
4,313
-
5,126
55
- Notional value
-
-
3,410
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- future exposure
-
-
410
-
-
-
-
- Notional value
-
-
28,365
1,782
-
615,116
2,306
-
-
484
-
-
(27)
- future exposure
-
-
- Notional value
-
-
- future exposure
Contracts not forming part of clearing agreements
Financial
companies
Banks
Insurance
companies
Non-financial
Other issuers
institutions
(319)
(4)
-
(878)
532,416
595
(2,507)
154
-
31,821
(115)
-
(2,028)
(49)
1
856
61
-
5,368
23
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4. Other instruments
A.6 OTC financial derivatives: trading book for supervisory purposes: notional values, gross positive and
negative fair values by counterparty, contracts forming part of clearing agreements
Governments
and central
banks
Other public
entities
- Notional value
-
-
86,475,894
15,857,207
-
-
-
-
-
2,759,957
327,443
-
-
-
-
-
(2,559,730)
(199,272)
-
-
-
- Notional value
-
-
29,090
-
-
-
-
-
-
278
-
-
-
-
-
-
(42)
-
-
-
-
- Notional value
-
-
1,259,122
107,491
-
-
-
-
-
6,936
280
-
-
-
-
-
(6,069)
(383)
-
-
-
- Notional value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Contracts forming part of clearing agreements
Financial
companies
Banks
Insurance
companies
Non-financial
Other issuers
institutions
- 377 -
B
A.7 OTC financial derivatives: banking book: notional values, gross positive and negative fair values by
counterparty, contracts not forming part of clearing agreements
A.8 OTC financial derivatives: notional values, positive and negative gross fair values by counterparty contracts forming part of clearing agreements
Governments
and central
banks
Other public
entities
- Notional value
-
-
6,223,905
375,000
-
-
-
-
-
96,476
-
-
-
-
-
-
(786,421)
-
-
-
- Notional value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- Notional value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- Notional value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Contracts forming part of clearing agreements
Financial
companies
Banks
Insurance
companies
Non-financial
Other issuers
institutions
(101,698)
A.9 Residual life of OTC financial derivatives: notional values
Within 12
months
Underlyings/residual value
1 to 5 years
Over 5 years
Total
A. Trading book for supervisory purposes
22,453,560
40,594,308
50,942,458
113,990,326
A.1 Financial derivatives on debt securities and interest rates
20,429,333
40,574,103
50,940,208
111,943,644
26,054
4,196
2,250
32,500
1,998,173
16,009
-
2,014,182
-
-
-
-
B. Banking book
769,953
2,288,402
3,540,550
6,598,905
B.1 Financial derivatives on debt securities and interest rates
769,953
2,288,402
3,540,550
6,598,905
B.2 Financial derivatives on equities and equity indices
-
-
-
-
B.3 Financial derivatives on exchange rates and gold
-
-
-
-
A.2 Financial derivatives on equities and equity indices
A.3 Financial derivatives on exchange rates and gold
A.4 Financial derivatives on other instruments
B.4 Financial derivatives on other instruments
-
-
-
-
Total at 31/12/2015
23,223,513
42,882,710
54,483,008
120,589,231
Total at 31/12/2014
38,674,675
46,547,727
84,097,840
169,320,242
- 378 -
B
A.10 OTC financial derivatives: counterparty risk/financial risk – Internal Models
The Group does not use EPE (expected positive exposure) internal models to define counterparty
risk/financial risk.
B. CREDIT DERIVATIVES
The Group has not entered any transactions involving credit derivatives.
C. FINANCIAL AND CREDIT DERIVATIVES
C.1 OTC financial and credit derivatives: net fair values and future exposure by counterparty
Governments
Other public
and central
entities
banks
Financial
companies
Banks
Nonfinancial Other issuers
institutions
Insurance
companies
1. Bilateral financial derivative agreements
-
-
250,991
98,783
-
-
-
-
-
(739,606)
(72,413)
-
-
-
- Future exposure
-
-
368,493
75,983
-
-
-
- Net counterparty risk
-
-
619,486
174,766
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- Future exposure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- Future exposure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2. Bilateral credit derivative agreements
2. "Cross product" agreements
The Group uses bilateral offsetting arrangements relating to operations in over-the-counter
derivatives with principal market counterparties, giving the option to offset creditor positions
against debtor positions in the event of counterparty default.
- 379 -
B
SECTION 1.3 – LIQUIDITY RISK
A. General aspects, management and measurement of liquidity risk
Liquidity risk is the risk of being unable to meet payment obligations caused by inability to
obtain funding (funding liquidity risk) and/or the presence of restrictions on the ability to sell
assets (market liquidity risk). This risk can also take the form of a loss relative to fair value
deriving from a forced sale, or more generally, of a loss in terms of reputation or business
opportunities.
Funding liquidity risk is incurred in banking activities when institutional counterparties
withdraw their usual funding, or request a significantly higher return than in normal
circumstances.
The policy for managing liquidity risk of the Banca Popolare di Vicenza Group lays down the
following fundamental principles for governing this risk:
- liquidity is managed centrally by the Parent Bank, Banca Popolare di Vicenza;
- responsibility for defining the propensity to liquidity risk and the guidelines on
managing that risk rests with the Parent Bank’s Board of Directors;
- the Liquidity Funding Plan (for ordinary liquidity management) and the Contingency
Funding Plan (for contingency management) are developed and managed by the Parent
Bank for the entire BPVi Group.
The Parent Bank’s Board of Directors uses the Finance and ALMs Committee and relevant
company functions for the operational and strategic management of this risk. In particular:
- the Finance and ALMs Committee proposes strategic guidelines in its consultative
capacity to the Parent Bank’s Board of Directors;
- the Managing Director and General Manager of the Parent Bank, having consulted the
Finance and ALMs Committee, manages situations of liquidity stress, proposes possible
corrective measures within the scope of the powers assigned to him by the Board of
Directors, and submits proposals for action, that lie beyond his delegated powers, to the
competent Bodies;
- the Risk Management Department monitors the risk limits, the results of the stress
testing, the early warning indicators, and, more generally, the liquidity of the Group and
of the individual Subsidiaries. Also, with the support of the Finance Division and of the
Reporting and Planning Division, he regularly audits and updates the Contingency
Funding Plan based on the results of the stress test;
- the Reporting and Planning Division, jointly with the Finance Division and the Risk
Management Department, defines how the transfer price system operates within funds;
- the Finance Division has operational management duties.
Short-term liquidity management (within a 12-month horizon) uses an Operating Maturity
Ladder, which identifies mismatches between expected cash inflows and outflows for each time
period (liquidity gaps on precise dates). The cumulative mismatches (cumulative liquidity gaps)
are used for calculating the net cash requirement/surplus for the different time horizons
considered.
Medium/long-term liquidity management (beyond 12 months) uses a Structural Maturity
Ladder, which identifies the balance between assets and liabilities by matching them not only in
terms of cash flows but also in terms of statement of financial position ratios. The objective is to
ensure that the profile of structural liquidity is sufficiently balanced, with restrictions on the
possibility of financing medium/long-term assets with liabilities of a different duration.
- 380 -
B
The liquidity risk monitoring process is integrated between the Risk Management and Treasury
functions of the Parent Bank and uses the ALMPro ERMAS application. The high level of
automation in terms of both database input and report production fosters early monitoring of the
risk/operating limit indicators.
The Global Markets Department is responsible for operational management of liquidity risk by
seeking to maintain an optimum balance between average maturities of short-term lending and
funding, and by diversifying positions by counterparty and due date negotiated both over the
counter and on the Interbank Deposits Market. In addition to usual banking treasury activities
(daily monitoring of the Group’s liquidity and optimisation of its short-term management), any
medium and long-term imbalances are managed using appropriate policies established by the
Finance and ALMs Committee.
As part of overall Risk Management, the Board of Directors establishes the Group’s propensity to
liquidity risk on an annual basis, by defining the system of operational limits and “attention
thresholds” for monitoring.
The system of limits and “attention thresholds” illustrated below is functional to the daily
monitoring of the operational liquidity position and the monthly monitoring of the structural
liquidity position by the Risk Management Department.
The system of operating limits and attention thresholds approved by the Board of Directors for
2015 was based on the use of the following risk indicators:
-
Liquidity Coverage Ratio;
Net Stable Funding Ratio.
Loans / Deposits Ratio;
Cumulative cash position over total assets (1- and 3-month time horizon).
The first two indicators have a regulatory origin.
In particular, the reference indicator selected for monitoring short-term liquidity is the Liquidity
Coverage Ratio, determined using static, not stressed, logic. This indicator identifies, at Group
level, the stock of not committed high quality liquid assets held by the Bank, which can be used
to cover net cash outflows, which the Bank might need to cover in the event of a short-term
liquidity crisis.
The reference indicator selected for monitoring medium/long-term liquidity is the Net Stable
Funding Ratio, determined using static, not stressed, logic. This indicator identifies, at Group
level, the ratio of available stable funding to required stable funding, which are both calculated
as the sum of capital cash flows in the banking book expiring starting from the time bucket of 1
year, exclusive, up to the end of the time bucket in which the Group operates.
Since 30 June 2014, the Group has prepared its monthly Supervisory Reports on the basis of the
LCR (Liquidity Coverage Ratio) indicator and the quarterly reports on the NSFR (Stable Funding
Ratio) indicator, as defined in Regulation no. 575/2013 (CRR).
In addition to the indicators described above, the Group has defined early warning indicators,
which are used, inter alia, to identify and recognise an “early warning” state of liquidity within
the Contingency Funding Plan. They are divided into the following categories:
- structural early warning indicators which provide evidence of the potential presence of
stress or a liquidity crisis, based on Group’s structure of assets and liabilities (bank
specific);
- 381 -
B
-
early warning alert indicators which provide alerts on the potential presence of stress or a
liquidity crisis, based on indices and market variables.
With particular regard to diversifying funding sources, a specific “attention threshold” is defined
for the level of concentration of funding from single counterparties, for the following two types
of funding:
-
wholesale sight deposits, including time deposits;
deposits on the non-collateralised euro interbank market.
The contribution of individual counterparties must not exceed a pre-set threshold of the total
specific type of funding. Said attention threshold is monitored on a monthly basis, and monthly
reports are provided in the Finance and ALMs Committee meeting.
In addition, the liquidity risk originated from intra-day operations is also monitored. Every day,
the monitoring anticipates an ex-post analysis of the entire trend for cash flows entering and
leaving the Group, identifying the minimum intra-day financial position. The analysis is
performed in both ongoing terms and relating to specific stress scenarios. Furthermore, the
timing at which “time critical” payments (i.e. of the payments that must be made within
determined cut-off periods) is also monitored.
The trend in the Group’s liquidity situation is reported monthly to the Parent Bank’s Board of
Directors, to the Risk Committee and to the Finance and ALMs Committee. The Top
Management is informed on the Group’s exposure to liquidity risk on a daily basis. Lastly, the
Group is monitored on a weekly basis by the Bank of Italy and the ECB, to which is sent a
standard set of reports showing: the short-term liquidity, the medium-long term liquidity
position, and the composition of the eligible ECB assets that make up the Group’s liquidity
buffer.
