Annual Financial Report 2023
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Annual Financial Report
for the year ended 31 December 2023
Contents Page
Board of Directors and Executives 1
Forward Looking Statements and Notes 2
Directors' Report of Bank of Cyprus Holdings Public Limited Company 3
Risk and Capital Management Report 50
ESG Disclosures 89
Annual Corporate Governance Report 158
Consolidated Financial Statements of Bank of Cyprus Holdings Group 233
Independent Auditor’s Report to the Members of Bank of Cyprus Holdings Public Limited Company on the Consolidated
Financial Statements and the Company Financial Statements 432
Financial Statements of Bank of Cyprus Holdings Public Limited Company 444
Alternative Performance Measures Disclosures 464
Additional Information – EU Taxonomy Disclosure Tables 480
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Board of Directors and Executives
as at 28 March 2024
Board of Directors of Bank of Cyprus
Holdings Public Limited Company
Efstratios-Georgios Arapoglou
CHAIRMAN
Lyn Grobler
VICE-CHAIRPERSON
Panicos Nicolaou
Constantine Iordanou
Eliza Livadiotou
Monique Hemerijck
Adrian John Lewis
Executive Committee
Panicos Nicolaou
CHIEF EXECUTIVE OFFICER
Dr. Charis Pouangare
DEPUTY CHIEF EXECUTIVE OFFICER & CHIEF OF BUSINESS
Eliza Livadiotou
EXECUTIVE DIRECTOR FINANCE
Demetris Th. Demetriou
CHIEF RISK OFFICER
Irene Gregoriou
EXECUTIVE DIRECTOR PEOPLE & CHANGE
George Kousis
EXECUTIVE DIRECTOR TECHNOLOGY & OPERATIONS
Company Secretary
Katia Santis
Legal Advisers as to matters of Irish
Law
Arthur Cox
Legal Advisers as to matters of
English and US Law
Sidley Austin LLP
Legal Advisers as to matters of
Cypriot Law
Chryssafinis & Polyviou LLC
Statutory Auditors
PricewaterhouseCoopers
One Spencer Dock
North Wall Quay
Dublin 1
D01 X9R7
Ireland
Registered Office
10 Earlsfort Terrace
Dublin 2
D02 T380
Ireland
1
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Forward Looking Statements and Notes
This document contains certain forward-looking statements which can usually be identified by terms used
such as 'expect', 'should be', 'will be' and similar expressions or variations thereof or their negative
variations, but their absence does not mean that a statement is not forward-looking. Examples of forward-
looking statements include, but are not limited to, statements relating to the Bank of Cyprus Holdings
Group's (the Group) near term and longer term future capital requirements and ratios, intentions, beliefs or
current expectations and projections about the Group’s future results of operations, financial condition, the
level of the Group’s assets, liquidity, performance, prospects, anticipated growth, provisions, impairments,
business strategies and opportunities. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events, and depend upon circumstances, that will or may occur in the
future. Factors that could cause actual business, strategy and/or results to differ materially from the plans,
objectives, expectations, estimates and intentions expressed in such forward-looking statements made by
the Group include, but are not limited to: general economic and political conditions in Cyprus and other
European Union (EU) Member States, interest rate and foreign exchange rate fluctuations, legislative, fiscal
and regulatory developments and information technology, litigation and other operational risks, adverse
market conditions, the impact of outbreaks, epidemics or pandemics, and geopolitical developments as well
as uncertainty over the scope of actions that may be required by us, governments and other to achieve
goals relating to climate, environmental and social matters, as well as the evolving nature of underlying
science and industry and governmental standards and regulations. This creates significantly greater
uncertainty about forward-looking statements. Should any one or more of these or other factors
materialise, or should any underlying assumptions prove to be incorrect, the actual results or events could
differ materially from those currently being anticipated as reflected in such forward-looking statements.
Further, forward-looking statements may be affected by changes in reporting frameworks and accounting
standards, including practices with regard to the interpretation and application thereof and emerging and
developing ESG reporting standards. The forward-looking statements made in this document are only
applicable as at the date of publication of this document. Except as required by any applicable law or
regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statement contained in this document to reflect any change in the Group’s
expectations or any change in events, conditions or circumstances on which any statement is based.
Non-IFRS performance measures
Bank of Cyprus Holdings Public Limited Company's (the Company) management believes that the non-IFRS
performance measures included in this document provide valuable information to the readers of the Annual
Financial Report as they enable the readers to identify a more consistent basis for comparing the Group’s
performance between financial periods and provide more detail concerning the elements of performance
which management are directly able to influence or are relevant for an assessment of the Group. They also
reflect an important aspect of the way in which the operating targets are defined and performance is
monitored by the Group’s management. However, any non-IFRS performance measures in this document
are not a substitute for IFRS measures and readers should consider the IFRS measures as the key measures
of the 31 December position. Refer to ‘Alternative Performance Measures Disclosures’ on pages 464 to 479
of the Annual Financial Report for the year ended 31 December 2023 for further information and
calculations of non-IFRS performance measures included throughout this document and their reconciliation
to the most directly comparable IFRS measures included in the Consolidated Financial Statements.
The Annual Financial Report for the year ended 31 December 2023 is available on the Group’s website
www.bankofcyprus.com (Group/Investor Relations) (the Group's website).
The Annual Financial Report 2023 is originally issued in English. The Greek translation of the Annual
Financial Report 2023 will be available on the Group’s website by 5 April 2024. In case of a difference or
inconsistency between the English document and the Greek document, the English document prevails.
2
3
DIRECTORS’ REPORT
FOR THE YEAR
2023
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
4
The Board of Directors submits to the shareholders of Bank of Cyprus Holdings Public Company Ltd (the
‘Company’) their Directors’ Report together with the audited Consolidated Financial Statements (‘Consolidated
Financial Statements’) and Financial Statements of the Company for the year ended 31 December 2023.
The Annual Financial Report relates to the Company and together with its subsidiaries the Group, which was listed
on the London Stock Exchange (‘LSE’) and the Cyprus Stock Exchange (‘CSE’) as at 31 December 2023.
Activities
The Company is the holding company of the Group and of Bank of Cyprus Public Company Ltd (‘BOC PCL’ or the
‘Bank’). The principal activities of BOC PCL and its subsidiary companies involve the provision of banking,
financial, and insurance services and the management and disposal of property predominately acquired in
exchange of debt.
All Group companies and branches are set out in Note 50 to the Consolidated Financial Statements. The Group
has established branches in Greece. There were no acquisitions of subsidiaries and no material disposals of
subsidiaries during the year ended 31 December 2023. Information on Group companies and acquisitions and
disposals during the year are detailed in Note 50 to the Consolidated Financial Statements.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
5
Group financial results on the underlying basis
Commentary on underlying basis
The financial information presented in this section provides an overview of the Group financial results for the year
ended 31 December 2023 on the ‘underlying basis’, which management believes best fits the true measurement
of the performance and position of the Group, as this presents separately any non-recurring items and also
includes certain reclassifications of items, other than non-recurring items, which are done for presentational
purposes under the underlying basis for aligning their presentation with items of a similar nature.
Reconciliations between the audited statutory basis and the underlying basis to facilitate the comparability of the
underlying basis to the statutory information, are included in section ‘Reconciliation of the Consolidated Income
Statement for the year ended 31 December 2023 between the audited statutory basis and the underlying basis’
and ‘Alternative Performance Measures Disclosures’ of the Annual Financial Report 2023.
Throughout the Directors’ Report, financial information in relation to the year ended 31 December 2022 has been
restated to reflect the transition to IFRS 17 which was adopted on 1 January 2023 and applied retrospectively.
As a result, such 2022 financial information, ratios and metrics are presented on a restated basis unless otherwise
stated. Further information on the impact of IFRS 17 transition is provided below and in Note 2.2.1 of the
Consolidated Financial Statements for the year ended 31 December 2023.
Throughout the Directors’ Report, the capital ratios as at 31 December 2022 have been restated in order to take
into consideration the 2022 dividend declaration. This refers to the recommendation by the Board of Directors to
the shareholders for approval of a final dividend in respect of the earnings of the year ended 31 December 2022
following the approval by the European Central Bank (‘ECB’). The proposed final dividend was declared at the
Annual General Meeting (‘AGM’) which was held on 26 May 2023. This dividend amounted to €22.3 million in total
and had a negative impact of 22 bps on the Group’s CET1 ratio and Total Capital ratio as at 31 December 2022.
As a result, the 31 December 2022 capital ratios are presented as restated for the 2022 dividend unless otherwise
stated. Further details are provided in section ‘Balance Sheet Analysis – Capital Base’ below.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
6
Group financial results on the underlying basis (continued)
The main financial highlights for the year ended 31 December 2023 are set out below:
Consolidated Income Statement on the underlying basis
€ million 2023
1
2022
1,2
(restated)
Net interest income 792
370
Net fee and commission income 181
192
Net foreign exchange gains and net gains/(losses) on financial instruments 37
26
Net insurance result 54
44
Net gains
/(losses)
from revaluation and disposal of investment properties and
on disposal of stock of properties
10
13
Other income 18
17
Total income 1,092
662
Staff costs (192)
(181)
Other operating expenses (149)
(144)
Special levy on deposits and other levies/contributions (43)
(38)
Total expenses
(384)
(363)
Operating profit 708
299
Loan credit losses (63)
(47)
Impairments of other financial and non-financial assets (53)
(33)
Provisions for pending litigations,
claims,
regulatory and other
matters (net
of reversals)
(28)
(11)
Total loan credit losses, impairments and provisions (144)
(91)
Profit before tax and non-recurring items 564
208
Tax (73)
(31)
Profit attributable to non-controlling interests (2)
(3)
Profit after tax and
before non
-
recurring items (attributable to the
owners of the Company)
489
174
Advisory and other transformation costs - organic (2)
(11)
Profit after tax
-
organic (attributable to the owners of the
Company)
487
163
Net profit/(loss)/provisions relating to NPE sales -
1
Restructuring and other costs relating to NPE sales -
(3)
Restructuring costs - Voluntary Staff Exit Plan (VEP) -
(104)
Profit after tax (attributable to the owners of the Company) 487
57
1.
The financial information is derived from and should be read in conjunction with the accompanied Consolidated Financial
Statements.
2.
On 1 January 2023 the Group adopted IFRS 17 ‘Insurance contracts’ which replaced IFRS 4 ‘Insurance contracts’. 2022
comparative information has been restated to reflect the impact of IFRS 17. For further details refer to Note 2.2.1 of the
Consolidated Financial Statements for the year ended 31 December 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
7
Group financial results on the underlying basis (continued)
Consolidated Income Statement on the underlying basis (continued)
Key Performance Ratios 2023
2022
1
(restated)
Net interest margin 3.41%
1.65%
Cost to income ratio 35%
55%
Cost to income ratio excluding special levy on deposits and other
levies/contributions
31%
49%
Operating profit return on average assets (annualised) 2.7%
1.2%
Basic earnings per share attributable to the owners of the Company
(€)
2
1.09
0.13
Return on tangible equity (ROTE) 24.8%
3.2%
Return on tangible equity (ROTE) excluding
amounts reserved for
distribution
3
25.3%
3.3%
Tangible book value per share (€) 4.93
3.93
1.
On 1 January 2023 the Group adopted IFRS 17 ‘Insurance contracts’ which replaced IFRS 4 ‘Insurance contracts’. 2022
comparative information has been restated to reflect the impact of IFRS 17. For further details refer to Note 2.2.1 of the
Consolidated Financial Statements for the year ended 31 December 2023.
2.
The diluted earnings per share attributable to the owners of the Company as at 31 December 2023 amounted to €1.09 (2022:
€0.13).
3.
Calculated as profit after tax (attributable to the owners of the Company) (annualised) for the period divided by the average of
shareholder’s equity minus intangible assets at each quarter/year end and the amounts approved/recommended for distribution
in respect of earnings of the relevant year the distribution relates to.
Consolidated Balance Sheet on the underlying basis
€ million 2023
1
2022
1,2
(restated)
Cash and balances with central banks 9,615
9,567
Loans and advances to banks 385
205
Reverse repurchase agreements 403
-
Debt securities, treasury bills and equity investments 3,695
2,704
Net loans and advances to customers 9,822
9,953
Stock of property 826
1,041
Investment properties 62
85
Other assets 1,821
1,734
Total assets 26,629
25,289
Deposits by banks 472
508
Funding from central banks 2,044
1,977
Customer deposits 19,337
18,998
Debt securities in issue 672
298
Subordinated liabilities 307
302
Other liabilities 1,309
1,157
Total liabilities 24,141
23,240
Shareholders’ equity 2,247
1,807
Other equity instruments 220
220
Total equity excluding non-controlling interests 2,467
2,027
Non-controlling interests 21
22
Total equity 2,488
2,049
Total liabilities and equity 26,629
25,289
1.
The financial information is derived from and should be read in conjunction with the accompanied Consolidated Financial
Statements.
2.
On 1 January 2023 the Group adopted IFRS 17 ‘Insurance contracts’ which replaced IFRS 4 ‘Insurance contracts’. 2022
comparative information has been restated to reflect the impact of IFRS 17. For further details refer to Note 2.2.1 of the
Consolidated Financial Statements for the year ended 31 December 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
8
Group financial results on the underlying basis (continued)
Consolidated Balance Sheet on the underlying basis (continued)
Key Balance Sheet figures and ratios 2023
2022
1,
(restated)
Gross loans (€ million) 10,070
10,217
Allowance for expected loan credit losses (€ million) 267
282
Customer deposits (€ million) 19,337
18,998
Loans to deposits ratio (net) 51%
52%
NPE ratio 3.6%
4.0%
NPE coverage ratio 73%
69%
Leverage ratio 9.1%
7.8%
Capital ratios and risk weighted assets
2023
(Regulatory)
3
2022
2
Common Equity Tier 1 (CET1) ratio (transitional) 17.4%
15.2%
Total capital ratio (transitional) 22.4%
20.4%
Risk weighted assets (€ million) 10,341
10,114
1.
On 1 January 2023 the Group adopted IFRS 17 ‘Insurance contracts’ which replaced IFRS 4 ‘Insurance contracts’. 2022
comparative information has been restated to reflect the impact of IFRS 17. For further details refer to Note 2.2.1 of the
Consolidated Financial Statements for the year ended 31 December 2023.
2.
The capital ratios have been restated to take into consideration the dividend in respect of the earnings of the year ended 31
December 2022. More information is provided in ‘Capital Base’ under the ‘Balance Sheet Analysis’ section below.
3.
Includes profits for the year ended 31 December 2023 net of distribution at 30% payout ratio, following ECB approval in March
2024 (refer to section ‘Balance Sheet Analysis – Capital Base’ below).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
9
Group financial results on the underlying basis (continued)
Transition to IFRS 17
On 1 January 2023 the Group adopted IFRS 17 ‘Insurance Contracts’ (‘IFRS 17’) which replaced IFRS 4 ‘Insurance
contracts’. IFRS 17 is an accounting standard that was implemented on 1 January 2023, with retrospective
application, and establishes principles for the recognition, measurement, presentation and disclosure of insurance
contracts issued, investment contracts with discretionary participation features issued and reinsurance contracts
held. In substance, IFRS 17 impacts the phasing of profit recognition for insurance contracts as profitability is
spread over the lifetime of the contract compared to being recognised substantially up-front under IFRS 4. This
new accounting standard does not change the economics of the insurance contracts but decreases the volatility
of the Group’s insurance companies’ profitability.
The Group’s total equity as at 31 December 2022 as restated for IFRS 17 compared to IFRS 4, was reduced by
overall €52 million (predominantly relating to the life insurance business of the Group) as a result of:
- The removal of the present value of in-force life insurance contracts ('PVIF') asset including the associated
deferred tax liability, resulting in a reduction of approximately €101 million in the Group’s total equity.
- The remeasurement of insurance assets and liabilities (including the impact of the recognition of the
contractual service margin (‘CSM’)) resulting in an increase in the Group’s equity by €49 million.
The estimated future profit of insurance contracts is included in the measurement of the insurance contract
liabilities as the contractual service margin (‘CSM’) and this will be gradually recognised in revenue, as services
are provided over the duration of the insurance contract. A contractual service margin liability of approximately
€42 million was recognised as at 31 December 2022 (reflected in the impact from the remeasurement of insurance
liabilities mentioned above).
With regards to the Group’s income statement for the year ended 31 December 2022, as restated for IFRS 17,
the profit after tax (attributable to the owners of the Company) was reduced by €14 million to €57 million
(compared to €71 million under IFRS 4) reflecting mainly:
- Profit is deferred and held as a CSM liability as mentioned above to be recognised in the income statement
over the contract service period.
- The impact of assumption changes relating to the future service is also deferred through the CSM liability
and is recognised in the income statement over the contract service period.
- There is increased use of current market values in the measurement of insurance assets and liabilities
(for unit-linked business) and market volatility on unit-linked business is deferred to the CSM, thereby
reducing the volatility in the income statement.
The transition to IFRS 17 had no impact on the Group’s regulatory capital. However, as a result of the benefit
arising from the remeasurement of the insurance assets and liabilities, the life insurance subsidiary distributed
€50 million as dividend to the Bank in February 2023, which benefited Group regulatory capital by an equivalent
amount on the same date, enhancing the CET1 ratio by approximately 50 bps. Going forward, meaningful dividend
generation from the insurance business is expected to continue.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
10
Group financial results on the underlying basis (continued)
Reconciliation of the Consolidated Income Statement for the year ended 31 December 2023 between
the audited statutory basis and the underlying basis
€ million
Underlying
basis
Other
Statutory
basis
Net interest income 792
-
792
Net fee and commission income 181
-
181
Net foreign exchange gains and net gains
/(losses)
on financial
instruments
37
4
41
Net gains on derecognition of financial assets measured at
amortised cost
-
6
6
Net insurance result* 54
-
54
Net gains
/(losses)
from revaluation and disposal of investment
properties and on disposal of stock of property
10
-
10
Other income 18
-
18
Total income 1,092
10
1,102
Total expenses (384)
(30)
(414)
Operating profit 708
(20)
688
Loan credit losses (63)
63
-
Impairment of other financial and non-financial assets (53)
53
-
Provisions for
pending
litigation
s
,
claims,
regulatory and other
matters (net of reversals)
(28)
28
-
Credit losses on
financial assets and impairment net of
reversals of non-financial assets
-
(126)
(126)
Profit before tax and non-recurring items 564
(2)
562
Tax (73)
-
(73)
Profit attributable to non-controlling interests (2)
-
(2)
Profit after tax and before
non
-
recurring items
(attributable to the owners of the Company)
489
(2)
487
Advisory and other transformation costs - organic (2)
2
-
Profit after tax (attributable to the owners of the
Company)
487
-
487
* Net insurance result per underlying basis comprises the aggregate of captions ‘Net insurance finance
income/(expense) and net reinsurance finance income/(expense)’, ‘Net insurance service result’ and ‘Net
reinsurance service result’ per the statutory basis.
The reclassification differences between the statutory basis and the underlying basis are explained below:
- Net gains on loans and advances to customers at FVPL of €2 million included in ‘Loan credit losses’ under
the underlying basis are included in ‘Net gains/(losses) on financial instruments’ under the statutory basis.
Their classification under the underlying basis is done to align their presentation with the loan credit losses
on loans and advances to customers at amortised cost.
- ‘Net gains on derecognition of financial assets measured at amortised cost’ of €6 million under the statutory
basis comprise the below items which are reclassified accordingly under the underlying basis as follows:
- €8 million net gains on derecognition of loans and advances to customers included in ‘Loan credit
losses’ under the underlying basis as to align their presentation with the loan credit losses arising from
loans and advances to customers.
- Net losses on derecognition of debt securities measured at amortised cost of approximately €2 million
included in ‘Net foreign exchange gains and net gains/(losses) on financial instruments’ under the
underlying basis in order to align their presentation with the net gains/(losses) on financial
instruments.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
11
Group financial results on the underlying basis (continued)
Reconciliation of the Consolidated Income Statement for the year ended 31 December 2023 between
the audited statutory basis and the underlying basis (continued)
- ‘Provisions for pending litigations, claims, regulatory and other matters (net of reversals)’ amounting to
€28 million presented within ‘Operating profit before credit losses and impairment' under the statutory
basis, are presented under the underlying basis in conjunction with loan credit losses and impairments.
- ‘Advisory and other transformation costs – organic’ of approximately €2 million included in 'Other
operating expenses' under the statutory basis are separately presented under the underlying basis since
they comprise, mainly, fees to external advisors in relation to the transformation programme and other
strategic projects of the Group.
- ‘Credit losses on financial assets' and 'Impairment net of reversals of non-financial assets’ under the
statutory basis include: i) credit losses to cover credit risk on loans and advances to customers of €73
million, which are included in ‘Loan credit losses’ under the underlying basis, and ii) credit losses of other
financial assets of €6.5 million and impairment net of reversals of non-financial assets of €47 million,
which are included in ‘Impairment of other financial and non-financial assets’ under the underlying basis,
as to be presented separately from loan credit losses.
Balance Sheet Analysis
Capital Base
Total equity excluding non-controlling interests totalled €2,467 million as at 31 December 2023 compared to
€2,027 million as at 31 December 2022. Shareholders’ equity totalled to €2,247 million as at 31 December 2023
compared to €1,807 million as at 31 December 2022.
The regulatory Common Equity Tier 1 capital (CET1) ratio on a transitional basis stood at 17.4% as at 31
December 2023, compared to 15.2% as at 31 December 2022, as restated. During the year ended 31 December
2023 organic capital generation amounted to 482 bps (of which 134 bps were recorded in the fourth quarter of
2023). Throughout this Directors’ Report, the capital ratios as at 31 December 2023 include profits for the year
ended 31 December 2023 net of a distribution deduction of approximately 135 bps in respect of 2023 earnings
distribution (refer to section ‘Distributions’ below). From the third quarter of 2023, the amount corresponding to
the Pillar II add-on requirement relating to ECB’s prudential provisioning expectations of 32 bps (as at 31
December 2023) is deducted from CET1 capital and has been eliminated from the Pillar II SREP capital
requirements from 1 January 2024. A prudential charge in relation to the onsite inspection on the value of the
Group’s foreclosed assets is being deducted from own funds since June 2021, the impact of which is 12 bps on
the Group’s CET1 ratio as at 31 December 2023. In addition, the Group is subject to increased capital
requirements in relation to its real estate repossessed portfolio which follows a SREP provision to ensure minimum
capital levels retained on long-term holdings of real estate assets, with such requirements being dynamic by
reference to the in-scope REMU assets remaining on the balance sheet of the Group and the value of such assets.
As at 31 December 2023 the impact of these increased capital requirements were 24 bps on the Group’s CET1
ratio. The above-mentioned requirements are within the capital plans of the Group and incorporated within its
capital projections.
The Group had elected to apply the EU transitional arrangements for regulatory capital purposes (EU Regulation
2017/2395) where the impact on the impairment amount from the initial application of IFRS 9 on the capital
ratios was phased-in gradually, with the impact being fully phased-in (100%) by 1 January 2023. The final
phasing-in of the impact of the impairment amount from the initial application of IFRS 9 was approximately 65
bps on the CET1 ratio on 1 January 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
12
Group financial results on the underlying basis (continued)
Balance Sheet Analysis(continued)
Capital Base (continued)
The regulatory Total Capital ratio on a transitional basis stood at 22.4% as at 31 December 2023, compared to
20.4% as at 31 December 2022, as restated.
The Group’s capital ratios are above the Supervisory Review and Evaluation Process (SREP) requirements.
The Group’s minimum phased-in CET1 capital ratio requirement as at 31 December 2023 was at 10.72%,
comprising a 4.50% Pillar I requirement, a 1.73% Pillar II requirement, the Capital Conservation Buffer of 2.50%,
the O-SII Buffer of 1.50% and the CcyB of approximately 0.48%. The Group’s minimum phased-in Total Capital
ratio requirement was set at 15.56%, comprising an 8.00% Pillar I requirement, of which up to 1.50% can be in
the form of AT1 capital and up to 2.00% in the form of T2 capital, a 3.08% Pillar II requirement, the Capital
Conservation Buffer of 2.50%, the O-SII Buffer of 1.50% and the CcyB of approximately 0.48%. Following the
annual SREP performed by the ECB in 2022, ECB has maintained the non-public guidance for an additional Pillar
II CET1 buffer (P2G) unchanged compared to 2021.
Following the annual SREP performed by the ECB in 2023, and based on the final SREP decision received in
November 2023, effective from 1 January 2024, the Group’s minimum phased-in CET1 capital ratio and Total
Capital ratio requirements decreased, when disregarding the phasing-in of the O-SII buffer and CcyB, reflecting
the elimination of the Pillar II add-on relating to ECB’s prudential provisioning expectations, following the Group’s
decision to directly deduct from own funds such amount. On 1 January 2024, the Group’s minimum phased-in
CET1 capital ratio is set at approximately 10.91%, comprising a 4.50% Pillar I requirement, a 1.55% Pillar II
requirement, the Capital Conservation Buffer of 2.50%, the O-SII Buffer of 1.875% and the CcyB of approximately
0.48%. Likewise, the Group’s minimum phased-in Total Capital ratio requirement is set at approximately 15.61%,
comprising an 8.00% Pillar I requirement, of which up to 1.50% can be in the form of AT1 capital and up to
2.00% in the form of T2 capital, a 2.75% Pillar II requirement, the Capital Conservation Buffer of 2.50%, the O-
SII Buffer of 1.875% and the CcyB of approximately 0.48%. The ECB has also provided revised lower non-public
guidance for an additional Pillar II CET1 buffer (P2G) compared to the previous year. From 2 June 2024, both
CET1 capital and Total Capital requirements are expected to increase by approximately 0.50% as a result of the
increase in the CcyB.
On 30 November 2022, the CBC, following the revised methodology described in its macroprudential policy,
decided to increase the CcyB from 0.00% to 0.50% of the total risk exposure amounts in Cyprus of each licensed
credit institution incorporated in Cyprus effective from 30 November 2023. Further, in June 2023, the CBC
announced an additional increase of 0.50% in the CcyB of the total risk exposure amounts in Cyprus of each
licensed credit institution incorporated in Cyprus to be observed from June 2024, increasing the CcyB to 1.00%.
The Bank has been designated as an Other Systemically Important Institution (O-SII) by the Central Bank of
Cyprus (CBC) in accordance with the provisions of the Macroprudential Oversight of Institutions Law of 2015 and
the relevant buffer stood at 1.50%. In October 2023, the CBC concluded its reassessment for the designation of
credit institutions that meet the definition of O-SII institutions and the setting of O-SII buffer to be observed.
The Group’s O-SII buffer has been revised to 2.25% (from 1.50%), phased in annually by 37.5 bps, to 1.875%
on 1 January 2024 and to 2.25% on 1 January 2025.
Own funds held for the purposes of P2G cannot be used to meet any other capital requirements (Pillar I, Pillar II
requirements or the combined buffer requirement), and therefore cannot be used twice.
The Group participated in the ECB Stress Test of 2023, the results of which were published by the ECB on 28 July
2023. For further information please refer to the ‘Risk and Capital Management Report’ of the Annual Financial
Report 2023.
Resumption of distributions
Following the 2022 SREP decision, the equity dividend distribution prohibition was lifted for both the Company
and the Bank, with any dividend distribution being subject to regulatory approval.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
13
Group financial results on the underlying basis (continued)
Balance Sheet Analysis(continued)
Resumption of distributions (continued)
In April 2023, the Company obtained the approval of the European Central Bank to pay a dividend. Following this
approval, the Board of Directors of the Company recommended to the shareholders a final dividend of €0.05 per
ordinary share in respect of earnings for the year ended 31 December 2022 (‘2022 Dividend’). The proposed final
dividend was declared at the Annual General Meeting (‘AGM’) which was held on 26 May 2023. The 2022 Dividend
amounted to €22.3 million in total and was equivalent to a payout ratio of 14% of the Group’s adjusted recurring
profitability for the year ended 31 December 2022 or 31% based on profit after tax for the year ended 31
December 2022 (as reported in the 2022 Annual Financial Report). The 2022 Dividend was paid in cash on 16
June 2023.
The 2022 Dividend had a capital impact of 22 bps on the Group’s CET1 ratio and Total Capital ratio as at 31
December 2022.
This was the first dividend payment after 12 years underpinning the Group’s position as a strong and well-
diversified organisation, capable of delivering sustainable shareholder returns.
Distribution policy
The Group aims to provide a sustainable return to shareholders. In line with the Group’s distribution policy,
distributions are expected to build prudently and progressively over time, towards a payout ratio in the range of
30-50% of the Group’s adjusted recurring profitability, including cash dividends and buybacks. Group adjusted
recurring profitability is defined as the Group’s profit after tax before non-recurring items (attributable to the
owners of the Company) taking into account distributions under other equity instruments such as the annual AT1
coupon. The distribution policy takes into consideration market conditions as well as the outcome of capital and
liquidity planning. The distribution level will reflect, amongst other things, the strength of the Group’s capital and
capital generation, the Board of Directors’ assessment of the capital required to implement the Group Strategy
and any capital the Group retains to cover uncertainties (e.g. related to the economic outlook) and any impact
from the evolving regulatory and accounting environments.
Distributions out of 2023 earnings
The Company, in March 2024, obtained regulatory approval from the European Central Bank for a Distribution in
respect of 2023 earnings of a total amount of €137 million, comprising a cash dividend of €112 million and a
share buyback of ordinary shares of the Company for an aggregate consideration of up to €25 million. Following
ECB approval, the Board of Directors of the Company recommended a final dividend to shareholders and approved
in principle to undertake a buyback of ordinary shares as described in section ‘Distributions’ of the Directors’
Report. The payout ratio for the financial year 2023 of 30% is in line with the Distribution Policy and represents
a material increase compared to the previous year (14% payout ratio for the financial year 2022, as reported).
Other equity instruments
At 31 December 2023, the Group’s other equity instruments relate to Additional Tier 1 Capital Securities (the
‘AT1 securities’) and amounted to €220 million, at the same levels as at 31 December 2022.
In June 2023, the Company successfully launched and priced an issue of €220 million Fixed Rate Reset Perpetual
Additional Tier 1 Capital Securities (the ‘New Capital Securities’). The New Capital Securities constitute unsecured
and subordinated obligations of the Company, are perpetual and are issued at par. They carry an initial coupon
of 11.875% per annum, payable semi-annually and resettable on 21 December 2028 and every 5 years
thereafter. The Company will have the option to redeem the New Capital Securities from, and including, 21 June
2028 to, and including, 21 December 2028 and on each interest payment date thereafter, subject to applicable
regulatory consents and the relevant conditions to redemption. Transaction costs of €3.5 million in relation to the
transaction were recorded directly in equity in June 2023.
At the same time, the Company invited the holders of its outstanding €220 million Fixed Rate Reset Perpetual
Additional Tier 1 Capital Securities callable in December 2023 to tender their Existing Capital Securities at a
purchase price of 103% of the principal amount, after which approximately €16 million Existing Capital Securities
remained outstanding. As a result, a cost of approximately €7 million was recorded directly in the Company’s
equity during the year ended 31 December 2023, forfeiting the relevant future coupon payments.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
14
Group financial results on the underlying basis (continued)
Balance Sheet Analysis(continued)
Capital Base (continued)
Other equity instruments (continued)
In July 2023, the Company purchased and cancelled a further approximately €7 million Existing Capital Securities
in the open market. In November 2023, the Board of Directors resolved to exercise the Company’s option to
redeem the remaining approximately €8 million in aggregate principal amount outstanding of the Existing Capital
Securities on 19 December 2023.
Legislative amendments for the conversion of DTA to DTC
Legislative amendments allowing for the conversion of specific deferred tax assets (DTA) into deferred tax credits
(DTC) became effective in March 2019. The legislative amendments cover the utilisation of income tax losses
transferred from Laiki Bank to the Bank in March 2013. The introduction of the Capital Requirements Regulation
(CRR) and Capital Requirements Directive (CRD) IV in January 2014 and its subsequent phasing-in led to a more
capital-intensive treatment of this DTA for the Bank. With this legislation, institutions are allowed to treat such
DTAs as ‘not relying on future profitability’, according to CRR/CRD IV and as a result not deducted from CET1,
hence improving a credit institution’s capital position. The Law provides that a guarantee fee on annual tax credit
is payable annually by the credit institution to the Government.
Following certain modifications to the Law in May 2022, the annual guarantee fee is to be determined by the
Cyprus Government on an annual basis, providing however that such fee to be charged is set at a minimum fee
of 1.5% of the annual instalment and can range up to a maximum amount of €10 million per year, and also
allowing for a higher amount to be charged in the year the amendments became effective (i.e. in 2022).
The Group estimates that such fees could range up to approximately €5 million per year (for each tax year in
scope i.e. since 2018) although the Group understands that such fee may fluctuate annually as to be determined
by the Ministry of Finance. An amount of approximately €5 million was recorded in the consolidated income
statement during the year ended 31 December 2023.
Regulations and Directives
The 2021 Banking Package (CRR III and CRD VI and BRRD)
In October 2021, the European Commission adopted legislative proposals for further amendments to the Capital
Requirements Regulation (CRR), CRD and the BRRD (the ‘2021 Banking Package’). Amongst other things, the
2021 Banking Package would implement certain elements of Basel III that have not yet been transposed into EU
law. In the case of the proposed amendments to CRD and the BRRD, their terms and effect will depend, in part,
on how they are transposed in each member state. The European Council’s proposal on CRR and CRD was
published on 8 November 2022. During February 2023, the European Parliament’s ECON Committee voted to
adopt Parliament’s proposed amendments to the Commission’s proposal. In June 2023, negotiators from the
Council presidency and the European Parliament reached a provisional agreement on amendments to the Capital
Requirements Regulation and the Capital Requirements Directive. In December 2023, the preparatory bodies of
the Council and European Parliament have endorsed the amendments to the Capital Requirements Regulation
and the Capital Requirements Directive. With the decisions taken by the Council and European Parliament
preparatory bodies, the legal texts have now been published on the Council and the Parliament websites. Although
still subject to legal revision and to the final vote in the Plenary, no changes in substance are expected until their
adoption by the European Parliament by the second quarter of 2024. It is expected that they will enter into force
on 1 January 2025; and certain measures are expected to be subject to transitional arrangements or to be phased
in over time.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
15
Group financial results on the underlying basis (continued)
Balance Sheet Analysis (continued)
Regulations and Directives (continued)
Bank Recovery and Resolution Directive (BRRD)
Minimum Requirement for Own Funds and Eligible Liabilities (MREL)
The Bank Recovery and Resolution Directive (BRRD) requires that from January 2016, EU member states shall
apply the BRRD’s provisions requiring EU credit institutions and certain investment firms to maintain a minimum
requirement for own funds and eligible liabilities (MREL), subject to the provisions of the Commission Delegated
Regulation (EU) 2016/1450. On 27 June 2019, as part of the reform package for strengthening the resilience and
resolvability of European banks, the BRRD ΙΙ came into effect and was required to be transposed into national
law. BRRD II was transposed and implemented in Cyprus law in early May 2021. In addition, certain provisions
on MREL have been introduced in CRR ΙΙ which also came into force on 27 June 2019 as part of the reform
package and were immediately effective.