- 382 -
B
1. Distribution of financial assets and liabilities by residual maturity
Sight
1 to 7 days
15 days to 1
month
7 to 15 days
1 to 3 months
3 to 6 months 6 to 12 months
1 to 5 years
Unspecified
duration
Over 5 years
Cash assets
A.1 Government securities
313
-
-
-
-
71,397
2,379
1,812,365
2,500,977
-
A.2 Other debt securities
406
-
280
10,596
69,713
38,586
38,534
181,069
253,075
-
244,164
-
-
-
-
-
-
-
-
-
5,792,587
69,083
187,658
814,803
1,437,598
1,284,288
1,749,749
8,128,557
8,059,572
108,522
1,276,398
4,516,189
423
68,660
1,103
186,555
16,863
797,940
19,289
1,418,309
255,967
1,028,321
120,769
1,628,980
351,540
7,777,017
8,059,572
108,522
-
(11,702,492)
(81,249)
(191,847)
A.3 Mutual funds
A.4 Loans
- banks
- customers
Cash liabilities
B.1 Deposits and current accounts
- banks
- customers
B.2 Debt securities
B.3 Other liabilities
(282,779)
(11,419,713)
(116,402)
(563,842)
(81,249)
(413)
(4,800,000)
(148,240)
(959,178)
(498,945)
(48,262)
(37,000)
(270,700)
(215,000)
(78,000)
(143,585)
(45,246)
-
(111,240)
(41,925)
(100,002)
(688,478)
(195,214)
(49,822)
(283,945)
(128,652)
(1,209,679)
(437,413)
(359,413)
(585,867)
(72,848)
(46,607)
(46,607)
(4,038,219)
(3,225,936)
(166,464)
-
(946)
-
(165,518)
(592,122)
(1,988,944)
-
Off-balance sheet transactions
C.1 Financial derivatives with exchange of capital
- long positions
- short positions
C.2 Financial derivatives without exchange of capital
(1)
(7,049)
10,511
9,486
1,290
4,744
963
2,635
171
-
75
89,054
197,948
387,859
258,243
112,020
143,989
15,276
211
-
(76)
(96,103)
(187,437)
(378,373)
(256,953)
(107,276)
(143,026)
(12,641)
(40)
-
407,642
-
-
-
-
-
-
-
-
-
- long positions
3,171,889
-
-
-
-
-
-
-
-
-
- short positions
(2,764,247)
C.3 Deposits and loans to be received
- long positions
- short positions
C.4 Irrevocable commitments to make loans
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(25,597)
- long positions
23,380
- short positions
(48,977)
(2,576)
222
(2,798)
-
-
70
1,004
70
1,004
-
-
(361,885)
1,548
(363,433)
-
-
-
(169,105)
-
(56,668)
-
363,857
250,901
-
10,077
14,564
363,857
250,901
-
(179,182)
(71,232)
-
-
-
C.5 Financial guarantees given
-
-
-
-
-
-
-
-
-
-
C.6 Financial guarantees received
-
-
-
-
-
-
-
-
-
-
C.7 Credit derivatives with exchange of capital
-
-
-
-
-
-
-
-
-
-
- long positions
-
-
-
-
-
-
-
-
-
-
- short positions
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- long positions
-
-
-
-
-
-
-
-
-
-
- short positions
-
-
-
-
-
-
-
-
-
-
C.8 Credit derivatives without exchange of capital
The unspecified duration of line A.4 “Loans to banks” includes the compulsory reserve deposit
of the Parent Bank and of the Subsidiary banks.
Among loans to customers are the loans securitised in the self-securitisations named “Piazza
Venezia” and “Berica ABS 4” , in which the originator Banks subscribed all Asset-Backed
Securities issued, in proportion to the transferred portfolio. Residual loans amount, for the
“Piazza Venezia” securitisation, to Euro 544,046 thousand, of which non performing positions of
Euro 56,604 thousand, and for the “Berica ABS 4” to Euro 864,022, of which non performing
positions of Euro 13,273 thousand.
The nominal quantities of ABS held by the Group and issued within the aforementioned selfsecuritisation are summarised below:
 “Piazza Venezia” securitisation
a. Euro 151,811 thousand in mezzanine notes with external rating assigned by Fitch
(“A+”) with yield tied to the 6-month Euribor plus 105 bps for class A2 and external
rating assigned by Fitch (“A-”) with yield tied to the 6-month Euribor plus 125 bps for
class A3;
b. Euro 462,816 thousand in unrated junior notes subscribed by the Bank with yield tied
to the 6-month Euribor;
 "Berica ABS 4” securitisation:
a. Euro 647,261 thousand in senior notes with an external rating from Fitch (“AA+”) and
DBRS (“AA”) with a yield tied to the 3-month Euribor plus 80 bps;
b. Euro 75,700 thousand in mezzanine notes with an external rating from Fitch (“A”)
and DBRS (“A-”) with a yield tied to the 3-month Euribor plus 110 bps;
c. Euro 47,300 thousand in mezzanine notes with an external rating from Fitch (“BBB”)
and DBRS (“BBB”) with a yield tied to the 3-month Euribor plus 210 bps;
d. Euro 94,711 thousand in unrated junior notes with a yield tied to the 3-month Euribor.
- 383 -
B
1.4 – OPERATIONAL RISK
A. General aspects, management and measurement of operational risk
Operational risk is defined as the risk of losses deriving from inadequate or dysfunctional
procedures, human resources or internal systems, or external events.
This category includes, inter alia, losses deriving from fraud, human error, the interruption of
operations, the malfunction and non-availability of systems, contractual non-performance and
natural catastrophes. Operational risk also includes legal risk, but excludes strategic and
reputation risk.
Operational risks are “monitored” by the Operational Risk and IT Risk Unit within the Risk
Management Department.
For the purposes of the prudential capital requirements in view of operational risks, the Group
uses the so-called basic approach or BIA (Basic Indicator Approach), whereby the capital
requirement is equal to the average over the last 3 years of the net interest and other banking
income (Income Statement line item 120) multiplied by a fixed coefficient of 15%.
The core principles of the operational risk governance model of the BPVi Group, developed
according to a logic consistent with the roles and responsibilities defined in the ICAAP prescribe
that:
 responsibility for defining the guidelines on managing operational risks rests with the
Body with strategic supervision function of the Parent Bank;
 riskiness is monitored centrally by the Parent Bank with reference to the individual legal
entities and to the Group as a whole;
 individual legal entities must comply with the guidelines defined by the Parent Company
for risk and capital management.
The operational risk management framework of the BPVi Group is based:
 on the assessment of the 1st and 2nd level organisational controls and on the construction
of the so-called Risk Map, which is the method used by the Group to conduct its risk selfassessment;
 on operational Loss Data Collection.
With reference to item 1 above, the scope for the purposes of assessing organisational control is
consistent with the provisions of the Group’s ICAAP process and it specifically matches the
definition of banking group pursuant to Article 65 of the Consolidated Law on Banking and
Lending, i.e. with the scope represented by the parties included in the consolidated supervision.
With regard to item 2, the scope extends to the Parent Bank, Banca Popolare di Vicenza and to
the Subsidiary Banca Nuova.
During 2015, the Internal Audit Department of the Parent Bank carried out remote and on-site
checks in relation to the distribution network in order to verify compliance with company
standards (basically: correct application of regulations and correct performance of line controls).
The audit of processes rather than of their central owners also examined regulatory, procedural
and organisational structure in order to assess the adequacy of controls over operational risks in
terms of compliance with corporate strategy, of achieving process effectiveness and efficiency, of
protecting the value of assets and protecting against losses, of the reliability and completeness of
accounting and management information, and the compliance of transactions with the law,
supervisory requirements and internal instructions.
- 384 -
B
The results attest the existence and adequacy of the system of controls protecting against such
risks, and as far as distribution processes are concerned, are based on the compliance observed
during audit activities within the Network.
With regard to the monitoring of operational risks, the Bank was a founding member in 2002 of
DIPO, the interbank consortium promoted by ABI that maintains an Italian database of
operational losses. As a consequence, the Group gathers regular information about its
operational losses.
The procedures for managing operational risks are formalised in a dedicated policy that
describes:
 the steps and structure of the operational risk management process;
 the roles and responsibilities of the company Bodies and Functions within the operational
risk management process;
 the reporting system addressed to company Bodies and Functions (Management
Reporting System);
The policy describes the flow of information to the Bodies and Committees and in particular it
prescribes that the dynamics of operational risks shall be submitted to the Control Committee
and to the Parent Bank’s Body with strategic supervision function on a quarterly basis, with
specific reference to loss data (Loss Data Collection).
In 2015, the Parent Bank continued to gather data on operational losses for reporting to DIPO,
which was more complete thanks to the more structured approach used after adopting the
manual, which was also adopted by the subsidiary Banca Nuova in June 2008.
The events have been divided by type and line of business according to the categories envisaged
in the New Capital Accord (Basel 2).
Of the events identified in the Group in 2015 involving an increase in operating losses, 94.86%
were attributable to the category “customers, products and business practices”, 4.61% to
“execution, delivery and process management”, 0.35% to “external fraud”, 0.12% to “interrupted
operations and IT system dysfunctions”, 0.03% to “employment practices and workplace safety”,
0.03% to “damage from external events” and the remainder to “internal fraud”.
The “retail” line of business accounted for the largest share of the loss, i.e. 52.74%. This is
followed by “retail intermediation” which accounted for 41.52% of the total loss, “trading and
sales” for 4.76% and the “commercial” business line, that completes the totality of events with
0.99% of total losses.
- 385 -
B
SECTION 2 – RISKS PERTAINING TO INSURANCE ACTIVITIES
SECTION 3 – RISKS PERTAINING TO OTHER BUSINESSES
- 386 -
B
PART F – INFORMATION ON CONSOLIDATED EQUITY
SECTION 1
Consolidated Equity
A. QUALITATIVE INFORMATION
Definition of equity
The definition of equity used by the Group corresponds to the sum of the following line items:
140 “Valuation reserves”, 150 “Redeemable shares”, 160 “Equity instruments”, 170 “Reserves”,
180 “Additional paid-in capital”, 190 “Capital stock”, 200 “Treasury shares” and 220 “Net
income (loss) for the year”.
Management of equity
Information about the way in which the Group pursues its capital management objectives is
provided in Section 2.2 below.
Nature of the capital adequacy requirement
Since the Banking Group carries out lending activities, it is subject to the requirements of art. 29
et seq. of Decree 385 dated 1 September 1993 “Consolidated law on banking and lending” or
“TUB”. Accordingly, the Bank must comply with the capital adequacy requirements detailed in
the above legislation.
Changes in disclosure requirements
The disclosure requirements relating to capital have not undergone any changes compared with
the prior year.
- 387 -
B
B. QUANTITATIVE INFORMATION
B.1 Consolidated equity: Breakdown by type of company
Consolidation
Equity line items
Banking group
Insurance
Other
eliminations
companies companies
and
Total
adjustments
Capital stock
951,805
-
-
(563,769)
388,036
3,323,712
-
-
(113,276)
3,210,436
424,111
-
-
(197,601)
226,510
1,415
-
-
-
1,415
(Treasury shares)
(25,470)
-
-
-
(25,470)
Valuation reserves
61,669
-
-
95,710
157,379
557,247
-
-
-
557,247
78
-
-
-
78
- Intangible assets
-
-
-
-
-
- Hedges of foreign investments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Reserves
Equity instruments
- Property, plant and equipment
- Cash-flow hedges
(505,445)
- Exchange differences
(505,445)
- Non-current assets held for sale and
discontinued operations
- Actuarial gains (losses) on defined-benefit
pension plans
- Portion of valuation reserves of equity
investments method carried at equity
(6,435)
-
-
-
25,536
25,536
- Special revaluation laws
16,224
-
-
70,174
86,398
(1,630,214)
-
-
224,035
(1,406,179)
3,107,028
-
-
(554,901)
2,552,127
Net income (loss) for the year (+/-) - Group and
minority interests
Equity
- 388 -
(6,435)
B
B.2 Valuation reserves - AFS financial assets: breakdown
Consolidation
Insurance
Banking group
Other companies
companies
1. Debt securities
Negative
reserve
Total
adjustments
Assets/Values
Positive
reserve
eliminations and
Positive Negative Positive Negative Positive Negative Positive Negative
reserve
reserve
reserve
reserve
reserve
reserve
reserve
reserve
529,913
(1,625)
-
-
-
-
-
-
529,913
(1,625)
25,814
(3,466)
-
-
-
-
-
-
25,814
(3,466)
6,927
(316)
-
-
-
-
-
-
6,927
(316)
-
-
-
-
-
-
-
2. Equities
3. Mutual funds
4. Loans
-
-
-
Total at 31/12/15
562,654
(5,407)
-
-
-
-
-
-
562,654
(5,407)
Total at 31/12/14
274,998
(66,709)
-
-
-
-
-
1,357
274,998
(65,352)
This table reports the positive and negative reserves, net of tax, arising on the fair value
measurement of financial assets available for sale.
Among the positive reserves on debt securities are Euro 518,811 thousand of Inflation linked BTP
which serve as cash flow hedges against the inflation risk. On the connected hedging derivatives
are recorded negative valuation reserves amounting to Euro 503,037 thousand.
B.3 Valuation reserves - AFS financial assets: changes during the year
Debt
securities
Equities
Mutual
funds
Loans
1. Opening balance
145,126
60,120
4,400
-
2. Positive changes
771,104
20,908
17,115
-
2.1 Increases in fair value
723,656
15,520
6,089
-
39,002
3,640
10,806
-
1
2,600
10,420
-
39,001
1,040
386
-
8,446
1,748
220
-
387,942
58,680
14,904
-
24,783
955
1,186
-
1,357
37
8,388
-
3.3 Release positive disposal reserves to income statement
163,566
57,634
2,776
-
3.4 Other changes
198,236
54
2,554
-
4. Closing balance
528,288
22,348
6,611
-
2.2 Release negative reserves to income statement
- from impairment
- from disposals
2.3 Other changes
3. Negative changes
3.1 Decreases in fair value
3.2 Impairment writedowns
Lines 2.3 and 3.4 relate to the change in taxation for changes occurred during the year in the
equity reserve arising from the fair value valuation of financial assets available for sale.
- 389 -
B
B.4 Valuation reserves on defined-benefit plans: changes during the year
Defined-benefit plan
Opening balance
(10,428)
Positive changes
3,993
Positive changes on actuarial gains and losses
3,993
-
Negative changes
Negative changes on actuarial gains and losses
(6,435)
Closing balance
- 390 -
B
SECTION 2
Own funds and capital adequacy ratios
2.1 Scope of application of the regulations
The Group’s Own funds and the prudential ratios at 31 December 2015 were determined in
accordance with the regulatory framework of Basel 3, including the transitory provisions and the
national discretionary powers, that came into effect starting from 1 January 2014 subsequent to
the issuing of the Regulation (EU) 575/2013 dated 26 June 2013 (CRR) and the Directive
2013/36/EU dated 26 June 2013 (CRD IV).
2.2 Own funds
1. Common Equity Tier 1 (CET 1) capital
At 31 December 2015, Common Equity Tier 1 capital consists of the various items of the Group’s
Equity, with the sole exception of “equity instruments” and net of treasury shares held indirectly
through investment schemes (Euro 2.6 million).
The financial instruments computed in Common Equity Tier 1 capital relate to the ordinary
shares issued by the Parent Bank. In this regard, it should be specified that the shares issued
within the capital increase operations reserved for new stockholders completed in 2013 and in
2014, totalling Euro 200 million, were excluded from the aggregate for the portion (Euro 57
million) financed by the issuer, as allowed by the regulations of the aforesaid operations.
“Prudential filters” include the DTAs connected to multiple frankings of the same goodwill, the
accumulated net gains recorded in the income statement referred to changes on the Bank’s own
credit rating, the valuation reserves referred to hedges on the cash flows of assets and liabilities
not measured at fair value and, lastly, “prudent valuation” whose amount was determined in
accordance with the simplified approach. For complete disclosure, it should be pointed out that
the “prudential filters” also include the neutralisation (Euro 320.8 million) from the calculation of
Own Funds with respect to which a correlation was found to exist between
purchases/subscriptions of BPVi shares and loans disbursed to certain Members/Stockholders,
i.e., in relation to which certain anomaly profiles were detected that require it to be deducted
from the Common Equity Tier 1 capital elements pursuant to Art. 36 of Regulation (EU) no.
575/2013.
“Deductions” from Common Equity Tier 1 capital pertain to the intangible assets recorded in the
financial statements, including the differences in equity recorded in the Group’s consolidated
financial statements to increase the book value of the equity investments held in associated
companies, to deferred tax assets that depend on future profitability and do not arise from
temporary differences, to the common equity instruments issued by entities in the financial
sector in which the Group holds a significant investment, and deferred tax assets that depend on
future profitability and arise from temporary differences whose amount exceeds the thresholds
prescribed by current regulations, taking into account the transitional provisions on this matter.
Lastly, the Group exercised its right to sterilize the valuation reserves relating to debt securities
issued by central governments of European Union countries held in the “Financial assets
available for sale” portfolio, including the related cash flow hedge reserve on the same securities.
- 391 -
B
2. Additional Tier 1 (AT1) capital
The Bank has not issued any financial instruments that can be computed in Additional Tier 1
capital.
3. Tier 2 (T2) capital
Tier 2 capital comprises certain subordinated bonds issued by the Parent Bank which were
computed net of any buy-backs and taking into account the transitional provisions. The principal
contractual characteristics of the subordinated liabilities issued are presented below.
Portion
Issue date
Maturity
Captions(1)
Interest rate
XS1300456420 (2)
29/09/2015
29/09/2025
30 Liabilities
9.50%
(2)
20/12/2007
20/12/2017
30 Liabilities Euribor3m + 2.35
(2)(3)
ISIN code
Nominal value
Book value
included in
Tier 2 capital
XS0336683254
200,000
189,740
189,498
200,000
200,038
78,904
31/12/2009
31/12/2016
30 Liabilities
3.70%
85,622
85,272
17,162
XS1300818785 (2)
02/10/2015
02/10/2025
30 Liabilities
9.50%
50,000
48,567
47,359
IT0004657471 (2)(5)
15/12/2010
15/12/2017
30 Liabilities
4.60%
99,294
104,799
69,506
IT0004724214
(2)(4)
24/06/2011
24/06/2018
30 Liabilities
6.65%
42,893
37,917
-
IT0004781073
(2)(5)
28/12/2011
28/12/2018
30 Liabilities
8.50%
46,985
47,104
32,889
724,794
713,437
435,318
IT0004548258
Total
(1)
30 P.P. = Debt securities in issue; 50 P.P.= Financial liabilities at fair value.
The bonds with a subordination clause whereby, if the Bank were to be wound up, they would be redeemed only
after all other creditors, not subordinated to the same extent, have been satisfied.
(2)
(3) Bond convertible into Banca Popolare di Vicenza ordinary shares from 1 November 2016 to 30 November 2016, in a
ratio of 1 share of par value Euro 3.75 each for every bond of nominal value Euro 64.50. Bondholders are entitled to
convert early in the event of extraordinary operations involving capital, except for mergers with other companies in
the Banca Popolare di Vicenza Group or with companies controlled by the Issuer.
Zero coupon bond, issued under the Exchange Tender Offer promoted during the year on index linked policies
issued by the affiliates Berica Vita and Cattolica Life, placed with Group clients and having as underlying assets
securities issued by Icelandic banks in default. This liability is not included in the calculation of Own Funds as it does
not meet all the conditions required by regulatory provisions for the inclusion.
(4)
Starting in 2014, admissibility in Own Funds is limited to the “grandfathering” clauses that regulate the gradual
shift from the previous Basel 2 rules to the current Basel 3 rule.
(5)
- 392 -
B
31/12/2015
A. CET1 before the application of prudential filters
of which CET1 instruments object of transitional disposals
B. Prudential filters of Tier 1 capital
31/12/2014
2,478,827
3,671,876
-
-
(392,470)
C. CET1 before deductions and transitional arrangements effects (A+/-B)
(72,299)
2,086,357
3,599,577
D. Deductions from CET1
651,257
540,385
E. Transitional arrangements - Impact on CET1 (+/-), minority interests
object of transitional disposal included
220,453
(34,076)
F. Total Common Equity Tier 1 - CET1 (C-D+/-E)
1,655,553
3,025,116
-
-
-
-
H. Deductions from AT1
-
-
I. Transitional arrangements - Impact on AT1 (+/-), minority interests
object of transitional disposal included
-
-
L. Total Additional Tier 1 (AT1) (G-H+/-I)
-
-
435,318
327,312
102,395
169,827
-
-
G. Additional Tier 1 - AT1 before deductions and transitional arrangements
effects
of which AT1 instruments object of transitional disposals
M. Tier 2 - T2 before deductions and transitional arrangements effects
of which T2 instruments object of transitional disposals
N. Deductions from T2
O. Transitional arrangements - Impact on T2 (+/-), minority interests object
of transitional disposal included
(68,377)
P. Total Tier 2 - T2 (M-N+/-O)
366,941
323,901
2,022,494
3,349,017
Q. Total Own Funds (F+L+P)
(3,411)
At 31 December 2015, Own Funds amounted to Euro 2,022.5 million, versus Euro 3.349 million at
31 December 2014. This change was primarily caused by the loss for the year and the “prudential
filter” applied to deduct from the calculation of Own Funds the capital with respect to which a
correlation was found between purchases/subscriptions of BPVi shares and loans disbursed to
certain Members/Stockholders, i.e., in relation to which certain criticality profiles were detected
that require it to be deducted from the Common Equity Tier 1 capital elements pursuant to Art.
36 of Regulation (EU) no. 575/2013.
The loss for the year was entirely deducted from “Common Equity Tier 1 (CET 1) capital before
the application of the prudential filters”.
- 393 -
B
2.3 Capital adequacy
The capital management policies adopted by the Banca Popolare di Vicenza Group are intended
to ensure that Tier 1 capital is consistent with the overall level of risk accepted and the plans for
the expansion of the Group, as well as to optimise the composition of capital by recourse to
various financial instruments that minimise the related cost.
Categories/Amounts
Weighted amounts/
Requirements
Unweighted amounts
31/12/2015
31/12/2014
31/12/2015
31/12/2014
A. RISK ASSETS
A.1 Credit and counterparty risk
39,452,377
44,557,056
22,302,109
25,721,357
1. Standard methodology
39,138,389
44,234,719
21,983,681
25,310,694
-
-
-
-
2.1 Basic
-
-
-
-
2.2 Advanced
-
-
-
-
313,988
322,337
318,428
410,663
1,784,169
2,057,709
33,276
57,126
2. Methodology based on internal ratings
3. Securitizations
B. CAPITAL ADEQUACY REQUIREMENTS
B.1 Credit and counterparty risk
B.2 Adjustment credit valuation risk
B.3 Regulamentary risk
-
-
B.4 Market risks
22,744
57,731
1. Standard methodology
22,744
57,731
2. Internal models
-
-
3. Concentration risk
-
-
B.5 Operational risks
150,552
146,240
1. Basic method
150,552
146,240
2. Standard method
-
-
3. Advanced method
-
-
B.6 Other elements of calculation
-
-
1,990,741
2,318,806
-
-
24,884,259
28,985,070
B.7 Total prudential requirements
RISK ASSETS AND CAPITAL RATIOS
C.1 Risk-weighted assets
C.2 CET1 capital/ Risk-weighted assets (CET1 capital ratio)
6.65%
10.44%
C.3 Tier 1 capital/ Risk-weighted assets (Tier 1 capital ratio)
6.65%
10.44%
C.4 Regulatory capital including TIER 3/Risk-weighted assets (Total capital ratio)
8.13%
11.55%
The Common Equity Tier 1 Ratio and the Tier 1 Ratio are both 6.65% (10.44% at 31 December
2014), while the Total Capital Ratio is 8.13% (11.55% at 31 December 2014). At 31 December 2015,
the Group’s capital exceeded the minimum regulatory requirements of Article 92 of the CRR by
Euro 31.8 million.
However, the Basel 3 framework also prescribes establishing additional capital reserves above
the regulatory minimums in order to provide banks with high quality capital means to be used at
times of market stress to prevent dysfunctions in the banking system and avoid interruptions in
the loan granting process and to address risks deriving from the systemic relevance of banks at
the global or domestic level.