In January 2024, the Bank received final notification from the SRB regarding the 2024 MREL decision, by which
the final MREL requirement is now set at 25.00% of risk weighted assets and must be met by 31 December 2024,
one year earlier than the previous decision, in light of the Group’s progress over the years of becoming a strong,
well-capitalised with sustainable profitability organisation.
Furthermore, the binding interim requirement of 1 January 2022 set at 14.94% of risk weighted assets and 5.91%
of LRE must continue to be met. The own funds used by the Bank to meet the Combined Buffer Requirement
(CBR) are not eligible to meet its MREL requirement expressed in terms of risk-weighted assets. The Bank must
comply with the MREL requirement at the consolidated level, comprising the Bank and its subsidiaries.
The regulatory MREL ratio as at 31 December 2023, calculated according to the SRB’s eligibility criteria currently
in effect and based on internal estimate, stood at 25.5% of risk weighted assets (RWA) and at 11.7% of LRE.
The MREL ratio expressed as a percentage of risk weighted assets does not include capital used to meet the CBR
requirement, which stood at 4.48% on 31 December 2023 (compared to 3.77% as at 31 December 2022),
reflecting the increase on 30 November 2023 of CcyB from 0.00% to 0.50% of the total risk exposure amounts
in Cyprus. CCyB is expected to further increase from June 2024 as announced by CBC. Additionally, the CBR
requirement is increased further on 1 January 2024 following an increase in O-SII buffer from 1.50% to 1.875%
and subsequently to 2.25% from 1 January 2025, as announced by CBC.
Throughout this Directors’ Report, the MREL ratios as at 31 December 2023 include profits for the year ended 31
December 2023 net of a distribution deduction of approximately 135 bps in respect of 2023 earnings distribution.
The Bank continues to evaluate opportunities to optimise the build-up of its MREL.
Funding and Liquidity
Funding
Funding from Central Banks
At 31 December 2023, the Bank’s funding from central banks amounted to €2,044 million, which relates to ECB
funding, comprising solely of funding through the Targeted Longer-Term Refinancing Operations (TLTRO) III,
compared to €1,977 million at 31 December 2022.
The maturity date of the Bank’s funding of €1.7 billion under the seventh TLTRO III operation is in March 2024,
whilst the €300 million under the eighth TLTRO III operation is in June 2024.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
16
Group financial results on the underlying basis (continued)
Balance Sheet Analysis (continued)
Funding and Liquidity (continued)
Funding (continued)
Deposits
Customer deposits totalled €19,337 million at 31 December 2023, compared to €18,998 million at 31 December
2022. Customer deposits are mainly retail-funded and approximately 58% of deposits are protected under the
deposit guarantee scheme as at 31 December 2023.
The Bank’s deposit market share in Cyprus reached 37.7% at 31 December 2023, compared to 37.2% at 31
December 2022. Customer deposits accounted for 73% of total assets and 80% of total liabilities at 31 December
2023, compared to 75% of total assets and 82% of total liabilities at 31 December 2022.
The net loans to deposits (L/D) ratio stood at 51% as at 31 December 2023, compared to 52% as at 31 December
2022 on the same basis.
Subordinated liabilities
At 31 December 2023, the carrying amount of the Group’s subordinated liabilities amounted to €307 million,
compared to €302 million at 31 December 2022, and relate to unsecured subordinated Tier 2 Capital Notes (‘T2
Notes’).
The T2 Notes were priced at par with a fixed coupon of 6.625% per annum, payable annually in arrear and
resettable on 23 October 2026. The maturity date of the T2 Notes is 23 October 2031. The Company will have
the option to redeem the T2 Notes early on any day during the six-month period from 23 April 2026 to 23 October
2026, subject to applicable regulatory approvals.
Debt securities in issue
At 31 December 2023, the carrying value of the Group’s debt securities in issue amounted to €672 million,
compared to €298 million at 31 December 2022, and relate to senior preferred notes. The increase of 126% since
the beginning of the year, relates to the issuance of €350 million senior preferred notes in the third quarter of
2023.
In July 2023, the Bank successfully launched and priced an issuance of €350 million of senior preferred notes
(the ‘Notes’). The Notes were priced at par with a fixed coupon of 7.375% per annum, payable annually in arrear,
until the Optional Redemption Date, i.e. 25 July 2027. The maturity date of the Notes is 25 July 2028; however,
the Bank may, at its discretion, redeem the Notes on the Optional Redemption Date subject to meeting certain
conditions (including applicable regulatory consents) as specified in the Terms and Conditions. If the Notes are
not redeemed by the Bank, the coupon payable from the Optional Redemption Date until the Maturity Date will
convert from a fixed rate to a floating rate and will be equal to 3-month Euribor + 409.5 bps, payable quarterly
in arrear. The Notes comply with the criteria for the Minimum Requirement for Own Funds and Eligible Liabilities
(‘MREL’) and contribute towards the Bank’s MREL requirement.
In June 2021, the Bank executed its inaugural MREL transaction issuing €300 million of senior preferred notes
(the ‘SP Notes’). The SP Notes were priced at par with a fixed coupon of 2.50% per annum, payable annually in
arrear and resettable on 24 June 2026. The maturity date of the SP Notes is 24 June 2027 and the Bank may, at
its discretion, redeem the SP Notes on 24 June 2026, subject to meeting certain conditions as specified in the
Terms and Conditions, including applicable regulatory consents. The SP Notes comply with the criteria for MREL
and contribute towards the Bank’s MREL requirement.
Liquidity
At 31 December 2023, the Group Liquidity Coverage Ratio (LCR) stood at 359%, compared to 291% at 31
December 2022, well above the minimum regulatory requirement of 100%. The LCR surplus as at 31 December
2023 amounted to €9.1 billion, compared to €7.2 billion at 31 December 2022. When disregarding the TLTRO III,
the Group’s liquidity position remains strong with an LCR of 302% and liquidity surplus of €7.1 billion.
At 31 December 2023, the Group Net Stable Funding Ratio (NSFR) stood at 158%, compared to 168% at 31
December 2022, well above the minimum regulatory requirement of 100%.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
17
Group financial results on the underlying basis (continued)
Balance Sheet Analysis (continued)
Loans
Group gross loans totalled €10,070 million at 31 December 2023, compared to €10,217 million at 31 December
2022, broadly flat compared to the beginning of the year, as repayments offset new lending.
New lending granted in Cyprus reached €2,025 million in the year ended 31 December 2023, compared to €2,092
million in the year ended 31 December 2022, despite the rising interest rate environment, driven mainly by
corporate demand.
At 31 December 2023, the Group net loans and advances to customers totalled €9,822 million, compared to
€9,953 million at 31 December 2022, broadly flat since the beginning of the year.
The Bank is the largest credit provider in Cyprus with a market share of 42.2% at 31 December 2023, compared
to 40.9% at 31 December 2022.
In December 2023, the Bank entered into an agreement with Cyprus Asset Management Company (‘KEDIPES’)
to acquire a portfolio of performing and restructured loans with gross book value of approximately €58 million
with reference date 31 December 2022 (the ‘Transaction’). The Transaction is broadly neutral to the Group’s
income statement and capital position. The Transaction was completed in March 2024.
Loan portfolio quality
The Group has continued to make steady progress across all asset quality metrics. Today, the Group’s priorities
focus mainly on maintaining high quality new lending with strict underwriting standards and preventing asset
quality deterioration following the ongoing macroeconomic uncertainty.
The loan credit losses amounted to €63 million for the year ended 31 December 2023, compared to €47 million
for the year ended 31 December 2022. Further details regarding loan credit losses are provided in section ‘Profit
before tax and non-recurring items’.
Non-performing exposures
Following a deep dive assessment of the Group’s loan portfolio in the second half of 2023, a total amount of €90
million was classified as unlikely to pay exposures (‘UTPs’). The vast majority of the UTPs of approximately €76
million are customer specific with idiosyncratic characteristics and are not linked with the current macroeconomic
environment, they adhere to their payment schedule and present no arrears. Despite the high interest rates and
inflation, there are no material signs of asset quality deterioration to date. While defaults have been limited, the
additional monitoring and provisioning for sectors and individuals vulnerable to the macroeconomic environment
remain in place to ensure that potential difficulties in the repayment ability are identified at an early stage, and
appropriate solutions are provided to viable customers.
Non-performing exposures (NPEs) were decreased to €365 million at 31 December 2023, compared to €411
million at 31 December 2022. As a result, the NPEs account for 3.6% of gross loans as at 31 December 2023,
compared to 4.0% at 31 December 2022.
The NPE coverage ratio stands at 73% at 31 December 2023, compared to 69% at 31 December 2022. When
taking into account tangible collateral at fair value, NPEs are fully covered.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
18
Group financial results on the underlying basis (continued)
Balance Sheet Analysis (continued)
Loan portfolio quality (continued)
Mortgage-To-Rent Scheme (‘MTR’)
In July 2023, the Mortgage-to-Rent Scheme (‘MTR’) was approved by the Council of Ministers and aims for both,
the reduction of NPEs backed by primary residence and the protection of the primary residence of vulnerable
borrowers. The eligible criteria include:
- Borrowers that were non-performing as at 31 December 2021, remained non-performing as at 31
December 2022 and who also received government allowances during the period January 2021 to
December 2022, with facilities backed by primary residence with Open Market Value of up to €250
thousand;
- Borrowers that had a fully completed application to Estia Scheme and were assessed as eligible but not
viable with a primary residence with Open Market Value of up to €350 thousand; and
- all applicants that were approved under Estia Scheme but their inclusion was terminated.
Under the MTR, eligible property owners will voluntarily surrender ownership of their residence to Cyprus Asset
Management Company (‘KEDIPES’) which has been approved by the Government to provide and manage social
housing and will be exempted from their mortgage loan, as the state will be covering fully the required rent on
their behalf. KEDIPES will carry out a new valuation and a technical due diligence for the eligible applicants’
property and if satisfied will approve the application and pay to the banks an amount equal to 65% of the Open
Market Value of the primary residence in exchange for the mortgage release, the write off of the NPE loan and
the transfer of the property title deeds.
The eligible applicants will be able to acquire the primary residence after five years at a favourable price, below
the Open Market Value.
The scheme has been launched in December 2023; it is expected to act as another tool to address NPEs in the
Retail sector.
Fixed income portfolio
Fixed income portfolio amounts to €3,548 million as at 31 December 2023, compared to €2,500 million as at 31
December 2022, increased by 42% compared to the prior year. As at 31 December 2023, the portfolio represents
14% of total assets (net of TLTRO III) and comprises €3,117 million (88%) measured at amortised cost and €431
million (12%) at fair value through other comprehensive income (‘FVOCI’).
The fixed income portfolio measured at amortised cost is held to maturity and therefore no fair value gains/losses
are recognised in the Group’s income statement or equity. This fixed income portfolio has high average rating at
Aa3. The amortised cost fixed income portfolio as at 31 December 2023 has an unrealised gain of €3 million,
reflecting an improvement in the market value of this portfolio, following the reduction in bond yields.
Real Estate Management Unit (REMU)
The Real Estate Management Unit (REMU) is focused on the disposal of on-boarded properties resulting from
debt for asset swaps. Cumulative sales of repossessed assets since the beginning of 2019 amount to €0.9 billion
and exceed properties on-boarded in the same period of €0.5 billion.
During the year ended 31 December 2023, the Group completed disposals of €194 million (compared to €162
million during the year ended 31 December 2022), resulting in a profit on disposal of approximately €11 million
for the year ended 31 December 2023 (compared to a profit of approximately €16 million for the year ended 31
December 2022). Asset disposals are across all property classes, with 47% gross sale value in the year ended 31
December 2023 relating to land.
During the year ended 31 December 2023, the Group executed sale-purchase agreements (SPAs) for disposals
of 569 properties with contract value of €213 million, compared to SPAs for disposals of 674 properties with
contract value of €184 million during the year ended 31 December 2022.
In addition, the Group had a strong pipeline of €40 million by contract value as at 31 December 2023, of which
€29 million related to SPAs signed (compared to a pipeline of €70 million as at 31 December 2022, of which €47
million related to SPAs signed).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
19
Group financial results on the underlying basis (continued)
Balance Sheet Analysis (continued)
Real Estate Management Unit (REMU) (continued)
REMU on-boarded €21 million of assets in the year ended 31 December 2023, compared to additions of €86
million during the year ended 31 December 2022, via the execution of debt for asset swaps and repossessed
properties.
As at 31 December 2023, assets held by REMU had a carrying value of €878 million, (comprising properties of
€826 million classified as ‘Stock of property’ and €52 million as ‘Investment properties’), of which €862 million
are repossessed properties, compared to €1,116 million as at 31 December 2022 (comprising properties of €1,041
million classified as ‘Stock of property’ and €75 million as ‘Investment properties’).
In addition to assets held by REMU, properties classified as ‘Investment properties’ with carrying value of €10
million as at 31 December 2023, compared to €10 million as at 31 December 2022, are not managed by REMU.
Income Statement Analysis
Total income
Net interest income (NII) for the year ended 31 December 2023 amounted to €792 million, compared to €370
million for the year ended 31 December 2022, up by 114%, benefitting from higher interest rates on liquid assets
and loans, the growth of fixed income portfolio and a well-managed deposit pass-through, notwithstanding the
foregone NII on the NPE sale (the Helix 3 portfolio) (approximately €13 million in the year ended 31 December
2022) and the end of the TLTRO III favourable terms (approximately €15 million in the year ended 31 December
2022).
Quarterly average interest earning assets (AIEA) for the year ended 31 December 2023 amounted to €23,211
million, compared to €22,483 million in the year ended 31 December 2022. The increase was driven by the
increase in liquid assets mainly as a result of the increase in deposits by approximately €0.34 billion since the
prior year and the issuance of senior preferred notes of €0.35 billion.
Net interest margin (NIM) for the year ended 31 December 2023 amounted to 3.41%, compared to 1.65% for
the year ended 31 December 2022. The increase was driven by the higher interest rate environment.
Non-interest income for the year ended 31 December 2023 amounted to €300 million (compared to €292 million
for the year ended 31 December 2022) comprising net fee and commission income of €181 million, net foreign
exchange gains and net gains/(losses) on financial instruments of €37 million, net insurance result of €54 million,
net gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of properties
of €10 million and other income of €18 million. The increase in non-interest income in the year ended 31
December 2023 was driven by higher net foreign exchange gains and net gains/(losses) on financial instruments
and net insurance result, and was partly offset by lower net fee and commission income.
Net fee and commission income for the year ended 31 December 2023 amounted to €181 million, compared to
€192 million for the year ended 31 December 2022; when disregarding the impact of the liquidity fees abolished
in December 2022 and NPE sale-related servicing fee, net fee and commission income was up 6% compared to
the prior year, reflecting higher net credit card commissions and transactional fees.
Net foreign exchange gains and net gains/(losses) on financial instruments of €37 million for the year ended 31
December 2023 (comprising net foreign exchange gains of approximately €28.5 million and net gains on financial
instruments of approximately €8.5 million), compared to €26 million for the year ended 31 December 2022 up
by 46%, due to higher net gains on financial instruments. Net foreign exchange gains and net gains/(losses) on
financial instruments are considered volatile profit contributors.
Net insurance result amounted to €54 million for the year ended 31 December 2023, compared to €44 million for
the year ended 31 December 2022. The increase was driven mainly by improved experience variance due to
better claims experience and the reduction in the loss component from the insurance contracts (recognised
upfront in line with IFRS 17) in life insurance business.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
20
Group financial results on the underlying basis (continued)
Income Statement Analysis (continued)
Total income (continued)
Net gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of properties
for the year ended 31 December 2023 amounted to €10 million (comprising net gains on disposal of stock of
properties of €9 million, net gains on disposal of investment properties of €2 million and net loss from revaluation
of investment properties of €1 million), compared to €13 million for the year ended 31 December 2022
(comprising net gains on disposal of stock of properties of €16 million and net loss from revaluation of investment
properties of €3 million). REMU profit remains volatile.
Total income amounted to €1,092 million for the year ended 31 December 2023, compared to €662 million for
the year ended 31 December 2022, driven by strong growth in net interest income, as explained above.
Total expenses
Total expenses for the year ended 31 December 2023 were €384 million, compared to €363 million for the year
ended 31 December 2022. Of these, 50% related to staff costs (€192 million), 39% to other operating expenses
(€149 million) and 11% to special levy on deposits and other levies/contributions (€43 million).
Total operating expenses amounted to €341 million for the year ended 31 December 2023 (compared to €325
million for the year ended 31 December 2022) with savings from the efficiency actions undertaken in 2022, partly
offsetting inflationary pressures. Total operating expenses for the year ended 31 December 2023 included
approximately €11 million performance related pay accrual (for both, the Long-Term Incentive Plan (‘LTIP’) and
Short-term Incentive Plan (‘STIP’)), approximately €7.5 million in relation to staff exit costs and €2.5 million cost
on the introduction of a Reward Programme for performing borrowers. When disregarding the aforementioned,
total operating expenses for the year ended 31 December 2023 amounted to approximately €320 million, down
by 1% compared to the prior year.
Staff costs for the year ended 31 December 2023 were €192 million, compared to €181 million for the year ended
31 December 2022. The increase was driven by the staff exit costs of approximately €7.5 million and the
performance related pay accrual of approximately €11 million, partly offset by the savings of the Voluntary Staff
Exit Plan (VEP) that took place in 2022. During the year ended 31 December 2023, 50 full-time employees were
approved to leave the Group at a total cost of approximately €7.5 million.
The performance related pay accrual relates to the Short-Term Incentive Plan and the Long-Term Incentive Plan.
The Short-Term Incentive Plan involves variable remuneration to selected employees and is driven by both
delivery of the Group’s strategy as well as individual performance.
At the Annual General Meeting which took place in May 2022, a special resolution was approved for the
establishment and implementation of the share based Long-Term Incentive Plan (‘LTIP’). In December 2022 the
Group granted 819,860 share awards to 22 eligible employees under the LTIP, comprising the Extended Executive
Committee of the Group. The awards granted in December 2022 are subject to a three-year performance period
for 2022-2024 (with all performance conditions being non-market performance conditions). In October 2023,
479,160 share awards were granted to 21 eligible employees, comprising the Extended Executive Committee of
the Group. The awards granted in October 2023 are subject to a three-year performance period for 2023-2025
(with all performance conditions being non-market performance conditions). These shares will then normally vest
in six tranches, with the first tranche vesting after the end of the performance period and the last tranche vesting
on the fifth anniversary of the first vesting date.
As at 31 December 2023, the Group employed 2,830 persons compared to 2,889 persons as at 31 December
2022.
Other operating expenses for the year ended 31 December 2023 amounted to €149 million, compared to €144
million for the year ended 31 December 2022, driven mainly by inflationary pressures and higher expenses due
to the Reward Programme launched to reward performing borrowers under Antamivi Reward Scheme.
Special levy on deposits and other levies/contributions for the year ended 31 December 2023 amounted to €43
million compared to €38 million for the year ended 31 December 2022. The increase was driven by the increase
of deposits by €0.34 billion year-on-year.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
21
Group financial results on the underlying basis (continued)
Income Statement Analysis (continued)
Total expenses (continued)
The cost to income ratio excluding special levy on deposits and other levies/contributions for the year ended 31
December 2023 was 31% compared to 49% for the year ended 31 December 2022, a decrease of 18 p.p. The
decrease is driven by the higher total income and disciplined cost management.
Profit before tax and non-recurring items
Operating profit for the year ended 31 December 2023 amounted to €708 million, compared to €299 million for
the year ended 31 December 2022. The year-on-year increase is driven by the significant increase in net interest
income.
Loan credit losses for the year ended 31 December 2023 were €63 million, compared to €47 million for the year
ended 31 December 2022 and include €19 million higher loan credit losses on specific customers with idiosyncratic
characteristics assessed as ‘Unlikely to pay’ (‘UTPs’) exposures, even though they adhere to their repayment
schedule and present no arrears.
Cost of risk for the year ended 31 December 2023 is equivalent to 62 bps, compared to a cost of risk of 44 bps
for the year ended 31 December 2022.
At 31 December 2023, the allowance for expected loan credit losses, including residual fair value adjustment on
initial recognition and credit losses on off-balance sheet exposures totalled €267 million (compared to €282 million
at 31 December 2022) and accounted for 2.7% of gross loans (compared to 2.8% for 31 December 2022).
Impairments of other financial and non-financial assets for the year ended 31 December 2023 amounted to €53
million, compared to €33 million for the year ended 31 December 2022, up €20 million year-on-year, driven
mainly by higher impairments on specific, large, illiquid REMU stock properties.
Provisions for pending litigations, claims, regulatory and other matters (net of reversals) for the year ended 31
December 2023 amounted to €28 million, compared to €11 million for the year ended 31 December 2022. The
year-on-year increase is driven mainly by provisions in relation to certain legacy matters, as well as in relation
to the run-down of legacy and non-core operations of the Group.
Profit before tax and non-recurring items for the year ended 31 December 2023 totalled €564 million, compared
to €208 million for the year ended 31 December 2022.
Profit after tax (attributable to the owners of the Company)
The tax charge amounted to €73 million for the year ended 31 December 2023, compared to €31 million for the
year ended 31 December 2022. In 2023, the tax charge also includes a credit in relation to the recognition of
deferred tax assets relating to temporary differences of approximately €10 million.
On 22 December 2022, the European Commission approved Directive 2022/2523 which provides for a minimum
effective tax rate of 15% for the global activities of large multinational groups (Pillar Two tax). The Directive that
follows closely the OECD Inclusive Framework on Base Erosion and Profit Shifting should be transposed by the
Member States throughout 2023, entering into force on 1 January 2024. In Cyprus, the legislation has not been
substantively enacted at the balance sheet date however it is expected to be enacted within 2024. The Group
expects to be in scope of the draft legislation and has performed an initial assessment of the potential impact of
Pillar Two tax which is currently estimated to be in the range of up to 2% of profit before tax. However, the actual
impact will depend on the Group’s consolidated income statement variables at the time of implementation.
Because of the calculation complexity resulting from these rules and as the final legislation has yet to be
implemented, the effects of this reform are still being examined and the Group will further refine the quantification
in view of the first accounting recognition of the additional tax charge in the Group’s consolidated accounts in
2024.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
22
Group financial results on the underlying basis (continued)
Income Statement Analysis (continued)
Profit after tax (attributable to the owners of the Company) (continued)
Profit after tax and before non-recurring items (attributable to the owners of the Company) for the year ended
31 December 2023 is €489 million, compared to €174 million for the year ended 31 December 2022.
Advisory and other transformation costs – organic for the year ended 31 December 2023 are €2 million, compared
to €11 million for the year ended 31 December 2022.
Profit after tax arising from the organic operations (attributable to the owners of the Company) for the year ended
31 December 2023 amounted to €487 million, compared to €163 million for the year ended 31 December 2022.
Following the completion of Helix 3 project, there are no amounts recognised for provisions/net profit/(loss)
relating to NPE sales in the year ended 31 December 2023.
Restructuring and other costs relating to NPE sales for the year ended 31 December 2023 was nil compared to
€3 million for the year ended 31 December 2022 (relating to the agreements for the sale of portfolios of NPEs).
Restructuring costs relating to the Voluntary Staff Exit Plan (VEP) of €104 million in the year ended 31 December
2022 mainly related to the Voluntary Staff Exit Plan (VEP) that took place in the third quarter of 2022. In July
2022 the Group completed a VEP which led to the reduction of the Group’s full-time employees by 16%, at a total
cost of €101 million. The gross annual savings were estimated at approximately €37 million or 19% of staff costs
with a payback period of 2.7 years.
Profit after tax attributable to the owners of the Company for the year ended 31 December 2023 amounts to
€487 million, corresponding to a ROTE of 24.8%, compared to €57 million for the year ended 31 December 2022
(with a ROTE of 3.2%). ROTE excluding amounts reserved for the distribution for the year ended 31 December
2023 increases to 25.3%, compared to a ROTE of 3.3% for the year ended 31 December 2022, calculated on the
same basis. The adjusted recurring profitability (i.e. defined as the Group’s profit after tax before non-recurring
items (attributable to the owners of the Company) taking into account distributions under other equity
instruments such as the annual AT1 coupon) amounted to €455 million for the year ended 31 December 2023
compared to €147 million for the year ended 31 December 2022.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
23
Operating Environment
War and geopolitics can be very disruptive to the economy and society. Meantime wars continue to rage in Ukraine
and in the Middle East, adding to uncertainty and instability. The attacks on merchant shipping in the Red Sea
from the Houthis in Yemen, is a reflection of the uncertainty. The attacks are forcing many carriers to change
route adding days and costs to shipping which eventually will add to inflationary pressures, with implications for
monetary policy.
The European Commission’s Winter Forecast estimates GDP growth in 2023 at 0.5% in both the EU and the euro
area. Going forward, growth is expected to rebound mildly in the euro area to 0.8% in 2024 and to 1.5% in 2025.
HICP inflation is forecast to decrease from 5.4% in 2023, to 2.7% in 2024, and 2.2% in 2025, other things being
equal. Uncertainty and downside risks to the economic outlook have increased in recent months, primarily related
to the evolution of the geopolitical environment.
Real GDP growth in Cyprus averaged 2.5% in the four quarters and was respectively 3.1%, 2.1%, 2.2% and
2.4% in the first, second, third and fourth quarter. Trade, transport and accommodation contributed more than
half of the recorded growth in the period. Accommodation, which is tourism driven, continues to reflect the
recovery from the Covid collapse, and so the respective contribution to the overall growth of the economy is
higher than normal. Other important contributions came from the sectors of information and communications,
industry and public administration, education and health. Financial services and professional services made small
negative contributions.
Private consumption expanded strongly supported by high employment and rising wages. The automatic partial
indexation of wages (COLA) has somewhat cushioned the negative impact of elevated prices on consumption.
Investment, particularly in residential construction, has been supported by the interest-subsidisation scheme for
mortgages and an influx of foreign companies.
In the labour market employment growth slowed in the first three quarters of 2023, averaging 0.8% compared
with 3.2% and 2.8% respectively in 2021 and 2022. The unemployment rate continued to decline from 6.8%
average in 2022, to 6.0% in the third quarter of 2023, seasonally adjusted.
Inflation measured by the Harmonised Index of Consumer Prices, decreased to an average of 3.9% in Cyprus
and 5.4% in the Euro area in 2023, from 8.1% on average in 2022 in Cyprus and 8.4% in the Euro Area. Core
inflation (defined as total headline inflation excluding energy and food) for 2023 was 2.8% in Cyprus and 4.9%
in the Euro area. The decline in the headline inflation was driven by the non-core components of energy and food,
while core inflation was stickier. Harmonised inflation is expected to continue to decelerate in the medium term
falling to around 2.4% and 2.1% respectively in 2024 and 2025 according to the European Commission’s Winter
forecasts assuming falling energy prices and support measures adopted by the government.
Tourist activity continued to improve in 2023 after a strong performance in 2022. Arrivals increased by 20.1%
from a year earlier, reaching 3.8 million persons, which corresponds to 97% of arrivals in 2019 before the
pandemic. Likewise, receipts for the year ended 31 December 2023 increased by 22.6% reaching almost €3
billion for the year, higher than total receipts in the respective period in 2019.
In public finances, there have been significant improvements in budget and debt dynamics including debt
affordability indicators. The recovery in 2021 was underpinned by a significant increase in general government
revenue and a relative decrease in government expenditure. The result was a reduction in the budget deficit to
1.9% of GDP, from a deficit of 5.7% of GDP in 2020. In 2022 the budget surplus rose to 2.4% of GDP and gross
debt dropped to 85.6% of GDP from 99.3% of GDP in 2021. The budget surplus in 2023 is estimated at 2.4% of
GDP according to the Cyprus Ministry of Finance with gross debt falling to 78.4% of GDP. The budget balance is
forecast to remain in surplus at 2.1% of GDP in 2024 and 2.5% in 2025. Gross debt is set to decline strongly in
relation to GDP, to 71.5% and 66.3% respectively, on the back of nominal GDP growth and substantial budget
surpluses. Debt affordability metrics are favourable and are expected to remain solid in 2023-2024, as gross
financing needs are moderate, and the cash buffer gives the government a high degree of financing flexibility.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
24
Operating Environment (continued)
The ECB left its interest rates unchanged at the latest Governing Council meeting on 7 March 2024. The minimum
refinancing operations rate remained at 4.5%, compared with zero at the start of the tightening cycle in July
2021, while the ECB deposit facility rate is at 4.0%, compared with -50 bps in July 2021. The ECB’s policy remains
focussed on ensuring that inflation returns to the 2% medium-term target in a timely manner, and so interest
rates will remain at sufficiently restrictive levels for as long as necessary.
Non-performing exposures (NPE) continued their declining trend mostly due to sales packages by the two largest
banks. Non-performing loans were 8.3% of gross loans at the end of November 2023, according to data from the
Central Bank of Cyprus compared to 9.5% at the end of December 2022. The NPE ratio in the non-financial
corporations segment was 7.1% and that of households was 10.5%. Private indebtedness continues to decline
with total loans to residents excluding the government dropping to about 68% of GDP at the end of December
2023. New lending in 2023 remained in line with new lending volumes in 2022, showing signs of slowing in the
last quarter of the year, particularly in relation to housing loans, reflecting the tighter monetary conditions
prevailing.
Sovereign ratings
The sovereign risk ratings of the Cypriot government have improved significantly in recent years, reflecting
reduced banking sector risks, improved economic resilience and consistent fiscal outperformance. Cyprus has
demonstrated policy commitment to correcting fiscal imbalances through reform and restructuring of its banking
system. Public debt remains high as a share of GDP, but large-scale asset purchases by the ECB ensure favourable
funding costs for Cyprus and ample liquidity in the government bond market.
In December 2023, Fitch Ratings affirmed Cyprus' long-term foreign currency issuer default rating at 'BBB' and
revised its outlook from stable to positive. This follows an affirmation of Cyprus' long-term foreign currency issuer
default rating with a stable outlook in June 2023, and the upgrade in March 2023. The upgrade and affirmation
reflect the improvement in public finances and government debt, as well as strong GDP growth, the resilience of
the Cypriot economy to external shocks, and the improvement in the banking sector's asset quality.
In September 2023, Moody's Investors Service upgraded the long-term issuer and senior unsecured ratings of
the Government of Cyprus to Baa2 from Ba1. The outlook was revised to stable from positive. This is a two-notch
upgrade of Cyprus' ratings, reflecting broad-based and sustained improvements in the country's credit profile as
a result of past and ongoing economic, fiscal and banking reforms. Economic resilience has improved and
medium-term growth prospects remain strong. Fiscal strength has also improved significantly, with a positive
debt trend and sound debt affordability metrics. The stable outlook balances the positive credit trends with
remaining challenges.
In addition, S&P Global Ratings revised its outlook on Cyprus to positive from stable in September 2023 and
affirmed Cyprus' long-term local and foreign currency sovereign ratings at BBB. The positive outlook reflects the
ongoing macroeconomic normalisation since the country's financial crisis in 2012-2013, with the government on
track to achieve steady fiscal surpluses and a declining debt-to-GDP ratio in the coming years. The positive
outlook also reflects the significant progress made in the banking sector.
Also in September 2023, DBRS Ratings GmbH (DBRS Morningstar) upgraded the long-term foreign and local
currency issuer ratings of the Republic of Cyprus from BBB to BBB (high). The rating action is stable. The upgrade
is driven by the recent decline in government debt and the expectation that public debt metrics will continue to
improve over the next few years, while economic growth is expected to remain among the strongest in the euro
area. The stable outlook balances the recent favourable fiscal dynamics with downside risks to the economic
outlook.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
25
Strategy and Outlook
The vision of the Group is to create a lifelong partnership with its customers, guiding and supporting them in an
evolving world.
The strategic pillars of the Group remain intact:
- Grow revenues in a more capital efficient way; by enhancing revenue generation via growth in high quality
new lending, diversification to less capital intensive banking and other financial services (such as
insurance and the digital economy) as well as prudent management of the Group’s liquidity
- Achieve a lean operating model; by ongoing focus on efficiency through further automations facilitated
by digitisation
- Maintain robust asset quality; by maintaining high quality new lending via strict underwriting criteria,
normalising cost of risk and reducing other impairments
- Enhance organisational resilience and ESG (Environmental, Social and Governance) agenda; by leading
the transition of Cyprus to a sustainable future and building a forward-looking organisation embracing
ESG in all aspects.
In 2023, there was a fast and steep increase in interest rates and in conjunction with the Group’s highly liquid
balance sheet, resulted in a significant increase in the net interest income of the Group. During 2023 the Group’s
net interest income has more than doubled compared to the previous year, facilitating strong profitability. Overall,
the Group delivered a ROTE of 24.8% (or ROTE excluding distributions of 25.3%) for the year ended 31 December
2023, exceeding significantly its 2023 targets that were set in June 2023 during the Investor Update Event.
In line with the average market forward rates for January 2024, the ECB deposit facility rate is expected to
average to 3.4% in 2024 (compared to 3.3% in 2023), with recent market expectation indicating great volatility
in the path of rate cuts. Nevertheless, the ECB deposit facility rate is expected to normalise by 2025, and expected
to reduce to 2.7% by the fourth quarter of 2024 and to 2.0% by the fourth quarter of 2025. Euribor rates have
already started to move in expectation of these moves, with 6-month Euribor expected to average to 3.2% in
2024 (compared to 3.7% in 2023) using average January forecasts. As a result, the Group’s net interest income
is expected to exceed €670 million (compared to over €625 million previously guided in June 2023) with a
quarterly declining trend. The main drivers for this guidance are:
- Time and notice deposit pass-through to increase to an average of 40% in 2024 from 18% in 4Q2023.
The interest rate cuts are expected to pass gradually to new deposits whilst slow repricing of the back
book is expected in 2025;
- Gradual change in deposit mix towards time and notice deposits from 32% as at 31 December 2023 to
approximately 45% by 31 December 2024;
- Low single-digit loan growth whilst loans are expected to reprice to lower Euribor rates (in anticipation of
the ECB deposit facility rate cuts);
- Fixed income portfolio is expected to continue to grow, subject to market conditions, so that it represents
approximately 16% of total assets by end-2024, benefitting also from rollover to higher rates; and
- Higher wholesale funding costs, reflecting the full year impact of the 2023 senior preferred issuance and
any further planned issuance in order to meet the 2024 MREL requirement.
Additionally, as the Group’s majority of interest earning assets are floating, the Group is undertaking solutions in
order to reduce its net interest income sensitivity, converting some of its assets from floating rate to fixed. During
2023 these actions included: investing in fixed rate bonds, initiating the use of reverse repos, offering fixed rate
loans and engaging into receiving fixed interest rate swaps on the subordinated debt and debt securities.
Simultaneously, about one fifth of the Group’s loan portfolio is linked with the Bank’s base rate which provides a
natural hedge against the cost of deposits. Overall, these structural hedging actions have led to a reduction in
the net interest income sensitivity (to a parallel shift in interest rates by 100 bps) by €16 million in 2023 compared
to prior year. These actions are expected to continue in 2024 so that the structural hedging increases by around
€4 to €5 billion by end of 2024, subject to market conditions, via partial hedging of non-rate sensitive deposits
through receipt of fixed interest rate swaps, further investment in fixed rate bonds, additional reverse repos and
continuing offering of fixed rate loans. In this respect, it is expected that NII sensitivity by end-2024 will decrease
further by approximately €30-40 million.
Separately, the Group continues to focus on improving revenues through multiple less capital-intensive initiatives,
with a focus on net fee and commission income, insurance and non-banking activities, enhancing the Group’s
diversified business model further. Non-interest income is an important contributor to the Group’s profitability
and historically covered on average around 80% of its total operating expenses and it is expected to continue
covering around 70-80% of the Group’s total operating expenses for 2024-2025, supported by a growing net fee
and commission income in line with economic growth.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
26
Strategy and Outlook (continued)
Maintaining cost discipline management remains an ongoing focus for the Group. The cost to income ratio
excluding special levy on deposits or other levies/contributions is reiterated at approximately 40% for 2024,
reflecting mainly reduced income due to the lower interest rates.
In terms of asset quality, the NPE ratio target by end-2024 is updated and is currently expected to stand at
approximately 3% whilst the NPE ratio target of below 3% by end-2025 is reaffirmed. The cost of risk for 2024-
2025 is expected to trend towards normalised levels of 40-50 bps.
Since 2019, the Real Estate Management Unit (REMU) stock has been consistently reducing, with properties sold
exceeding the book value of properties acquired, while inflows remain substantially reduced following balance
sheet derisking. Going forward, REMU sales are expected to continue, with expected inflows to remain at limited
levels. Therefore, the target of REMU portfolio to reduce to approximately €0.5 billion by end-2025 is reiterated.
Overall, the Group continues to expect that it can deliver a ROTE of over 17% on 15% CET1 ratio (excluding
amounts reserved for distribution) for 2024 corresponding to a CET1 generation of between 200-250 bps pre-
distributions. Additionally, the ROTE target for 2025 of over 16% on 15% CET1 ratio (excluding amounts reserved
for distribution) is reiterated, reflecting lower interest rates (average ECB deposit facility rate at 2.2% for 2025).
The Group’s aim to provide sustainable shareholder returns is reiterated. Distributions are expected to build
prudently and progressively over time, towards a payout ratio in the range of 30-50% of the Group’s adjusted
recurring profitability, including cash dividends and share buybacks.
A summary of the targets are shown below:
Key metrics
FY2024
(June 2023)
FY2025
(June 2023)
FY2024
(February 2024)
Net interest income
Average ECB Deposit
facility rate
>€625 mn
3.1%
Lower than 2024
2.5%
>€670 mn
3.4%
Cost to income ratio
1
c.40s Mid 40s c.40s
Return on tangible
equity on 15% CET1
ratio
>17% >16% >17%
5
NPE ratio <4% <3% c.3%
Cost of risk
To normalise towards 40-50 bps over the medium-
term
Trending towards
normalised levels of 40-
50 bps
Capital
200-250 bps organic capital generation p.a. pre
distributions
2
CET1 ratio of c.19% by end-2025
200-250 bps CET1
generation pre-
distributions
3
Distributions
Building prudently and progressively to 30-50% payout ratio
4
, including cash
dividends and buybacks
1.
Excluding special levy on deposits and other levies/contributions
2. Based on profit after tax (pre distributions)
3. Yoy increase in CET1 ratio pre-distributions
4. Payout ratio calculated on adjusted recurring profitability which refers to profit after tax before non-
recurring items (attributable to the owners of the Company) taking into consideration the
distributions from other equity instruments such as AT1 coupon. Any recommendation for a
distribution is subject to regulatory approval.
5. Excluding amounts reserved for distribution
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
27
Business Overview
Credit ratings
The Group’s financial performance is highly correlated to the economic and operating conditions in Cyprus. In
December 2023, S&P Global Ratings upgraded the long-term issuer credit rating of the Bank to BB and maintained
a positive outlook. The upgrade by one notch reflects the significant progress Cypriot banks have made toward
rebalancing their funding profiles, reducing the dependence on non-resident deposits, the improved operating
environment and the profitability prospects due to higher interest rates, improved efficiency and contained credit
losses. In November 2023, Fitch Ratings upgraded the long-term issuer default rating to BB from B+, whilst
maintaining the positive outlook. The two notch upgrade reflects a combination of Fitch’s improved assessment
of the Cypriot operating environment and continued improvement in the Bank’s credit profile, strengthened
capitalisation, reduced stock of legacy problem assets and structurally improved profitability. In October 2023
Moody’s Investors Service upgraded the Bank’s long-term deposit rating to the investment grade Baa3 from Ba1,
while the outlook remained positive. The main drivers for this upgrade are the continued resilience of the Cypriot
economy and credit conditions and the continued improvements in Bank’s solvency profile, with further gradual
improvements in asset quality and capital metrics, and a significant strengthening in the Bank’s core profitability.
Financial performance
The Group is a leading, financial and technology hub in Cyprus. During the quarter ended 31 December 2023,
the Group delivered another strong set of financial results, generating a ROTE of 25.6%, the fourth consecutive
quarter with a ROTE over 20%. Overall, the Group generated €487 million profit after tax for the year,
corresponding to a ROTE of 24.8%, surpassing its 2023 targets, supported by strong net interest income growth,
whilst non-interest income remained a significant contributor to the Group’s profitability and diversified model,
covering 88% of total operating expenses. The Group’s efficiency ratio was significantly improved on prior year
reflecting continued revenue growth and disciplined cost management amidst inflationary pressures. The Group’s
tangible book value per share improved by 25% to €4.93. Currently, the Group enters a declining interest rate
environment with the path of interest rate normalisation being very volatile. The Group reiterates its expectation
of delivering a ROTE of over 17% based on 15% CET1 ratio (excluding amounts reserved for distribution) for
2024. Ιnterest rates are expected to normalise to around 2.0-2.5% by 2025 and the Group’s 2025 ROTE target
of over 16% based on 15% CET1 ratio (excluding amounts reserved for distribution) is reaffirmed.
Financial Year 2023 Distribution at 30% payout ratio
The Group’s strong financial performance in 2023 facilitated a rapid capital build-up, unlocking approximately
480s bps organic capital generation during the year and as a result, accelerating shareholder value. In March
2024, the Company obtained the approval of the ECB to pay a cash dividend and to conduct a share buyback
(together the ‘Distribution’). The Distribution corresponds to a 30% payout ratio on financial year 2023 adjusted
recurring profitability and amounts to €137 million in total, comprising a cash dividend of €112 million and an
approved share buyback of up to €25 million. The payout ratio for financial year 2023 of 30% is in line with the
updated Distribution Policy (refer to section ‘Capital Base’ above) and represents a material increase compared
to the previous year (at 14% payout ratio).
Following ECB approval, the Board of Directors of the Company has resolved to propose to the AGM that will be
held on 17 May 2024 for approval, a final cash dividend of €0.25 per ordinary share in respect of earnings for the
year ended 31 December 2023. Further, the Board of Directors of the Company confirmed its intention to
commence a programme to buy back ordinary shares in the Company for an aggregate consideration of up to
€25 million. The Group’s ROTE excluding amounts reserved for the Distribution for the year ended 31 December
2023 increases to 25.3% (compared to 3.3% for the year ended 31 December 2022 calculated on the same
basis).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
28
Business Overview (continued)
Financial performance (continued)
Interest rate environment
The structure of the Group’s balance sheet is highly liquid, and hence benefitted immediately from the rises in
interest rates. As at 31 December 2023, cash balances with ECB (excluding TLTRO III of approximately €2.0
billion) amounted to approximately €7.6 billion. The repricing of the references gradually benefited the interest
income on loans as almost half of the Group’s loan portfolio is Euribor based. As a result, the net interest income
for the year ended 31 December 2023 amounted to €792 million, more than double compared to the previous
year. This increase was underpinned by faster and steeper than expected interest rate rises as well as a resilient
low cost of deposits.
In a dynamic interest rate environment, the Group’s interest earning assets are in majority floating rate.
Therefore, the Group undertook pro-active solutions to reduce the net interest income sensitivity by converting
some of its floating assets to fixed rate assets. These actions included: investing in fixed rate bonds, initiating
the use of reverse repos, offering fixed rate loans and engaging into receiving fixed interest rate swaps on the
subordinated debt and debt securities. Simultaneously, about one fifth of the Group’s loan portfolio is linked with
the Bank’s base rate which provides a natural hedge against the cost of deposits. Overall, these actions have led
to a reduction in the net interest income sensitivity (to a parallel shift in interest rates by 100 bps) by €16 million
compared to prior year.
The Group intends to increase its structural hedging position by a further €4 to €5 billion (with average duration
of 3-4 years) by end of 2024, subject to market conditions, via partial hedging of non-rate sensitive deposits with
fixed interest rate swaps, further investment in fixed rate bonds, additional reverse repos and continuing offering
of fixed rate loans. In this respect, it is expected that NII sensitivity by end-2024 will decrease further by
approximately €30 to €40 million.
In line with the average market forward rates for January 2024, the ECB deposit facility rate is expected to
average to 3.4% in 2024 (compared to 3.3% in 2023), with recent market expectation indicating great volatility
in the path of rate cuts. Nevertheless, the ECB deposit facility rate is expected to normalise by 2025, and expected
to reduce to 2.7% by the fourth quarter of 2024 and to 2.0% by the fourth quarter of 2025. Euribor rates have
already started to move in expectation of these moves, with 6-month Euribor expected to average to 3.2% in
2024 (compared to 3.7% in 2023) on the basis of average January forward rates.
As a result, the Group’s net interest income is expected to exceed €670 million (compared to over €625 million
previously guided in June 2023) with a quarterly declining trend. This updated guidance incorporates assumptions
on deposit pass-through, deposit mix, loan and fixed income portfolio growth, the impact of structural hedging
and wholesale funding costs. For further details, please refer to section ‘Strategy and Outlook’.
Growing revenues in a more capital efficient way
The Group remains focused on growing revenues in a more capital efficient way through growth of high-quality
new lending and the growth in niche areas, such as insurance and digital products that provide further market
penetration and diversify through non-banking operations.
The Group has continued to provide high quality new lending in the year ended 31 December 2023 via prudent
underwriting standards. Growth in new lending in Cyprus has been focused on selected industries in line with the
Bank’s target risk profile. During the year ended 31 December 2023, new lending remained strong at €2,025
million, despite the rising interest rate environment. Gross performing loan book remained broadly flat on a yearly
basis, as repayments offset new lending. Low single-digit loan growth per annum for 2024 and 2025 is expected.
Fixed income portfolio continued to grow in 2023 to €3,548 million, and currently represents 14% of total assets
(net of TLTRO III). This portfolio is mostly measured at amortised cost and is highly rated with average rating at
Aa3. The amortised cost fixed income portfolio as at 31 December 2023 has an unrealised gain of €3 million,
reflecting an improvement in the market value of this portfolio, following the reduction in bond yields. Careful
expansion of fixed income portfolio is expected, subject to market conditions, so that fixed income portfolio
represents approximately 16% of total assets by 31 December 2024.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
29
Business Overview (continued)
Financial performance (continued)
Growing revenues in a more capital efficient way (continued)
Separately, the Group focuses to continue improving revenues through multiple less capital-intensive initiatives,
with a focus on fees and commissions, insurance and non-banking opportunities, leveraging on the Group’s digital
capabilities. During the year ended 31 December 2023, non-interest income amounted to €300 million, remaining
an important contributor to the Group’s profitability, and covering overall 88% of the Group’s total operating
expenses and is expected to continue covering 70-80% of the Group’s total operating expenses for 2024-2025.
In 2023, net fee and commission income is negatively affected by the termination of liquidity fees in December
2022 and an NPE sale-related servicing fee in mid-February 2023. When disregarding the aforementioned impact
of the liquidity fees and NPE sale-related servicing fee, net fee and commission income increased by 6% on prior
year, reflecting higher net credit card commissions and transactional fees. In the following two years, net fee and
commission income is expected to increase broadly in line with economic growth.
Net fee and commission income is enhanced by transaction fees from the Group’s subsidiary, JCC Payment
Systems Ltd (JCC), a leading player in the card processing business and payment solutions, 75% owned by the
Bank. During the year ended 31 December 2023, JCC’s net fee and commission income contributed 10% of total
non-interest income and amounted to €30 million, up 11% compared to the prior year, backed by strong
transaction volume.
The Group’s insurance companies, EuroLife and GI are respectively leading players in the life and general
insurance business in Cyprus, and have been providing recurring and improving income, further diversifying the
Group’s income streams. The net insurance result for the year ended 31 December 2023 contributed 18% of non-
interest income and amounted to €54 million, up 20% compared to the year ended 31 December 2022, reflecting
improved experience variance in life insurance business; insurance companies remain valuable and sustainable
contributors to the Group’s profitability.
Finally, the Group through the Digital Economy Platform (Jinius) (‘the Platform’) aims to support the national
digital economy by optimising processes in a cost-efficient way, allow the Bank to strengthen its client
relationships, create cross-selling opportunities as well as to generate new revenue sources over the medium
term, leveraging on the Bank’s market position, knowledge and digital infrastructure. The first Business-to-
Business services are already in use by clients and include invoice, remittance, tender and ecosystem
management. Currently, over 2,000 companies are registered in the platform and over €360 million cash were
exchanged via the platform in 2023 through invoicing and remittance services. In February 2024, the Business-
to-Consumer service was launched, a product marketplace aiming to increase the touch points with customers.
Currently over 50 retailers were onboarded in fashion and technology sectors and over 100 thousand products
were embedded in the marketplace.
Lean operating model
Striving for a lean operating model is a key strategic pillar for the Group in order to deliver shareholder value,
without constraining funding its digital transformation and investing in the business.
The efficiency actions of the Group in 2022 to maintain operating expenses under control in an inflationary
environment included further branch footprint optimisation and substantial streamline of workforce. In 2022 the
Group successfully completed a Voluntary Staff Exit Plan (VEP) through which 16% of the Group’s full-time
employees were approved to leave at a total cost of €101 million. Following the completion of the VEP, the gross
annual savings were estimated at approximately €37 million or 19% of staff costs with a payback period of 2.7
years. Additionally, in January 2022, one of the Bank’s subsidiaries completed a small-scale targeted VEP, through
which a small number of full-time employees were approved to leave at a total cost of €3 million. In relation to
branch restructuring, during 2022 the Group reduced the number of branches by 20 to 60, a reduction of 25%.
In 2023, 50 full-time employees were approved to leave the Group at a total cost of approximately €7.5 million,
recorded in staff costs.
In addition, staff costs for the year ended 31 December 2023 include approximately €11 million staff cost rewards,
namely the Short-Term Incentive Plan and the Long-Term Incentive Plan. The Short-Term Incentive Plan involves
variable remuneration to selected employees and will be driven by both, delivery of the Group’s strategy as well
as individual performance.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
30
Business Overview (continued)
Financial performance (continued)
Lean operating model (continued)
At the Annual General Meeting which took place in May 2022, a special resolution was approved for the
establishment and implementation of the share based Long-Term Incentive Plan (‘LTIP’). In December 2022 the
Group granted 819,860 share awards to 22 eligible employees under the LTIP, comprising the Extended Executive
Committee of the Group. The awards granted in December 2022 are subject to a three-year performance period
2022-2024 (with all performance conditions being non-market performance conditions). In October 2023,
479,160 share awards were granted to 21 eligible employees, comprising the Extended Executive Committee of
the Group. The awards granted in October 2023 are subject to a three-year performance period 2023-2025 (with
all performance conditions being non-market performance conditions).
These shares will then normally vest in six tranches, with the first tranche vesting after the end of the performance
period and the last tranche vesting on the fifth anniversary of the first vesting date.
The Group’s total operating expenses for the year ended 31 December 2023 amounted to €341 million, up by
5% compared to the prior year with savings partly offsetting inflationary pressures. Total operating expenses
excluding exit costs of approximately €7.5 million, variable pay (STIP and LTIP) of approximately €11 million and
the cost of €2.5 million for the Reward Programme for performing borrowers, were reduced by 1% compared to
31 December 2022. The cost to income ratio excluding special levy on deposits and other levies/contributions for
the year ended 31 December 2023 was reduced further to 31%, 18 p.p. down compared to the year ended 31
December 2022, driven mainly by the higher total income and disciplined cost management. Maintaining cost
discipline management is a key priority. The cost to income ratio excluding special levy on deposits and other
levies/contributions for 2024 of approximately 40% is reaffirmed, reflecting mainly lower income due to lower
rates.
Transformation plan
The Group’s focus continues on deepening the relationship with its customers as a customer centric organisation.
A transformation plan is already in progress and aims to enable the shift to modern banking by digitally
transforming customer service, as well as internal operations. The holistic transformation aims to (i) shift to a
more customer-centric operating model by defining customer segment strategies, (ii) redefine distribution model
across existing and new channels, (iii) digitally transform the way the Group serves its customers and operates
internally, and (iv) improve employee engagement through a robust set of organisational health initiatives.
Digital transformation
In the dynamic world of banking, the Group stands as a pioneer of digital banking innovation in Cyprus, reshaping
the banking experience into something more intuitive, more responsive, and more aligned with the contemporary
needs of its customers, consistently pushing the boundaries to offer unparalleled banking services. The Group
aims to continue to innovate and simplify the banking journey, providing a unique and personalised experience
to each of its customers.
The Group’s digital channels continue to grow. As at 31 December 2023, the Group’s digital community has
increased to more than 450 thousand active subscribers, both on Internet Banking and the BoC Mobile App,
improving by 9.4% since the beginning of the year. Likewise, the BOC Mobile App, had more than 410 thousand
active subscribers as at 31 December 2023 and increased by 14.4% since the beginning of the year. This app is
a central pillar in the Group’s ongoing endeavour to constantly refine, expand and elevate its digital services,
ensuring that every interaction is a testament to its commitment to digital excellence.
During 2023, the Group continued to enrich and improve its digital portfolio with new innovative services to its
customers. The redesign of the Home Insurance flow in BOC Mobile App for improved user experience that will
lead to a substantial increase in user engagement, ultimately translating into higher adoption rates and amplified
sales figures. A new feature ‘View Card Details’ was launched in BOC Mobile App empowering users with greater
control and accessibility to their essential payment information. This new functionality enables users to effortlessly
access crucial card details, including card number, expiry date, and CVV, directly within BOC mobile app. In
collaboration with the Ministry of Culture, the Group launched the ‘Youth Culture Card’, a transformative initiative
aimed at fostering cultural engagement among young adults. The Youth Culture Card, designed for individuals
aged 18 and above, is a prepaid card loaded with €220 in credit, empowering recipients to immerse themselves
in a diverse array of enriching cultural experiences throughout the year.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
31
Business Overview (continued)
Financial performance (continued)
Lean operating model (continued)
Digital transformation (continued)
One of the Group’s latest digital innovations, Quickloans, accessible through both the BOC Mobile App and Internet
Banking, has transformed the traditional loan process, enabling customers to obtain a credit facility decision
instantly, without the need to visit a branch. Since the beginning of the year 2023, over 33 thousand applications
were processed, granting €100 million new loans.
The digital signing feature, launched in July 2023 further simplified the process of allowing customers to apply,
sign, and obtain loans up to €15 thousand and car loans up to €35 thousand efficiently. In collaboration with
Genikes Insurance, an insurance plan purchase was integrated into BoC Mobile App, enabling customers to access
car or home insurance plans through the BOC Mobile App at lower rates than branch prices. Digital insurance
sales for the year ended 31 December 2023 amounted to €415 thousand, compared to €68 thousand for the year
ended 31 December 2022, reflecting around 1,400 policies in 2023 compared to approximately 230 policies in
2022.
As at 31 December 2023, 95.6% of the number of transactions involving deposits, cash withdrawals and
internal/external transfers were performed through digital channels (up by 11.8 p.p. from 83.8% in June 2020).
In addition, 84.1% of individual customers were digitally engaged (up by 11.7 p.p. from 72.4% in June 2020),
choosing digital channels over branches to perform their transactions. Furthermore, digital account openings
increased by 108% in 2023 to 9,715 from 4,667 in 2022 and new debit cards increased by 156% to 11,536 in
2023.
Asset quality
Balance sheet de-risking was largely completed in 2022, marked by the completion of Project Helix 3 in November
2022 which refers to the sale of non-performing exposures with gross book value of approximately €550 million
as at the date of completion. As at 31 December 2023, the Group’s NPE ratio stood at 3.6% below its 2023 target
of reaching an NPE ratio below 4%. The Group’s priorities remain intact, maintaining high quality new lending
with strict underwriting standards and preventing asset quality deterioration. The NPE ratio target for the year
ended 31 December 2024 is updated and is currently expected to stand at approximately 3% whilst the NPE ratio
target of below 3% by end-2025 is reaffirmed. The cost of risk for 2024-2025 is expected to trend towards
normalised levels of 40-50 bps.
Enhancing organisational resilience and ESG (Environmental, Social and Governance) agenda
Climate change and transition to a sustainable economy is one of the greatest challenges. As part of its vision to
be the leading financial hub in Cyprus, the Group is determined to lead the transition of Cyprus to a sustainable
future. The Group continuously evolves towards its ESG agenda and continues to progress towards building a
forward-looking organisation embracing ESG in all aspects of business as usual. In 2023, the Company received
a rating of AA (on a scale of AAA-CCC) in the MSCI ESG Ratings assessment.
Reaffirming its strong commitment to sustainability and to the long term value creation for all its stakeholders,
in November 2023, the Bank was the first bank in Cyprus to become an official signatory of the United Nations
Principles for Responsible Banking representing a single framework for a sustainable banking industry developed
through a collaboration between banks worldwide and the United Nations Environment Programme Finance
Initiative.
The ESG strategy formulated in 2021 is continuously expanding. The Group is maintaining its leading role in the
Social and Governance pillars and focus on increasing the Group’s positive impact on the Environment by
transforming not only its own operations, but also the operations of its customers.
The Group has committed to the following primary ESG targets, which reflect the pivotal role of ESG in the Group’s
strategy:
- Become carbon neutral by 2030
- Become Net Zero by 2050
- Steadily increase Green Asset Ratio
- Steadily increase Green Mortgage Ratio
- ≥30% women in Group’s management bodies (defined as the Executive Committee (EXCO) and the
Extended EXCO) by 2030
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
32
Business Overview (continued)
Financial performance (continued)
Enhancing organisational resilience and ESG (Environmental, Social and Governance) agenda
(continued)
For the Group to continue its progress against its primary ESG targets and address the evolving regulatory
expectations, it further enhanced in 2023, its ESG working plan which was established in 2022. Progress on the
ESG working plan is closely monitored by the Sustainability Committee, the Executive Committee and the Board
Committees on a quarterly basis.
Environmental Pillar
The Group has estimated the Scope 1 and Scope 2 greenhouse gas (GHG) emissions of 2021 relating to own
operations in order to set the baseline for carbon neutrality target. The Bank being the main contributor of GHG
emissions of the Group, designed in 2022 the strategy to meet the carbon neutrality target by 2030 and GHG
progress towards Net Zero target of 2050. For the Group to become carbon neutral by 2030, Scope 1 and Scope
2 emissions should be reduced by 42% by 2030. The Bank, following the implementation of various energy
upgrade actions in 2022 and 2023, achieved approximately 18% reduction in Scope 1 and Scope 2 GHG emissions
in 2023 compared to the baseline of 2021.
The Group plans to invest in energy efficient installations and actions as well as replace fuel intensive machineries
and vehicles from 2024 to 2025, which would lead to approximately 3-4% reduction in Scope 1 and Scope 2
emissions by 2025 compared to 2021. The Group expects that the Scope 2 emissions will be reduced further
when the energy market in Cyprus shifts further towards renewable energy. The Bank achieved a reduction of
approximately 8% in Scope 1 - Mobile and Stationery Combustion GHG emissions and approximately 11% in
Scope 2 – Purchased electricity GHG emissions in the year ended 31 December 2023 compared to the year ended
31 December 2022 due to new solar panels connected to energy network in 2022 and early 2023 as well as
buildings abandonment as part of the digitalization journey. The Group is also considering several other actions
aiming to a further reduction of approximately 30% in Scope 1 and Scope 2 GHG emissions by 2030 compared
to 2022. The Bank achieved an increase of 65% in renewable energy production, from 173,583 Kwh to 285,907
Kwh in the year ended 31 December 2023 compared to the year ended 31 December 2022.
The Group is gradually integrating climate-related and environmental (C&E) risks into its Business Strategy. The
Bank was the first bank in Cyprus to join the Partnership for Carbon Accounting Financials (PCAF) in October
2022, and has estimated and published the Financed Scope 3 GHG emissions associated with its lending portfolio
using the PCAF standards, methodology and proxies. Following the estimation of Financed Scope 3 GHG emissions
of loan portfolio, the Bank established a decarbonization target on Mortgage loan portfolio. The decarbonization
target on Mortgage loan portfolio was established by applying the International Energy Agency’s Below 2 Degree
Scenario.
For the Group’s Mortgage loan portfolio to be aligned with the climate scenario and effectively be associated with
lower transition risks, the baseline as at 31 December 2022 of 53.5 kgCO
2
e/m
2
should be reduced by 43% by 31
December 2030. The carbon intensity of the Mortgage loan portfolio as at 31 December 2023 was estimated at
50.73 kgCO
2
e/m
2
achieving a reduction of approximately 5% compared to baseline, due to increased installation
of solar panels in residential properties in 2023. A Green Housing product was launched at the end of 2023 to
support the Bank to meet the decarbonization target on Mortgage loans and effectively limit the level of climate
transition risk that is exposed to. In addition, the Bank has set lending and investment limits on specific carbon
intensive sectors which are widely considered to be associated with high climate transition risk. Further, having
introduced and implementing a Business Environment Scan process, the Bank developed green/transition new
lending targets in certain sectors to support its customers’ transition to a low carbon economy and effectively
manage climate transition risks.
During 2023, the Bank has made considerable progress in integrating climate-related and environmental risks
into its risk management approach and risk culture. The Bank revised and enhanced the Materiality assessment
process on C&E risks. The Bank has carried out a comprehensive identification and assessment of C&E risks as
drivers of existing financial and non-financial risks considering its business profile and loan portfolio composition.
As part of this process, the Bank has identified the risk drivers, both physical and transition, which could
potentially have an impact on its risk profile and operations and has assessed the severity of each risk driver for
all the existing categories of risks. The Bank has implemented an ESG Due Diligence process designed to enhance
data collection, score customers on their performance against various aspects around C&E risks and provide
guidance on remediation actions. This process involves the utilization of structured ESG questionnaires applied
at the individual company level for customers of the Corporate Division to derive an ESG score.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
33
Business Overview (continued)
Financial performance (continued)
Enhancing organisational resilience and ESG (Environmental, Social and Governance) agenda
(continued)
Environmental Pillar (continued)
The Bank established a structure and detailed Business Environment Scan process to monitor the impact of C&E
risks on its business environment in the short, medium and long-term. The results of the preliminary (quarterly)
and final (annual) impact assessment have been incorporated in the Materiality assessment of C&E risks as well
as informed the Bank’s Business Strategy.
BOC PCL offers a range of environmentally friendly products to manage transition risk and help its customers
become more sustainable. Specifically, BOC PCL offers loans for energy upgrades of homes, installation of solar
panels, acquisition of new hybrid or electric cars, as well as financing of renewable energy projects. The gross
amount of environmentally friendly loans as at 31 December 2023 was €24.5 million compared to €20.9 million
as at 31 December 2022.
During 2023, in order to enhance the awareness and skillset on ESG matters, the Group performed relevant
trainings to the Board of Directors and Senior Management as well as to members of control functions and other
members of staff.
Social Pillar
At the centre of the Group’s leading social role lie its investments in the Bank of Cyprus Oncology Centre (with
an overall investment of approximately €70 million since 1998, whilst 60% of diagnosed cancer cases in Cyprus
are being treated at the Centre), the immediate and efficient response of Bank of Cyprus’ SupportCY network,
consisting of companies and organisations, to various needs of the society and in cases of crises and emergencies,
through the activation of programs, specialized equipment and a highly trained Volunteers Corps, the contribution
of the Bank of Cyprus Cultural Foundation in promoting the cultural heritage of the island, and the work of IDEA
Innovation Centre. During 2023, SupportCY among other initiatives responded to more than 30 fire incidents in
Cyprus and Greece, the deadly floods in Greece and sent support to the earthquake victims in Syria.
The Cultural Foundation undertook a number of innovative projects such as ‘AISTHISEIS’ - Multi sensory museum
experience for groups with disabilities, educational programs for schools approved by the Ministry of Education,
Sport and Youth, aspiring to bring youth closer to art, literature, museums and culture of Cyprus as well as
exhibitions, events and activities developed to encourage and promote the island’s history. The ReInHerit program
facilitating innovation and research cooperation between European museums and heritage continued also into
2023, with 35,154 people participating in events at the Cultural Foundation between January to December 2023.
The IDEA Innovation Centre, invested approximately €4 million in start-up business creation since its
incorporation, supported creation of 89 new companies to date, provided support to 210+ entrepreneurs through
its Startup program since incorporation, and provided education to 7,000 entrepreneurs. Staff continued to
engage in voluntary initiatives to support charities, foundations, people in need and initiatives to protect the
environment.
The Group has continued to upgrade its staff’s skillset by providing training and development opportunities to all
staff and capitalising on modern delivery methods. In 2023, the Bank’s employees attended 72,888 hours of
training. In addition, in 2023 the Group launched the BoC Academy to offer up-skilling short courses for
employees, with 20 members of staff enrolling on the Academy’s programs. In addition, 4 full MBA scholarships
were offered to selected members of staff. Moreover, the Group continued its emphasis on staff wellness during
2023 by offering webinars, team building activities and family events with sole purpose to enhance mental,
physical, financial and social health, attended by approximately 2,000 employees through its Well at Work
program. One of the highlights of 2023, was the successful launch of the 1st BOC Intrapreneurship Competition
‘Think Tank’. The vision was to empower creativity, increase engagement, nurture a Culture of Innovation, and
identify our talents. More than 70 ideas were submitted with 9 Think Tank finalists presenting their ideas to the
committee in a final pitching event. The 3 winning ideas were related with the areas of ESG, Digital Transformation
and New product development.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
34
Business Overview (continued)
Financial performance (continued)
Enhancing organisational resilience and ESG (Environmental, Social and Governance) agenda
(continued)
Governance Pillar
The Group continues to operate successfully within a complex regulatory framework of a holding company which
is registered in Ireland, listed on two Stock Exchanges and run in compliance with a number of rules and
regulations. Its governance and management structures enable it to achieve present and future economic
prosperity, environmental integrity and social equity across its value chain. The Group operates within a
framework with adequate control environment, which enable risk assessment and risk management based on the
relevant policies under the leadership of the Board of Directors.
The Group has set up a Governance Structure to oversee its ESG agenda. Progress on the implementation and
evolution of the Group’s ESG strategy is monitored by the Sustainability Committee and the Board of Directors.
The Sustainability Committee is a dedicated executive committee set up in early 2021 to oversee the ESG agenda
of the Group, review the evolution of the Group’s ESG strategy, monitor the development and implementation of
the Group's ESG objectives and the embedding of ESG priorities in the Group’s business targets.
The Group’s ESG Governance structure continues to evolve, so as to better address the Group’s evolving ESG
needs. The Group’s regulatory compliance continues to be an undisputed priority.
The Board composition of the Company and the Bank is diverse, with 45% of the Board members being female
as at 31 December 2023. The Board displays a strong skillset stemming from broad international experience.
Moreover, the Group’s aspiration to achieve a representation of at least 30% women in Group’s management
bodies (defined as the EXCO and the Extended EXCO) by 2030, has been reached earlier. As at 31 December
2023 there is a 33% representation of women in Group’s management bodies, following the appointment of two
female General Managers in Eurolife and General Insurance of Cyprus. As at 31 December 2023, there is a 40%
representation of women at key positions below the Extended EXCO level (defined as positions between Assistant
Manager and Manager).
Going concern
The Directors have made an assessment of the ability of the Group, the Company and BOC PCL to continue as a
going concern for a period of 12 months from the date of approval of the Consolidated Financial Statements.
The Directors have concluded that there are no material uncertainties which would cast significant doubt over the
ability of the Group, the Company and BOC PCL to continue to operate as a going concern for a period of 12
months from the date of approval of the Consolidated Financial Statements and the Financial Statements of the
Company.
In making this assessment, the Directors have considered a wide range of information relating to present and
future conditions, including projections of profitability, cash flows, capital requirements and capital resources,
liquidity and funding position, taking also into consideration, the Group’s Financial Plan 2024-2027 approved by
the Board in February 2024 (the ‘Plan’) and the operating environment (as set out in section ‘Operating
Environment’ in the Directors’ Report). The Group has sensitised its projection to cater for an adverse scenario
and has used reasonable economic inputs to develop its medium-term strategy. The Group is working towards
materialising its Strategy.
Capital
The Directors and Management have considered the Group’s forecasted capital position, including the potential
impact of a deterioration in economic conditions. The Group has developed capital projections under a base and
an adverse scenario and the Directors believe that the Group has sufficient capital to meet its regulatory capital
requirements throughout the period of assessment.
Funding and liquidity
The Directors and Management have considered the Group’s funding and liquidity position and are satisfied that
the Group has sufficient funding and liquidity throughout the period of assessment. The Group continues to hold
a significant liquidity buffer at 31 December 2023 that can be easily and readily monetised in a period of stress.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
35
Viability statement
In accordance with the requirements of Provision 31 of the UK Corporate Governance Code 2018 (‘UK Code’), the
Directors have assessed the viability of the Group, taking account of the Group’s current position and the potential
impact of the main risks that the Group is facing.