- 394 -
B
In this regard, the capital conservation buffer has already been provided29, while the
countercyclical capital buffer30, the buffer for entities with global systemic relevance (G-SII
buffer) and the buffer for other entities with systemic relevance (O-SII buffer)31 will be applied
from 1 January 2016 onwards. The total amount of the aforesaid additional capital reserves is
called “combined capital reserve requirement” and banks are obligated to address it with
Common Equity Tier 1 (CET1) capital.
At 31 December 2015, the Bank had a deficit of Euro 590.4 million on the “combined capital
reserve requirement” prescribed by the prudential regulations, and of Euro 895.1 million with
respect to the target CET1 Ratio, for which a reduction from 10.30% to 10.25% was notified by the
ECB in November 2015.
In reference to the aforesaid deficits, the Board of Directors has already decided to take all
measures needed for transformation into a joint stock company (“S.p.A.”) and for listing the
shares on the Electronic Stock Market managed by Borsa Italiana, as well as to carry out a share
capital increase up to Euro 1.5 billion, which will bring the capital ratios to above the ECB targets
by the end of April 2016. The completion of these activities, currently in progress and envisaged
in the new 2015-2020 Business Plan, approved by the Board of Directors during the meeting of 30
September 2015 and updated, on the basis of 2015 preliminary results, on 9 February 2016, will
allow the Group to comply with the stringent regulatory requirements going forward.
Capital adequacy requirements were calculated using the following methods:

risk-weighted assets used for determining the credit and counter-party risk requirement
have been quantified using the standard method and simplified credit risk mitigation
(CRM) by adopting unsolicited external ratings provided by the ECAI DBRS for the
supervisory portfolio “Exposures to Central governments or central banks” by the
Moody’s, S&P and Fitch ECAI for the supervisory portfolio “Elements that represent
positions relating to securitisations” and unsolicited ratings by the Cerved Group ECAI
for the supervisory portfolio “Exposures to Companies”;

the market risk requirement is determined using the standard method, under which
sensitivity models are used to represent derivatives involving interest rates and debt
securities;

the operational risks requirement was determined using the basic method, with the
calculation of the reference aggregate aligned to the new supervisory provisions.
The capital conservation reserve is equal to 2.5% of total risk exposure.
On 30 December 2015, the Bank of Italy published the decision with which it set, for the first three months of 2016,
to zero percent the coefficient of the countercyclical capital buffer applicable to exposures towards Italian
counterparties.
29
30
The requirements for entities with global systemic relevance or for the other entities with systemic relevance do
not apply to the Group.
31
- 395 -
B
SECTION 3
Insurance regulatory capital and capital adequacy ratios
This Section has not been completed since the Group does not have any companies under its
exclusive or joint control that are subject to insurance supervision.
SECTION 4
Capital adequacy of the financial conglomerate
This Section has not been completed since the Group is not a financial conglomerate, as defined
by the supervisory authorities (Bank of Italy, CONSOB, ISVAP).
- 396 -
B
SECTION 1
Transactions during the year
This section has not been completed because the Group did not carry out any business
combinations in 2015.
SECTION 2
Operations carried out after the end of the year
The Group has not carried out any business combinations involving companies or business units
after 31 December 2015.
SECTION 3
Retrospective adjustments
In accordance with IFRS 3, paragraphs 61, 62 and 63, we point out that no changes have occurred
during year 2015 on goodwill.
- 397 -
B
1. Information on the remuneration of key management personnel
The following table reports the remuneration paid to key management personnel during the year
2015.
Managers with strategic
responsibilities
a)
Short-term benefits
b)
Post-employment benefits
c)
Other long-term benefits
12,271
261
-
d) Indemnities due on termination of employment
e)
Share-based payments
4,813
-
Total
17,345
Key management personnel comprise members of the Parent Bank’s General Management team,
as defined in its Articles of Association, as well as its serving Directors and Statutory Auditors.
The above table includes the remuneration paid to key managers who left office during the year.
The remuneration categories included in the above table comprise:
a) Short-term benefits: the item includes: i) for General Management members: wages, salaries
and related social security contributions, payment in lieu of vacation and sick leave,
incentives and benefits in kind, such as medical assistance, housing, company cars and goods
or services provided free or at reduced cost; ii) for Directors and Statutory Auditors:
attendance fees, remuneration for the performance of their duties (also for serving in similar
capacities at other Group companies);
b) Post-employment benefits: these include the company contributions to pension funds
(pension and retirement plans, life insurance and health care subsequent to termination) and
the provision for severance indemnities recorded on the basis required by law and in-house
agreements;
c) Other long-term benefits: there are no other long-term benefits worthy of mention (such as
leave of absence or sabbaticals related to length of service, bonuses linked to anniversaries,
other benefits linked with length of service, disability benefits and, if due more than twelve
months after the reporting date, profit share, incentives and deferred remuneration);
d) Indemnities due on termination of employment: these include the amounts paid for early
termination prior to pensionable age, incentives for voluntary redundancy and incentives for
early retirement;
e) Share-based payments: these include the cost of shares assigned on attaining a certain length
of service or specific objectives.
- 398 -
B
2. Information on related-party transactions
“Related-party transactions” are defined as all transactions with parties defined as such in IAS
24.
More specifically, with reference to the organisation and governance of the Group, the following
parties are deemed to be “Related parties”:
- companies under joint control: companies over which the Group exercises joint control, whether
directly or indirectly;
- associated companies: companies over which the Group exercises significant influence, whether
directly or indirectly;
- key management personnel, i.e. members of General Management of the Parent Bank and its
banking subsidiaries, the General Manager and/or Managing Director of the other
subsidiaries, the Directors and Statutory Auditors of the Parent Bank and other Group
companies;
- “close relatives” of key management personnel;
- companies controlled by, jointly controlled by or associated with key management personnel or their
close family;
- parties that manage pension plans for the Group’s employees and any other parties related to the
Group.
“Close relatives” are deemed to be: (a) the partner and children of the related party; (b) the
children of the partner; (c) the dependents of the related party or his/her partner.
The following tables summarise the balances and transactions with related parties during the
period and their impact on cash flow, according to their classification at 31 December 2015.
Statement of financial position
Loans and
advances to
banks
Loans and
advances to
customers
Other assets1
- Associated companies
-
66,303
288
-
136,701
216,195
- Companies under joint control
-
-
-
-
-
-
-
- Managers with strategic responsibilities
-
31,252
21
-
4,999
804
4
- Other related parties3
-
65,516
112
-
29,164
17,228
33,013
-
163,071
421
-
170,864
234,227
71,006
2,150,149
25,178,117
9,643,851
9,973,459
16,272,137
9,160,358
2,408,221
0.00%
0.65%
0.00%
0.00%
1.05%
2.56%
2.95%
Related parties
Total
Total reported in balance sheet
% incidence
Guarantees
and
commitments
Other
Due to
customers
Due to banks
liabilities2
37,989
1 Asset line items 20, 30, 40, 50 and 160 from the consolidated statement of financial position.
2 Liability line items 30, 40, 50 and 100 from the consolidated statement of financial position.
3 Including the close family of key management personnel, companies controlled by, jointly controlled by or associated with key
management personnel or their close family, and parties that manage pension plans for the Group’s employees and any other parties
related to the Group.
“Loans and advances to customers” include net non performing loans for Euro 29,975 thousand.
The relative adjustments amount to Euro 23,987 thousand.
“Guarantees and Commitments” include net non performing unsecured loans to associated
companies for Euro 56 thousand. The relevant adjustments amount to Euro 84 thousand.
- 399 -
B
Income statement
Related parties
- Associated companies
Interest
income
2,824
(13,257)
33,513
-
-
-
- Companies under joint control
- Managers with strategic responsibilities
- Other related parties 2
Total
Total reported in balance sheet
% incidence
Net fee and
commission
income
Interest
expense
Other
income/other
costs 1
(48,952)
-
565
(70)
66
(17,345)
2,913
(687)
679
(1)
6,302
(14,014)
34,258
(66,298)
962,036
(458,156)
322,425
(708,406)
0.66%
3.06%
10.63%
9.36%
1 Line
items 180 and 220 from the consolidated income statement. These include the remuneration paid to key management
personnel of the Parent Bank.
2 Including the close family of key management personnel, companies controlled by, jointly controlled by or associated with key
management personnel or their close family, and parties that manage pension plans for the Group’s employees and any other parties
related to the Group.
Cash flows
Cash flows
Cash flows
31/12/2015
-
(123,855)
Other assets 1
(10,699)
Total cash flows with related parties
(134,554)
Total net liquidity absorbed by financial assets
% incidence
1
2,365,497
-5.69%
Asset line items 20, 30, 40, 50 and 160 from the consolidated statement of financial position.
- 400 -
B
Cash flows
31/12/2015
Due to banks
-
Due to customers
Other liabilities
21,319
2
(214,859)
(193,540)
Total net liquidity generated by financial liabilities
% incidence
2
(2,630,239)
7.36%
Liability line items 30, 40, 50 and 100 from the consolidated statement of financial position.
Cash flows
31/12/2015
6,302
(14,014)
34,258
Other income/other costs 3
(31,608)
(5,062)
Total net liquidity generated by operations
198,092
% incidence
3
-2.56%
Line items 180 and 220 from the consolidated income statement.
- 401 -
B
This Section has not been completed because there are no outstanding equity-settled payment
arrangements.
- 402 -
B
The composition of the various business segments is as follows:
Banks:
Banca Popolare di Vicenza SCpA
Banca Nuova SpA
Farbanca SpA
Product companies:
Prestinuova SpA
Service company:
Servizi Bancari SCpa
Immobiliare Stampa SCpA
Monforte 19 Srl
BPVi Multicredito – Agenzia in attività finanziaria SpA
Private Equity and Asset Management:
NEM Sgr SpA
Nem Imprese
Nem Imprese II
Proprietary Trading:
The composition of the various geographical areas is as follows:
Northern and Central Italy:
Banca Popolare di Vicenza SCpA
Farbanca SpA
PrestiNuova SpA
NEM Sgr SpA
Nem Imprese
Nem Imprese II
Monforte 19 Srl
Immobiliare Stampa SCpA
Servizi Bancari SCpA
BPVi Multicredito – Agenzia in attività finanziaria SpA
Southern Italy and the Islands:
Banca Nuova SpA
Other EU countries:
- 403 -
B
A. PRIMARY SEGMENT
A.1 Distribution by business segments: income statement
Line items/Segments
Product
Service
banks
companies
companies
Net interest income (line item 30)
473,335
Net fee and commission income (line item 60)
321,828
Dividends and similar income (line item 70)
Net change in financial assets and liabilities (line items 80, 90, 100 and 110)
Net impairment adjustments (line item 130)
Private Equity
Commercial
19,388
(550)
58,645
(3,056)
(142)
Other
Trading
Total
11,627
722
503,880
23
7
322,425
(232)
-
10,535
456
-
14,994
7,504
-
(39,022)
-
30,614
329,704
(1,331)
(121,908)
3,705
(1,481,396)
(783,897)
(4,246)
(30,420)
(2,171)
(1,959)
48,124
(774,569)
Net provisions for risks and charges (line item 190)
(513,106)
(141)
(249)
(6)
442
(513,060)
(27)
(25,081)
(line items 220, 240, 250, 260 and 270)
Profit (loss) from current operations before tax (line item 280)
693
Proprietary
Administrative costs (line item 180)
Net adjustments to property, plant and equipment (line items 200 and 210)
(1,362,555)
1,864
1,349
-
307,348
e Asset
Management
(30,314)
(492,938)
439
(2,021,654)
15,414
-
(7)
(76)
1,292
(54,213)
45,481
(11,413)
(1,051)
203,579
(255,903)
(11,976)
12,233
(105,384)
218,849
(1,892,518)
The “Other” column includes intercompany eliminations and consolidation adjustments.