Time horizon
The Directors have selected a three-year period for this assessment in arriving at the viability statement. This
period is chosen as it is within the period covered by the Group’s Financial Plan approved by the Board which
contains projections of profitability, capital and liquidity requirements and capital resources as well as within the
period covered by the Group’s stress testing programmes. This period is representative of the time horizon to
consider the impact of ongoing regulatory changes in the financial services industry. The Group’s Financial Plan
covers the period 2024–2027.
Planning process and assessment
The Directors have assessed the prospects of the Group through a number of sources, including the latest
Financial Plan of the Group, the Internal Capital Adequacy Assessment Process (‘ICAAP’) and the Internal Liquidity
Adequacy Assessment Process (‘ILAAP’) reports.
The Group’s Financial Plan takes into account the Group’s strategy, risk appetite and objectives in the context of
its operating environment including actual and reasonably expected changes in the Cyprus macroeconomic
environment, competitive landscape, margin pressures and capital requirements. The Board-approved risk
appetite framework is a key consideration of the Group's Financial Plan. Risks to the achievement of the Financial
Plan are identified and assessed through a Risk Assessment of the Financial Plan. Performance against the risk
appetite for each of the risk indicators is reported to the Board on a regular basis.
The ICAAP is a process the main objective of which is to assess the Group’s capital adequacy in relation to the
level of underlying material risks that may arise from pursuing the Group’s strategy or from changes in its
operating environment. More specifically, the ICAAP analyses, assesses and quantifies the Group’s risks,
establishes the current and future capital needs for the material risks identified and assesses the Group’s
absorption capacity under both the baseline scenario and stress testing conditions, aiming to assess whether the
Group has sufficient capital, under both the base and stress case scenarios, to support its business and achieve
its strategic objectives as per its Board-approved Risk Appetite and Strategy.
The Group undertakes quarterly reviews of its ICAAP results as well as on an ad-hoc basis if needed, considering
the latest actual and forecasted information. During the quarterly review, any material changes/developments
since the annual ICAAP exercise are assessed in terms of capital adequacy. The 2023 quarterly ICAAP reviews
indicated that the Group has sufficient capital and available mitigants to support its risk profile and its business
and to enable it to meet its regulatory requirements, both under baseline and stressed conditions.
The ILAAP is a process the main objective of which is to assess whether the volume and capacity of liquidity
resources available to the Group are adequate to support its business model, to achieve its strategic objectives
under both the base and severe stress scenarios, and to meet regulatory requirements.
The Group undertakes quarterly reviews of its ILAAP through quarterly liquidity stress tests, where actual and
forecasted information is considered. Any material changes since the year-end are assessed in terms of liquidity
and funding. The 2023 quarterly ILAAP reviews indicated that the Group maintains liquidity resources which are
adequate to ensure its ability to meet obligations as they fall due under ordinary and stressed conditions.
The 2023 ICAAP and ILAAP packages are due for submission to the SSM on 28 March 2024.
Risk management
The Group identifies, assesses, manages and monitors its risk profile based on the disciplines outlined within its
Risk Management Framework. The Group is exposed to a number of risks, the most significant of which are credit
risk, liquidity and funding risk, market risk (arising from adverse movements in interest rates, foreign currency
exchange rates, and in security and property prices), non-financial risks (mainly operational risk, compliance risk,
reputational risk, climate and environmental risks, information security and data quality risks) and strategic risk
(business model risks, macroeconomic risks). These risks are identified, monitored, managed and mitigated
through various control mechanisms and processes set out in the 'Principal risks and uncertainties-Risk
management and mitigation' section below. Similarly, the Group monitors the uncertain geopolitical environment
and the macroeconomic outlook and assesses and manages the potential impact on its operations.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
36
Viability statement (continued)
Risk management (continued)
Further, stress testing is an integral risk management principle used to assess the financial and operational
resilience of the Group. Stress tests are performed to assess the capital adequacy, liquidity and funding
availability. Internal scenarios used for the ICAAP are designed to be extreme but plausible and take account of
potential risk management actions. Reverse stress testing is also used to assess scenarios and circumstances
that could potentially make the Group’s business model unviable. These exercises begin with a definition of
business model failure e.g. a breach of capital minimum thresholds, and analyse potential events that could cause
such failure and the identification of appropriate mitigating actions. The results are reported to the Board Risk
Committee and the Board.
The Group has identified a suite of management actions which can be implemented to manage and mitigate the
impact of stress scenarios. Management actions’ impact on capital, liquidity and recovery planning under stress
conditions is assessed. This enables the Group to understand, monitor and control the risks identified.
Management believes that the stress testing process considers a range of severe but plausible scenarios.
However, stress tests should not be assumed to be an exhaustive assessment of all possible hypothetical extreme
or remote scenarios.
In making their viability assessment the Directors have considered a wide range of detailed information relating
to present and potential conditions, including projections for profitability, cash flows, capital and liquidity
requirements and capital and liquidity resources.
The Group has sensitised its baseline projections to cater for a downside scenario and has used conservative
economic inputs. The Financial Plan adverse scenario considers the capital forecast for the Group, and its ability
to withstand adverse scenarios such as the deterioration of the economic environment in Cyprus.
In addition to the information outlined above, the Directors have also considered a wide range of information and
a number of factors including but not limited to:
- The Group’s business and operating models and strategy.
- The Group’s approach to managing risk and allocating capital.
- The Group’s financial position considering performance, its ability to maintain minimum levels of
regulatory capital, liquidity and funding and the minimum requirements for own funds and eligible
liabilities over the period of the assessment.
- The Group’s strong capital position as at 31 December 2023.
- The Group’s strong liquidity position as at 31 December 2023.
The Directors confirm that based on their assessment of the principal risks and the assessment of the Group’s
current position and prospects, the Directors have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period to 31 December 2026.
Principal risks and uncertainties - Risk management and mitigation
As part of its business activities, the Group faces a variety of risks. The Group identifies, monitors, manages and
mitigates these risks through various control mechanisms. Credit risk, liquidity and funding risk, market risk
(arising from adverse movements in foreign currency exchange rates, interest rates, security prices and property
prices), insurance and re-insurance risk and operational risk, are some of the key significant risks the Group
faces. In addition, key risks facing the Group include geopolitical risk, legal risk, regulatory compliance risk,
information security and cyber risk, digital transformation and technology risks, climate related and
environmental risks, and business model and strategic risk.
Information relating to the principal risks the Group faces and risk management is set out in Notes 44 to 47 of
the Consolidated Financial Statements and in the ‘Risk and Capital Management Report’, both of which form part
of the Annual Financial Report for the year ended 31 December 2023, and in the ‘Pillar III Disclosures 2023’ which
is published on the Group’s website. In addition, in relation to legal risk arising from litigations, investigations,
claims and other matters, further information is disclosed in Note 38 of the Consolidated Financial Statements.
Additionally, the Group is exposed to the risk of changes in the value of property which is held either for own use
or as stock of property or as investment property. Stock of property is predominately acquired in exchange for
debt and is intended to be disposed of in line with the Group’s strategy. Further information is disclosed in Note
27 of the Consolidated Financial Statements.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
37
Principal risks and uncertainties - Risk management and mitigation (continued)
Details of the financial instruments and hedging activities of the Group are set out in Note 21 of the Consolidated
Financial Statements. Further information on financial instruments is also presented in Notes 44 and 45 of the
Consolidated Financial Statements.
The Group’s activities are mainly in Cyprus therefore the Group's performance is impacted by changes in the
Cyprus operating environment, as described in the 'Operating environment' section of this Directors’ Report and
changes in the macroeconomic conditions and geopolitical developments as described in the ‘Risk and Capital
Management Report' which forms part of the Annual Financial Report for the year ended 31 December 2023.
In addition, details of the significant and other judgements, estimates and assumptions which may have a
material impact on the Group’s financial performance and position are set out in Note 5 of the Consolidated
Financial Statements.
As the war in Ukraine continues and the latest military conflict in the Middle east rages on, considerable
uncertainly is added to the outlook for the global economy and the wider impact will depend on how these conflicts
evolve in the future. The Group has limited direct exposure to both Ukraine and Russia as well as to Israel, and
is continuously monitoring the current affairs and remains vigilant to take precautionary measures as required.
The risk factors discussed above and in the reports referenced above should not be regarded as a complete and
comprehensive statement of all potential risks and uncertainties. There may be risks and uncertainties of which
the Group is not aware of, or which the Group does not consider significant, but which may become significant.
There are challenging conditions in global markets due to the high interest rate environment, inflationary
pressures, the geopolitical developments, the growing threat from cyberattacks and other unknown risks. As a
result the precise nature of all risks and uncertainties that the Group faces cannot be predicted with accuracy as
many of these risks are outside of the Group’s control.
Events after the reporting date
KEDIPES Loan portfolio acquisition
In December 2023, BOC PCL entered into an agreement with Cyprus Asset Management Company ('KEDIPES')
to acquire a portfolio of performing and restructured loans with gross book value of approximately €58 million
with reference date 31 December 2022 (the 'Transaction'). The Transaction is broadly neutral to the Group's
income statement and capital position. Regulatory approvals have been obtained and the Transaction was
completed in March 2024.
Distribution out of 2023 earnings
The Group, in March 2024, obtained regulatory approval from the European Central Bank for a Distribution in
respect of 2023 earnings of a total amount of €137 million, comprising a cash dividend of €112 million and a
buyback of ordinary shares of the Company for an aggregate consideration of up to €25 million. Following ECB
approval, the Board of Directors of the Company recommended a final dividend to shareholders and approved in
principle to undertake a buyback of ordinary shares as described in section ‘Distributions’ below.
No other significant non-adjusting events have taken place since 31 December 2023.
Capital base
Total equity excluding non-controlling interests totalled €2,467 million at 31 December 2023, compared to €2,027
million at 31 December 2022 (as restated). The regulatory CET1 ratio on a transitional basis stood at 17.4% at
31 December 2023 (incorporating the Distribution in respect of 2023 earnings of a 30% payout ratio) and at
15.2% at 31 December 2022 as restated. During the year ended 31 December 2023, the CET1 ratio was positively
affected by organic capital generation from profitability in the year, net of deduction for a distribution in respect
of 2023 earnings at a payout ratio of 30% in line with the Group Distribution Policy and as approved by the ECB
and relevant resolution by the Board of Directors, as well as the €50 million distribution to BOC PCL in February
2023 by the life insurance subsidiary. The CET1 ratio was negatively affected mainly by the final phasing-in of
IFRS 9 and other transitional adjustments, the increase in risk-weighted assets and the deduction of 0.33% in
relation to the ECB prudential expectations for NPEs as well as the AT1 coupon and refinancing costs The
regulatory Total Capital ratio on a transitional basis at 31 December 2023 stood at 22.4% (2022: 20.4% as
restated).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
38
Capital base (continued)
Additional information on the regulatory capital is disclosed in the 'Risk and Capital Management Report' which
forms part of this Annual Financial Report and in the Pillar III Disclosures Report, which is published on the
Group’s website.
Share capital
As at 31 December 2023, there were 446,199,933 issued ordinary shares with a nominal value of €0.10 each.
Information about the authorised and issued share capital during 2023 and 2022 is disclosed in Note 34 of the
Consolidated Financial Statements.
Share-based payments - share awards
Long-term incentive award
During the Annual General Meeting of the shareholders of the Company which took place on 20 May 2022, a
special resolution was approved for the establishment and implementation of the share-based Long-Term
Incentive Plan of Bank of Cyprus Holdings Public Limited Company (the ‘LTIP’), which is effective for ten years
since its adoption.
The LTIP is a share-based compensation plan for executive directors and senior management of the Group. The
LTIP provides for an award in the form of ordinary shares of the Company based on certain non-market
performance and service vesting conditions. Performance will be measured over a 3-year period. The performance
conditions are set by the Human Resources & Remuneration Committee (HRRC) each year and may be
differentiated to reflect the Group’s strategic targets and employee's personal performance, at its discretion.
Performance will be assessed against an evaluation scorecard consistent with the Group’s Medium Term Strategic
Targets containing both financial and non-financial objectives, and including targets in the areas of: (i)
Profitability; (ii) Asset quality; (iii) Capital adequacy; (iv) Risk control & compliance; and (v) Environmental,
Social and Governance ('ESG') targets. The awards ordinarily vest in six tranches, with 40% vesting in the year
following the year the performance period ends and the remaining 60% vesting in five equal tranches (12%), on
each annual anniversary following the first vesting date. For any award to vest the employee must be in
employment of the Group up until the date of the vesting of such an award. Under certain circumstances the
HRRC has the discretion to determine whether the award will lapse and/or the extent to which the award will be
vested.
The maximum number of shares that may be issued pursuant to the LTIP until the tenth anniversary of the
relevant resolution shall not exceed 5% of the issued ordinary share capital of the Company, as at the date of
the resolution (being 22,309,996 ordinary shares of €0.10 each), as adjusted for any issuance or cancellation of
shares subsequently to the date of the resolution (excluding any issuances of shares pursuant to the LTIP). The
awards are not entitled to dividend equivalents in accordance with regulatory requirements.
The pre-existing Share Option Plan, which was operating at the level of the Company, has been superseded by
the LTIP.
Under the LTIP, share awards were granted by the Company in December 2022 (subject to a three-year
performance period during 2022-2024) and in October 2023 (subject to a three-year performance period during
2023-2025). Each award vests in six tranches and vesting is subject to service conditions. Awards are subject to
potential forfeiture under certain leaver scenarios. Further information on awards granted is disclosed in Note 14
of the Consolidated Financial Statements.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
39
Share-based payments - share awards (continued)
Short-term incentive award
Short-term incentive award refers to a Short-Term Incentive Plan established by the Company in 2023. This
involves variable remuneration in the form of cash to selected employees and is driven by both delivery of the
Company's Strategy, as well as individual performance, in the relevant year. Executive Management are also
eligible to be considered for the short-term incentive award. The short-term incentive award is generally paid in
cash and is non-deferred, however, and in cases where the amount exceeds a specified threshold as per
regulatory guidelines, 50% of the award is awarded in shares and 50% in cash. In cases the award for an
individual comprises both a share and a cash component, the award vests, similarly to LTIP vesting, i.e. 40%
vests in the year of the grant i.e. following the performance year to which the incentive award relates to and the
remaining 60% vests in tranches (12%) over five years. Further information on the short-term incentive award
for the performance year 2023 awarded to Executive Directors and Other Key Management personnel is disclosed
in Note 49 of the Consolidated Financial Statements. Other than the amounts disclosed in Note 49, the Short-Term
Incentive Plan award for the performance year 2023 will be in the form of cash.
Treasury shares of the Company
The consideration paid, including any directly attributable incremental costs (net of income taxes), for shares of
the Company held by entities controlled by the Group is deducted from equity attributable to the owners of the
Company as treasury shares, until these shares are cancelled or reissued. No gain or loss is recognised in the
consolidated income statement on the purchase, sale, issue or cancellation of such shares.
The life insurance subsidiary of the Group, as at 31 December 2023, held a total of 142 thousand ordinary shares
of the Company of a nominal value of €0.10 each (2022: 142 thousand ordinary shares of the Company of a
nominal value of €0.10 each), as part of its financial assets which are invested for the benefit of insurance
policyholders (Note 24 of the Consolidated Financial Statements). The cost of acquisition of these shares was
€21,463 thousand (2022: €21,463 thousand).
Change of control
There are no significant agreements to which the Company is a party and which take effect following a change of
control of the Company following a bid, but the Company is a party to a number of funding agreements that may
allow the counterparties to alter or terminate the agreements following a change of control. As at 31 December
2023, these agreements were not deemed to be significant in terms of their potential effect on the Group as a
whole given the liquidity position of the Group at the time, but the extent of their significance could vary
depending on the liquidity position at the time of the change of control.
The Group also has agreements which provide for termination if, upon a change of control of the Company, the
Company’s creditworthiness is materially worsened.
Other information
During 2023 and 2022 there were no restrictions on the transfer of the Company’s ordinary shares or securities
and no restrictions on voting rights other than the provisions of the Banking Law of Cyprus which requires
regulatory approval prior to acquiring shares of the Company in excess of certain thresholds, and the generally
applicable provisions including those of the Market Abuse Regulation and applicable takeover legislation. From
time to time, specific shareholders may have their rights in shares restricted in accordance with sanctions,
anti-corruption, anti-money laundering and/or anti-terrorism compliance, including sanctions relating to events
in Ukraine as applicable. The Group’s policy is to comply with all applicable laws, including sanctions and other
restrictive measures that apply at all times, and the Group may from time to time request individual shareholders
to refrain from exercising certain rights to facilitate compliance with such measures or related compliance issues.
Shares of the Company held by the life insurance subsidiary of the Group as part of its financial assets which are
invested for the benefit of insurance policyholders carry no voting rights, pursuant to the insurance law. The
Company does not have any shares in issue which carry special control rights.
There are no agreements between shareholders, known to the Company, which may result in restrictions on the
transfer of securities or voting rights.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
40
Rights and obligations of ordinary shares
In accordance with the Company’s Constitution, the rights and restrictions attaching to the ordinary shares are
as follows:
- subject to the right of the Company to set the record dates for the purposes of determining the identity
of members entitled to notice of and/or to vote at a general meeting, the right to attend and speak at
any general meeting of the Company and to exercise one vote per ordinary share at any general meeting
of the Company;
- the right to participate pro rata in all dividends declared by the Company; and
- the right, in the event of the Company’s winding up, to participate pro rata in the distribution of the
total assets of the Company.
Major holders of shares and financial instruments
As at 31 December 2023 and 6 March 2024, the Company has been advised of the following notifiable interests
in the share capital of the Company:
31 December 2023
Number of
ordinary shares
or Depositary
Interests
representing
Company
ordinary shares
% held
Financial
instruments with
similar economic
effect (Regulation
17(1)(b) of the
Transparency
(Directive
2004/109/EC)
Regulations 2007 of
Ireland as amended)
% held
Lamesa Investments Ltd 41,383,699
9.27%
-
-
CarVal Investors
40,455,322
9.07%
-
-
Senvest Management LLC
38,163,877
8.56%
1,347,482
0.30%
Caius Capital LLP 24,884,267
5.58%
-
-
European Bank for Reconstruction and Development (EBRD) 22,401,744
5.02%
-
-
Cyprus Popular Bank Public Co Ltd
21,467,719
4.81%
-
-
Provident Fund of the Cyprus Bank Employees 21,153,863
4.74%
-
-
Osome Investments 14,809,498
3.32%
-
-
6 March 2024
Number of
ordinary shares
or Depositary
Interests
representing
Company
ordinary shares
% held
Financial
instruments with
similar economic
effect (Regulation
17(1)(b) of the
Transparency
(Directive
2004/109/EC)
Regulations 2007 of
Ireland as amended)
% held
Lamesa Investments Ltd
41,383,699
9.27%
-
-
CarVal Investors 40,455,322
9.07%
-
-
Senvest Management LLC 38,330,080
8.59%
1,439,626
0.32%
Caius Capital LLP
24,884,267
5.58%
-
-
European Bank for Reconstruction and Development (EBRD) 22,401,744
5.02%
-
-
Cyprus Popular Bank Public Co Ltd 21,467,719
4.81%
-
-
Provident Fund of the Cyprus Bank Employees
21,153,863
4.74%
-
-
Osome Investments
14,809,498
3.32%
-
-
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
41
Distributions
Based on the 2022 SREP decision, effective from 1 January 2023, any equity dividend distribution is subject to
regulatory approval, both for the Company and BOC PCL. The requirement for approval does not apply if the
distributions are made via the issuance of new ordinary shares to the shareholders which are eligible as Common
Equity Tier 1 Capital nor to the payment of coupons on any AT1 capital instruments issued by the Company or
BOC PCL.
Distribution in respect of 2023 earnings
The Group, in March 2024, obtained regulatory approval from the European Central Bank for a Distribution in
respect of 2023 earnings of a total amount of €137 million, comprising a cash dividend of €112 million and a
buyback of ordinary shares of the Company for an aggregate consideration of up to €25 million. Following ECB
approval, the Board of Directors of the Company recommended a final cash dividend to shareholders and
approved in principle to undertake a buyback of ordinary shares as described below.
Proposed Dividend
The Board of Directors recommended to shareholders a final dividend of €0.25 per ordinary share in respect of
earnings for the year ended 31 December 2023 (totalling €112 million based on the total number of ordinary
shares currently outstanding). This is subject to shareholder approval at the Annual General Meeting in May 2024.
The financial statements for the year ended 31 December 2023 do not reflect this dividend, which will be
accounted for in shareholders’ equity as an appropriation of retained earnings in the year ending 31 December
2024.
Proposed Buyback of ordinary shares
The Board of Directors confirmed their intention to undertake a buyback of ordinary shares of the Company of an
aggregate consideration amount of up to €25 million and in compliance with the terms of the approval received
from the ECB. The financial statements for the year ended 31 December 2023 do not reflect the impact of the
proposed share buyback, which will be accounted for as and when shares are repurchased by the Company.
Dividends and share buybacks are funded out of distributable reserves.
The combined Proposed Dividend and Proposed Share Buyback (together referred to as the ‘Distribution’)
represents a 30% payout of the Group’s adjusted recurring profitability for the year 2023 in line with the Group’s
approved distribution policy. Group adjusted recurring profitability is defined as the Group’s profit after tax before
non-recurring items (attributable to the owners of the Company) taking into account distributions under other
equity instruments such as the annual AT1 coupon.
Distribution in respect of 2022 earnings
In April 2023, the Company obtained the approval of the European Central Bank to pay a dividend in respect of
earnings for the year ended 31 December 2022. Following this approval, the Board of Directors of the Company
recommended to the shareholders for approval at the Annual General Meeting (‘AGM’) on 26 May 2023, a final
dividend of €0.05 per ordinary share in respect of the earnings of the year ended 31 December 2022 (‘2022
Dividend’). The AGM on 26 May 2023 declared a final dividend of €0.05 per share. The 2022 Dividend amounted
to €22,310 thousand in total and is equivalent to a payout ratio of 14% of the financial year 2022 adjusted
recurring profitability or 31% based on the financial year 2022 profit after tax (as reported in the 2022 Annual
Financial Report).
Books and significant records
The measures that the Directors have taken to secure compliance with the requirements of sections 281 to 285
of the Companies Act 2014 of Ireland (Companies Act 2014), with regards to the keeping of accounting records,
include the provision of appropriate resources to maintain adequate accounting records throughout the Company
and the Group, including the appointment of personnel with appropriate qualifications, experience and expertise.
The accounting records are maintained at the Company’s registered office at 10 Earlsfort Terrace, Dublin 2, D02
T380, Ireland and at 51 Stasinos Street, 2002 Strovolos, Nicosia, Cyprus.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
42
Research and development
In the ordinary course of business, the Group develops new products and services that enhance the customer
experience. Additional information is disclosed in the 'Business Overview' section of this Directors' Report.
Relevant audit information
In the case of persons who are Directors at the time this report is approved in accordance with section 330 of
the Companies Act 2014:
- the Directors hereby individually and collectively acknowledge, that so far as each Director is aware, there
is no relevant audit information of which the Company’s statutory auditors are unaware; and
- that he/she has taken all the steps that he/she ought to have taken as a Director in order to make
himself/herself aware of any relevant audit information and to establish that the Company’s statutory
auditors are aware of that information.
Preparation of periodic reporting
The Board is responsible for ensuring that the management maintains an appropriate system of internal controls
which provides assurance of effective operations, internal financial controls and compliance with rules and
regulations. It has the overall responsibility for the Group and approves and oversees the implementation of the
Group’s strategic objectives, ESG and risk strategy and internal governance.
The Group has appropriate internal control mechanisms, including sound administrative and accounting
procedures, Information Technology (IT) systems and controls. The governance framework is subject to review
at least once a year.
Policies and procedures have been designed in accordance with the nature, scale and complexity of the Group’s
operations in order to provide reasonable but not absolute assurance against material misstatements, errors,
losses, fraud or breaches of laws and regulations.
The Board, through the Audit Committee and the Risk Committee, conducts reviews on a frequent basis, regarding
the effectiveness of the Group’s internal controls and information systems, as well as in relation to the procedures
used to ensure the accuracy, completeness and validity of the information provided to investors. The reviews
cover all systems of internal controls, including financial, operational and compliance controls, as well as risk
management systems. The role of the Audit Committee is inter alia to ensure the financial integrity and accuracy
of the Company’s financial reporting.
The Group’s financial reporting process is controlled using documented accounting policies and procedures
supported by instructions and guidance on reporting requirements, issued to all reporting entities within the
Group in advance of each reporting period. The submission of financial information from each reporting entity is
subject to sign off by the responsible financial officer.
Further analytical review procedures are performed at Group level. The internal control system also ensures that
the integrity of the accounting and financial reporting systems, including financial and operational controls and
compliance with legal and regulatory requirements and relevant standards, is adequate.
Where from time-to-time areas of improvement are identified these become the focus of management’s attention
in order to resolve them and thus strengthen the procedures that are in place. Areas of improvement may include
the formalisation of existing controls and the introduction of new information technology controls, as dependency
on information technology is ever increasing.
The Annual Financial Report in advance of its submission to the Board is reviewed and approved by the Executive
Committee. The Board, through the Audit Committee scrutinises and approves the financial statements, results
announcements and the Annual Financial Report and ensures that appropriate disclosures have been made. This
governance process ensures that both management and the Board are given sufficient opportunity to challenge
the Group’s financial statements and other significant disclosures before their publication.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
43
Corporate Governance Statement
In January 2019, the CSE released the 5th Edition of the Corporate Governance Code (the ‘2019 CSE Code’). It
is mandatory for listed companies to incorporate a report by the Board of Directors on Corporate Governance,
known as the Corporate Governance Report, in their Annual Financial Report. In the first section of this Corporate
Governance Report companies are required to disclose their level of compliance with the 2019 CSE Code and the
extent of implementation of its principles. The second section necessitates an explicit confirmation from the
companies regarding their adherence to the provisions of the 2019 CSE Code. Additionally, in instances where
there is any deviation from the provisions of the 2019 CSE Code, companies are obligated to provide a
comprehensive explanation justifying the non-compliance.
The Company has voluntarily chosen to adhere to the provisions of the 2018 UK Corporate Governance Code, as
published by the Financial Reporting Council in the UK (the ‘2018 UK Code’). In accordance with the Corporate
Governance Report, it is hereby noted that the Group has applied the principles and complied with the provisions
of the 2018 UK Code, other than as set out in Part B of the Introduction of the 2023 Corporate Governance
Report.
In relation to the first section of the Corporate Governance Report, the Company, as an entity listed on the CSE,
has formally adopted the 2019 CSE Code, and is actively implementing its principles. In reference to the second
section of the Corporate Governance Report, it is affirmed that the Company adheres to the provisions of the
2019 CSE Code. The Corporate Governance Report for the year 2023 includes a detailed narrative statement on
how the principles of the 2019 CSE Code have been effectively applied. The narrative also covers principles of
the 2018 UK Code and how these have been applied throughout the year.
The rules governing the composition of the Board of Directors and the appointment and replacement of its
members are set out in section 1 of the Corporate Governance Report for 2023. The powers of the Board of
Directors and committees of the Board with administrative, management and supervisory functions, including
any powers of the Directors in relation to the issuing or buying back by the Company of its shares, are also set
out in the Corporate Governance Report.
Any amendment or addition to the Articles of Association of the Company is only valid if approved by a special
resolution at a shareholders’ meeting.
A description of the operation of the shareholders' meeting, the key powers of the shareholders' meeting,
shareholders’ rights and the exercise of such rights are contained in section 5 of the Corporate Governance Report
for 2023.
Details of restrictions in voting rights and special control rights in relation to the shares of the Company are set
out in the section ‘Other information’ above. Other information required to be disclosed for the purposes of the
European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 is included on page 40.
In accordance with section 167 of the Companies Act 2014, the Directors confirm that a Board Audit Committee
is established. The Corporate Governance Report for 2023 details the role and responsibilities of the Board Audit
Committee and also includes a thorough account of the Board Audit Committee’s activities throughout the year
ended 31 December 2023. Furthermore, the Corporate Governance Report explicitly enumerates the members
of the Board Audit Committee and records the frequency of meetings held, as well as the attendance record of
each member for the reporting year.
Diversity information for the purposes of the UK Listing Rules, the FCA Disclosure and Transparency Rules and
the European Union Disclosure of Non-Financial and Diversity Information by certain large undertakings and
groups Regulations 2017, SI No. 360 of 2017 (as amended) is included in the Corporate Governance Report for
2023 on pages 176 to 177.
The Corporate Governance Report for 2023 is included within this Annual Financial Report on pages 158 to 232
and contains the information required for the purposes of section 1373 of the Companies Act 2014.
The statements and information referred to in this Corporate Governance Statement are deemed to be
incorporated herein.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
44
Directors’ Compliance Statement
As required by section 225 of the Companies Act 2014, the Directors acknowledge that they are responsible for
securing the Company’s compliance with its ‘relevant obligations’ (as defined in section 225(1) of the Companies
Act 2014). The Directors further confirm that a compliance policy statement has been drawn up setting out the
Company’s policies and that appropriate arrangements and structures have been put in place that are, in the
Directors’ opinion, designed to secure material compliance with the relevant obligations. A review of those
arrangements and structures has been conducted in the financial year to which this report relates.
Service agreements termination
The service contract of one of the Executive Directors in office as at 31 December 2023 includes a clause for
termination, by service of six months’ notice to that effect by the Executive Director but provided there is a
change of control of BOC PCL as this is defined in the service agreement. In such an event, the Executive Director
will be entitled to compensation as this is determined in the service contract. The terms of employment of the
other Executive Director are mainly based on the provisions of the collective agreement in place, which provides
for notice or compensation by BOC PCL based on years of service and for a four-month prior written notice by
the Executive Director, in the event of a voluntary resignation.
Political donations
Political donations are required to be disclosed under the Electoral Act 1997 of Ireland (as amended). Based on
the Donations, Sponsorships and Partnerships Policy of the Group, the Group does not sponsor political parties,
or any associations/organisations related directly, or indirectly, to one. The Directors, on enquiry, have satisfied
themselves that there were no political donations made during the year ended 31 December 2023.
Board of Directors
The members of the Board of Directors of the Company as at the date of this Directors' Report are listed on page
1. All Directors were members of the Board throughout the year and up to the date of this Directors’ Report
except as disclosed below.
On 17 February 2023 the Board of Directors nominated Mrs Monique Hemerijck as a new member to the Board
of Directors. On 10 August 2023 ECB approved the appointment of Mrs Monique Hemerijck as a member of the
Board of Directors.
On 31 March 2023 Mr Arne Berggren resigned as a member of the Board of Directors and on the same day the
Board of Directors nominated Mr Adrian John Lewis as a new member of the Board of Directors. On 17 November
2023 ECB approved the appointment of Mr Adrian John Lewis as a member of the Board of Directors.
On 13 October 2023 Mrs Maria Philippou resigned as a member of the Board of Directors. On 11 December 2023
Mr Nicolaos Sofianos resigned as a member of the Board of Directors. On 31 December 2023 both Mrs Paula
Hadjisotiriou and Mr Ioannis Zographakis resigned from their respective positions as members of the Board of
Directors.
In accordance with the Articles of Association at each annual general meeting of the Company every Director who
has been in office at the completion of the most recent annual general meeting since they were last appointed or
reappointed, shall retire from office and offer themselves for re-election if they wish.
The remuneration of the Board of Directors is disclosed in Note 49 of the Consolidated Financial Statements and
in the Remuneration Policy Report set out in the Corporate Governance Report.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
45
Directors’ and Secretary’s interests
The interest in the share capital of the Company held by each member of the Board of Directors and the Company
Secretary, including interests of their close family members at 31 December 2023, is presented in the table
below:
Ordinary shares or
Depositary Interests
representing Company
ordinary shares of €0.10
each at 31 December 2023
Ordinary shares or
Depositary Interests
representing Company
ordinary shares of €0.10
each at 1 January 2023 or
at the date of appointment
Non
-
executive directors
Efstratios-Georgios (Takis) Arapoglou 106,500
106,500
Arne Berggren (resigned on 31/03/2023)
n/a
25,000
Ioannis Zographakis
(resigned on
31/12/2023)
3,012
3,012
Paula Hadjisotiriou (resigned on 31/12/2023)
7
7
Constantine (Dinos) Iordanou 1,395,449
1,347,979
Maria Philippou (resigned on 13/10/2023)
n/a
1
Executive directors
Panicos Nicolaou 5,027
5,027
Eliza Livadiotou 35
35
Company Secretary
Katia Santis
5
5
1,510,035
1,487,566
The table above excludes awards under the Company’s long-term incentive plan and short-term incentive plan,
details of which are outlined on pages 224 to 226 and 230 of the Remuneration Policy Report.
Apart from the interests set out above, the Board of Directors and the Company Secretary had no other interests
in the shares of the Company or its subsidiaries at 31 December 2023.
Auditors
The Auditors, PricewaterhouseCoopers (‘PwC’) Chartered Accountants and Statutory Audit Firm, were
re-appointed as Auditors at the last Annual General Meeting held on 26 May 2023 in accordance with section
383(2) of the Companies Act 2014.
ESG Disclosures
As a recognised leader of the sustainability agenda in Cyprus, the Group is committed to building long-term
resilience and sustainability for its business, the economy and society. With key ambitions and targets set across
its sustainability agenda, the Group’s focus is on implementation and delivery, including investing in corporate
sustainability reporting and meeting disclosure obligations. The Group believes transparency is at the heart of
corporate sustainability, and in this section, it demonstrates its commitment to principles of openness and
accountability through the publication of a range of non-financial corporate sustainability and ESG disclosures.
These disclosures provide a basis for us to consider our commitments, while also imposing additional discipline
on the Group to make further progress and to use our influence to advocate for sustainability across our range
of stakeholders.
The mandatory non-financial reporting disclosures are provided in the ‘ESG Disclosures’ section of this Annual
Financial Report and are comprised of the Task Force on Climate-related Financial Disclosures (TCFD), the EU
Taxonomy Disclosures and the Non-Financial Information Statement, a requirement under the Non-Financial
Reporting Directive (NFRD).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
46
ESG Disclosures (continued)
Task Force on Climate-related Financial Disclosures
The Financial Conduct Authority (FCA) Listing Rules require premium-listed and standard-listed companies to
make disclosures under the TCFD framework. The Group’s disclosures are in line with the TCFD Recommendations
and Recommended Disclosures which are structured in the core elements of how organisations operate –
governance, strategy, risk management and metrics and targets.