A.2 Distribution by business segment: statement of financial position
Line items/Segments
Loans to customers (line item 70)
Commercial
Product
Service
banks
companies
companies
Private Equity
e Asset
Management
Proprietary
Other
Trading
Total
25,497,740
382,881
-
27,129
199,488
(929,121)
25,178,117
Deposits with banks and liquid assets (line items 10 and 60)
4,560,179
2,054
18,591
32,736
64,173
(2,354,078)
2,323,655
Financial assets (line items 20, 30, 40, 50 and 80)
8,784,497
-
-
8,023
382,776
Equity mehtod investments (line item 100)
1,023,978
35
108
32,018
-
Property, plant & equipment & intangible assets (line items 120 and 130)
135,212
4,076
467,978
12
-
Other assets (line items 90, 150 and 160)
562,497
480
1,246
760
40,564,103
389,526
487,923
16,247,533
165,518
10,844,040
10,590,104
Total assets
Due to customers (line item 20)
Deposits from banks (line item 10)
Financial liabilities (line items 30, 40, 50 and 60)
Other liabilities (line items 90, 100, 110 and 120)
Total liabilities
(563,403)
9,175,296
492,736
1,901
609,179
48
(17,265)
547,766
100,678
646,485
(3,861,966)
38,326,749
3,945
-
-
(144,859)
16,272,137
167,236
226,577
-
582,147
(1,846,541)
9,973,459
486
-
-
14,438
(1,274,817)
9,330,211
1,335,567
11,045
12,914
660
20,955
(42,708)
1,338,433
39,017,244
344,285
243,436
660
617,540
(3,308,925)
36,914,240
- 404 -
B
B. SECONDARY SEGMENT
B.1 Distribution by geographical area: income statement
Italy
Other EU
Northern and
Central Italy
Southern Italy
and the
Islands
Net interest income (line item 30)
401,186
90,345
11,627
722
503,880
Net fee and commission income (line item 60)
278,052
44,343
23
7
322,425
69,007
173
456
315,424
6,776
7,504
Line items/Segments
Dividends and similar income (line item 70)
Net change in financial assets and liabilities (line items 80, 90,
100 and 110)
Net impairment adjustments (line item 130)
Other
countries
Total
(39,022)
-
30,614
329,704
(1,273,993)
(89,200)
(121,908)
3,705
(1,481,396)
Administrative costs (line item 180)
(717,852)
(102,882)
(1,959)
48,124
(774,569)
Net provisions for risks and charges (line item 190)
(506,867)
(6,635)
442
(513,060)
(52,322)
(3,107)
(76)
1,292
(54,213)
(354,282)
(104,149)
(1,051)
203,579
(255,903)
(1,841,647)
(164,336)
(105,384)
218,849
(1,892,518)
Net adjustments to property, plant and equipment (line items
200 and 210)
(line items 220, 240, 250, 260 and 270)
Profit (loss) from current operations before tax (line item 280)
-
B.2 Distribution by geographical area: statement of financial position
Italy
Line items/Segments
Loans and advances to customers (line item 70)
Cash, loans and advances to bank (line items 10 and 60)
Financial assets (line items 20, 30, 40, 50 and 80)
Equity method investments (line item 100)
Tangible and intangible assets (line items 120 and 130)
Othet assets (line items 90, 150 and 160)
Total assets
Due to customers (line item 20)
Deposits from banks (line item 10)
Financial liabilities (line items 30, 40, 50 and 60)
Other liabilities (line items 90, 100, 110 and 120)
Total liabilities
Other EU
Northern and
Central Italy
Southern Italy
and the
Islands
23,066,110
2,841,640
199,488
(929,121)
25,178,117
3,514,468
1,099,092
64,173
(2,354,078)
2,323,655
8,773,946
18,574
382,776
1,055,602
537
-
598,011
9,267
-
451,424
113,559
37,459,561
Other
countries
Total
(563,403)
9,175,296
492,736
1,901
609,179
48
(17,265)
547,766
4,082,669
646,485
(3,861,966)
38,326,749
13,844,166
2,572,830
-
(144,859)
16,272,137
10,722,537
515,316
582,147
(1,846,541)
9,973,459
9,739,057
851,533
14,438
(1,274,817)
9,330,211
1,298,096
62,090
20,955
(42,708)
1,338,433
35,603,856
4,001,769
617,540
(3,308,925)
36,914,240
The "Other" column includes intercompany eliminations and consolidation adjustments.
- 405 -
B
ATTACHMENT NO. 1
Fees for auditing and services other than auditing pursuant to art. 149-duodecies of the Consob Issuers’
Regulation
The table below, drawn up pursuant to art. 149-duodecies of the Consob Issuers’ Regulation
(resolution 11971), reports the fees paid to the auditing firm KPMG S.p.A. and to the companies
within its network, received separately for auditing assignments and for the provision of other
services to the Group.
Fees
Type of service
Provider of service
of which:
professional
fees
Recipient of the service
of which:
expenses
of which:
VAT
Total
Banca Popolare di Vicenza S.C.p.A. - Banca Nuova S.p.A. Prestinuova S.p.A. - BPV Finance (International) Plc -
Audit
KPMG SpA
Immobiliare StampaS.c.p.A. - Monforte 19 S.r.l. - NEM Sgr S.p.A.
- BPVI Multicredito S.p.A. - Servizi Bancari S.c.p.A. - Industrial
772,938
72,615
179,876
1,025,428
565,000
14,300
127,006
706,306
Opportunit
Banca Popolare di Vicenza S.C.p.A. - Immobiliare Stampa
Certification services
KPMG SpA
Tax advisory services
Other advisory services
Finance
(International)
Plc
Studio Associato ConsulenzaBPV
legale
e tributaria
- KPMG
Ireland
Banca Popolare di Vicenza S.C.p.A.
KPMG Advisory SpA
S.c.p.A. - Monforte 19 S.r.l. - NEM Sgr S.p.A. - BPVI Multicredito
S.p.A. - Servizi Bancari S.c.p.A.
Total
- 406 -
17,000
-
3,910
20,910
784,534
39,227
181,227
1,004,988
2,139,472
126,142
492,019
2,757,632
B
CERTIFICATION OF THE FINANCIAL REPORTING
(CONSOLIDATED FINANCIAL STATEMENTS)
- 407 -407-
MANAGER
B
CERTIFICATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
PURSUANT TO ART. 81-TER OF CONSOB REGULATION NO.11971 OF MAY 14,
1999, AS AMENDED AND UPDATED
1. The undersigned
– Dott. Stefano Dolcetta Capuzzo, as Chairman of the Board of Directors, and
– Dott. Massimiliano Pellegrini, as Financial Reporting Manager of Banca Popolare di Vicenza S.c.p.A.,
taking into account of the provisions of Article 154-bis, paragraphs 3 and 4 of Legislative Decree No.
58 of 24 February 1998, do hereby certify:
• the adequacy in relation to the enterprise's characteristics and
• the effective application
of the administrative and accounting procedures for preparing the consolidated financial statements,
during 2015.
2. The adequacy of the accounting and administrative processes for preparing the consolidated financial
statements at 31 december 2015 has been evaluated on the basis of an internal procedure established
by Banca Popolare di Vicenza S.c.p.A. in compliance with the Internal Control - Integrated Framework
published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), which
are internationally accepted frameworks for internal control system.
3. It’s also certified that:
3.1 The consolidated financial statements as at 31 December 2015:
a) have been prepared in compliance with applicable international accounting standards recognized by
the European Community pursuant to European Parliament and Council Regulation no. 1606/2002
of 19 July 2002;
b)
correspond to the results of the book and accounts;
c) give a true and fair presentation of the balance sheet, profit and loss and financial position of the
issuer and of the companies included in the scope of consolidation.
3.2 The report on operations contains a reliable analysis of the business trends and results, as well as
the general situation of the issuer and of the other companies included in the consolidation,
together with a description of the main risks and uncertainties to which they are exposed.
Vicenza, February 23, 2016
The Chairman of the Board of Directors
Financial Reporting Manager
Dott. Stefano Dolcetta Capuzzo
Dott. Massimiliano Pellegrini
- 408 -
B
INDIPENDENT AUDITORS’
FINANCIAL STATEMENTS
REPORT
- 409 -409-
ON
THE
CONSOLIDATED
- 410 -
- 411 -
- 412 -
SEPARATE FINANCIAL STATEMENTS
- 413 -
BANCA POPOLARE DI VICENZA
STATEMENT OF FINANCIAL POSITION
in unit of Euro
ASSETS
10.
Cash and cash equivalents
20.
30.
40.
60.
70.
80.
Hedging derivatives
90.
Remeasurement of financial assets backed by macro
hedges (+/-)
31/12/2015
138,939,470
155,791,190
3,399,163,335
7,528,006,455
7,842,079
4,259,881
5,325,984,800
4,359,376,575
3,319,379,917
3,308,250,323
22,129,457,803
25,148,702,917
32,933,221
94,880,680
19,590,881
56,517,005
1,023,399,631
1,253,236,393
121,812,165
125,834,357
4,038,496
235,156,146
100.
Equity investments
110.
120.
Intangible assets
of which: - goodwill
130.
-
Tax assets
a) current
150.
31/12/2014
218,151,507
1,346,504,943
866,137,554
82,748,003
70,136,863
b) deferred tax assets
1,263,756,940
796,000,691
of which: - L.214/2011
641,511,891
675,437,461
Other assets
Total assets
- 414
-414-
414,216,257
286,071,113
37,283,262,998
43,422,220,589
STATEMENT OF FINANCIAL POSITION
in unit of Euro
EQUITY AND LIABILITIES
31/12/2014
31/12/2015
10.
Due to banks
10,168,571,616
4,887,363,150
20.
Due to customers
13,534,653,530
19,175,427,217
30.
5,525,612,570
6,886,346,935
40.
2,766,587,410
5,948,500,016
50.
Financial liabilities designated at fair value
414,196,894
1,425,310,003
60.
Hedging derivatives
846,367,106
458,932,038
80.
Tax liabilities
b) deferred
100.
Other liabilities
110.
Provision for severance indemnities
120.
Provisions for risks and charges:
a) pensions and similar commitments
b) other provisions
148,145,753
290,354,979
148,145,753
290,354,979
677,558,913
738,035,093
59,757,531
66,188,474
534,514,272
49,344,676
4,828,772
5,252,818
529,685,500
44,091,858
49,907,999
130.
Valuation reserves
35,935,359
150.
Equity instruments
1,415,113
3,195,323
160.
Reserves
268,824,329
718,127,697
170.
3,206,572,847
3,365,095,274
180.
Capital stock
377,204,359
351,870,120
190.
Treasury shares (-)
200.
Net income (loss) for the year (+/-)
Total Equity and Liabilities
- 415
-415-
(25,470,437)
(25,887,625)
(1,399,393,393)
(823,681,554)
37,283,262,998
43,422,220,589
INCOME STATEMENT
in unit of Euro
CAPTIONS
31/12/2015
31/12/2014
10.
831,443,263
1,034,168,677
20.
(461,716,318)
(644,547,844)
30.
Net interest income
369,726,945
389,620,833
40.
Fee and commission income
304,261,737
302,500,461
50.
Fee and commission expense
(28,921,516)
(48,574,290)
60.
275,340,221
253,926,171
70.
Dividend and similar income
58,472,249
54,575,003
80.
Net trading income
35,378,430
94,673,144
90.
Net hedging gains (losses)
56,498,077
52,023,707
100.
Gains (losses) on disposal or repurchase of:
210,592,680
d) financial liabilities
171,022
204,417,272
34,143,505
6,067,098
110.
Net change in financial assets and liabilities designated at fair value
120.
Net interest and other banking income
130.
Net impairment adjustments on:
32,837,385
108,310
(1,477,142)
(1,785,592)
(8,380,817)
1,004,223,010
869,275,426
(1,267,130,224)
d) other financial transactions
(848,607,367)
(1,177,996,066)
(805,327,454)
(98,925,388)
(29,208,108)
9,791,230
(14,071,805)
140.
Net income from financial activities
(262,907,214)
20,668,059
150.