The Group is cognisant that the preparation of comprehensive TCFD aligned disclosures is an ongoing process
and anticipates that a number of key actions will be necessary in 2024 to further advance our TCFD disclosures,
including:
i. setting additional Science Based Targets aligned with a climate scenario relating to the loan portfolio,
enabling the Group to incorporate further climate-related objectives and targets into the Group’s business
strategy;
ii. setting additional metrics used to assess the impact of climate-related risks on loan portfolio;
iii. estimating Financed Scope 3 GHG emissions and Insurance associated GHG emissions on additional asset
classes currently not available under the PCAF standards;
iv. developing further the stress testing and risk quantification methodologies and modelling;
v. developing the methodology to estimate the impact of climate-related issues on the financial performance
and financial position of the Group;
vi. developing further our tracking and data capabilities to facilitate regular and transparent reporting on our
progress; further leveraging our climate-related opportunities, in particular in relation to the development
of the Group’s sustainable finance propositions; and
vii. continuing to address feedback from the ECB on the Group’s Climate Risk Implementation Plan and
implementing actions as per the expectations embedded in the ECB Guide on climate-related and
environmental risks.
The Company acknowledges the importance of the TCFD and the UK’s FCA Listing Rules’ requirements for
reporting on climate-related risks and opportunities. We have undertaken a comprehensive review of our climate-
related risks and opportunities, taking into account the potential impact of climate change on our business
environment, and we have been making progress in integrating these considerations into our overall risk
management framework. Disclosures have been made for all TCFD Recommendations and Recommended
Disclosures, providing information on relevant decisions and on how these were taken. We have considered our
‘comply or explain’ obligation under the UK’s FCA Listing Rules, and confirm that we have made disclosures
consistent with the TCFD Recommendations and Recommended Disclosures.
All the current and future actions are comprehensively reported within our TCFD disclosures under each different
pillar of the reporting recommendations. Uncertainties and disclaimers associated with climate disclosures are
reported within the TCFD disclosures.
The Group is committed to providing transparent and consistent climate-related disclosures to its stakeholders,
including investors, customers, and employees, and will regularly review and update its disclosure practices in
line with evolving regulatory requirements and best practices.
The Group is committed to the principles of the TCFD and will continue to engage with stakeholders and
collaborate with industry peers to advance the adoption of climate-related disclosure practices across the business
community.
Information required is included in the ‘Non-financial information statement’ included within the ‘ESG Disclosures’
section of the Annual Financial Report
EU Taxonomy
In 2020, the European Union adopted the Taxonomy Regulation establishing a list of activities that can qualify as
environmentally sustainable and the obligation for companies subject to the NFRD to disclose how their operations
align with the EU Taxonomy.
In response to the disclosure requirement, in 2021 and 2022 the Group published the eligibility ratio. This ratio
shows the proportion of activities on its balance sheet that are included in the list of EU Taxonomy activities, but
without determining if they are aligned.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
47
ESG Disclosures (continued)
EU Taxonomy(continued)
For the first time in 2023, financial institutions are required to publish the green asset ratio (GAR) for two climate
objectives (Climate Change Mitigation and Climate Change Adaptation).
As companies' transparency in line with the EU Taxonomy increases, it will enable expanded reporting against
the Taxonomy. The adoption of CSRD and European Sustainability Reporting Standards (ESRS) will support
further implementation of the EU Taxonomy Regulation into our business strategy, systems, investment and
lending processes.
Information required is included in the ‘Non-financial information statement’ included within the ‘ESG Disclosures’
section of the Annual Financial Report.
Non-financial information statement
EU regulations on non-financial information, which were transposed into Irish law (European Union Disclosure of
Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017, SI No. 360
of 2017 (as amended), require reporting on specific topics such as the environment, social and employee matters,
respect for human rights, bribery and corruption. Information required is included in the ‘Non-financial information
statement’ included within the ‘ESG Disclosures’ section of the Annual Financial Report.
The Group publishes its Annual Non-Financial Results based on the Global Reporting Initiative (GRI) and the
Sustainability Accounting Standards Board (‘SASB’) guidelines and standards, which identify and include all the
above information. The Corporate Sustainability Report 2023 will be available at the Group's website
http://www.bankofcyprus.com (Group/Sustainability/Our Sustainability Reports).
In November 2023, TCFD was succeeded by the International Sustainability Standards Board (ISSB). Going
forward, the Group will align its disclosures with the Corporate Sustainability Reporting Directive (CSRD) and the
International Financial Reporting Standards for Climate (S2) and Sustainability Disclosures (S1).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
48
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Financial Report and the financial statements in accordance
with International Financial Reporting Standards (IFRS) adopted by the EU and with those parts of the Companies
Act 2014 applicable to companies reporting under IFRSs, the EU (Credit Institutions: Financial Statements)
Regulations 2015 and, in respect of the consolidated financial statements, Article 4 of the International Accounting
Standards (IAS) Regulation. Company law requires the Directors to prepare Group and Company financial
statements for each financial year.
Under Irish law the Directors shall not approve the financial statements unless they are satisfied that they give a
true and fair view of the Group’s and Company’s assets, liabilities and financial position as at the end of the
financial year and of the profit or loss of the Group and the Company for the financial year and otherwise comply
with the Companies Act 2014.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether the financial statements have been prepared in accordance with IFRSs adopted by the EU
and ensure that they contain the additional information required by the Companies Act 2014; and
- prepare the financial statements on a going concern basis unless it is inappropriate to presume that the
Group and the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions, to disclose with reasonable accuracy at any time the assets, liabilities and financial
position of the Company and enable them to ensure that the financial statements comply with the provisions of
the Companies Act 2014 and Article 4 of IAS Regulation. The Directors, through the use of appropriate procedures
and systems, have also ensured that measures are in place to secure compliance with the Company’s and the
Group’s obligations to keep adequate accounting records. These accounting records are kept at the Company’s
registered office at 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland and at 51 Stasinos Street, 2002, Strovolos,
Nicosia, Cyprus.
In compliance with section 283 of the Companies Act 2014, the information and returns relating to the business
dealt with in the accounting records for 2023 have been sent to the registered office of the Company. The
Directors are also responsible for safeguarding the assets of the Group and the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and the requirements of the UK’s FCA Listing Rules issued by the LSE, the Directors are also
responsible for preparing a Directors' Report and reports relating to Directors' remuneration and corporate
governance. The Directors are also required by the Transparency (Directive 2004/109/EC) Regulations 2007, as
amended Part 2 (Transparency Requirements) of the Central Bank (Investment Market Conduct) Rules 2019 and
the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority to include a Directors'
report containing a fair review of the development and performance of the business and the position of the Group
and a description of the principal risks and uncertainties facing the Group.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company’s website. Legislation in Ireland governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Directors’ Report
49
Statement of Directors’ Responsibilities (continued)
The Directors confirm that, to the best of each Director’s knowledge and belief:
- they have complied with the above requirements in preparing the financial statements;
- the financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities and financial position of the Group and the Company and of the profit or loss
of the Group and the Company;
- the Directors’ report contained in the Annual Financial Report 2023 includes a fair review of the
development and performance of the business and the position of the Group and the Company, together
with a description of the principal risks and uncertainties that they face; and
- the Annual Financial Report 2023 and the financial statements, taken as a whole, is fair, balanced and
understandable and provide the information necessary for shareholders to assess the Group’s position
and performance, business model and strategy.
28 March 2024
50
Risk and Capital Management Report
2023
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
51
The Group’s approach to risk management
One of the Group’s main priorities is to continually improve its risk management framework to be able to respond
to the ever changing environment in an appropriate manner. Effective risk management is critical to the success
of the Group, and as such the Group maintains a risk management framework designed to ensure the safety
and soundness of the institution, protect the interests of depositors and shareholders and comply with regulatory
requirements. Clearly defined lines of authority and accountability are in place as well as the necessary
infrastructure and analytics to allow the Group to identify, assess, monitor and control risk.
1. Risk Management Framework (RMF)
The Board of Directors, through the Risk Committee (RC), is responsible to ensure that a coherent and
comprehensive Risk Management Framework (the ‘Framework’ or ‘RMF’) for the identification, assessment,
monitoring and controlling of all risks is in place. The Framework ensures that material and emerging risks are
identified, including, but not limited to, risks that might threaten the Group’s business model, future
performance, liquidity, and solvency. Such risks are taken into consideration in defining the Group’s overall
business strategy ensuring alignment with the Group’s risk appetite. In setting its risk appetite, the Group
ensures that its risk bearing capacity is considered so that the appropriate capital levels are always maintained.
The RMF is supported by a strong governance structure and is comprised of several components that are
analysed in the sections below. The RMF is reviewed, updated and approved by the Board at least annually to
reflect any changes to the Group’s business or to take into consideration external regulations, corporate
governance requirements and industry best practices.
1.1 Risk Governance
The responsibility for the governance of risk at the Group lies with the Board of Directors (the ‘Board’) which
is ultimately accountable for the effective management of risks and for the system of internal controls in the
Group. The Board is assisted in its risk governance responsibilities by the Board Risk and Board Audit Committees
(RC and AC respectively) and at executive management level by the Executive Committee (EXCO), Asset and
Liability Committee (ALCO), Asset Disposal Committee (ADC), Technology Committee (TC), Sustainability
Committee (SC) and the Credit Committee.
The RC supports the Board on risk oversight matters including the monitoring of the Group’s risk profile and of
all risk management activities whilst the AC supports the Board in relation to the effectiveness of the system of
internal controls. In addition, discussion and escalation processes are in place through both the Board
Committees and executive level Committees that provide for a consistent approach to risk management and
decision-making.
Discussion around risk management is supported by the appropriate risk information submitted by the Risk
Management Division (RMD) and Executive Management. The Chief Risk Officer (CRO) or his representatives
participate in all such key committees to ensure that the information is appropriately presented, and that RMD’s
position is clearly articulated.
Furthermore, the roles of the CEO and the Group CRO are critical as they carry specific responsibilities with
respect to risk management. These include:
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
52
1. Risk Management Framework (RMF) (continued)
1.1 Risk Governance (continued)
Chief Executive Officer (CEO)
The CEO is accountable for leading the development of the Group’s strategy and business plans in a manner
that is consistent with the approved risk appetite and for managing and organising Executive Management to
ensure these are executed. It is the CEO’s responsibility to manage the Group’s financial and operational
performance within the approved risk appetite.
Chief Risk Officer (CRO)
The CRO leads an independent RMD across the Group including its subsidiaries. The CRO is responsible for the
execution of the Risk Management Framework and the development of risk management strategies. The CRO is
expected to challenge business strategy and overall risk taking and risk governance within the Group and
independently submit his findings, where necessary, to the RC. The CRO reports to the RC and for administrative
purposes has a dotted line to the CEO, as presented in the figure organizational diagram below.
1.2 Organisational Model
The RMD is the business function set up to manage the risk management process of the Group on a day-to-day
basis. The risk management process is integrated into BOC PCL’s internal control system. The RMD is organized
into several departments, each of which is specialized in one or several categories of risks. The organization of
RMD reflects the types of risks inherent in the Group.
*The Data Quality and Governance Unit of the Data Office & Risk Analytics Department directly reports through its manager
to the Data Quality & Governance committee chaired by the Executive Director People & Change.
RMD organisational model
The RMD operates independently and this is achieved through:
- Organisational independence from the activities assigned to control;
- Unrestricted and direct access to Executive Management and the Board, either through the RC or directly
- Direct and unconditional access to all business lines that have the potential to generate material risk to
the Group. Front Line managers are required to cooperate with the RMD managers and provide access to
all records and files of the Group as well as any other information necessary;
- A separate budget submitted to the RC for approval;
- The CRO is a member of the EXCO and holds voting or veto presence in key executive committees as well
as operational committees.
Furthermore, this independence is also ensured as:
- The CRO is assessed annually by the RC that is jointly responsible with Human Resources & Remuneration
Committee
- The CRO maintains a close working relationship with both the RC and its Chairperson which includes
regular and frequent direct communication both during official RC meetings as well as unofficial meetings
and discussions
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
53
1. Risk Management Framework (RMF) (continued)
1.2 Organisational Model (continued)
The RMD organisational model is structured so as to:
- Define risk appetite and report regularly on the status of the risk profile
- Ensure that all material and emerging risks have proper ownership, management, monitoring and clear
reporting
- Promote proper empowerment in key risk areas that will assist in the creation of a robust risk culture
- Provide tools and methodologies for risk management to the business units
- Report losses from risks identified to the EXCO, the RC and the Board and, where necessary, to the
Regulatory Authorities
- Collect and monitor Key Risk Indicators (KRIs)
The RMD is responsible for the risk identification and management across the Group companies.
1.3 Risk Identification
The risk identification process is comprised of two simultaneous but complementary approaches, namely, the
top-down and the bottom-up approaches. The top-down process is led by Senior Management and focuses on
identifying the Group’s material risks whilst the bottom-up approach risks are identified and captured through
several methods such as the Risk and Control Self-Assessment (RCSA) process, incident capture, fraud events
capture, regulatory audits, direct engagement with specialized units and other. The risks captured by these
processes are compiled during the annual ICAAP process and its quarterly updates and form the Groups’ material
risks.
To ensure a complete and comprehensive identification of risks the Group has integrated several key processes
into its risk identification process, including the:
- Internal Capital Adequacy Assessment Process (ICAAP)
- Internal Liquidity Adequacy Assessment Process (ILAAP)
- Stress testing
- Group Financial Plan compilation process
- Regulatory, internal and external reviews and audits
1.4 Three Lines of Defence
The Group complies with the regulatory guidelines for corporate governance and has established the "Three
Lines of Defence" model as a framework for effective risk and compliance management and control. The three
lines of defence model defines the responsibilities in the risk management process ensuring adequate
segregation in the oversight and assurance of risk.
First Line of Defence
The first line of defence lies with the functions that own and manage risks as part of their responsibility for
achieving objectives and are responsible for implementing corrective actions to address, process and control
deficiencies. It comprises of the management and staff of business lines and support functions who are directly
aligned with the delivery of products and/or services.
Second Line of Defence
The second line of defence includes functions that oversee the compliance of the first line management and
staff, with the regulatory framework and risk management principles. It comprises of the RMD, Information
Security and Compliance functions. The second line of defence sets the corporate governance framework of the
Group and establishes policies and guidelines that the business lines and support functions, Group entities and
staff should operate within. The second line of defence also provides support, as well as independent oversight
of the risk profile and risk framework.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
54
1. Risk Management Framework (RMF) (continued)
1.4 Three Lines of Defence (continued)
Third Line of Defence
The third line of defence is the Internal Audit Division (IA) which provides independent assurance to the Board
and the EXCO on the design adequacy and operating effectiveness of the Group’s internal control framework,
corporate governance and risk management processes for the management of risks according to the risk
appetite set by the Board. Findings are communicated to the Board through the committees and senior
management and other key stakeholders, with remediation plans monitored for progress against agreed
completion dates.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
55
1. Risk Management Framework (continued)
1.5 Risk Appetite Framework (RAF)
The objective of the Risk Appetite Framework (RAF) is to set out the level of risk that the Group is willing to
take in pursuit of its strategic objectives, outlying the key principles and rules that govern the risk appetite
setting. It comprises the Risk Appetite Statement (RAS), the associated policies and limits where appropriate,
as well as the roles and responsibilities for the implementation and monitoring of the RAF.
The RAF has been developed in order to be used as a key management tool to better align business strategy
(financial and non-financial targets) with risk management, and it should be perceived as the focal point for all
relevant stakeholders within the Group, as well as the supervisory bodies, for the assessment of whether the
undertaken business activities are consistent with the set risk appetite.
The RAF is one of the main elements of the Risk Management Framework which includes, among others, a
number of frameworks, policies and circulars that address the principal risks of the Group. Separate RAFs are
in place for all operating subsidiaries which are subject to each subsidiary’s board approval.
Risk Appetite Statement (RAS)
The RAS is the articulation, in written form, of the aggregate level and types of risk that the Group is willing to
accept in the course of executing its business objectives and strategy. It includes qualitative statements as well
as quantitative measures expressed relative to Financial and Non-Financial risks. As part of the overall
framework for risk governance, it forms a boundary condition to strategy and guides the Group in its risk-taking
and related business activities.
Risk appetite and Financial Plan interaction
The Group’s Financial Plan is integral to how the Group manages its business and monitors performance. It
informs the delivery of the Group’s strategy and is aligned to the Risk Appetite Statement. The RAS is subject
to an annual review process during the period in which the Group’s Financial Plan as well as the divisional
strategic plans are being formulated. The interplay between these processes provides for cycle of feedback
during which certain RAS indicators (such as ones related to minimum regulatory requirements) act as a
backstop to the Group’s Financial Plan while for other indicators the Group Financial Plan provides input for risk
tolerance setting. Furthermore, the Group Financial Plan and Reforecast exercises are tested to ensure they are
within the Group’s risk appetite.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
56
1. Risk Management Framework (continued)
1.5 Risk Appetite Framework (RAF) (continued)
Risk Appetite monitoring
To ensure that the risk profile of the Group is within the approved risk appetite, a consolidated risk report and
a risk appetite profile report are regularly reviewed and discussed by the Board and the RC.
Where a breach of a RAS indicator occurs, the Risk Appetite Framework provides the necessary escalation
process to analyse the materiality and nature of the breach, notify the appropriate authorities, and decide the
necessary remediation actions.
1.6 Risk Taxonomy
In order to ensure that all risks the Group may face are identified and managed, a risk taxonomy is in place
which is a key component of the Internal Capital Adequacy Assessment Process (ICAAP) and the Internal
Liquidity Adequacy Assessment Process (ILAAP). The taxonomy ensures that the coverage of risks is
comprehensive and identifies potential linkages between risks.
The Risk taxonomy provides a categorisation of different risk types / factors enabling the institution to assess,
aggregate and manage risks in a consistent way through a common risk language and mapping. It comprises
of several levels of risks in increasing granularity and supports a multi-level tree categorization to enhance the
overall risk classification. This risk categorization is also used to accommodate additional regulatory compliance
requirements and internal risk analysis and reporting needs.
1.7 Risk measurement and reporting
The RMD uses several systems and models to support key business processes and operations, including stress
testing, credit approvals, fraud risk and financial reporting. The RMD has established a model governance and
validation framework to help address risks arising from model use.
Additionally, the RMD:
- Maintains a categorization and definitions of risks and terminologies which are used throughout the Group
- Collates reports of Key Risk Indicators (KRIs) and other relevant risk information. When limit violations
occur, escalation and reporting procedures are in place;
- Checks that risk information provided by management is complete and accurate and management has
made all reasonable endeavour to identify and assess all key risks;
- Ensures that the risk information submitted to the RC and the Board by RMD and management is
appropriate and enables monitoring and control of all the risks faced by the Group ;
- Discloses risk information externally and prepares reports on significant risks in line with internal and
external regulatory requirements.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
57
1. Risk Management Framework (continued)
1.7 Risk measurement and reporting (continued)
Stress testing
Stress testing is a key risk management tool used by the Group to provide insights on the behaviour of different
elements of the Group in a crisis scenario and to assess the Group’s resilience and capital and liquidity adequacy.
To make this assessment, a range of scenarios is used, based on variations of market, economic and other
operating environment conditions. Stress tests are performed for both internal and regulatory purposes and
serve an important role in:
- Understanding the risk profile of the Group;
- Evaluating whether there is sufficient capital or adequate liquidity under stressed conditions (ICAAP and
ILAAP) so as to put in place appropriate mitigants;
- Evaluating of the Group’s strategy;
- Establishing or revising limits;
- Assisting the Group to understand the events that might push the Group outside its risk appetite.
The Group carries out the stress testing process through a combination of bottom-up and top-down approaches.
Scenario and sensitivity analysis follows a bottom-up approach, whereas reverse stress testing follows a top-
down approach.
If the stress testing scenarios reveal vulnerability to a given set of risks, management makes recommendations
to the Board, through RC, for remedial measures or actions.
The Group’s stress testing programme embraces a range of forward looking stress tests and takes all the Group’s
material risks into account. These key internal exercises include:
 Stress testing undertaken in support of the Internal Capital Adequacy Assessment Process (ICAAP).
Quarterly ICAAP reviews are also undertaken.
 Stress testing applied to the funding and liquidity plan in support of the Internal Liquidity Adequacy
Assessment Process (ILAAP) to formally assess the Group’s liquidity risks. Quarterly ILAAP reviews are
also undertaken.
 Annual recovery stress tests which use scenarios to assess the adequacy of recovery indicators of both
capital and liquidity in identifying the recovery plan options used to exit that stress;
 Ad hoc stress testing as and if required, including in response to regulatory requests.
Other business and specific risk type stress tests
The Market and Liquidity Risk Department performs additional stress tests, which include the following:
- Monthly stress testing for interest rate risk (2% shock on Economic Value (EV));
- Quarterly stress testing for interest rate risk (2% shock on Net Interest Income (NII));
- Quarterly stress testing for interest rate risk (based on the six predefined Basel interest rate scenarios
which involve flattening, steepening, short up, short down, parallel up, parallel down shocks);
- Quarterly stress testing on items that are marked to market: impact on profit/loss and reserves is
indicated from changes in interest rates and prices of bonds and equities.
ICAAP
The ICAAP is a process whose main objective is to assess the Group’s capital adequacy in relation to the level
of underlying material risks that may arise from pursuing the Group’s strategy or from changes in its operating
environment. More specifically, the ICAAP analyses, assesses and quantifies the Group’s risks, establishes the
current and future capital needs for the material risks identified and assesses the Group’s absorption capacity
under both the baseline scenario and stress testing conditions, aiming to assess whether the Group has sufficient
capital, under both the base and stress case scenarios, to support its business and achieve its strategic
objectives as per its Board-approved Risk Appetite and Strategy.
The Group undertakes quarterly reviews of its ICAAP results as well as on an ad-hoc basis if needed, which are
submitted to the ALCO and the RC, considering the latest actual and forecasted information. During the quarterly
review, the Group’s risk profile is reviewed and any material changes/developments since the annual ICAAP
exercise are assessed in terms of capital adequacy.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
58
1. Risk Management Framework (continued)
1.7 Risk measurement and reporting (continued)
The 2023 ICAAP is due for submission to the ECB on 28 March 2024. The 2023 quarterly ICAAP reviews indicated
that the Group has sufficient capital and available mitigants to support its risk profile and its business and to
enable it to meet its regulatory requirements, both under baseline and stressed conditions.
ILAAP
The ILAAP is a process whose main objective is to assess whether the volume and capacity of liquidity resources
available to the Group are adequate to support its business model, to achieve its strategic objectives under both
the base and severe stress scenarios, and to meet regulatory requirements, including the LCR and the NSFR.
The Group undertakes quarterly reviews of its ILAAP results through quarterly liquidity stress tests which are
submitted to the ALCO and the RC, where actual and forecasted information is considered. Any material changes
since the year-end are assessed in terms of liquidity and funding.
The 2023 ILAAP is due for submission to the ECB on 28 March 2024. The 2023 quarterly ILAAP reviews indicated
that the Group maintains liquidity resources which are adequate to ensure its ability to meet obligations as they
fall due under ordinary and stressed conditions.
1.8. 2023 ECB SREP Stress Test
The Group participated in the ECB SREP Stress Test of 2023. The stress test measures how banks would fare in
a hypothetical adverse economic scenario, which assumes a prolonged period of low growth, elevated interest
rates and high inflation. It is not a ‘pass-or-fail’ exercise, and no threshold is set to define the failure or success
of banks. Instead, the findings of the stress test will feed into the ongoing supervisory dialogue, in which
supervisors explain their assessment to banks and discuss potential measures to address any shortcomings.
The ECB published on 28 July 2023 the results of the stress test. As per the relevant ECB press release ‘Capital
depletion at the end of the three-year horizon was lower than in previous stress tests’. This was mainly due to
banks overall being in better shape going into the exercise, with higher-quality assets and stronger profitability.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
59
1. Risk Management Framework (continued)
1.8. 2023 ECB SREP Stress Test (continued)
By its standard procedures, the ECB considers the quantitative performance in the adverse scenario as an input when reconsidering the level
of the Pillar II Guidance in its 2023 SREP assessment and the qualitative performance as one aspect when holistically reviewing the Pillar II
Requirement. The stress test was based on a static balance sheet approach, thus using the Group’s financial and capital position as at 31
December 2022 as a starting point. The results for the Group, as published by the ECB, are presented below:
High
-
level individual results
by range
Scenario sensitivities: 2023
-
2025
projections
adverse scenario, FL (delta over total REA FL 2022)
Institution Sample
Maximum
CET1 ratio
(FL)
depletion
by ranges
Minimum
CET1 ratio
(FL) by
ranges
Minimum
Tier 1
leverage
ratio (FL) by
ranges
Delta
projected NII
adverse vs.
baseline
scenario
(in %)
Delta
projected LLPs
adverse vs.
baseline
scenario
(in %)
Delta
projected
profit/ loss
adverse vs.
base-line
scenario (in
%)
Bank of Cyprus
Holdings
Public Limited Company
SSM
300 to 599
bps
8%
<
CET1R
< 11%
5%
<
LR <
6%
-3.7%
4.4%
-9.0%
In terms of the Group’s results, the capital depletion of the CET1 FL ratio over the 3-year horizon in the adverse scenario was in the range of
300 to 599 basis points as indicated above, compared to 600 to 899 basis points in the 2021 stress test, and compares well with the average
480 basis points for the 98 ECB stress-tested banks.
1.9 The Group is participating in the Fit-for-55 exercise.
The Group is also participating in the European Banking Authority (“EBA”) “Fit-for-55” climate risk scenario analysis exercise. The one-off
exercise is part of the new mandates received by the EBA in the scope of the European Commission's Renewed Sustainable Finance Strategy.
Under the European Green Deal, all 27 EU Member States committed to turning the EU into the first climate-neutral continent by 2050 and
pledged to reduce emissions by at least 55% by 2030, compared to 1990 levels. The One-off Fit-for-55 climate risk scenario analysis aims at
assessing the resilience of the financial sector in line with the Fit-for-55 package and to gain insights into the capacity of the financial system
to support the transition to a lower carbon economy under conditions of stress.
1.10 The Group is participating in the ECB Cyber Resilience Stress Test
The Group is participating in the cyber resilience stress test exercise being conducted by the ECB in the first half of 2024. The aim is to assess
the cyber-resilience framework for all SSM Significant Institutions. The exercise will assess how banks respond to and recover from a
cyberattack, rather than their ability to prevent it. The insights gained will be used for the wider supervisory assessment in 2024. Supervisors
will discuss the findings and lessons learned with each bank as part of the 2024 Supervisory Review and Evaluation Process.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
60
2. Recovery and resolution planning
The Group’s recovery plan sets out the arrangements and measures that the Group could adopt in the event of
severe financial stress to restore the Group to long term viability. A suite of indicators and options are included
in the Group’s recovery plan, which together present the identification of stress events and the tangible
mitigating actions available to the Group to restore viability. The Group’s recovery plan is approved by the Board
on the recommendation of the RC and ALCO.
The Group resolution plan is prepared by the Single Resolution Board in cooperation with the National Resolution
Authority (Central Bank of Cyprus). The resolution plan describes the Preferred Resolution Strategy (PRS), in
addition to ensuring the continuity of the Group’s critical functions and the identification and addressing of any
impediments to the Group’s resolvability. The PRS for the Group is a single point of entry bail-in via BOC PCL.
The resolution authorities also determine the Minimum Requirements for own funds and Eligible Liabilities
(MREL) corresponding to the loss absorbing capacity necessary to execute the resolution.
3. Risk Culture
A robust risk culture is a substantial determinant of whether the Group will be able to successfully execute its
strategy within its defined risk appetite. An action plan towards the implementation of a firm-wide risk culture
is in place across the Group and RMD has a leading role in it. The action plan includes, among other, the
measurement of risk culture, both at bank wide and divisional level, through a specific Risk Culture Dashboard,
the communication of a series of topics aiming at re-enforcing risk culture and the provision of specific training
for areas such as credit underwriting and other risk management related topics.
4. Principal Risks
As part of its business activities, the Group faces a variety of risks. The principal and other risks faced by the
Group are described below as well as the way these are identified, assessed, managed and monitored by the
Group, including the available mitigants. The risks described below, should not be regarded as a complete and
comprehensive statement of all potential risks, uncertainties or mitigants as other factors either not yet
identified or not currently material, may also adversely affect the Group.
4.1 Credit Risk
Credit risk is defined as the current or prospective risk to earnings and capital arising from an obligor’s failure
to meet the terms of any contract with the Group (actual, contingent or potential claims both on and off balance
sheet) or failure to perform as agreed. Within the general definition of credit risk, the Group identifies and
manages the following types of risk:
 Counterparty credit risk (CCR): the Group’s credit exposure with other counterparties. The risk of
losses arising as a result of the counterparty not meeting their contractual obligations in full and on
time.
 Settlement risk: the risk that a counterparty fails to deliver the terms of a contract with the Group.
 Issuer risk: the risk to earnings arising from a credit deterioration of an issuer of instruments in which
the Group has invested.
 Concentration risk: the risk that arises from the uneven distribution of exposures (i.e. credit
concentration) to individual borrowers or by industry, collateral, product, currency, economic sector or
geographical region.
 Country risk: the Group’s credit exposure arising from lending and/or investment or the presence of
the Group to a specific country.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
61
4. Principal Risks (continued)
4.1 Credit Risk (continued)
In order to manage these risks the Group has a Credit Risk Management function within RMD that:
- Develops policies, guidelines and approval limits necessary to manage and control or mitigate the
credit and concentration risk in the Group. These documents are reviewed and updated at least
annually, or earlier if deemed necessary, to reflect any changes in the Group’s risk appetite and
strategy and consider the market environment or any other major changes from external or internal
factors that come into effect;
- Assesses credit applications before their submission for approval to Credit Committee 3 / the RC / the
Board from an independent credit risk perspective and prepares recommendations with suggestions to
improve credit proposals and mitigate credit risk;
- Participates as an observer in the Credit Committee 3 and in specific cases that fall under the approving
authority of Corporate Sanctioning;
- Sets KRIs for monitoring the loan portfolio quality and adopts a proactive monitoring approach for such
risks;
- Measures the expected credit losses in a prudent way in order to have a fair representation of the loan
book in the financial statements of the Group
The Group sets and monitors Risk Appetite limits relating to credit risk. Furthermore, a limits framework is in
place in relation to the credit granting process and its structure and also the general rules are documented in
the Group’s Lending Policy. Relevant circulars and guidelines are in place that provide limits and parameters for
the approval of credit applications and related credit limits. The Group has an established Credit Committee
(Credit Committee 3) which is comprised of members from various Group divisions outside RMD to ensure
independence of opinion. Applications falling outside the approval limits of Credit Committee 3 are submitted to
the RC or the Board, depending on the total exposure of the customer group.
The Group has adopted methodologies and techniques for credit risk identification. These methodologies are
revised and modified whenever deemed necessary to reflect changes in the financial environment and adjusted
to be in line with the Group’s overall strategy and its short-term and long-term objectives.
The Group dedicates considerable resources to assess credit risk and to correctly reflect the value of its on-
balance and off-balance sheet exposures in accordance with regulatory and accounting guidelines. This process
can be summarised in the following stages:
 Analysing performance and asset quality
 Measuring exposures and concentrations
 Raising allowances for impairment
Furthermore, post-approval monitoring is in place to ensure adherence to both, terms and conditions set in the
approval process and credit risk policies and procedures. A key aspect of credit risk is credit risk concentration
which is defined as the risk that arises from the uneven distribution of exposures to individual borrowers, specific
industry or economic sectors, geographical regions, product types or currencies. The monitoring and control of
concentration risk is achieved by limit setting (e.g. sector and name limits) and reporting them to senior
management.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
62
4. Principal Risks (continued)
4.1 Credit Risk (continued)
Approved policies and procedures are in place for the approval of Credit and Settlement Limits per counterparty
based on the business needs, current exposures and investment plans. Counterparty credit and settlement limits
for Treasury transactions are monitored real-time through the Treasury front to back system.
With the aim of identifying credit risk at an early stage, a number of key reports are prepared for the EXCO
and / or the Board. Indicatively, these include a credit quality dashboard which analyses, among others, the
overall loan book performance, forborne facilities, the performance of new lending, specific products or
portfolios, new forbearances and modifications and other portfolio quality KPIs.
Country Risk
Country Risk refers to the possibility that borrowers of a particular country may be unable or unwilling to fulfill
their foreign obligations for reasons beyond the usual risks which arise in relation to all lenders. Country risk
affects the Group via its operation in other countries and also via investments in other countries (Money Market
(MM) placements, bonds, shares, derivatives, etc.). In addition, the Group is indirectly affected by credit facilities
provided to customers for their international operations or due to collateral in other countries. In this respect,
country risk is considered in the risk assessment of all exposures, both on-balance sheet and off-balance sheet.
Country risk exposures are the aggregation of the various on-balance sheet and off-balance sheet exposures
including investments in bonds, money market placements, loans by or guarantees to residents of a country,
letters of credit, properties etc.
The Group monitors country risk on a quarterly basis by reporting to ALCO country exposures compared to
country limits. The Board, through the RC is also informed on a regular basis and at least annually, on any limit
breaches. The country limits are allocated based on the CET1 capital of the Group, the country's credit rating
and internal scoring.
Credit Risk Mitigation
The fundamental lending principle of the Group is to approve applications and provide credit facilities only when
the applicant has the ability to pay and where the terms of these facilities are consistent with the customers’
income and financial position, independent of any collateral that may be assigned as security and in full
compliance with all external laws, regulations, guidelines, internal codes of conduct and other internal policies
and procedures. The value of collateral is not a decisive factor in the Group’s assessment and approval of any
credit facility since collaterals may only serve as a secondary source of repayment in case of default.
Collaterals are used for risk mitigation. Collaterals are considered as an alternative means of debt recovery in
case of default. Collateral by itself is not a predominant criterion for approving a loan, with the exception of
when the loan agreement envisages that the repayment of the loan is based on the sale of the property pledged
as collateral or liquid collateral provided (e.g. cash). The Group’s requirements around completion, valuation
and management of collateral are set out in appropriate Group policies.
Credit risk mitigation is also implemented through a number of policies, procedures, guidelines circulars and
limits. Policies are approved by the RC and include the:
 Lending Policy
 Write-off policy
 Concentration Risk Policy
 Valuation Policy
 Credit Risk Monitoring Policy
 Environmental & Social Policy
 Asset Acquisition and Disposal Policy
 Loan Syndication Policy
 Green Lending Policy
 Shipping Finance Policy
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
63
4. Principal Risks (continued)
4.1 Credit Risk (continued)
Systems
The effective management of the Group’s credit risk is achieved through a combination of training and
specialisation as well as appropriate credit risk assessment (risk rating) systems. The Group aims to continuously
upgrade the systems and models used in assessing the creditworthiness of Group customers. Additionally the
Group continuously upgrades the systems and models for the assessment of credit risk aiming to correctly
reflect the value of its on-balance and off-balance sheet exposures in accordance with regulatory and accounting
guidelines.
Further information and analysis relating to credit risk is set out in Note 44 of the Consolidated Financial
Statements. Furthermore, the Group’s significant judgements, estimates and assumptions regarding the
determination of the level of provisions for impairment/expected credit losses (ECLs) are set out in Note 5
‘Significant and other judgements, estimates and assumptions’ of the Consolidated Financial Statements.
The analysis of loans and advances to customers in accordance with the EBA standards is presented
below.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
64
4. Principal Risks (continued)
4.1 Credit Risk (continued)
The tables below present the analysis of loans and advances to customers in accordance with the EBA standards.
Gross loans and advances to customers
Accumulated impairment, accumulated negative changes in fair value due to
credit risk and provisions
31 December 2023
Group gross
customer
loans and
advances
1,2
Of which:
NPEs
Of which exposures with
forbearance measures
Accumulated
impairment,
accumulated
negative changes in
fair value due to
credit risk and
provisions
Of which:
NPEs
Of which exposures with forbearance
measures
Total exposures
with forbearance
measures
Of which:
NPEs
Total exposures
with forbearance
measures
Of which:
NPEs
€000 €000 €000 €000 €000 €000 €000 €000
Loans and advances to customers
General governments 35,249 - - - 6 - - -
Other financial corporations 253,077 805 1,201 448 4,247 378 308 305
Non-financial corporations 4,931,801 155,212 258,469 95,156 91,640 61,097 37,355 33,472
Of which: Small and Medium sized
Enterprises
3
(SMEs)
3,017,909 125,600 161,086 69,551 66,104 48,370 25,743 22,814
Of which: Commercial real estate
3
3,567,684 136,152 228,516 90,842 66,458 50,862 33,774 31,716
Non-financial corporations by sector
Construction 484,893 24,873 8,585
Wholesale and retail trade 869,753 37,739 22,936
Accommodation and food service activities 1,169,399 14,310 9,657
Real estate activities 1,019,544 40,296 23,461
Manufacturing 359,874 3,852 4,589
Other sectors 1,028,338 34,142 22,412
Households 4,781,114 207,883 196,070 96,019 83,560 58,962 30,330 25,227
Of which: Residential mortgage loans
3
3,726,056 169,734 173,407 83,445 52,863 39,732 25,119 20,849
Of which: Credit for consumption
3
590,945 29,347 21,312 12,704 21,108 13,357 4,897 4,157
Total on-balance sheet 10,001,241 363,900 455,740 191,623 179,453 120,437 67,993 59,004
1
Excluding loans and advances to central banks and credit institutions.
2
The residual fair value adjustment on initial recognition (which relates mainly to loans acquired from Laiki Bank and is calculated as the difference between the outstanding contractual amount
and the fair value of loans acquired and bears a negative balance) is considered as part of the gross loans, therefore decreases the gross balance of loans and advances to customers.
3
The analysis shown in lines ‘non-financial corporations’ and ‘households’ is non-additive across all categories as certain customers could be in both categories.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
65
4. Principal Risks (continued)
4.1 Credit Risk (continued)
Gross loans and advances to customers
Accumulated impairment, accumulated negative changes in fair value due to
credit risk and
provisions
31 December 2022
Group gross
customer
loans and
advances
4,5
Of which:
NPEs
Of which exposures with
forbearance measures
Accumulated
impairment,
accumulated
negative changes in
fair value due to
credit risk and
provisions
Of which:
NPEs
Of which exposures with forbearance
measures
Total exposures
with forbearance
measures
Of which:
NPEs
Total exposures
with forbearance
measures
Of which:
NPEs
€000 €000 €000 €000 €000 €000 €000 €000
Loans and advances to customers
General governments 39,766 - - - 25 - - -
Other financial corporations 186,281 3,202 11,665 2,825 6,008 2,332 2,453 2,250
Non-financial corporations 5,134,784 144,522 950,499 91,100 100,265 69,212 53,940 44,957
Of which: Small and Medium sized
Enterprises
6
(SMEs)
3,492,414 84,493 449,891 33,140 53,939 33,882 17,643 11,683
Of which: Commercial real estate
6
3,975,290 120,445 895,971 80,980 76,385 58,414 47,047 41,152
Non-financial corporations by sector
Construction 549,921 11,949 13,319
Wholesale and retail trade 909,438 20,783 15,907
Accommodation and food service activities 1,164,979 20,824 9,543
Real estate activities 1,108,581 20,281 19,738
Manufacturing 392,843 9,429 4,033
Other sectors 1,009,022 61,256 37,725
Households 4,770,863 260,629 290,556 143,140 72,144 54,643 37,362 32,087
Of which: Residential mortgage loans
6
3,785,834 220,354 253,794 125,994 45,805 37,616 29,759 25,751
Of which: Credit for consumption
6
547,490 37,622 42,719 21,235 20,355 14,628 8,543 7,486
Total on-balance sheet 10,131,694 408,353 1,252,720 237,065 178,442 126,187 93,755 79,294
4
Excluding loans and advances to central banks and credit institutions.
5
The residual fair value adjustment on initial recognition (which relates mainly to loans acquired from Laiki Bank and is calculated as the difference between the outstanding contractual amount
and the fair value of loans acquired and bears a negative balance) is considered as part of the gross loans, therefore decreases the gross balance of loans and advances to customers.
6
The analysis shown in lines ‘non-financial corporations’ and ‘households’ is non-additive across all categories as certain customers could be in both categories.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
66
4. Principal Risks (continued)
4.2 Market Risk
Market Risk is defined as the current or prospective risk to earnings and capital arising from adverse movements
in interest rates, currency / foreign exchange rates and from any other changes in market prices. The main
types of market risk to which the Group is exposed to are listed below:
a. Interest Rate Risk in the Banking Book (IRRBB);
b. Currency / foreign exchange rates risk;
c. Securities price risk (bonds, equities);
d. Properties risk;
Each of the risks above is defined and further analysed in the subsections below. Furthermore, additional
information relating to Market risk is set out in Note 45 of the Consolidated Financial Statements.
The management of market risk in the Group is governed by the Group’s Risk Appetite Statement approved by
the Board and by the Market Risk Policy, approved by the RC. These are supplemented by a range of approved
limits and controls as per Market Risk Limits document approved by the Board. The Group has an established
governance structure for market risk. Market risk is measured using portfolio sensitivity analysis, Value at Risk
(‘VaR’) and stress testing measures. Measurement and reporting to management body and committees are
performed on a frequent basis.
Interest Rate Risk in the Banking Book
Interest rate risk in the banking book (“IRRBB”) is the current or prospective risk to both the earnings and
capital of the Group as a result of adverse movements in interest rates. The four components of interest rate
risk are: repricing risk, yield curve risk, basis risk and option risk. Repricing risk is the risk of loss of net interest
income or economic value as a result of timing mismatch in the repricing of assets, liabilities and off balance
sheet items. Yield curve risk arises from changes in the slope and the shape of the yield curve. Basis risk is the
risk of loss of net interest income or economic value as a result of imperfect correlation between different
reference rates. Option risk arises from options, including embedded options, e.g. consumers redeeming fixed
rate products when market rates change.
The Group does not operate any trading book and thus all interest rate exposure arises from the banking book.
In order to manage interest rate risk, the Group sets a one year limit on the maximum reduction of the net
interest income. Limits are set as a percentage of Group Tier 1 capital and as a percentage of Group annual net
interest income (when positive). There are different limits for Euro and USD. Whilst limit breaches must be
avoided at all times, any such occurrence is reported to the relevant authorities (ALCO and / or RC) and
mitigating actions are put in place. Monthly monitoring is provided to the ALCO.
Treasury Division is responsible for managing the interest rate exposure of the Group. Corrective actions are
taken by Treasury Division with a view of minimizing the risk exposure and in any event to restrict exposure
within limits.
Currency/foreign exchange rates risk
Currency/foreign exchange rates risk is the risk that the fair value of future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
67
4. Principal Risks (continued)
4.2 Market Risk (continued)
Currency/foreign exchange risk (continued)
In order to limit the risk of loss from adverse fluctuations in foreign exchange rates, overall Intraday and
Overnight open currency position limits have been set. These internal limits are small compared to the maximum
permissible by the CBC. Internal limits serve as a trigger to management for avoiding regulatory limit breaches.
Due to the fact that there is no Foreign Exchange Trading Book, VaR (Value at Risk) is calculated on a monthly
basis on the position reported to the CBC. Intraday and overnight FX position limits are monitored daily and the
open foreign currency position or any breaches are reported to ALCO and to the RC on a monthly basis.
Treasury Division is responsible for managing the foreign currency open position of the Group emanating from
its balance sheet. The foreign currency position emanating from customer transactions is managed by the
Treasury Sales Unit of Global Markets & Treasury Sales Department. Treasury Division is also responsible for
hedging the foreign currency open positions of the foreign non-banking units of the Group.
Equities Price Risk
The risk of loss from changes in the price of equity securities arises when there is an unfavorable change in the
prices of equity securities held by the Group as investments.
The Group holds equity and fund investments on in its balance sheet. The equity portfolio mainly relates to
certain legacy positions acquired through loan restructuring activity and specifically through debt for equity
swaps, whereas the fund portfolio mainly relates to investments held by the insurance operations of the Group.
The policy is to manage the current equity portfolio with the intention to run it down by selling all positions for
which there is a market. No new purchases of equities are allowed without ALCO approval. Nevertheless, new
equities may be obtained from repossessions of collateral for loans. Analysis of equity and fund holdings are
reported to ALCO on a quarterly basis. The RC is also updated on a quarterly basis. Analysis of the positions the
Group maintains as at 31 December 2023 is presented in Note 20 of the Consolidated Financial Statements.
Debt Securities Price Risk
Debt securities price risk is the risk of loss as a result of adverse changes in the prices of debt securities held
by the Group. Debt security prices change as the credit risk of the issuers changes and/or as the interest rates
of fixed rate securities change.
The Group invests a significant part of its liquid assets in debt securities. Changes in the prices of debt securities
classified as investments at FVPL, affect the profit or loss of the Group, whereas changes in the value of debt
securities classified as FVOCI affect directly the equity of the Group. Debt securities classified as HTC are held
at amortised cost.
Debt security investment limits exist at RAS level governing the level of riskiness of the overall portfolio. Credit
limits per issuer are also in place. Limit monitoring is performed on a daily basis by the Market & Liquidity Risk
Unit. Any breaches are reported following the escalation process depending on the limit breach.
The debt security portfolio is managed by the Treasury Division and governed by the Bond Investment Policy.
The annual bond investment strategy is proposed by Treasury and approved by ALCO. Treasury proceeds with
bond investment amounts as approved through the Financial Plan which are within the Bond Investment Policy
and within limits and parameters set in the various policies and frameworks. Analysis of the positions the Group
maintains as at 31 December 2023 is presented in Note 20 of the Consolidated Financial Statements.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
68
4. Principal Risks (continued)
4.2 Market Risk (continued)
Property Price Risk
Property price risk is the risk that the value of property will decrease, either as a result of:
˗ Changes in the demand for, and prices of, Cypriot real estate; or
˗ Regulatory requests which may increase the capital requirements for stock of property
The Group is exposed to the risk of negative changes in the fair value of property which is held either for own
use, as stock of property or as investment property. Stock of property has been predominately acquired in
exchange of debt with a clear plan and intention to be disposed of in line with the Group’s strategy.
The Group has in place a number of actions to manage and monitor the exposure to property risk as indicated
below:
˗ It has an established Real Estate Management Unit (REMU), a specialised division to manage, promote
and monetise the repossessed portfolio, including other non-core assets, through appropriate real estate
disposal initiatives;
˗ ;It has placed great emphasis on the efficient and quick disposal of on-boarded properties and in their
close monitoring and regular reporting. RAS indicators and other KPIs are in place monitoring REMU
properties in terms of value, aging, and sales levels;
˗ It assesses and quantifies property risk as one of the material risks for ICAAP purposes under both the
normative and economic perspective;
˗ It monitors the changes in the market value of the collateral and, where necessary, requests the pledging
of additional collateral in accordance with the relevant agreement;
˗ As part of the valuation process, assumptions are made about the future changes in property values, as
well as the timing for the realisation of collateral, taxes and expenses on the repossession and subsequent
sale of the collateral as well as any other applicable haircuts;
˗ For the valuation of properties owned by the Group, judgement is exercised which takes into account
available reference points, such as comparable market data, expert valuation reports, current market
conditions and application of appropriate illiquidity haircuts where relevant.
4.3 Liquidity and Funding Risk
Liquidity risk is the risk that the Group does not have sufficient financial resources to meet its commitments as
they fall due. This risk includes the possibility that the Group may have to raise funding at high cost or sell
assets at a discount to fully and promptly satisfy its obligations.
Funding risk is the risk that the Group does not have sufficiently stable sources of funding or access to sources
of funding may not always be available at a reasonable cost and thus the Group may fail to meet its obligations,
including regulatory requirements (e.g. MREL).
Further information relating to Group risk management in relation to liquidity and funding risk is set out in Note
46 of the Consolidated Financial Statements. Additionally, information on encumbrance and liquidity reserves is
provided below.
4.3.1 Encumbered and unencumbered assets
Asset encumbrance arises from collateral pledged against secured funding and other collateralised obligations.
An asset is classified as encumbered if it has been pledged as collateral against secured funding and other
collateralised obligations and, as a result, is no longer available to the Group for further collateral or liquidity
requirements. The total encumbered assets of the Group amounted to €3,681,929 thousand as at 31 December
2023 (2022: €3,631,269 thousand).
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
69
4. Principal Risks (continued)
4.3 Liquidity and Funding Risk (continued)
4.3.1 Encumbered and unencumbered assets (continued)
An asset is classified as unencumbered if it has not been pledged as collateral against secured funding and other
collateralised obligations. Unencumbered assets are further analysed into those that are available and can
potentially be pledged and those that are not readily available to be pledged. As at 31 December 2023, the
Group held €20,640,651 thousand (2022: €19,468,233 thousand) of unencumbered assets that can potentially
be pledged and can be used to support potential liquidity funding needs and €717,575 thousand (2022:
€659,311 thousand) of unencumbered assets that are not readily available to be pledged for funding
requirements in their current form.
The table below presents an analysis of the Group’s encumbered and unencumbered assets and the extent to
which these assets are currently pledged for funding or other purposes. The carrying amount of such assets is
disclosed below:
31 December 2023
Encumbered Unencumbered
Total
Pledged as
collateral
Which can
potentially be
pledged
Which are not
readily available to
be pledged
€000 €000 €000 €000
Cash and other liquid assets 72,800 9,890,350 439,353 10,402,503
Investments 260,011 3,419,445 15,953 3,695,409
Loans and advances to customers 3,349,118 6,229,383 243,287 9,821,788
Property - 1,101,473 18,982 1,120,455
Total on-balance sheet 3,681,929
20,640,651
717,575
25,040,155
31 December 2022
Cash and other liquid assets 73,557 9,391,365 307,147 9,772,069
Investments 284,343 2,393,796 25,564 2,703,703
Loans and advances to customers 3,273,369 6,397,745 282,138 9,953,252
Property - 1,285,327 44,462 1,329,789
Total on-balance sheet 3,631,269
19,468,233
659,311
23,758,813
Encumbered assets primarily consist of loans and advances to customers and investments in debt securities.
These are mainly pledged for the funding facilities of the European Central Bank (ECB) and for the covered bond
(Notes 29 and 46 of the Consolidated Financial Statements for the year ended 31 December 2023 respectively).
Encumbered assets include cash and other liquid assets placed with banks as collateral under ISDA agreements
which are not immediately available for use by the Group but are released once the transactions are terminated.
Cash is mainly used to cover collateral required for (i) derivatives and (ii) trade finance transactions and
guarantees issued. It may also be used as part of the supplementary assets for the covered bond.
BOC PCL maintains a Covered Bond Programme set up under the Cyprus Covered Bonds legislation and the
Covered Bonds Directive of the Central Bank of Cyprus (CBC). Under the Covered Bond Programme, BOC PCL
has in issue covered bonds of €650 million secured by residential mortgages originated in Cyprus. The covered
bonds have a maturity date on 12 December 2026 and interest rate of 3-months Euribor plus 1.25% payable
on a quarterly basis. On 9 August 2022, BOC PCL proceeded with an amendment to the terms and conditions
of the covered bonds following the implementation of Directive (EU) 2019/2162 in Cyprus. The covered bonds
are listed on the Luxemburg Bourse and have a conditional Pass-Through structure. All the bonds are held by
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
70
4. Principal Risks (continued)
4.3 Liquidity and Funding Risk (continued)
4.3.1 Encumbered and unencumbered assets (continued)
BOC PCL. The covered bonds are eligible collateral for the Eurosystem credit operations and are placed as
collateral for accessing funding from the ECB.
Unencumbered assets which can potentially be pledged include debt securities and Cyprus loans and advances
which are less than 90 days past due. Balances with central banks are reported as unencumbered and can be
pledged, to the extent that there is excess available over the minimum reserve requirement. The minimum
reserve requirement is reported as unencumbered not readily available to be pledged.
Unencumbered assets that are not readily available to be pledged primarily consist of loans and advances which
are prohibited by contract or law to be encumbered or which are more than 90 days past due or for which there
are pending litigations or other legal actions against the customer, a proportion of which would be suitable for
use in secured funding structures but are conservatively classified as not readily available for collateral.
Properties whose legal title has not been transferred to the Company or a subsidiary are not considered to be
readily available as collateral.
Insurance assets held by Group insurance subsidiaries are not included in the table above or below as they are
primarily due to the insurance policyholders.
The carrying and fair value of the encumbered and unencumbered investments of the Group as at 31 December
2023 and 31 December 2022 are as follows:
31 December 2023
Carrying value
of
encumbered
investments
Fair value of
encumbered
investments
Carrying value of
unencumbered
investments
Fair value of
unencumbered
investments
€000 €000 €000 €000
Equity securities 0
0
144,016
144,016
Debt securities 260,011
250,480
3,291,383
3,303,818
Total investments 260,011
250,480
3,435,399
3,447,834
31 December 2022
Equity securities -
-
194,841
194,841
Debt securities 284,343
265,696
2,224,519
2,150,383
Total investments 284,343
265,696
2,419,360
2,345,224
4.3.2 Liquidity regulation
The Group is required to comply with provisions on the Liquidity Coverage Ratio (LCR) under CRD IV/CRR (as
supplemented by Delegated Regulations (EU) 2015/61), with the limit set at 100%. The Group must also comply
with the Net Stable Funding Ratio (NSFR) calculated as per the Capital Requirements Regulation II (CRR II),
with the limit set at 100%.
The LCR is designed to promote the short-term resilience of a Group’s liquidity risk profile by ensuring that it
has sufficient high-quality liquid resources to survive an acute stress scenario lasting for 30 days. The NSFR has
been developed to promote a sustainable maturity structure of assets and liabilities.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
71
4. Principal Risks (continued)
4.3 Liquidity and Funding Risk (continued)
4.3.2 Liquidity regulation (continued)
As at 31 December 2023, the Group was in compliance with all regulatory liquidity requirements. As at 31
December 2023, the Group’s LCR stood at 359% (compared to 291% at 31 December 2022) and the Group’s
NSFR stood at 158% (compared to 168% at 31 December 2022).
4.3.3 Liquidity reserves
The below table sets out the Group’s liquidity reserves:
Composition of the
liquidity reserves
31 December 2023 31 December 2022
Internal
Liquidity
Reserves
Liquidity reserves as
per LCR Delegated
Regulation (EU)
2015/61 LCR eligible
Internal
Liquidity
Reserves
Liquidity reserves as
per LCR Delegated
Regulation (EU)
2015/61 LCR eligible
Level 1
Level
2A & 2B
Level 1
Level
2A & 2B
€000 €000 €000 €000 €000 €000
Cash and balances with
central banks
9,428,052
9,428,052
-
9,379,888
9,379,888
-
Placements with banks 214,588
-
-
55,825
-
-
Liquid investments 3,299,967
2,801,667
354,128
1,827,698
1,344,032
214,800
Available ECB Buffer 92,088
-
-
147,844
-
-
Total 13,034,695
12,229,719
354,128
11,411,255
10,723,920
214,800
Internal Liquidity Reserves present the total liquid assets as defined in BOC PCL’s Liquidity Policy. Liquidity
reserves as per LCR Delegated Regulation (EU) 2015/61 present the liquid assets as per the definition of the
aforementioned regulation i.e., High-Quality Liquid Assets (HQLA).
Balances in Nostro accounts and placements with banks are not included in Liquidity reserves as per LCR, as
they are not considered HQLA (they are part of the LCR Inflows).
Liquid investments under the Liquidity reserves as per LCR are shown at market values reduced by standard
weights as prescribed by the LCR regulation. Liquid investments under Internal Liquidity Reserves include
additional unencumbered liquid bonds which are shown at market values net of haircuts based on the ECB
methodology and haircuts for the ECB eligible bonds, while for the non-ECB eligible bonds, a more conservative
internally developed haircut methodology is used.
Current available ECB buffer is not part of the Liquidity reserves as per LCR.
In March 2022, the ECB announced the steps for the gradual phasing out of the temporary pandemic collateral
easing measures implemented during COVID-19 breakout. The gradual phasing out is scheduled to be concluded
in three steps having started from July 2022 and will be completed by March 2024 and gives banks time to
adapt to the adjustments to the collateral framework. In the first step in July 2022, the ECB halved the
temporary reduction in collateral valuation haircuts across all assets from the previous 20% adjustment to 10%.
In the second step, in June 2023, the ECB implemented a new valuation haircut schedule based on its pre-
pandemic risk tolerance level for credit operations, phasing out the temporary reduction in collateral valuation
haircuts completely. In the third and final step, in March 2024, the ECB will, in principle, phase out the remaining
pandemic collateral easing measures.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
72
4. Principal Risks (continued)
4.4 Operational Risk
Operational risk is defined as the risk of direct or indirect impact/loss resulting from inadequate or failed internal
processes, people, and systems or from external events. The Group includes in this definition compliance, legal
and reputational risk.
The Group recognises that the control of operational risk is directly related to effective and efficient management
practices and high standards of corporate governance. To that effect, the management of operational risk is
geared towards maintaining a strong internal control governance framework and managing operational risk
exposures through a consistent set of management processes that drive risk identification, assessment, control
and monitoring.
The Group also maintains adequate insurance policies to cover for unexpected material operational losses.
Operational Risk Management (ORM) Framework
The Group has established an Operational Risk Management Framework which addresses the following
objectives:
- Raising operational risk awareness and building the appropriate risk culture,
- Providing effective risk monitoring and reporting to the Group’s management at all levels in relation to
the operational risk profile, so as to facilitate decision making for risk control activities,
- Mitigating operational risk to ensure that operational losses do not cause material damage to the Group’s
franchise and that the impact on the Group’s profitability and corporate objectives is contained, and
- Maintaining a strong system of internal controls to ensure that operational incidents do not cause material
damage to the Group’s franchise and have a minimal impact on the Group’s profitability and reputation.
Operational risks can arise from all business lines and from all activities carried out by the Group and are thus
diverse in nature.
To enable effective management of all material operational risks, the operational risk management framework
adopted by the Group is based on the three lines of defence model, through which risk ownership is dispersed
throughout the organisation.
The key components of the Operational Risk Management Framework include the following:
Operational Risk Appetite
A defined Operational RAS is in place, which forms part of the Group RAS. Thresholds are applied for conduct
and other operational risk related losses.
Risk Control Self-Assessment (RCSA)
A RCSA methodology is established across the Group. According to the RCSA methodology, business owners are
requested to identify risks that arise primarily from the risk areas under the full Risk Taxonomy.
Updating/enriching the risk register in terms of existing and potential new risks identified and their mitigation
is an on-going process, sourced from RCSAs, but also from other risk and control assessments (RCAs)
performed.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
73
4. Principal Risks (continued)
4.4 Operational Risk (continued)
Operational Risk Management (ORM) Framework (continued)
Incident recording and analysis
An operational risk event is defined as any incident where through the failure or lack of a control, the Group
could actually or potentially have incurred a loss including circumstances whereby the Group could have incurred
a loss, but in fact made a gain, as well as, incidents resulting in potential reputational or regulatory impact.
Operational risk loss events are classified and recorded in the Group’s Risk and Compliance Management System
(RCMS), which serves as an enterprise tool integrating all risk-control data (e.g. risks, loss incidents, KRIs) to
provide a holistic view with regards to risk identification, corrective action and statistical analysis. During the
year ended 31 December 2023, 710 loss events with gross loss equal to or greater than €1,000 each were
recorded including incidents of prior years (mostly legal cases) for which losses materialised in 2023 (2022: 466
loss events).
Key Risk Indicators (KRIs)
These are operational or financial variables, which track the likelihood and/or impact of a particular operational
risk. KRIs serve as a metric, which may be used to monitor the level of particular operational risks.
Operational Risk Capital Requirements and ICAAP
Regulatory and economic capital requirements for operational risk are calculated using the Standardised
Approach. Additional Pillar II Regulatory capital is calculated for operational risk on a scenario-based approach.
Scenarios are built after taking into consideration the Key Risk Drivers, which are identified using a combination
of methods and sources, through top-down and bottom-up approaches.
Training and awareness
The Group strives to continuously enhance its risk control culture and increase the awareness of its employees
on operational risk issues through ongoing staff training (both through physical workshops and through e-
learning).
Reporting
Important operational risks identified and assessed through the various tools/methodologies of the Operational
Risk Management Framework, are regularly reported to top management, as part of overall risk reporting. More
specifically, the CRO reports on risk to the EXCO and the RC on a monthly basis, while annual risk reports are
submitted to the Regulators. Ad-hoc reports are also submitted to management, as needed.
4.4.1 Fraud Risk Management
The Group has a dedicated unit under the ORM Function, the Fraud Risk Management (FRM) unit, which is
responsible for the oversight of internal and external fraud by:
˗ Developing and maintaining a framework and supporting policies for the management of internal and
external fraud risks;
˗ Undertaking Specialised Fraud Risk Assessments and ensuring that divisions and business departments
have a sound process for identifying new and emerging fraud risks;
˗ Promoting and adopting automated / alert-based systems and controls for the prevention and early
detection of external and internal fraud;
˗ Establishing structured Fraud Incident response management processes and plans;
˗ Analysing data and emerging fraud trends for the proactive management of emerged fraud;
˗ Providing direction through policy, education, tools and training;
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
74
4. Principal Risks (continued)
4.4 Operational Risk (continued)
4.4.1 Fraud Risk Management (continued)
˗ Ensuring compliance with relevant regulations and assessing new regulations or amendments to existing
ones with regards to fraud related issues, by performing regulatory gap analysis in cooperation with other
related stakeholders.
Ongoing activities/initiatives towards further enhancements of FRM involved inter alia, the provision of fraud
risks and emerged frauds awareness seminar to Group’s staff and top-management, and the further
strengthening of external fraud prevention controls and framework, as a result of the customers’ accelerated
shift towards digital channels and digital banking.
4.4.2 Third-Party Risk Management
The Group has a dedicated unit under the ORM Function, the Third-Party Risk Management unit, which is
responsible to perform risk assessments on all outsourcing, strategic and intragroup arrangements of the Group.
As part of the risk assessment, the team identifies and monitors the effective handling of any potential
gaps/weaknesses. The risk assessment occurs prior to signing an outsourcing, strategic or intragroup
arrangement as well as prior to their renewal, annually and upon any change of scope of service.
Third-Party and Outsourcing risk can arise from a third party's failure to provide the service as expected due to
reasons such as inadequate capacity, technological failure, human error, unsatisfactory quality of service,
unsatisfactory continuity of service and/or financial failure.
4.4.3 Business Continuity Risk Management (BCRM)
The Group has a dedicated unit under the ORM Function, the Business Continuity Risk Management unit, which
provides direction and sets the overall framework to individual Business Units (BUs) to mitigate business
continuity risks and minimize the impact of severe disruptive incidents such as natural disasters, loss of
Information Technology Center, loss of electricity, pandemic etc.
5. Other principal risks and uncertainties
In addition to the risks described in section 4 above, further risks are also faced by the Group. These risks are
described below as well as the way these are identified, assessed, managed and monitored by the Group,
including the available mitigants.
Emerging risks are defined as new risks or existing risks that may escalate in a different way, with the potential
to threaten the execution of the Group’s strategy or operations over a medium-term horizon. The Group is
forward-looking in its risk identification processes to ensure emerging risks are identified. The internal and
external risk environment of the Group as well as macro-themes are assessed to identify such emerging risks
that may require escalation and implementation of suitable mitigation actions. Half-year reporting of emerging
risks to the RC and the EXCO is performed to ensure all significant risks are escalated effectively for discussion
and action. The main emerging risks currently considered by the Group are Geopolitical Risk, Digital
Transformation and Climate and Environment Risks all of which are also principal risks and are further described
below.
The risks described, should not be regarded as a complete and comprehensive statement of all potential risks,
uncertainties or mitigants, as other factors either not yet identified or not currently material, may also adversely
affect the Group.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
75
5. Other principal risks and uncertainties (continued)
5.1 Business Model and Strategic Risk
Business model and strategic risk is the risk of not achieving the Group Strategy and business goals and arises
from changes in the external environment including economic trends and competition, and their underlying
factors or enablers such as geopolitical influences and regulatory changes and/or due to inadequate planning or
implementation. The Group faces competition from domestic banks, international banks and financial technology
companies operating in Cyprus and in other parts of Europe and insurance companies offering savings, insurance
and investment products. Also, a possible deterioration of the macroeconomic environment stemming from the
impact of inflationary pressures and the high interest rates or other factors could lead to adverse financial
performance which could deplete capital resources.
Furthermore, the Group's business and performance are materially dependent on the economic conditions in,
and future economic prospects of, Cyprus where the Group's operations and earnings are predominantly based
and generated. The Group is also dependent on the economic conditions and prospects in the countries of the
main counterparties it conducts business with.
The Group has a clear strategy with key objectives to enable delivery and operates within defined risk appetite
limits which are calibrated to be within the Group’s Risk bearing capacity. The strategy is monitored closely on
a regular basis. Furthermore, the Group remains ready to explore opportunities that complement its strategy
including diversification of income. As the Group’s business model is pivotal to strategic risk, it has to be viable
and sustainable and produce results that are consistent with its annual targets.
The Group manages business model risk within its Risk Appetite Framework, by setting limits in respect of
measures such as financial performance, portfolio performance and concentration and capital levels. At a more
operational level, the risk is mitigated through periodic monitoring of variances to the Group Financial Plan.
During the year, periodic reforecast updates for the full year financial outcome are produced. The frequency of
reforecast updates during each year are determined based on prevailing business and economic conditions.
Performance against plan is monitored at a Group and business line level on a monthly basis and reported to
the EXCO and the Board.
The Group also closely monitors the risks and impact of changing macroeconomic conditions on its lending
portfolio, strategy and objectives and takes mitigating actions where necessary. An internal stress testing
framework as part of the Group’s ICAAP is in place to provide insights and to assess capital resilience to shocks.
5.2 Geopolitical Risk
Cyprus is a small, open, services-based economy, with a large external sector and high reliance on tourism and
international business services. As a result, external factors which are beyond the control of the Group, including
developments in the European Union and in the global economy, or in specific countries with which Cyprus
maintains close economic and investment links, or in specific regions, can have a significant impact on domestic
economic activity. A number of macro and market related risks, including weaker economic activity, a higher
interest rate environment for longer, and higher competition in the financial services industry, could negatively
affect the Group’s business environment, results and operations.
Geopolitical tensions remain high as the war in Ukraine continues and the latest military conflict in the Middle
East rages on, adding considerable uncertainty to the outlook for the global economy. The wider impact will
depend on how these conflicts evolve in the future.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
76
5. Other principal risks and uncertainties (continued)
5.2 Geopolitical Risk (continued)
The economic environment has evolved rapidly since February 2022 following Russia’s invasion in Ukraine. In
response to the war in Ukraine, the EU, the UK and the US, in a coordinated effort joined by several other
countries imposed a variety of financial sanctions and export controls on Russia, Belarus and certain regions of
Ukraine as well as various related entities and individuals. As the war is prolonged, geopolitical tension persists
and inflation remains elevated, impacted by soaring energy prices and disruptions in supply chains. This high
inflation weighs on business confidence and consumers’ behaviour. In this context, the Group is closely
monitoring the developments, utilising dedicated governance structures including a Crisis Management
Committee as required and has assessed the impact the crisis has on the Group’s operations and financial
performance.
Amid the ongoing conflict in Gaza, there exists the potential of further escalation, with spillovers being felt in
Lebanon and the Red Sea. This may translate to disruptions in the supply chain, including a shortage in goods
and oil supplies, which could potentially have an impact on inflation. Having identified its exposure in terms of
credit risk and market risk related to Israel, the Group has determined that its exposure is limited. The Group
closely monitors the situation and remains vigilant to take any precautionary measures as required.
In Cyprus, financial sector exposure to foreign markets has been reduced since the 2013 banking crisis.
Although, there have been distinct improvements in Cyprus’ risk profile after the banking crisis, substantial risks
remain. Cyprus’ overall country risk is a combination of sovereign, currency, banking, political and economic
structure risk, influenced by external developments with substantial potential impact on the domestic economy.
Given the above, the Group recognises that unforeseen political events can have negative effects on the Group’s
activities, operating results, and market position.
Interest rates in the US and the eurozone peaked in the third quarter as headline inflation continues to decline
while core inflation proves stickier. Amidst a high interest rate environment, financial stability risks will remain
elevated.
The Group is continuously monitoring the current affairs and the impact of the forecasted macroeconomic
conditions and geopolitical developments on the Group’s strategy to proactively manage emerging risks. Where
necessary, bespoke solutions are offered to affected exposures and close monitoring on those is maintained.
Furthermore, the Group includes related events in its stress testing scenarios in order to gain a better
understanding of the potential impact.
5.3 Legal Risk
The Group may, from time to time, become involved in legal or arbitration proceedings which may affect its
operations and results. Litigation risk arises from pending or potential legal proceedings and regulatory
investigations against the Group (Information on pending litigation, claims, regulatory and other matters is
disclosed in Note 38 of the Consolidated Financial Statements). In the event that legal issues are not properly
dealt with by the Group, this may result in financial and/or reputational loss to the Group.