Administrative costs:
(675,057,385)
(602,967,279)
a) payroll
(334,608,576)
b) other administrative costs
(340,448,809)
160.
170.
(323,961,392)
(279,005,887)
(506,645,613)
(15,280,713)
Net adjustments to property, plant and equipment
(11,491,861)
(10,468,994)
180.
Net adjustments to intangible assets
(15,680,806)
190.
200.
Operating costs
210.
Profit (loss) from equity investments
220.
Net gains (losses) arising on fair value adjustments to property, plant and
equipment and intangible assets
230.
Adjustments to goodwill
240.
Gains (losses) on disposal of investments
250.
Profit (loss) on current operations before income taxes
260.
Income taxes on current operations
270.
Profit (loss) from current operations after tax
(1,399,393,393)
(823,681,554)
290.
(1,399,393,393)
(823,681,554)
59,592,546
(1,149,283,119)
(543,046,076)
(229,808,003)
(6,858,912)
(923,032)
-
(218,151,507)
(675,263,320)
(64,609)
(1,861,137,484)
461,744,091
- 416 -416-
(4,097,732)
89,768,642
22,187
(1,204,478,062)
380,796,508
STATEMENT OF COMPREHENSIVE INCOME
in unit of euro
CAPTIONS
10.
31/12/2015
31/12/2014
(1,399,393,393)
(823,681,554)
Other post-tax components of income without reversal to income statement
40.
3,372,140
Defined-benefit plans
(3,503,390)
Other post-tax components of income with reversal to income statement
90.
Cash-flow hedges
(376,520,915)
(92,263,274)
100.
359,176,135
216,580,621
130.
Total other post-tax components of income
(13,972,640)
120,813,957
140.
Total comprehensive income (Lines 10 + 130)
(1,413,366,033)
- 417
-417-
(702,867,597)
- 418
-418-
Balance at
3,638,627,234
Equity
-
-
-
-
-
-
-
-
-
-
-
-
opening balances
Change in
Balance at
3,638,627,234
(823,681,554)
(25,887,625)
3,195,323
49,907,999
10,806,279
707,321,418
718,127,697
3,365,095,274
-
351,870,120
351,870,120
01/01/2015
The "issue of new shares" is stated net of the cancellations recorded during the year
(823,681,554)
(1)
(25,887,625)
Treasury shares
3,195,323
Equity instruments
10,806,279
b) other
49,907,999
707,321,418
a) from earnings
Valuation reserves:
718,127,697
3,365,095,274
Reserves:
-
351,870,120
a) ordinary shares
b) other shares
351,870,120
Capital stock:
31/12/2014
-
-
-
-
823,681,554
-
-
-
-
(424,986,206)
(424,986,206)
(398,695,348)
Reserves
-
-
-
-
-
-
-
-
-
-
-
-
other allocations
Dividends and
Allocation of prior year results
-
-
-
-
(26,086,748)
-
-
-
-
-
(26,086,748)
(26,086,748)
reserves
Changes in
265,507,160
-
-
-
-
-
-
-
240,172,921
-
25,334,239
417,188
-
417,188
-
-
-
-
-
-
-
-
-
shares (1)
25,334,239
Purchase of
treasury shares
Issue of new
STATEMENT OF CHANGES IN EQUITY 2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,624)
-
-
(1,780,210)
-
1,769,586
-
1,769,586
equity
instruments
dividends
Change in
distribution of
Extraordinary
Equity transactions
Changes in the year
Derivatives on
-
-
-
-
-
-
-
-
-
-
-
-
treasury shares
-
-
-
-
-
-
-
-
-
-
-
-
Stock Options
-
-
-
-
-
-
-
(1,413,366,033)
(1,399,393,393)
-
-
(13,972,640)
income at 31/12/2015
Total comprehensive
2,465,088,177
(1,399,393,393)
(25,470,437)
1,415,113
35,935,359
12,575,865
256,248,464
268,824,329
3,206,572,847
-
377,204,359
377,204,359
Equity at 31/12/2015
- 419
-419-
Balance at
10,806,279
(70,905,958)
3,332,283
(7,752,433)
(44,625,431)
b) other
Valuation reserves:
Equity instruments
Treasury shares
(1)
Change in
-
-
-
-
-
-
-
-
-
-
-
-
opening balances
Balance at
3,678,659,812
(44,625,431)
(7,752,433)
3,332,283
(70,905,958)
10,806,279
706,702,782
717,509,061
2,767,383,009
-
313,719,281
313,719,281
01/01/2014
The "issue of new shares" is stated net of the cancellations recorded during the year.
3,678,659,812
706,702,782
a) from earnings
Equity
717,509,061
2,767,383,009
Reserves:
-
313,719,281
a) ordinary shares
b) other shares
313,719,281
Capital stock:
31/12/2013
Group
-
-
-
-
-
44,625,431
-
-
-
-
(44,625,431)
(44,625,431)
reserves
allocations
other
-
-
-
-
-
-
-
-
-
-
-
-
Dividends and
Allocation of prior year results
-
-
-
-
45,244,067
-
-
-
-
-
45,244,067
45,244,067
reserves
Changes in
635,863,104
-
-
-
-
-
-
-
597,712,265
-
38,150,839
(18,135,192)
-
(18,135,192)
-
-
-
-
-
-
-
-
-
shares (1)
38,150,839
Purchase of
treasury shares
Issue of new
STATEMENT OF CHANGES IN EQUITY 2014
dividends
-
-
-
-
-
-
-
-
-
-
-
-
distribution of
Extraordinary
-
-
-
-
-
-
-
-
(136,960)
-
-
(136,960)
instruments
Change in equity
Equity transactions
Changes in the year
Derivatives on
-
-
-
-
-
-
-
-
-
-
-
-
treasury shares
Stock Options
-
-
-
-
-
-
-
-
-
-
-
-
Total
-
-
-
-
-
-
-
(702,867,597)
(823,681,554)
-
-
120,813,957
31/12/2014
income at
comprehensive
3,638,627,234
(823,681,554)
(25,887,625)
3,195,323
49,907,999
10,806,279
707,321,418
718,127,697
3,365,095,274
-
351,870,120
351,870,120
Equity at 31/12/2014
STATEMENT OF CASH FLOWS
Direct Method
in unit of Euro
A. OPERATING ACTIVITIES
31/12/2015
1. Cash generated from operations
103,059,457
- Interest income collected (+)
- Interest expense paid (-)
- Dividends and similar income
- Net fee and commission income (+/-)
31/12/2014
(109,469,331)
688,584,527
884,096,387
(401,384,300)
(573,581,713)
19,450,207
14,791,751
273,495,722
257,145,080
- Payroll costs (-)
(335,358,228)
(325,200,590)
- Other costs (-)
(341,788,471)
(286,620,333)
- Other revenues (+)
200,060,000
- Taxation (-)
-
- costs/income relating to groups of assets held for sale, net of tax effect (+/-)
2. Cash generated/used by financial assets
- Financial assets held for trading
-
-
1,968,038,252
684,976,429
951,407,000
- Financial assets designated at fair value
- Loans and advances to customers
- Loans and advances to banks: demand
- Loans and advances to banks: other receivables
- Other assets
(4,608,000)
(375,429,000)
(542,351,000)
1,532,812,069
1,695,991,127
130,898,000
588,952,000
(133,269,857)
(2,131,136,627)
- Due to banks: demand
- Due to banks: other payables
(1,009,610,000)
(3,602,000)
(134,777,960)
3. Cash generated/used by financial liabilities
3,216,000
(83,315,912)
(63,295,342)
19,897,644
(3,311,679,292)
502,621,000
(911,401,000)
4,278,601,000
(1,558,925,000)
- Due to customers
(4,802,340,284)
(1,130,887,848)
- Debt securities in issue
(1,108,664,511)
- Financial liabilities held for trading
- Financial liabilities designated at fair value
- Other liabilities
Net liquidity generated/used by operating activities
259,284,970
15,564,000
15,564,000
(976,240,000)
(195,031,000)
(40,677,832)
209,716,587
(60,038,918)
(2,736,172,194)
B. INVESTING ACTIVITIES
1. Cash generated by
43,667,293
- Disposal of equity investments
- Dividends collected on equity investments
- Disposal/redemption of financial assets held to maturity
- Disposal of property, plant and equipment
40,471,246
3,846,251
643,994
39,022,042
39,783,252
-
-
799,000
44,000
- Sale of intangible assets
-
-
- Sale of subsidiary companies and business divisions
-
-
(14,323,965)
(113,024,437)
(3,050,965)
(96,307,437)
2. Cash used by
- Purchase of equity investments
- Purchase of financial assets held to maturity
-
-
- Purchase of property, plant and equipment
(8,558,000)
(12,338,000)
- Purchase of intangible assets
(2,715,000)
(1,879,000)
- Purchase of subsidiary companies and business divisions
Net liquidity generated/used by investing activities
-
(2,500,000)
29,343,328
(72,553,191)
13,854,494
617,727,912
C. FUNDING ACTIVITIES
- Issue/Purchase of treasury shares
- Issues/Purchases of equity instruments
(10,623)
- Distribution of dividends and other purposes
Net liquidity generated/used by funding activities
TOTAL NET CASH GENERATED/USED IN THE YEAR
-
-
13,843,870
617,590,952
(16,851,720)
- 420
-420-
(136,960)
(2,191,134,433)
STATEMENT OF CASH FLOWS
Direct Method
in unit of Euro
RECONCILIATION
Captions
31/12/2015
Cash and cash equivalents at the beginning of the year
Cash and 'cash equivalents resulting from extraordinary transactions entered into by the Bank
Cash and cash equivalents resulting from business combination
155,791,190
2,346,925,623
-
-
-
Net liquidity generated/used in the year
(16,851,720)
Cash and balances with central banks: effect of change in exchange rates
31/12/2014
1,144,690
(2,192,279,123)
-
-
138,939,470
155,791,190
Key:
(+) generated
(-) used
The statement of cash flows presented above was prepared using the “direct” method envisaged
by IAS 7 and reports the “cash flows” from the Bank’s operating, investing and financing
activities.
- 421 -421-
- 422 -
EXPLANATORY NOTES
PART B – INFORMATION ON THE STATEMENT OF FINANCIAL POSITION
PART C - INFORMATION ON THE INCOME STATEMENT
PART D – COMPREHENSIVE INCOME
PART F – INFORMATION ON EQUITY
- 423 -
A. 1 – GENERAL INFORMATION
Section 1 – Declaration of conformity with IFRS
The financial statements at 31 December 2015 were prepared in accordance with the
International Accounting Standards (IAS) and International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB), endorsed by the
European Commission under the procedure per art. 6 of Regulation (EC) No. 1606/2002 of the
European Parliament and Council dated 19 July 2002 and in force at the current reporting date,
including the related interpretations of the International Financial Reporting Interpretations
Committee (IFRIC).
The currently applicable international accounting standards (IAS/IFRS), as endorsed by the
European Commission, adopted to prepare the Financial Statements at 31 December 2015 are as
follows:
IFRS 1 First-time adoption of IFRS
IFRS 7 Financial Instruments: Disclosures
IFRS 8 Operating segments
IFRS 10 Consolidated financial statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 1 Presentation of financial statements
IAS 7 Statement of cash flows
IAS 8 Accounting policies, changes in accounting estimates and errors
IAS 10 Events after the reporting period
IAS 12 Income taxes
IAS 16 Property, plant and equipment
IAS 17 Leases
IAS 18 Revenue
IAS 19 Employee benefits
IAS 21 The effects of changes in foreign exchange rates
IAS 24 Related party disclosures
IAS 26 Accounting and reporting by retirement benefit plans
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
IAS 30 Disclosures in the financial statements of banks and similar financial institutions
- 424 -
IAS 32 Financial Instruments: Presentation
IAS 36 Impairment of assets
IAS 37 Provisions, contingent liabilities and contingent assets
IAS 38 Intangible assets
IAS 39 Financial Instruments: Recognition and Measurement
IAS 40 Investment property
Accounting standards and interpretations applied from 1 January 2015
The following table shows the new international accounting standards or the amendments to
accounting standards already in force, with the related endorsing regulations by the European
Commission, that came into force in 2015.