The Group has procedures in place to ensure effective and prompt management of Legal risk including, among
others, the risk arising from regulatory developments, new products and internal policies.
The Legal Services department (LSD) monitors the pending litigation against the Group and assesses the
probability of loss for each legal action against the Group based on International Accounting Standards. It also
estimates the amount of potential loss where it is deemed as probable. Additionally, it reports pending litigation
and latest developments to the Board.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
77
5. Other principal risks and uncertainties (continued)
5.4 Technology Risk
Technology risk arises from system downtimes impacting business operations and/or customer service.
Downtimes may be caused by hardware or software failures due to malfunctions, failed processes, human error,
or cyber incidents. Use of outdated, obsolete and unsupported systems increase this risk.
The Group has in place a Technology strategy designed to support Business strategy and customer centric
view. The strategy includes investments in skills and technology to minimize system downtimes and security
risks, modernization of legacy applications, a risk-based approach to leverage the benefits of Cloud technologies,
and investments in new and innovative applications to support business requirements. The Group implements
a collaborative operating model to implement the technology initiatives that support Business strategy and its
digital agenda. The Operating Model involves setting up cross-functional teams that combine Technical, Business
and Risk skills for accelerated results. Where necessary, the Group engages with appropriate external experts
to augment capacity and meet peak demand for technical initiatives while always maintaining good levels of
internal skills and capacity.
The Group’s policies, standards, governance and controls undergo ongoing review to ensure continued alignment
with the Group’s Technology strategy, compliance with regulation and effective management of the associated
risks.
5.5 Digital Transformation Risk
Digital transformation risk continues to be a principal and emerging risk, as banking models are rapidly evolving
both locally and globally and available technologies have resulted in the customers’ accelerated shift towards
digital channels. Money transmission, data driven integrated services and Digital Product Sales are rapidly
evolving. How the Group adapts to these emerging developments could impact the realisation of its market
strategies and financial plans.
In the context of the overall business strategy, the Group assesses and develops its Digital Strategy and
maintains a clear roadmap that provides for migration of transactions to the Digital Channels, full Digital and
Digital Assisted Product Sales, and Self-service banking support services. The Group’s emphasis on the Digital
Strategy is reflected in the Operating Model with a designated Chief Digital Officer supported by staff with the
appropriate skills that work closely with Technology and Control functions to execute the strategy.
The Group’s policies, standards, governance and controls undergo ongoing review to ensure continued alignment
with the Group’s strategy for digital transformation and effective management of the associated risk.
5.6 Information security and cyber risk
Information security and cyber-risk is a significant inherent risk, which could cause a material disruption to the
operations of the Group. The Group’s information systems have been and will continue to be exposed to an
increasing threat of continually evolving cybercrime and data security attacks. Customers and other third parties
to which the Group is significantly exposed, including the Group's service providers (such as data processing
companies to which the Group has outsourced certain services), face similar threats.
Current geopolitical tensions have also led to increased risk of cyber-attack from foreign state actors.
The Group has an internal specialized Information Security team which constantly monitors current and future
cyber security threats (either internal or external, malicious or accidental) and invests in enhanced cyber security
measures and controls to protect, prevent, and appropriately respond against such threats to Group systems
and information. The Group maintains an approved Group Information Security Policy that provides a set of
standards, guidelines, controls, measures designed to achieve a desired level of information.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
78
5. Other principal risks and uncertainties (continued)
5.6 Information security and cyber risk (continued)
The Group also collaborates with industry bodies, the National Computer Security Incident Response Team
(CSIRT) and intelligence-sharing working groups to be better equipped with the growing threat from cyber
criminals. In addition, the Group maintains insurance coverage which covers certain aspects of cyber risks, and
it is subject to exclusion of certain terms and conditions.
5.7 Regulatory Compliance Risk
The Group conducts its business subject to on-going regulation and the associated regulatory risk, including the
effects of changes in the laws, regulations, policies, voluntary codes of practice and interpretations. Regulatory
compliance risk is the risk of impairment to the organization’s business model, reputation and financial condition
from failure to meet laws and regulations, internal standards and policies, and expectations of key stakeholders
such as shareholders, customers, employees and society. Failure to comply with regulatory framework
requirements or identify and plan for emerging requirements could lead to, amongst other things, increased
costs for the Group, limitation on BOC PCL’s capacity to lend and could have a material adverse effect on the
business, financial condition and results, operations and prospects of the Group.
There is strong commitment by the management of the Group for an on-going and transparent dialogue with
the Regulators of the Group (including the ECB, the CBC and others, such as CySec and CSE). The Regulatory
Steering Group, chaired by the CEO and consisting of executive management, is regularly updated on Regulatory
Compliance Risk matters, through the Regulatory Affairs Department, which obtains relevant information from
Group Compliance, to ensure that all regulatory matters are brought to the attention of management in a timely
manner.
Regulatory compliance risks are identified and assessed using a combination of methods and sources as these
are incorporated in the Group Compliance Policy which sets out the compliance framework that applies within
BOC PCL and its subsidiaries in Cyprus and abroad. It sets out the business and legal environment applicable to
the Group as well as the objectives, principles, and responsibilities for compliance and how these responsibilities
are allocated and carried out at Group and Entity level. Furthermore, this Policy ensures that there are proper
procedures in place for BOC PCL to comply with the requirements of the CBC Internal Governance Directive and
the EBA Guidelines on Internal Governance.
The Compliance Risk Assessment Methodology sets out the principles to assess compliance risks. The
Compliance function identifies and communicates new and/or amended regulations, within the regulatory
compliance universe to the relevant business areas for impact assessment and/or a regulatory gap analysis with
the Compliance function as second line of defence to review and challenge.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
79
5. Other Principal Risks and uncertainties (continued)
5.7 Regulatory Compliance Risk (continued)
Appropriate tools and mechanisms are in place for identifying, assessing, monitoring, escalating and reporting
compliance risks which, inter alia, include:
˗ The assessment of periodic reports submitted by the network of its compliance liaisons;
˗ The use of aggregated risk measurements such as compliance risk indicators;
˗ Oversighting and challenging the regulatory risks identified by compliance liaisons and subsidiary
compliance officers through the gap analysis of new or amended regulations, assessments of new or
amended processes and procedures, project assessments, new or amended product/services
assessments and any other ad-hoc assessments with regulatory impact such as new operating models,
reorganisations etc., to ensure that compliance risks within the Group are managed effectively and
recommending additional controls and corrective actions, where needed;
˗ Oversighting the compliance risk assessment process followed by the compliance liaisons and subsidiary
compliance officers and the monitoring of the implementation of mitigating actions for the management
of identified risks;
˗ Overseeing the complaints process and utilising customer complaints as a source of relevant information
in the context of its general monitoring responsibilities;
˗ Cooperating and exchanging information with other internal control and risk management functions on
compliance matters, assessing any regulatory incidents, monitoring any mitigating actions to avoid
reoccurrence and manage the risk and reporting to competent authorities incidents of non-compliance
as per the relevant regulations;
˗ Conducting periodic onsite/offsite reviews with applicable laws, rules, regulations and standards and
providing recommendations / advise to management on measures to be taken to ensure compliance,
˗ Investigating possible breaches of the compliance policy and regulatory framework and/or conducting
investigations thereof, as requested by competent authorities with the assistance, if deemed necessary;
of experts from within the institution such as experts from the Internal Audit function, Legal Services
Department, Information Security Department or Fraud Risk Management unit.
Regulatory compliance risks are reported promptly to senior management and the management body in
accordance with the guidelines of the CBC Internal Governance Directive.
5.8 Insurance risk and re-insurance risk
The Group, through its subsidiaries, EuroLife Ltd (‘EuroLife’) and General Insurance of Cyprus Ltd (‘Genikes
Insurance’), provides life insurance and non-life insurance services, respectively, and is exposed to certain risks
specific to these businesses. Insurance events are unpredictable and the actual number and amount of claims
and benefits will vary from year to year from the estimate established using actuarial and statistical techniques.
Insurance risk therefore is the risk that an insured event under an insurance contract occurs and uncertainty
over the amount and the timing of the resulting claim exists.
The above risk exposure is mitigated by the Group through the diversification across a large portfolio of
insurance contracts. The variability of risks is also reduced by careful selection and implementation of
underwriting strategy guidelines, as well as the use of reinsurance arrangements. Although the Group has
reinsurance coverage, it is not relieved of its direct obligations to policyholders and is thus exposed to credit
risk with respect to ceded insurance, to the extent that any reinsurer is unable to meet the obligations assumed
under such reinsurance arrangements.
For that reason, the creditworthiness of reinsurers is evaluated by considering their solvency and credit rating
and reinsurance arrangements are monitored and reviewed to ensure their adequacy as per the reinsurance
policy. In addition, counterparty risk assessment is performed on a frequent basis.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
80
5. Other Principal Risks and uncertainties (continued)
5.8 Insurance risk and re-insurance risk (continued)
Both EuroLife and Genikes Insurance perform their annual stress tests (ORSA) which aim to ensure, among
others, the appropriate identification and measurement of risks, an appropriate level of internal capital in relation
to each company’s risk profile, and the application and further development of suitable risk management and
internal control systems.
5.9 Climate Related & Environmental Risks
Climate & Environmental matters is a growing agenda for financial institutions given the increasing effects of
climate change globally and the sharp regulatory focus on addressing the resultant risks. The Group’s
businesses, operations and assets could be affected by climate-related and environmental (C&E) risks over the
short, medium and long term. The Group is committed to integrate C&E risk considerations into all relevant
aspects of the decision-making, governance, strategy and risk management and has taken the necessary steps
to achieve this.
The Group applies the definition used in the Task Force on Climate-related Financial Disclosures (TCFD) for C&E
risks whereby climate-related risks are divided into two major categories: (1) risks related to the transition to
a lower-carbon economy (transition risks) and (2) risks related to the physical impacts of climate change
(physical risks).
˗ Physical risk refers to the financial impact of a changing climate, including more frequent extreme
weather events and gradual changes in climate, as well as of environmental degradation, such as air,
water and land pollution, water stress, biodiversity loss and deforestation. Physical risk is categorised
as “acute” when it arises from extreme events, such as droughts, floods and storms, and “chronic” when
it arises from progressive shifts, such as increasing temperatures, sea-level rises, water stress,
biodiversity loss, land use change, habitat destruction and resource scarcity. This can directly result in,
for example, damage to property or reduced productivity, or indirectly lead to subsequent events, such
as the disruption of supply chains.
˗ Transition risk refers to an institution’s financial loss that can result, directly or indirectly, from the
process of adjustment towards a lower-carbon and more environmentally sustainable economy. This
could be triggered, for example, by a relatively abrupt adoption of climate and environmental policies,
technological progress or changes in market sentiment and preferences.
Accelerating climate change could lead to sooner than anticipated physical risk impacts to the Group and the
wider economy and there is uncertainty in the scale and timing of technology, commercial and regulatory
changes associated with the transition to a low carbon economy.
The Group has put in place targets which set transparent ambitions on its climate strategy and decarbonization
of its operations and portfolio aiming to achieve the transition to a net zero economy by 2050. An overall ESG
strategy and working plan is thus in place to facilitate these ambitions and address ECB expectations.
The Group also acknowledges the growing importance of environmental / nature-related risks which, as per the
Task Force for Nature-related Financial Disclosures (TNFD), are defined as those potential threats posed to an
organization arising from its own and the wider society’s dependencies and impacts on nature. These risks can
be physical or transition risks, as defined below:
˗ Physical risks arise when natural systems are compromised, due to the impact of climate.
˗ Transition risks result from a misalignment between a company or investor’s strategy and
management and its changing regulatory and policy landscape.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
81
5. Other Principal Risks and uncertainties (continued)
5.9 Climate Related & Environmental Risks (continued)
Dedicated teams both within Risk Management and Investor Relations & ESG Department, as well as other
resources, have been mobilised across the Group and are engaged in various streams of work such as the
measuring of own and financed emissions, the integration of C&E risk in the risk management framework and
the enhancement of green products offering.
Further information on C&E risks and its risk management is provided in the ESG Disclosures 2023 that form
part of the Group’s Annual Financial Report for 2023, within part A ‘Task Force on Climate-related Financial
Disclosures (TCFD)’.
6. Capital management
The primary objective of the Group’s capital management is to ensure compliance with the relevant regulatory
capital requirements and to maintain healthy capital adequacy ratios to cover the risks of its business, support
its strategy and maximise shareholders’ value.
The capital adequacy framework, as in force, was incorporated through the Capital Requirements Regulation
(CRR) and Capital Requirements Directive (CRD) which came into effect on 1 January 2014 with certain
specified provisions implemented gradually. The CRR and CRD transposed the new capital, liquidity and
leverage standards of Basel III into the European Union’s legal framework. CRR establishes the prudential
requirements for capital, liquidity and leverage for credit institutions. It is directly applicable in all EU member
states. CRD governs access to deposit-taking activities and internal governance arrangements including
remuneration, board composition and transparency. Unlike the CRR, member states were required to transpose
the CRD into national law and national regulators were allowed to impose additional capital buffer requirements.
On 27 June 2019, the revised rules on capital and liquidity (Regulation (EU) 2019/876 (CRR II) and Directive
(EU) 2019/878 (CRD V)) came into force. As an amending regulation, the existing provisions of CRR apply,
unless they are amended by CRR II. Certain provisions took immediate effect (primarily relating to Minimum
Requirement for Own Funds and Eligible Liabilities (MREL)), but most changes became effective as of June
2021. The key changes introduced consist of, among others, changes to qualifying criteria for Common Equity
Tier 1 (CET1), Additional Tier 1 (AT1) and Tier 2 (T2) instruments, introduction of requirements for MREL and
a binding Leverage Ratio requirement (as defined in the CRR) and a Net Stable Funding Ratio (NSFR).
The amendments that came into effect on 28 June 2021 are in addition to those introduced in June 2020
through Regulation (EU) 2020/873, which among others, brought forward certain CRR II changes in light of the
COVID-19 pandemic. The main adjustments of Regulation (EU) 2020/873 that had an impact on the Group’s
capital ratio relate to the acceleration of the implementation of the new SME discount factor (lower RWAs),
extending the IFRS 9 transitional arrangements and introducing further relief measures to CET1 allowing to
fully add back to CET1 any increase in ECL recognised in 2020 and 2021 for non-credit impaired financial assets
and phasing in this starting from 2022 (phasing in at 25% in 2022, 50% in 2023 and 75% in 2024) and
advancing the application of prudential treatment of software assets as amended by CRR II (which came into
force in December 2020). In addition, Regulation (EU) 2020/873 introduced a temporary treatment of
unrealized gains and losses on exposures to central governments, to regional governments or to local
authorities measured at fair value through other comprehensive income which the Group elected to apply and
implemented from the third quarter of 2020. This temporary treatment was in effect until 31 December 2022.
In October 2021, the European Commission adopted legislative proposals for further amendments to the CRR,
CRD and the BRRD (the ‘2021 Banking Package’). Amongst other things, the 2021 Banking Package would
implement certain elements of Basel III that have not yet been transposed into EU law. The 2021 Banking
Package includes:
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
82
6. Capital management (continued)
 a proposal for a Regulation (sometimes known as ‘CRR III’) to make amendments to CRR with
regard to (amongst other things) requirements on credit risk, credit valuation adjustment risk,
operational risk, market risk and the output floor;
 a proposal for a Directive (sometimes known as ‘CRD VI’) to make amendments to CRD with regard
to (amongst other things) requirements on supervisory powers, sanctions, third-country branches
and ESG risks; and
 a proposal for a Regulation to make amendments to CRR and the BRRD with regard to (amongst
other things) requirements on the prudential treatment of G-SII groups with a multiple point of
entry resolution strategy and a methodology for the indirect subscription of instruments eligible
for meeting the MREL requirements.
The 2021 Banking Package is subject to amendment in the course of the EU’s legislative process. In addition,
in the case of the proposed amendments to CRD and the BRRD, their terms and effect will depend, in part,
on how they are transposed in each member state.
The European Council's proposal on CRR and CRD was published on 8 November 2022. During February
2023, the European Parliament’s ECON Committee voted to adopt Parliament’s proposed amendments to
the Commission’s proposal. In June 2023, negotiators from the Council presidency and the European
Parliament reached a provisional agreement on amendments to the Capital Requirements Regulation and
the Capital Requirements Directive and were endorsed in December 2023 by the preparatory bodies of the
Council and European Parliament. With the decisions taken by the Council and European Parliament
preparatory bodies, the legal texts have now been published on the Council and the Parliament websites.
Although still subject to legal revision and to the final vote in the Plenary, no changes in substance are
expected until its adoption by the European Parliament by the second quarter of 2024. It is expected that
the provisions will come into force on 1 January 2025; and certain measures are expected to be subject to
transitional arrangements or to be phased in over time.
The Regulatory CET1 ratio of the Group as at 31 December 2023 stands at 17.4% and the Total Capital ratio
at 22.4% on a transitional basis. The capital ratios as at 31 December 2023 include profits for the year ended
31 December 2023 and a deduction for the distribution in respect of 2023 earnings as described in Section
‘Distributions’ in the Directors Report included within the Annual Financial Report. Group’s adjusted recurring
profitability is defined as the Group’s profit after tax before non-recurring items (attributable to the owners
of the Company) taking into account distributions under other equity instruments, such as the annual AT1
coupon.
Minimum CET1 Regulatory Capital Requirements 2023 2022
Pillar I – CET1 Requirement 4.50% 4.50%
Pillar II – CET1 Requirement 1.73% 1.83%
Capital Conservation Buffer (CCB)* 2.50% 2.50%
Other Systematically Important Institutions (O-SII) Buffer** 1.50% 1.25%
Countercyclical Buffer (CcyB) 0.48% 0.02%
Minimum CET1 Regulatory Requirements 10.72% 10.10%
* Fully phased in as of 1 January 2019
** Increasing by 0.375%. every year thereafter, until being fully implemented on 1 January 2025 at 2.25%.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
83
6. Capital management (continued)
Minimum Total Capital Regulatory Requirements 2023 2022
Pillar I – Total Capital Requirement 8.00% 8.00%
Pillar II – Total Capital Requirement 3.08% 3.26%
Capital Conservation Buffer (CCB)* 2.50% 2.50%
Other Systematically Important Institutions (O-SII) Buffer** 1.50% 1.25%
Countercyclical Buffer (CcyB) 0.48% 0.02%
Minimum Total Capital Regulatory Requirements 15.56% 15.03%
* Fully phased in as of 1 January 2019
** Increasing by 0.375%. every year thereafter, until being fully implemented on 1 January 2025 at 2.25%.
The minimum Pillar I total capital requirement ratio of 8.00% may be met, in addition to the 4.50% CET1
requirement, with up to 1.50% by AT1 capital and with up to 2.00% by T2 capital.
The Group is also subject to additional capital requirements for risks which are not covered by the Pillar I capital
requirements (Pillar II add-ons). Applicable Regulation allows a part of the said Pillar II Requirements (P2R) to
be met also with AT1 and T2 capital and does not require solely the use of CET1.
The capital position of the Group and BOC PCL as at 31 December 2023 exceeds both their Pillar I and their
Pillar II add-on capital requirements. However, the Pillar II add-on capital requirements are a point-in-time
assessment and therefore are subject to change over time.
In the context of the annual SREP conducted by the ECB in 2022 and based on the final SREP decision received
in December 2022 effective from 1 January 2023, the P2R has been revised to 3.08%, compared to the previous
level of 3.26%. The revised P2R included a revised P2R add-on of 0.33%, compared to the previous level of
0.26%, relating to ECB’s prudential provisioning expectations. When disregarding the P2R add-on relating to
ECB’s prudential provisioning expectations, the P2R is reduced from 3.00% to 2.75%. The ECB has also
maintained the P2G unchanged.
As of 30 September 2023, the amount corresponding to the abovementioned Pillar II add-on of 0.33% relating
to ECB’s prudential provisioning expectations is being deducted from CET1 capital and therefore the Pillar II
requirement decreased to 2.75% as of 1 January 2024. As at 31 December 2023, the impact of the capital
deduction taken, corresponds to 32 bps.
The CBC, in accordance with the Macroprudential Oversight of Institutions Law of 2015, sets, on a quarterly
basis, the CcyB rates in accordance with the methodology described in this law. The CcyB for the Group as at
31 December 2023 has been calculated at 0.48%.
On 30 November 2022, the CBC, following the revised methodology described in its macroprudential policy,
decided to increase the CcyB rate from 0.00% to 0.50% of the total risk exposure amount in Cyprus of each
licensed credit institution incorporated in Cyprus. The new rate of 0.50% became applicable as from 30
November 2023. Moreover, on 2 June 2023, the CBC, announced its decision to raise the CcyB rate to 1.00%
of the total risk exposure amount in Cyprus of each licenced credit institution incorporated in Cyprus. The said
increase of the CcyB is effective as from 2 June 2024. Based on the above, the CcyB for the Group is expected
to increase further.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
84
6. Capital management (continued)
In accordance with the provisions of this law, the CBC is also the responsible authority for the designation of
banks that are Other Systemically Important Institutions (O-SIIs) and for the setting of the O-SII Buffer
requirement for these systemically important banks. BOC PCL has been designated as an O-SII and since
November 2021 the O-SII Buffer had been set to 1.50%. This buffer was phased in gradually, having started
from 1 January 2019 at 0.50%. The O-SII Buffer as at 31 December 2022 stood at 1.25% and was fully phased
in on 1 January 2023 and as at 31 December 2023 stands at 1.50%. In October 2023, the CBC concluded its
reassessment for the designation of credit institutions that meet the definition of O-SII institutions and the
setting of O-SII buffer to be observed. The Group’s O-SII buffer has been revised to 2.25% (from 1.50%), to
be phased in annually by 37.5 bps to 1.875% on 1 January 2024 and by another 37.5 bps to 2.25% on 1
January 2025.
The Group’s minimum phased in CET1 capital ratio requirement as at 31 December 2023 is set at 10.72%,
comprising a 4.50% Pillar I requirement, a P2R of 1.73%, the CCB of 2.50%, the O-SII Buffer of 1.50% (to be
fully phased in at 2.25% on 1 January 2025, as aforementioned) and the CcyB of 0.48%. The Group’s minimum
phased in Total Capital requirement was set at 15.56%, comprising an 8.00% Pillar I requirement, of which up
to 1.50% can be in the form of AT1 capital and up to 2.00% in the form of T2 capital, a P2R of 3.08%, the CCB
of 2.50%, the O-SII Buffer of 1.50% and the CcyB of c.0.48%.
The Group is subject to a 3% Pillar I Leverage Ratio requirement.
The above minimum ratios apply for both BOC PCL and the Group.
Following the annual SREP performed by the ECB in 2023, and based on the final SREP decision received in
November 2023, effective from 1 January 2024, the Group’s minimum phased in CET1 capital ratio and Total
Capital ratio requirements decreased, when disregarding the phasing in of the O-SII buffer and CcyB, mentioned
above, reflecting the elimination of the Pillar II add-on relating to ECB’s prudential provisioning expectations
following the Group’s decision to directly deduct from own funds such amount. On 1 January 2024, the Group’s
minimum phased-in CET1 capital ratio requirement was set at approximately 10.91%, comprising a 4.50% Pillar
I requirement, a 1.55% Pillar II requirement, the Capital Conservation Buffer of 2.50%, the O-SII Buffer of
1.875% and CcyB of approximately 0.48%. On 1 January 2024, the Group’s minimum phased-in Total Capital
ratio requirement was set at approximately 15.61%, comprising an 8.00% Pillar I requirement, of which up to
1.50% can be in the form of AT1 capital and up to 2.00% in the form of T2 capital, a 2.75% Pillar II requirement,
the Capital Conservation Buffer of 2.50%, the O-SII Buffer of 1.875% and the CcyB of approximately 0.48%.
The ECB has also provided revised lower non-public guidance for an additional Pillar II CET1 buffer (P2G). From
2 June 2024 both CET1 and Total Capital minimum requirements are expected to increase by approximately
0.50% as a result of the increase in the CcyB described above.
The EBA final guidelines on SREP and supervisory stress testing and the Single Supervisory Mechanism’s (SSM)
2018 SREP methodology provide that the own funds held for the purposes of Pillar II Guidance (P2G) cannot
be used to meet any other capital requirements (Pillar I requirement, P2R or the Combined Buffer Requirement
(CBR)), and therefore cannot be used twice.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
85
6. Capital management (continued)
The capital position of the Group and BOC PCL as at the reporting date (after applying the transitional
arrangements) is presented below:
Regulatory capital
Group BOC PCL
31 December
2023
1
31 December
2022
(restated)
2
31 December
2023
1
31 December
2022
(restated)
2
€000 €000 €000 €000
Common Equity Tier 1 (CET1)
3
1,798,015
1,540,292
1,766,707
1,509,056
Additional Tier 1 capital (AT1) 220,000
220,000
220,000
220,000
Tier 2 capital (T2) 300,000
300,000
300,000
300,000
Transitional total regulatory
capital
2,318,015
2,060,292
2,286,707
2,029,056
Risk weighted assets – credit risk
4
9,013,267
9,103,330
9,005,552
9,150,831
Risk weighted assets – market risk -
-
-
-
Risk weighted assets – operational risk
1,327,871
1,010,885
1,292,350
997,720
Total risk weighted assets 10,341,138
10,114,215
10,297,902
10,148,551
Transitional % % % %
Common Equity Tier 1 (CET1) ratio
17.4
15.2
17.2
14.9
Total capital ratio 22.4
20.4
22.2
20.0
Leverage ratio 7.6
7.0
7.5
6.9
1.
Includes profits for the year ended 31 December 2023 and a deduction for a Distribution in respect of 2023 earnings of €137 million,
following approval received by the ECB in March 2024 and relevant recommendation by the Board of Directors to the shareholders for
a final cash dividend of €112 million and in principle approval by the Board to undertake a share buyback of ordinary shares of the
Company for an aggregate consideration of up to €25 million and in compliance with the terms of the ECB approval, as disclosed in
Section ‘Distributions’ within the Directors’ Report. Similarly, for BOC PCL, capital amounts and ratios include profits for the year ended
31 December 2023 and a deduction for a distribution in respect of 2023 earnings, following approval received by the ECB in March
2024 and relevant recommendation by the Board of Directors to the shareholders for a final cash dividend of €137 million.
2.
The 2022 capital ratios as previously reported in the 2022 Annual Financial Report and 2022 Pillar III Disclosures have been restated
following the approval by the ECB for the payment of a dividend in April 2023 and recommendation by the Board of Directors to the
shareholders for approval at the Annual General Meeting on 26 May 2023, of a final dividend in respect of earnings for the year ended
31 December 2022 which amounts to an aggregate distribution of €22,310 thousand.
3.
CET1 includes regulatory deductions, comprising, amongst others, intangible assets amounting to €24,337 thousand for the Group
and €16,861 thousand for BOC PCL as at 31 December 2023 (31 December 2022: €30,421 thousand for the Group and €25,445
thousand for BOC PCL). As at 31 December 2023 an amount of €15,337 thousand, for the Group and €12,643 thousand for BOC PCL,
relating to intangible assets, is considered prudently valued for CRR purposes and is not deducted from CET1 (31 December 2022:
€12,934 thousand for the Group and for BOC PCL).
4.
Includes Credit Valuation Adjustments (CVA).
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
86
6. Capital management (continued)
The capital ratios of the Group and BOC PCL as at the reporting date on a fully loaded basis are presented below:
Fully loaded
Group BOC PCL
31 December
2023
1,2
31 December
2022
3,4
(restated)
31 December
2023
1,2
31 December
2022
3,4
(restated)
% % % %
Common Equity Tier 1 ratio 17.3
14.5
17.1
14.1
Total capital ratio 22.4
19.6
22.2
19.3
Leverage ratio 7.6
6.7
7.5
6.5
1
Includes profits for the year ended 31 December 2023 and a deduction for the Distribution in respect of 2023 earnings of €137
million, following approval received by the ECB in March 2024 and relevant recommendation by the Board of Directors to the
shareholders for a final cash dividend of €112 million and in principle approval by the Board to undertake a share buyback of ordinary
shares of the Company for an aggregate consideration of up to €25 million and in compliance with the terms of the ECB approval, as
disclosed in Section ‘Distributions’ within the Directors’ Report. Similarly, for BOC PCL amounts include profits for the year ended 31
December 2023 and a deduction for the distribution in respect of 2023 earnings following approval received by the ECB in March 2024
and relevant recommendation by the Board of Directors to the shareholders for a final cash dividend of €137 million.
2
IFRS 9 fully loaded as applicable.
3
IFRS 9 and application of the temporary treatment of certain FVOCI instruments in accordance with Article 468 of CRR fully loaded
as applicable.
4
The 2022 capital ratios as previously reported in the 2022 Annual Financial Report and 2022 Pillar III Disclosures have been restated
following the approval by the ECB for the payment of a dividend in April 2023 and recommendation by the Board of Directors to the
shareholders for approval at the Annual General Meeting on 26 May 2023, of a final dividend in respect of earnings for the year ended
31 December 2022 which amounts to an aggregate distribution of €22,310 thousand.
During the year ended 31 December 2023, CET1 ratio was positively affected by pre-provision income as well
as the €50 million dividend distributed to BOC PCL in February 2023 by the life insurance subsidiary and
negatively affected mainly by the phasing in of IFRS 9 and other transitional adjustments on 1 January 2023,
provisions and impairments, the payment of AT1 coupon, AT1 refinancing costs, the capital deduction of 0.33%
in relation to the ECB prudential expectations for NPEs, other movements and the increase in risk-weighted
assets. The CET1 ratio is also impacted by the deductions for distribution in respect of 2023 earnings and
charges in line with the applicable framework as set out above. As a result, the CET1 ratio (on a transitional
basis) has increased by c.220 bps during the year ended 31 December 2023, whereas on a fully loaded basis
the ratio has increased by c.280 bps.
In addition, a prudential charge in relation to the onsite inspection on the value of the Group’s foreclosed assets
is being deducted from own funds since June 2021, the impact of which is 12 bps on the Group’s CET1 ratio as
at 31 December 2023, decreased from 26bps as at 31 December 2022. Furthermore, the Group is subject to
increased capital requirements in relation to its real estate repossessed portfolio which follow a SREP provision
to ensure minimum capital levels retained on long-term holdings of real estate assets, with such requirements
being dynamic by reference to the in-scope REMU assets remaining on the balance sheet of the Group and the
value of such assets. As at 31 December 2023 the impact of these requirements was 24 bps on the Group’s
CET1 ratio. The above-mentioned requirements are within the capital plans of the Group and incorporated within
its capital projections.
In June 2023, the Company successfully launched and priced an issue of €220 million Fixed Rate Reset Perpetual
Additional Tier 1 Capital Securities (the ‘New Capital Securities’).
The proceeds of the issue of the New Capital Securities were on-lent by the Company to BOC PCL to be used for
general corporate purposes. The on-loan qualifies as Additional Tier 1 capital for BOC PCL.
At the same time, the Company invited the holders of its outstanding €220 million Fixed Rate Reset Perpetual
Additional Tier 1 Capital Securities callable in December 2023 to tender the previous AT1 issue in 2018 (‘Existing
Capital Securities’) at a purchase price of 103% of the principal amount.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
87
6. Capital management (continued)
As a result of the tender offer, c.€204 million or 93% in aggregate principal amount of the Existing Capital
Securities were purchased and cancelled by the Company, and c.€16 million in aggregate principal amount of
the Existing Capital Securities remained outstanding as at 30 June 2023. In July 2023, the Company purchased
and cancelled a further c.€7 million of the Existing Capital Securities, after which €8.25 million in aggregate
principal amount of the AT1 Capital Securities remained outstanding.
On 29 November 2023, the Board of Directors resolved to exercise the Company’s option to redeem the
remaining €8.25 million in aggregate principal amount outstanding of the Existing Capital Securities on 19
December 2023.
Capital requirements of subsidiaries
The insurance subsidiaries of the Group, the General Insurance of Cyprus Ltd and Eurolife Ltd, comply with the
requirements of the Superintendent of Insurance including the minimum solvency ratio. The regulated Cyprus
Investment Firm (CIF) of the Group, The Cyprus Investment and Securities Corporation Ltd (CISCO), complies
with the minimum capital adequacy ratio requirements. From 2021 the new prudential regime for Investment
Firms (‘IFs’) as per the Investment Firm Regulation (EU) 2019/2033 (‘IFR’) on the prudential requirements of
IFs and the Investment Firm Directive (EU) 2019/2034 (‘IFD’) on the prudential supervision of IFs came into
effect. Under the new regime CISCO has been classified as Non-Systemic ‘Class 2’ company and is subject to
the new IFR/IFD regime in full. In February 2023, the activities of the regulated asset management company
of the Group, BOC Asset Management Ltd, were absorbed by CISCO and BOC Asset Management Ltd was
dissolved without liquidation. The payment services subsidiary of the Group, JCC Payment Services Ltd,
complies with the regulatory capital requirements.
Minimum Requirement for Own Funds and Eligible Liabilities (MREL)
The Bank Recovery and Resolution Directive (BRRD) requires that from January 2016 EU member states shall
apply the BRRD’s provisions requiring EU credit institutions and certain investment firms to maintain a minimum
requirement for own funds and eligible liabilities (MREL), subject to the provisions of the Commission Delegated
Regulation (EU) 2016/1450. On 27 June 2019, as part of the reform package for strengthening the resilience
and resolvability of European banks, the BRRD ΙΙ came into effect and was required to be transposed into
national law. BRRD II was transposed and implemented in Cyprus law in May 2021. In addition, certain
provisions on MREL have been introduced in CRR ΙΙ which also came into force on 27 June 2019 as part of the
reform package and were immediately effective.
In January 2024, the Bank received final notification from the SRB regarding the 2024 MREL decision, by which
the final MREL requirement is now set at 25.00% of risk weighted assets and 5.91% of Leverage Ratio Exposure
(LRE) (as defined in the CRR) and must be met by 31 December 2024, one year earlier than the previous
decision, in light of the Group’s progress over the years of becoming a strong, well-capitalised with sustainable
profitability organisation.
Furthermore, the binding interim requirement of 1 January 2022 set at 14.94% of risk weighted assets and
5.91% of LRE must continue to be met. The own funds used by BOC PCL to meet the CBR are not eligible to
meet its MREL requirement expressed in terms of risk-weighted assets. BOC PCL must comply with the MREL
requirement at the consolidated level, comprising BOC PCL and its subsidiaries.