International accounting standards endorsed as at 31 December 2015 and in force since 2015
Regulation
Endorsement
Description
Effective date
634/2014
IFRIC Interpretation 21: Levies
January 1, 2015
First year with start date June 17, 2014
or later
1361/2014
Amendments to IFRS 13 Fair Value Measurement
Amendments to IAS 40 Investment property
January 1, 2015
First year with start dateJanuary 1, 2015
or later
Among the accounting rules that are applicable, mandatorily and for the first time, starting in
2015, of note is IFRIC Interpretation 21 - Levies, endorsed by the European Commission with
Commission Regulation (EU) No 634/2014. This Interpretation provides indications on the
methods for recognising liabilities connected with the payment of levies imposed by public
administrations and falling within the scope of IAS 37. In addition, since 2015 the amendments
to IFRS 3 and 13, as well as to IAS 40, endorsed by Regulation (EU) No. 1361/2014, have been
applicable.
- 425 -
The following table, instead, shows the new international accounting standards or the
amendments to accounting standards already in force, with the related endorsing Regulations by
the European Commission, which must be adopted on 1 January 2016 - in the case of financial
statements for calendar years - or on a subsequent date.
International accounting standards endorsed as at 31 December 2015 and to be adopted after 31 December
2015
Regulation
Endorsement
Description
Effective date
28/2015
Changes IFRS 2 Share-based impairment
Changes IFRS 3 Business Combination
Changes IFRS 8 Operating segments
Changes IAS 16 Property, plant and equipment
Changes IAS 24 Related party disclosures
Changes IAS 38 Intangible assets
January 1, 2016
The first annual period beginning on
June 17, 2016 or later
29/2015
Changes IAS 19 Employee benefits
January 1, 2016
2113/2015
Changes IAS 41 Agriculture
January 1, 2016
2173/2015
Changes IFRS 11 Joint arrangements
January 1, 2016
2231/2015
Changes IAS 38 Intangible assets
January 1, 2016
2343/2015
Chamges IFRS 5 Non-current Assets Held for sale and
Discontinued Operations
Changes IFRS 7 Financial Instruments. Disclosures
Changes IAS 19 Employee benefits
Changes IAS 34 Interim Financial Reporting
January 1, 2016
2406/2015
Changes IAS 1 First-time adoption of IFRS
January 1, 2016
2441/2015
Changes IAS 27 Separate Financial Statements
January 1, 2016
Any repercussions that the reporting principles, the amendments and interpretations to be
applied in future may have on financial disclosure are being studied and evaluated.
- 426 -
The following table shows the accounting standards affected by the amendments, with the
specification of the scope or of the object of the changes not yet endorsed by the European
Commission to date.
International accounting standards not yet endorsed as at 31 December 2015
Accounting
standard/
Interpretation
Description
Publication Date
IFRS 9
Financial Instruments
July 24, 2014
IFRS 14
Regulatory Deferral Accounts
January 30, 2014
IFRS 15
Revenue from Contracts with customers
May 28, 2014
Accounting
standard/
Interpretation
IFRS 10
Publication Date
Amendements
September 11, 2014
September 11, 2014
IFRS 10
December 18, 2014
IFRS 12
December 18, 2014
IAS 28
December 18, 2014
IAS 28
Section 2 – Basis of preparation
The Financial Statements at 31 December 2015 comprise the statement of financial position and
the income statement, the statement of comprehensive income, the statement of changes in
equity, the statement of cash flows and these Explanatory notes and they are accompanied by the
report on operations.
The financial statements have been prepared with reference to the formats and rules specified in
Bank of Italy Circular no. 262 of 22 December 2005 - 4th update dated 15 November 2015 ("Banks’
financial statements: layout and preparation"), issued by the Supervisory Body exercising its
regulatory powers pertaining to the technical forms of bank financial statements, in accordance
with Article 9 of Legislative Decree 38/2005.
As prescribed in Article 5.2 of Italian Legislative Decree no. 38/2005, the Financial Statements are
prepared using the Euro as the accounting currency. The amounts contained in the statement of
financial position, the income statement, the statement of comprehensive income, the statement
of changes in equity, the statement of cash flows and these explanatory notes are, except where
indicated otherwise, stated in thousands of euro. The roundings have been made in accordance
with the related regulations.
- 427 -
These Financial statements were prepared with the intention to provide clear information and
they truth and fair represent the financial position, the income and the cash flow of the Banca
Popolare di Vicenza.
In the preparation of the Financial statements, general reporting standards have been adopted, as
detailed below, prescribed by IAS 1 “Presentation of financial statements” and the accounting
standards illustrated in part A.2 of these explanatory notes, in compliance with the general
provisions included in the “Framework for the preparation and presentation of the financial
standards” (the “framework”) prepared by the International Accounting Standards Board, with
particular regard to the fundamental principle of the prevalence of substance over form, and to
the concept of the relevance and significance of the information.
The general reporting standards prescribed by IAS 1 are summarised below.
Going concern
These Financial statements were prepared on a going concern basis.
In this regard, the joint co-ordination committee for IAS/IFRS application between the Bank of
Italy, CONSOB and ISVAP (Italy’s insurance industry regulator) issued its document no. 2 on 6
February 2009 entitled “Disclosures in financial reports on the going concern assumption, financial
risks, tests of assets for impairment and uncertainties in the use of estimates”. This document requires
management to carry out a detailed review in relation to the going concern presumption, in
accordance with the requirements of IAS 1.
In particular, paragraphs 23-24 of IAS 1 establish that: “When preparing financial statements,
management shall make an assessment of an entity’s ability to continue as a going concern. An entity
shall prepare financial statements on a going concern basis unless management either intends to liquidate
the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in
making its assessment, of material uncertainties related to events or conditions that may cast significant
doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties.
When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact,
together with the basis on which it prepared the financial statements and the reason why the entity is not
regarded as a going concern.”
In this regard, the Directors examined the risks and uncertainties connected with the current
macroeconomic environment, as well as the specific Bank risk factors that emerged in 2015 also
with reference to the capital ratios, which at 31 December 2015 are above the regulatory
minimums but nonetheless fall below the minimum targets set by ECB as a part of the
“Supervisory Review and Evaluation Process” with notice dated 25 November 2015 and to the
Liquidity Coverage Ratio, which is the lower than the minimum regulatory requirements at 31
December 2015 (LCR 47.5%). The Directors, taking into account the actions already taken in
terms of strong managerial renewal, the decisions made and the actions already commenced in
respect to the process of transformation into a “Joint Stock Company”, to listing on the Electronic
Stock Market managed by Borsa Italiana and to the Bank’s capital and financial strengthening
(whose successful outcome is subordinated, inter alia, to the approval, by the Extraordinary
Stockholders’ Meeting convened for 4/5 March 2016, of the transformation into Joint Stock
Company and it is the subject of a “pre-guarantee” agreement at market terms and conditions),
as well as of the indications contained in the 2015-2020 Group Business Plan, approved last
September and revised on 9 February 2016, albeit in the presence of uncertainties connected with
the execution of the transformation and capital strengthening operation submitted for the
approval of the Extraordinary Stockholders’ Meeting convened for 4/5 March 2016 and to the
consequences that non-approval of the transformation to a joint stock company would bring in
relation to the provisions of art. 29, paragraph 2-bis, Consolidated Law on Banking and Lending,
- 428 -
for the reasons indicated below, deem it appropriate to prepare the present financial statements
at 31 December 2015 on the basis of the going concern presumption.
The negative result of the year 2015 was caused, for the most part, by non-recurring valuation
components. The raising of the coverage levels of the credit portfolio and the allocation of risk
provisions to address risks of disputes are an important element supporting the business’s
continuation as a going concern.
The Group’s levels of capitalisation are above the minimum regulatory requirements, although
they are below the targets established by the ECB at the end of the Supervisory Review and
Evaluation Process (SREP), mainly as a result of the impact of the purchase and subscription of
BPVi shares in relation to which, the ECB’s inspection and in-depth analyses conducted by the
Bank highlighted the criticality profiles indicated in the “Inspections” section of the Report on
Operations. The completion of a capital increase up to Euro 1.5 billion (to which are added Euro
150 million in the service of the over-allocation option and the additional funds that may result
from the exercise, by the stockholders, of the rights to subscribe new shares that will be assigned
to them to gain their loyalty and to provide an incentive to the subscription of the capital
increase), with respect to which the Bank stipulated a preliminary guarantee agreement with
Unicredit Group, at market terms and conditions, pertaining to the subscription of the shares to
be issued for the execution of the capital increase up to the maximum amount of Euro 1.5 billion,
aims to bring the Group’s capital ratios above the ECB targets by the spring of 2016. The capital
strengthening plan was preventively submitted to the competent Supervisory and Control
Authorities for approval and it will be submitted to the approval of the Extraordinary
Stockholders’ meeting of the Bank on 4/5 March 2016, together with the transformation into a
Joint Stock Company. Completion of these activities within the scope of the new 2015-2020
Business Plan, will enable the Group to continuously fulfil the stringent regulatory requirements
and, for the future, to express adequate levels of profitability.
Recognition on an accrual basis
The Financial statements are prepared, with the exception of cash flow disclosure, according to
the principle that costs and revenues are recognised on an accrual basis, regardless of the time of
their actual payment.
Relevance, significance and aggregation
Each relevant class of items, however similar they may be, shall be reported distinctly in the
financial statements. Items with dissimilar nature or destination may be aggregated only if they
are not significant. The presentation and classification of the items of the Financial statements
complies with the provisions set out in Bank of Italy Circular no. 262 which bindingly establishes
financial statement formats and the procedures for their completion, as well as the content of the
explanatory notes.
In accordance with the provisions of the aforesaid Circular no. 262, statements of financial
position, income statements and comprehensive income statements comprise line items
(indicated by numbers), lines (indicated by letters) and additional information details (the “of
which” portions of line items and lines). The line items, the lines and their information details
make up the financial statement accounts. New items may be added to the aforesaid statements,
provided their content is not associated to any of the items already included in the statements
and only if the amounts are relevant. The lines provided by the statements may be grouped
when one of the two following conditions is met: A) the amount of the lines is irrelevant; b)
grouping enhances the clarity of the financial statements; in this case, the explanatory notes
contain distinctly the lines to be grouped.
- 429 -
In this regard, the Bank, in preparing the Financial Statements at 31 December 2015, did not
apply the aforesaid provisions that allow to add new items or to group them. Line items in the
statement of financial position, the income statement, the statement of comprehensive income
and the tables included in the explanatory notes are not presented if their balance is zero in both
years.
Offsetting
Unless otherwise provided or expressly allowed by international reporting standards or by an
interpretation thereof or by the provision of the aforementioned Bank of Italy Circular no. 262,
assets and liabilities as well as costs and revenues may not be mutually offset.
Uniformity of presentation
The standards for the presentation and classification of Financial statement items are kept
constant from one period to the other in order to assure the comparability of information, unless
differently required by an international accounting standard or by an interpretation or if the
need emerges of making the representation of the information more appropriate in terms of
significance. If feasible, the change is adopted retroactively and the nature, the reason and the
amount of the items affected by the change are indicated.
Comparative information
For all amounts posted in the Consolidated Financial statements of the current year, unless
otherwise prescribed or allowed by an international accounting standard, comparative
information with respect to the previous year is provided and, when relevant for comprehension
of the financial statements for the reference year, also comparative information about comments
and descriptive information. If changes were made to the presentation or classification of line
items, the comparative amounts are reclassified as well, unless reclassification is not feasible.
Non comparability and the adaptation, or its impossibility, are pointed out and commented in
the explanatory notes.
At any rate, when comparing 2015 data against those of the previous year it should be kept in
mind that 2015 was an extraordinary year characterised by strong discontinuity from the past in
terms of economic results, equity, management and regulatory activities, also in connection with
inspections conducted by the ECB during the February-July 2015 period on “Risk Management –
Market Risk management (Proprietary Trading and Governance management), which showed
some critical elements and anomalies related, among other things, to the manner in which capital
increases were carried out in 2013-2014, treasury share transactions and the related legal and
reputational risks.
It should also be noted that as of 1 January 2015, new rules for the classification of non
performing loans came into effect. These rules were issued by the Bank of Italy in its 7th update
of Circular 272 of 30 July 2008 and aim to align the definition of non performing financial assets
with the new notions of “non-performing exposure and forbearance” introduced by the
implementing technical standards relating to harmonised consolidated supervisory statistics
reporting defined by the EBA and approved by the European Commission on 9 January 2015
(ITS). The same update also introduced the definition of “forbearance”, which can be applied to
non performing exposures (“non-performing exposures with forbearance measures”) as well as
performing exposures (“forborne performing exposures”). In particular, while the overall scope
of non performing loans remains the same, as of 1 January 2015 they are broken down into the
categories of bad loans, unlikely to pay and past-due.
- 430 -
The sum of these categories corresponds to the aggregate “non-performing exposures” set forth
in the ITS. As of the same date, the categories of watchlist exposures and restructured exposures
are no longer used. As a result, the comparability of information on non performing loans is
somewhat limited.
With regard to the foregoing, it should also be noted that in Part E, Section 1 of the Explanatory
notes comparative information concerning “Credit Quality” for 2014 has been omitted, as
allowed in the promulgation document of the 4th update to Circular no. 262 of 22 December 2005
published by the Bank of Italy on 15 December 2015. Information on changes in gross exposures
and write-downs of “forborne exposures” is also not provided, as such disclosures are required
for financial statements relating to the fiscal year ended 31 December 2016 or ongoing on that
date.
Estimation uncertainty and risks
As indicated in the specific sections of these explanatory notes, accounting estimates have been
made in support of the carrying amounts for the more significant items requiring measurement
in the financial statements at 31 December 2015, as required by the current accounting standards
and relevant regulations. This process, which largely involved estimating the future
recoverability of amounts reported in the financial statements in accordance with current
regulations, was performed on a going concern basis without considering forced-sale values.
Estimates have been primarily used for determining the fair value of financial instruments, for
the valuation of loans and intangible assets, for determining other provisions for risks and
charges and for quantifying current and deferred taxes and estimating the recoverability of
deferred tax assets.
The analysis carried out, also taking into account the impairment losses applied, the outcome of
the probability test performed with reference to the measurement of deferred tax assets and the
indications contained in the 2015-2020 Group Business Plan approved last September and
revised on 9 February 2015, supports the carrying amount of these items at 31 December 2015.
This valuation process was nevertheless particularly complex due to the current macroeconomic
and market conditions. In particular, continuing abnormal volatility in all the financial and nonfinancial parameters used for measurement purposes has rendered it difficult to make short-term
or other forecasts for such financial and non-financial parameters, which can have a significant
influence on estimated values. The parameters and the information used to verify the values
mentioned in the previous paragraphs are therefore significantly influenced by the particularly
uncertain macroeconomic and market environment, which could lead to rapid changes, not
foreseeable today, with consequent effects on the values reported in the Financial Statements at
31 December 2015.
In addition, as described in the specific section of the Report on Operations dedicated to the
inspections conducted by the ECB and completed in early July, the Bank, with the support of
legal, accounting and tax advisors of high standing, has initiated a complex and detailed analysis
of the criticality profiles that emerged from said assessments, in particular reference to
transactions for the purchase and subscription of the Bank’s shares, in order to identify the legal
profile of the various situations, and assess risks and potential impacts on income and the
financial position and the related applicable accounting standards. The results of the analyses
carried out to date and of the related assessments are reflected in the statements at 31 December
2015 through impairment adjustments on loans and specific provisions for risks and charges and
also subject to disclosure in the “Inspections” section of the Report on Operations.
- 431 -
The execution of complex estimations on such risks has been carried out to the best of the
information currently available , and taking into account the applicable accounting principles.
The Directors believe that the results of the analyses carried out to date and of the related
assessments provide a reasonable basis for the preparation of the financial statements at 31
December 2015.
It should also be noted that, with reference to the risks connected with other criticality profiles
that emerged in the ECB inspections, specific value adjustments were made and the appropriate
allocations made to provisions for risks and charges in the financial statements as at 31
December 2015, according to the indications of the aforementioned “Inspections” section of the
Report on Operations.
It should be specified, finally, that the Bank will continue to examine these analyses in depth and
fine tune them during 2016 and it cannot be excluded that the future assessments and estimates
may differ from those adopted for the purposes of the 2015 financial statements, including as a
consequence of the progress of the litigation and the claims from customers and the final
inspection reports that will be issued by Consob, the Italian Commission for Listed Companies
and the Stock Exchange.
- 432 -
Section 3 – Subsequent events
No significant events occurred between the reporting date of these Financial statements (31
December 2015) and the date of their approval by the Board of Directors (23 February 2016),
except as indicated below.
Monforte 19 S.r.l., whose merger by absorption, entered into on 21 December 2015, became
effective on 1 January 2016, is a real estate company belonging to the Banca Popolare di Vicenza
Group which manages several prime properties for business use by the Group and other parties.
Monforte 19 S.r.l. has been merged into Immobiliare Stampa S.c.p.a., a real estate company
owned by the Banking Group.
It should be noted that, on 19 January 2016, CONSOB started an inspection targeted at
acquiring the documents and data relating to the capital, banking and financial dealings with
Società Cattolica di Assicurazione Società Cooperativa and an assessment of the equity
investment held by the Bank in Società Cattolica di Assicurazione in the financial statements as
at 31 December 2014 and in the half-yearly report as at 30 June 2015.
Again on 19 January 2016, the ECB sent the Bank the draft decision relating to the inspection
regarding Risk Management – Market Risk (management of Proprietary Trading and Governance). For
details on the observations indicated by the ECB and on the actions taken by the Bank, please
refer to the chapter “Inspections” in the section dedicated to the “Activities of strategic
significance” of the Report on Operations.
economic/capital and financial projections of the 2015-2020 Business Plan, confirming the
strategic guidelines already approved in September. The new economic/capital objectives were
updated to take into account the final results of the financial statements at 31 December 2015 and
the findings of the analysis conducted on loans considered “correlated” to the
2020.
- 433 -
notches, from B+ to B-, confirming the short-term rating at B. The downgrade mainly reflects the
weakening of BPVi’s liquidity position following the significant reduction in deposits at 31
2015, due to the €1.4 billion loss and the filters applied to regulatory capital in connection with
capital related to loans granted by the Bank. However, Fitch emphasises that the Bank announced
a plan to strengthen capital, including a €1.5 billion capital increase, which will be completed in
the second quarter of 2016 with the goal of bringing the CET1 ratio above 12%, the sale of non
performing loans and some non-core assets. The Bank’s rating has been identified as “Rating
Watch Negative”, reflecting an increased risk of execution in connection with the Bank’s ability to
implement a successful turnaround and achieve its Business Plan objectives, including listing and
capital increase. With regard to the latter, Fitch is reassured by the presence of a preliminary
subscription agreement with UniCredit, but the Agency also believes that the current difficulties
in the financial markets could potentially result in the operation being postponed or not being
completed successfully.
On 12 February 2016, the company Berica Funding 2016 S.r.l. became a part of the BPVI
Banking Group; it is a securitisation company that, on 29 January 2016, completed a
securitisation of mortgage loans originated by Banca Popolare di Vicenza and by the subsidiary
Banca Nuova with a total value of approximately Euro 1.27 billion through the issue of four
classes of asset backed securities in accordance with Italian Law no. 130/99.
On 16 February 2016 the Board of Directors of Banca Popolare di Vicenza called the
order to resolve:




independent auditors.
- 434 -
by Law no. 33/2015 and with the related implementing provisions issued by Bank of Italy (9th
reimbursement, with the Bank’s own funds, the shares resulting from any exercise of the
withdrawal right. The shares resulting from the exercise of the withdrawal right shall be offered
to the other stockholders and they may subsequently be offered on the market; if they are not
placed, the residual shares will then be returned to stockholders once the law-mandated
procedures are completed. During the same meeting of the Board of Directors, moreover, it was
decided that, to ensure that the capital strengthening objectives would be achieved in a complex
market environment and that the interests of all stockholders are safeguard, up to 45% of the
capital increase shall be reserved to current stockholders, at least 50% of the capital increase
shall be reserved to institutional investors and 5% to retail. Claw-back mechanisms are
provided, whereby it will be possible to reallocate in favour of a tranche any shares not placed in
the other tranches. The issue price of the shares, to be equal for every category of investors,
shall be determined at the end of the placement through the “book building” method, on the
basis of the market’s demand for new shares. Current stockholders shall benefit from specific
conditions for participation in the capital increase. In particular:

price;

On 19 February 2016, the rating agency DBRS lowered the Bank’s long-term rating by one notch
to BB (low), confirming the short-term rating at R-4. The rating action by DBRS followed the
publication of the results of 2015 by BPVi, with the Bank recording a loss of Euro 1.4 billion, and it
took into consideration the deterioration of the Bank’s franchise, position and liquidity buffer.
on the rating.
Section 4 – Other matters
Statutory Audit of financial statements
The financial statements have been audited by KPMG S.p.A., an independent firm of auditors,
under the engagement for external audit conferred for the nine-year period from 2010 to 2018 by
resolution of the stockholders on 24 April 2010. The financial statements are also accompanied by
the certification of the Financial Reporting Manager, as required by art. 154-bis, par. 5, of
Legislative Decree 58/98 (Italy's Financial Markets Act – TUF) as amended by Decree no.
195/2007 implementing the “Transparency” Directive.
- 435 -
A. 2 – PART RELATING
STATEMENT LINE ITEMS
TO
THE
PRINCIPAL
FINANCIAL
The accounting standards adopted in the preparation of the Financial Statements at 31 December
2015 are as follows.
ASSETS
Classification
This line item comprises financial instruments held for trading1 and derivative contracts with a
positive fair value that are not designated as effective hedging instruments. Such financial
instruments must not carry any clause restricting their trading.
host and forward transactions in currencies, securities, goods and precious metals. An embedded
derivative is recognised separately from the host contract when all of the following conditions are
satisfied:
 its economic characteristics and risks are not closely related to those of the “host”
contract;
 the separated embedded instrument meets the definition of a derivative;
Financial instruments are designated as financial assets held for trading upon initial recognition,
except if former hedging derivatives with a positive fair value at the reporting date are
reclassified as “financial assets held for trading” after a hedging relationship has become
ineffective.
Recognition
The initial recognition of financial assets held for trading takes place: I) on the settlement date for
debt securities, equity instruments and units in mutual funds and SICAVs; ii) on the subscription
date for derivative contracts.
Financial assets held for trading are initially recognised at their fair value, whereas transaction
costs or income are written off immediately, even if directly attributable to the instrument
concerned.
1Positions
held for trading are those intentionally acquired for the purpose of sale in the near term and/or to benefit, in
the near term, from differences between the purchase and sale price, or from other changes in price or interest rates.
“Positions” are those held on own account and those arising from customer services or from market making.
- 436 -
After initial recognition, financial assets held for trading are stated at fair value through the
income statement.
document.
changes in the fair value of financial assets held for trading are booked to “net trading income” in
the income statement, except for any gains or losses on rating or valuation relating to derivative
contracts linked to the “fair value option”, which are booked to “net change in financial assets
and liabilities designated at fair value”.
The profits and losses recognised in “Net trading income” in the income statement also include
the differentials collected and paid on trading derivatives, and those accruing up to the reporting
date, while differentials relating to derivative contracts associated with financial assets and
liabilities designated at fair value and/or with finan

stato patrimoniale - Banca Popolare di Vicenza

Transcription

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