In July 2023, BOC PCL proceeded with an issue of €350 million senior preferred notes (the ‘Notes’). The Notes
comply with the MREL criteria and contribute towards BOC PCL’s MREL requirement.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Risk and Capital Management Report
88
6. Capital management (continued)
Minimum Requirement for Own Funds and Eligible Liabilities (MREL) (continued)
The MREL ratio as at 31 December 2023, calculated according to the SRB’s eligibility criteria currently in effect
and based on internal estimate, stood at 25.5% of RWAs and at 11.7% of LRE (based on the regulatory Total
Capital as at 31 December 2023). The MREL ratio expressed as a percentage of risk weighted assets does not
include capital used to meet the CBR requirement, which stood at 4.48% as at 31 December 2023 (compared
to 3.77% as at 31 December 2022), reflecting the increase as at 30 November 2023 of CcyB from 0.00% to
0.50% of the total risk exposure amounts in Cyprus and expected to further increase to 1.00% from June 2024
as announced by CBC. Additionally, the CBR requirement is increased further as at 1 January 2024 following
the increase of the O-SII buffer from 1.50% to 1.875% and subsequently to 2.25% from 1 January 2025.
BOC PCL continues to evaluate opportunities to optimise the build-up of its MREL.
89
ESG DISCLOSURES
2023
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
90
PART A:
Task Force on Climate-related Financial Disclosures (TCFD)
Climate change is a reality, with extreme weather events happening more and more frequently such as this year’s
unprecedented snow-storms and wildfires in Europe. This trend will have catastrophic impact to the planet; for
reversing it, drastic action is needed. The EU has committed to reach net zero emissions by 2050 (with 2030
other intermediate targets) and now each country must define its own, optimum pathway to reach Net Zero.
The global focus, in 2023, was climate and environmental related issues with events such as Conference of Parties
(‘COP’) 28 on climate change, keeping these topics to the forefront of public and political discourse. The results
of the world’s efforts to address climate change under the Paris agreement were presented for the first time on
COP28. Having shown that progress was too slow across all areas of climate action, countries responded with
a decision on how to accelerate action across all areas by 2030. This includes a call on governments to speed up
the transition away from fossil fuels to renewables such as wind and solar power in their next round of climate
commitments.
As part of its vision to be the leading financial hub in Cyprus, the Group is determined to lead the transition of
Cyprus to a sustainable future. The Group systematically moves forward to the alignment with sustainable
banking and continues to embed Environmental, Social and Governance (‘ESG’) in its infrastructure, strategies
and policies. The Group’s commitment to integrate climate risk considerations into all relevant aspects of the
decision-making, governance, strategy and risk management highlights the Group’s aspiration to be a frontrunner
in the climate space in Cyprus. This is the second TCFD report published by the Company, presenting the current
activities and future plans in the climate field.
TCFD Recommendations
Pages in our
disclosures
Governance
Board’s oversight of climate-related
risks and opportunities
 91–93, 95-97, 128
Management’s role in assessing and
managing climate-related risks and
opportunities
 94-95, 98-101
Strategy
Climate-related risks and opportunities
(short, medium and long term)
 102-104, 113-126
Impact of climate-related risks and
opportunities on business, strategy and
financial planning
 105-111
Resilience of strategy, considering
different climate-related scenarios,
including a 2C or lower scenario
 112, 130-131, 141-142
Risk Management
Processes for identifying and assessing
climate-related risks
 113-126
Processes for managing climate-related
risks
 127-134
Integration of processes for identifying,
assessing and managing climate-
related risks into overall risk
management
 127-134
Metrics and targets
Metrics to assess climate-related risks
and opportunities in line with strategy
and risk management process
 106-107, 127, 135-138,
141-147
Scope 1, 2 and 3 GHG emissions and
the related risks
 139-147
Targets used to manage climate-
related risks and opportunities and
performance against targets
 106-107, 127, 135-138,
141-147
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
91
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance
The Group considers climate action as one of its key priorities. To reflect this strong commitment, climate-related
risks and opportunities are integrated into the governance structure. The Group is committed to high standards
of governance that are consistent with regulatory expectations and evolving best practices.
Organisational structure of the governance structure of the Group
The following climate change and net zero-related governance diagram illustrates how the Company’s governance
is currently structured.
BOCH’s governance structure comprises of the following statutory bodies:
i. The Board of Directors (the ‘Board’)
ii. Board Committees
iii. Senior Management Committees
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
92
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance (continued)
Board of Directors and Board Committees
Oversight and approval of the Group’s climate strategy and how it manages climate-related and environmental
(‘C&E’) risks and opportunities.
Board Committee
Role and Responsibilities
Risk Committee
The Risk Committee (
‘
RC
’
) has been delegated authority by the
B
oard
and consists of
3 independent non-executive members of the Board, who possess appropriate
knowledge, skills, and expertise to understand and monitor the strategy regarding the
risk appetite of the Group.
The main purpose of the RC is to review, on behalf of the Board, the aggregate Risk
Profile of the Group, including performance against Risk Appetite for all risk types and
ensure both Risk Profile and Risk Appetite remain appropriate.
The RC is responsible for the following:
i. Oversee the identification, assessment, control and monitor of
financial/economic risks and non-financial risks (including operational,
technological, tax, legal, reputational, compliance, and ESG including C&E
risks) which the Group faces in cooperation with the responsible Board
Committees.
ii. Ensure that the Group's overall Risk Profile and Risk Appetite remain
appropriate given the evolving external environment, any key issues and
themes impacting the Group and the internal control environment.
iii. Ensure effective and on-going monitoring and review of the Group's
management or mitigation of risk, including the Group's control processes,
training and culture, information and communication systems and processes for
monitoring and reviewing their continuing effectiveness.
iv. Report to the Board any current or emerging topics relating to ESG risks and
matters, including C&E risks and matters, that are expected to materially affect
the business, operations, performance, or public image of the Group or are
otherwise pertinent to it and its stakeholders and if appropriate, detail actions
taken in relation to the same.
v. Determine the principles that should govern the management of risks (including
ESG and C&E risks), through the establishment of appropriate Risk Policies.
vi. Review and monitor key enterprise wide ESG, including C&E, metrics, targets,
Key Performance Indicators (‘KPIs’), Key Riks Indicators (‘KRIs’) and related
goals and monitor the progress towards achieving targets and benchmarks.
vii. Receive and review periodic reports from management on ESG and climate
trends, issues, and risks, including developments in applicable regulations, as
well as the corresponding mitigation initiatives and controls.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
93
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance (continued)
Board of Directors and Board Committees (continued)
Board
Committee
Role and Responsibilities
Nominations
and
Corporate
Governance
Committee
The Nominations and Corporate Governance Committee (
‘
NCGC
’
) has been delegated
authority by the Board and consists of 3 non-executive members of the Board, who possess
appropriate knowledge, skills, and expertise to provide oversight to the Group’s sustainability
strategy aimed at achieving present and future economic prosperity, environmental integrity,
climate stability and social equity for the Group and its stakeholders.
The NCGC is responsible for the following:
i. Develop a strategy for ESG including C&E matters focusing on Environmental,
Climate, Ethical, Social, and Economic pillars and ensure it is embedded throughout
the operations of the Group.
ii. Advise, support and guide the Chief Executive Officer (‘CEO’) and Executive
Management Team in formulating and implementing a business strategy geared to
the sustainable development of the Group taking into account ESG including C&E
impacts.
iii. Oversee the Sustainability Committee’s (‘SC') implementation and progress
regarding the ESG working plan.
iv. Review the institution’s response and plan of action to the objectives set out under
international agreements.
v. Review and approve the ESG targets and KPIs, including C&E targets and KPIs, and
monitor their performance.
vi. Review and approve the non-financial disclosures presented by the SC.
vii. Review and approve the ESG and Environmental Policy and Sustainable Finance
Framework which enables BOCH and/or BOC PCL to issue Green/Social or
Sustainable bonds.
Human
Resources
and
Remuneration
Committee
The Human Resources and Remuneration Committee (
‘
HRRC
’
)
has been delegated authority
by the Board and consists of 3 non-executive members of the Board, who possess
appropriate knowledge, skills and expertise to oversee the implementation of Strategic HR
initiatives which promote and are aligned with the Group’s ESG ambition, strategy and
objectives. The HRRC reviews at least annually the appropriate structure of the remuneration
system and whether the total amount of variable compensation has been set in accordance
with the Remuneration Framework of the Central Bank Directive on Governance. Therefore,
any enhancements to the Remuneration Policy to incorporate ESG and climate criteria are
approved by the HRRC.
Audit
Committee
The
A
udit
C
ommittee
(
‘
AC
’
)
has been delegated authority by the
Board
and
as of
3
1
December 2023 consists of 3 independent non-executive members of the Board, who possess
appropriate knowledge, skills and expertise to assess the soundness of the methodologies
and policies that the management of the Group uses to develop ESG, including C&E metrics
and other disclosures and to assess the key vendors’ plans about sustainability.
The AC is responsible for the following:
i. Ensure the ESG frameworks/standards, including C&E frameworks/standards, used
are proper and relevant climate-related financial disclosures are investor grade.
ii. Consider materiality in terms of how ESG issues, including C&E issues, impact the
Group’s financial performance and ability to create long-term value (Financial
materiality) and how the Group’s actions impact people and the planet (Social
materiality).
iii. Review other material public disclosures with respect to ESG, including C&E matters
and discuss with management the Group’s engagement with stakeholders on key
ESG matters, including C&E matters, including in response to any proposals or other
concerns that have been submitted to BOCH and/or BOC PCL or the Board.
iv. Ensure that Internal audit incorporates ESG, including C&E risks, in its Risk and Audit
Universe
1
.
1
The auditable areas, processes, systems and activities as assessed according to the primary risks which may impair their
functionality.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
94
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance (continued)
Management Committees
Oversight and responsibility for providing strategic direction and implementation regarding climate-related goals,
risks and disclosures.
Management
Committee
Role and Responsibilities
Sustainability
Committee
The SC is an executive level committee chaired by
the
CEO and has as a primary role the
oversight of the ESG agenda of the Group aiming to lead the Group towards a cleaner,
fairer, healthier, and safer world. This will be achieved by helping its customers manage
risks in a long term sustainable and equitable way and aims for the Group to be an
employer of choice in Cyprus.
The SC is responsible for the following:
i. Monitor and review the development of the Group's ESG strategy for managing ESG
risks, including C&E risks.
ii. Oversee the implementation of the Group's ESG & Climate strategy.
iii. Review the institution’s response and plan of action to the objectives set out under
international agreements.
iv. Review ESG targets and KPIs, including C&E targets and KPIs.
v. Review the incorporation of ESG including C&E targets, KPIs and KRIs in the
business strategy.
vi. Monitor progress against the Group’s ESG working plan including the
implementation of the ECB Guide on C&E risks.
vii. Monitor progress on KPIs set to manage C&E risks and the performance against
wider ESG targets, on a quarterly basis, through the Sustainability Performance
Report. The Sustainability performance report will be monitored by the Executive
Committee (‘EXCO’) and NCGC on a quarterly basis.
viii. Monitor KRIs set to manage C&E risks, through the Climate Risk report, on a
quarterly basis. The Climate Risk Report will also be monitored by the EXCO and RC
on a quarterly basis.
ix. Oversee the degree of the Group’s alignment with regulatory ESG including C&E
related guidance, rules (such as EU Taxonomy, SFDR, NFRD and TCFD) and ECB
expectations.
x. Oversee the establishment of environmentally friendly products and Sustainable
Finance Framework.
xi. Review policies relating to ESG matters, including C&E, matters to ensure that they
are in line with the needs of the Group and the Group’s ESG strategy and that they
comply with applicable legal and regulatory requirements. Monitors the
implementation of policies relating to ESG including C&E matters (Excluding ESG
and C&E risks related policies).
xii. Review and challenge Risk Management Division (‘RMD’) regarding ESG matters
and policies, including C&E risks related matters and policies, such as ESG and C&E
risk identification, quantification, materiality assessment (‘MA’) and establishment
of ESG and C&E criteria in the loan origination process. RMD subsequently submits
to RC for approval of ESG and C&E risks related matters and policies, also notifying
EXCO.
xiii. Review non-financial disclosures including but not limited to the TCFD, relevant ESG
disclosures in Pillar 3 and the annual Sustainability Report.
xiv. Monitor the external ESG and C&E trends affecting the formulation of ESG policies,
strategies and objectives.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
95
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance (continued)
Management Committees (continued)
Management
Committee
Role and Responsibilities
Executive
Committee
The
EXCO
is responsible
for the following
:
i. Consider the overall financial performance and progress of the Group per line of
business, including, but not limited to, the Group’s capital and liquidity position, the
Group profitability, the NPE and the REMU portfolio.
ii. Consider the market conditions and strategic initiatives.
iii. Monitor the recovery and early warning indicators and assess the need to escalate
for further action to the RC and the Board.
iv. Consider the Risk Report.
v. Consider and approve budgets, business strategies/risk strategy to be presented to
the Board for approval.
vi. Consider and approve the Group’s
Risk Appetite Statement to be presented to the
RC and Board for approval.
vii. Consider and approve the Group’s Capital Plan to be presented to the RC and the
Board for approval.
viii. Consider the Compliance Reports/Matters and progress.
ix. Consider the Internal Audit Reports/Matters and progress.
x. Consider the HR/People Management/Matters and progress.
xi. Consider the Corporate Affairs Report/Matters and progress.
xii. Approve all matters escalated to EXCO within its delegated authorities and/or
recommend matters requiring escalation to the Board.
xiii. Consider all other matters escalated for discussion by any member of the EXCO or
any other Committee/Forum.
xiv. Monitor the Board and Board Committees pending decision lists.
xv. Note the minutes of the Acquisition & Disposal Committee (‘ADC’), Group Asset &
Liability Committee (‘ALCO’), the Regulatory Steering Group (‘RSG’) and the
Business Development Committee (‘BDC’).
Board Oversight
The Board has ultimate oversight of the identification, assessment and integration of C&E risks and opportunities
throughout the organisation. The Board is informed about the performance of the targets as well as the progress
of the ESG working plan through NCGC and RC regular update.
The Terms of Reference of each committee dictate the responsibilities regarding ESG matters, including C&E
matters. All C&E matters that are submitted to the Board Committees are in the form of formal documentation
describing clearly the purpose and scope of the paper, the methodology applied, any considerations conducted
during the process and the conclusions/results reached. The papers are presented to the Board Committees by
the responsible division/department. The relevant Board Committee enquires and challenges the responsible
division/department in order to approve the relevant paper.
The Group has compiled in 2022 an ESG working plan which is monitored by Investor Relations & ESG Department
(‘IR&ESG’), RMD, the SC and ultimately by NCGC and RC. The ESG working plan is structured in workstreams
which are designed to articulate delivery of Group’s ESG strategic objectives and are aligned with ECB
expectations, London Stock Exchange (‘LSE’) Disclosure requirements and other regulatory disclosure
requirements. Each workstream is associated with specific activities designed to meet relevant reporting and
regulatory requirements and achieve the Group’s targets and objectives. For the successful delivery of the Group’s
ESG strategic objectives the Group has formed an ESG working group comprising of experts from various
departments assigned with specific activities under the ESG working plan. Each activity completed by the ESG
working group, is reviewed by the IR&ESG and RMD. The progress, status and output of activities is communicated
to the SC, as it has the responsibility for the oversight of all ESG activities and the SC recommends output for
activities relating to ESG policy, strategy and disclosures related matters to the EXCO for approval (except those
activities relating to ESG and C&E risks). Following EXCO approval these activities are recommended to the NCGC
for approval (except for these activities relating to ESG and C&E risks).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
96
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance (continued)
Board Oversight (continued)
Specifically, the process through which the Board Committees are informed on C&E issues is presented below:
i. The SC reviews policies relating to ESG matters, including C&E matters, to ensure that they are in line
with the needs of the Group and the Group’s ESG strategy and that they comply with applicable legal and
regulatory requirements. The SC recommends approval of policies to the EXCO (excluding ESG and C&E
risks related policies). Following EXCO’s approval, the policies relating to ESG including C&E matters
(excluding ESG and C&E risks related policies) are recommended to the NCGC for approval.
ii. The SC reviews and challenge the RMD regarding ESG, and C&E risks related matters and policies, such
as ESG and C&E risks identification, quantification, MA and establishment of ESG and C&E criteria in the
loan origination process. The RMD then submits to the RC for approval the ESG and C&E risks related
matters and policies, also notifying the EXCO.
iii. The SC reviews the institution’s response and plan of action towards the objectives set out under
international agreements and makes recommendation of the plan of actions for approval to the EXCO.
Following EXCO approval and recommendation the plan of actions is submitted to the NCGC for approval.
iv. The SC monitors and reviews the development of the Group's ESG strategy for managing ESG, including
C&E risks, and recommends to the EXCO for approval. Following EXCO approval and recommendation it
is submitted to NCGC for approval.
v. The SC reviews BOCH’s annual non-financial disclosures including, but not limited to the TCFD, relevant
ESG disclosures in Pillar 3 and the annual Sustainability Report and recommends to NCGC for approval,
also notifying the EXCO.
vi. The SC reports to the EXCO. The NCGC and RC are updated of the progress of ESG working plan on a
regular basis.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
97
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance (continued)
Board Oversight (continued)
Refer to the table below on the items discussed at the Board Committee level in 2023 on the ESG & Climate field.
Board
Committee
Date ESG & Climate items
NCGC
February
2023
i.
Update on the ESG Working Plan
.
ii. Reviewed and approved the updated ESG & Climate Governance
arrangements.
iii. Discussed and approved the Sustainable Finance Framework.
March 2023
i.
Reviewed and
approved the updated ESG & Climate Governance
arrangements.
ii. Reviewed and approved the ESG Disclosures included in the Group's
Annual Report.
iii. Reviewed and approved the ESG Disclosures included in the Annual
Pillar 3.
iv. Reviewed and approved the action plan to address the JST thematic
review observations on climate related and environmental risks.
June 2023
i.
Reviewed and approved the Annual Sustainability Report of
BOC
PCL.
August 2023
i.
Reviewed and approved the ESG Disclosures included in the
Interim
Pillar 3 Disclosures for the six months ended 30 June 2023.
ii. Reviewed and approved the proposal to join the United Nations
Environment Programme – Finance Initiative (‘UNEP FI’) Principles
for Responsible Banking (‘PRB').
November
2023
i.
Reviewed and approved the updated ESG & Climate Governance
arrangements.
ii. Reviewed and approved the updated roles and responsibilities on
C&E risks of the three lines of Defence.
iii. Reviewed and approved the establishment of Business Environment
Scan (‘BES’) process on C&E risks.
iv. Reviewed and approved the decarbonisation target on Mortgage
portfolio and sector limits on carbon intensive sectors.
v. Updated on the performance against Sustainability KPIs through the
establishment of the Sustainability Performance Report.
December
2023
i.
Reviewed and approved the
BES
Results and Follow up actions
.
ii. Reviewed and approved the ESG & Climate Data Gap & Strategy.
RC
March 2023
i.
Reviewed and approved the action plan to address the JST thematic
review observations on climate related and environmental risks.
ii. Reviewed and approved the MA on C&E risks.
June 2023
i.
Updated through the Climate Risk Report
.
December
2023
i.
Reviewed and approved the enhanced
MA
on C&E risks.
ii. Reviewed and approved the incorporation of ESG and Climate
considerations in Loan pricing.
iii. Reviewed and approved C&E Risks Quantification.
iv. Reviewed and approved Environmental risks management.
v. Reviewed and approved ESG Due Diligence in loan origination
process.
vi. Reviewed and approved the incorporation of C&E risks in risk
classification.
vii. Reviewed and approved the C&E risks in collateral valuations.
viii. Updated through the Climate Risk Report.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
98
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance (continued)
Management Oversight
The Group’s management, led by the CEO, consists of executives who have many years of experience and
extensive knowledge of the modern banking sector. The governance structure is flexible and functional in order
to serve in the best possible way, shareholders and customers.
The CEO is responsible for implementing the enterprise climate strategy (a pillar within the ESG strategy).
In 2021, the Group formed the executive SC whose members, working together, take a coordinated enterprise
approach to accelerate the Group’s climate ambitions, targets and public engagement, working with a broad set
of Group leaders to ensure full alignment and coordination on our climate strategy and actions.
The processes in which the EXCO and SC are involved in regards to the decisions taken on climate and
environmental matters has been described in “Board Oversight” and “Management Committees” sections above.
Following the compilation of the ESG strategy in 2021, the ESG working plan in 2022 and 2023, specific
accountabilities are assigned to the Group’s Executives and Directors. The C&E responsibilities assigned to key
Executives and Directors of the Group are summarised in the table below:
Responsible person C&E related responsibilities
Chief Executive Officer
The CEO governs the sustainability performance of
the Group
,
driving focus on ESG and climate stewardship and tracking
progress made across the business to meet the Group’s ESG
and climate ambitions through the long-term ESG working
plan. The CEO is involved in the identification of sustainable
finance growth opportunities for the Group and promoting the
development of these in tackling climate change.
Executive Director of Finance
The Executive Director
of
Finance is responsible for the
successful integration of ESG into the Group’s core business
operations, in cooperation with business lines Directors, and
long-term business strategy as well as the oversight of the
progress of the ESG working plan for the implementation of
ESG and climate strategy and Sustainability reporting. In
addition, the Executive Director of Finance is responsible for
the oversight of the estimation of Scope 1, Scope 2 and Scope
3 Greenhouse gas (‘GHG’) emissions of the Group and the
establishment of C&E decarbonisation targets and strategy, in
cooperation with Deputy CEO and Chief Risk Officer.
Chief Risk Officer
The Chief Risk Officer is responsible and accountable for the
process of effectively managing C&E risks of the Group. This
includes the responsibility of overseeing the implementation
of the ESG working plan which supports the C&E risk
identification, measurement, assessment, stress-testing and
limit setting, as well as the supporting governance. The role
further encompasses the responsibility of reviewing risk
appetite and C&E risk appetite metrics.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
99
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance (continued)
Management Oversight (continued)
Investor Relations and ESG Department
The Group’s IR&ESG department is developing and implementing the ESG and climate Strategy. The IR&ESG
main responsibilities are to:
i. Develop the action plan for the implementation of the ESG and climate strategy;
ii. Compile the ESG working plan and monitor its progress;
iii. Establish the ESG and climate targets and KPIs and monitor their progress;
iv. Develop and roll out the institution’s methodology for portfolio alignment assessments (e.g., using Paris
Agreement Capital Transition Assessment (‘PACTA’) and Science Based Target Initiative (‘SBTi’));
v. Develop and roll out the institution’s methodology for measuring financed emissions (e.g., using
Partnership for Carbon Accounting Financials (‘PCAF’));
vi. Prepare ESG and climate-related reporting;
vii. Coordinate the activities and deadlines of the ESG Working Group;
viii. Review in cooperation with RMD the activities completed by the ESG Working Group;
ix. Support other functions in the formulation/update of policies in line with ESG Strategy;
x. Report to the SC in frequent intervals and Board Committees in line with the Terms of Reference;
xi. Update ESG communication messages in coordination with Corporate Affairs Department (‘CAD’);
xii. Communicate ESG strategy to internal and external stakeholders in coordination with CAD and RMD;
and
xiii. Manage relationship with ESG Rating Agencies & analysts and coordinates improvement actions.
Risk Management Division
The RMD is responsible for the identification, quantification and monitoring of ESG risks, including C&E risks, for
own operations and clients. The main responsibilities are to:
i. incorporate ESG risks, including C&E risks, in the Risk Management Framework, policies and
procedures;
ii. incorporate ESG and climate criteria in the loan origination process;
iii. review in cooperation with IR&ESG the activities completed by the ESG Working Group;
iv. comply with ECB guide on C&E risks;
v. establish the ESG and climate targets and KPIs in cooperation with IR&ESG; and
vi. establish the C&E KRIs through the ESG and climate targets and KPIs set.
The RMD main tasks regarding ESG risks, including C&E risks:
i. Carries out the necessary MA in relation to C&E risks;
ii. Identifies ESG risks, including C&E risks, and ensures their inclusion in the risk taxonomy and risk register
of BOC PCL;
iii. Quantifies C&E risks through scenario or other analysis and provides estimates for their potential impact;
iv. Assesses the impact of C&E risks on BOC PCL’s capital adequacy from an economic and normative
perspective;
v. Incorporates C&E risks in its risk classification procedures;
vi. Analyses and provides expert judgement on exposures to clients from high-risk industries;
vii. Makes recommendations for risk-mitigating actions for transactions assessed as high-risk;
viii. Prepares and maintains the institution’s climate-related risk management policies (e.g., exclusion
policies);
ix. Develops and rolls out the institution’s climate-related client questionnaires for due diligence and data
collection purposes;
x. Conducts C&E risks stress testing and provides input on ESG supporting Governance;
xi. Produces reports on C&E risks for submission to the SC, EXCO and RC; and
xii. Provides advice and checks on the institution’s climate-related product offering, such as “green” products.
The Executive Director of Finance and the Chief Risk Officer monitor the progress of the ESG working plan on a
bi-weekly basis.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
100
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I – Governance (continued)
Management Oversight (continued)
The Group, in addition to the specific tasks and responsibilities assigned to RMD and IR&ESG, has assigned roles
and responsibilities on ESG including C&E risks to the Business Lines, Compliance Division and Internal Audit
Division.
Business Lines:
The main tasks of Business lines on ESG risks, including C&E risks are to:
i. Lead the interaction with customers regarding the incorporation of the ESG and climate criteria in the
credit underwriting process through the ESG questionnaires and scoring process;
ii. Observe and adhere any sector limits being put in place as derived from the science-based targets;
iii. Implement all policies relating to the Green transition (e.g., Environmental and Social Policy (‘E&S’),
Green Lending Policy etc.);
iv. Enable the Green Transition through promotion of Green products and services;
v. Engage with key customers for investments in Green products;
vi. When discussing a new lending, guide the customers towards green lending which will help them become
a more sustainable business;
vii. Implement initiatives included in BOC PCL’s decarbonisation strategy for own operations to reduce energy
consumption, paper consumption and GHG emissions in relation to the operation of their business unit;
viii. Own and manage C&E risks as part of their responsibility for achieving objectives and for implementing
corrective actions to address process and control deficiencies; and
ix. Support in the design of “green” products and services to meet customer’s needs and incentivise clients
to reduce emissions.
Compliance Division:
Compliance Division’s main tasks regarding ESG risks, including C&E risks, are:
i. Identifying, on an on-going basis, the legal and regulatory framework concerning ESG including C&E risks
and communicating to business units any regulatory developments applicable to them;
ii. Ensuring that a complete and updated register of ESG including C&E risks is maintained and that
emanating compliance obligations are documented and supported by appropriate action plans by the
responsible units;
iii. Assess and monitor the implementation of actions to ensure timely and effective compliance with
regulatory obligations concerning ESG including C&E risks and recommends changes to the institution’s
policies and coordinates the implementation of such changes;
iv. Updates SC, EXCO and AC on ESG Regulations & Compliance Requirements;
v. Performs compliance reviews taking into account ESG including C&E laws, rules, regulations and
standards identifying compliance weaknesses and risks. Prepares and recommends follow-up actions for
mitigating such risks. Reports the outcome of these reviews to the management body and/or its
committees, including as regards residual risk;
vi. Provides advice on ESG including C&E related policies, ensuring these are consistent with the Board’s risk
appetite and the Group’s ESG Strategy;
vii. Provides advice on design and evolution of the ESG and Climate Governance Structure; and
viii. Supports functions and Business Lines for Compliance with ESG Regulations.
Internal Audit Division (‘IA’):
The IA, as a third line of defense, provides independent assurance to the Board and Executive Management on
the design adequacy and operating effectiveness of the Group’s internal control framework, corporate governance
and risk management processes (including ESG and C&E risks), according to the risk appetite set by the Board.
IA maintains a Risk & Audit Universe, which includes all material risks that BOC PCL is exposed to, as well as all
auditable areas of BOC PCL. The management of C&E risks has been included in IA’s Risk and Audit Universe
both as a relevant primary risk, but also as an auditable area. Therefore, during the risk assessment process,
which is followed to derive IA’s Annual Audit Plan (‘AAP’), all auditable areas in the Audit Universe are assessed
against C&E risks.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
101
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar I - Governance (continued)
Management Oversight (continued)
Internal Audit Division (‘IA’): (continued)
Furthermore:
i. IA ensures the existence of adequate and appropriate resources for all audit engagements included in the
AAP, through the calculation of the estimated hours needed on the basis of engagement scope and
complexity, while also considering the assigned staff’s knowledge, skills and other competencies in the
area. Through the use of timesheets, the actual hours spent are recorded and compared with the
estimated hours, with deviations investigated and if necessary relevant actions being taken.
ii. The knowledge and skills of the IA staff is assessed on an annual basis, in accordance with its Competency
Framework. Based on this assessment, IA takes necessary actions and prepares specific development
plans, in order to ensure that its staff possesses the necessary skills and knowledge for the performance
of their duties (including C&E related topics, if required).
It is noted that, since the maintenance of the Risk and Audit Universe is an ongoing process, as the BOC PCL
gradually builds its overall capabilities for managing ESG including C&E risks and enhances relevant processes
within its first and second lines of defence, IA will be modifying its Risk and Audit Universe to cover them
accordingly.
Remuneration policy
The Group has taken necessary steps in embedding its ESG strategic goals within the remuneration policy,
adhering to the importance of connecting the performance of its personnel to ESG and climate matters as a way
of incorporating ESG culture within the organisation. The remuneration policy promotes and is consistent with
sound and effective risk management, is in line with the Group’s ESG and climate strategy and does not encourage
excessive risk taking that exceeds the level of risk tolerated by the Group.
Performance criteria (financial and/or not financial), set to measure the performance of Senior Management,
contain KPIs that relate to the implementation of the Group's ESG strategy, reflecting the Group’s emphasis on
achieving its climate related objectives, in accordance with the role and responsibility of each Senior Manager in
relation to the ESG Strategy. Performance criteria include incentives set to manage ESG risks, including C&E
risks, related objectives and/or limits to ensure that green washing practices are avoided. These are expected to
be cascaded down to staff, through the performance appraisal system, in line with the staff’s respective roles and
responsibilities, so as to continuously enhance the Group's ESG culture, elicit the right behaviours and align
individual results with ESG Strategy.
Group-wide performance relating to ESG and climate targets are included in the performance scorecard of any
applicable Long-Term Plans, at the time of the design and approval of a plan.
The long-term incentive plan (‘2022 LTIP’) that has been approved by the Company’s shareholders, incorporates
measurement of performance against an evaluation scorecard consistent with the Group’s Medium-Term Strategic
Targets, which include ESG targets. The evaluation scorecards used in the abovementioned scheme include KPIs
on External ESG ratings. External ESG ratings are granted based on an external assessment performed on ESG
aspects of the Group.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
102
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II - Strategy
Climate change is the biggest challenge that humanity faces. The World Meteorological Organisation (‘WMO’)
declared that 2023 is the warmest year on record. In 2023, the annual average global temperature was 1.45°C
± 0.12°C above pre-industrial levels. The Paris agreement overarching goal is to limit the increase of long-term
temperature to no more than 1.5°C above pre-industrial levels. The Global Greenhouse Gas ('Global GHG')
emissions continue to increase, and extreme climate events are more frequent than ever. To keep warming to
1.5°C, cuts of 45% are required by 2030, with Global GHG emissions reaching Net Zero by 2050. This means
GHG emissions need to decline now. The transition to this low carbon economy requires a transformation of
assets and behaviours, for which trillions of dollars in finance are required.
To assist this transition, European Regulators have put in place an EU action plan for sustainable growth that
includes several new regulatory disclosure standards, as well as expectations that are bound to become
requirements in the near future. Following the developments and having set a “Beyond Banking” approach and a
vision to create a stronger, safer, and future-focused organisation, the Group is determined to continue working
towards a better Cyprus and a better world for today and future generations. Consequently, the Group further
aspires to increase its positive impact on environment, and maintain its leading role in the social and governance
pillars by transforming not only its own operations, but also the operations of its customers.
The Group continues to broaden and strengthen its efforts to identify climate-related risks and opportunities, the
key first step in the Group’s climate strategy. Once identified, the Group assesses how the risks can be better
managed, reduced or mitigated in line with its risk management framework.
The Group’s approach to climate action is evolving over time and has progressively been embedded into the
Group’s activities and actions. Consequently, the Group focuses on creating lifelong partnerships with customers,
as well as guiding and supporting them in a changing world by financing projects which bear a positive climate
impact. Underpinning the Group’s Climate Strategy (a pillar within its ESG strategy), there are three strategic
areas where, moving forward, the Group will focus its climate action:
i. Reinforcing the impact of climate financing;
ii. Building resilience to climate change; and
iii. Further integrating climate change considerations across all of Group’s standards, methods and
processes.
The commitments made by the Group in its ESG Strategy focus on the following key primary objectives:
i. Become carbon neutral by 2030;
ii. Become Net Zero by 2050;
iii. Steadily increase Green Asset Ratio (‘GAR’); and
iv. Steadily increase Green Mortgage Ratio.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
103
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Climate-related and Environmental Risks and Opportunities
The Group’s Climate Strategy is continuously evolving as the Group improves the tools and expands the resources
available to grow its understanding of the interconnection between the climate, its business, operations, clients
and communities. The Group seeks to identify and advance the initiatives that will enhance its operational
resilience, decision-making and planning to mitigate climate-related risks and capitalise upon climate-related
opportunities. The Group’s strategy and risk management initiatives are interdependent and adapt as needed
based on the performance against established metrics and targets. The Group is working to advance its climate
knowledge base and resilience to climate-related shocks.
The Group views climate risk as a cross-cutting risk which manifests itself through or amplifies existing risk
categories within the Group’s Risk Taxonomy, as described further in the ‘Pillar III - Risk Management’ section of
these TCFD. These transition and physical risks can manifest themselves differently across risk categories in the
short, medium, and long term. The time horizons considered are described here for reference.
Time
horizon
label
Start
Year
End
Year
Rationalisation
Short-
term (1-
3 years)
2023 2026
The Corporate Sustainability Reporting Directive (
‘
CSRD
’
) is expected to be a major
disruption and a milestone for climate change activation. As CSRD will first be
applied in January 2025 (for FY2024) for EU listed companies, and every year
thereafter up until 2028 to include certain SMEs and large companies (Years 1-3),
the Group considers the first three years as its first time horizon. Furthermore, the
Group is committed to become carbon neutral by 2030 by reducing Scope 1 and
Scope 2 GHG emissions from own operations. The Group has focused its main
decarbonisation actions in the short-term up to 2026 in order to lead the
decarbonisation efforts, lead by example and also to benefit from any government
subsidies that will be announced as part of the Recovery and Resilience Facility
(‘RRF’) of the European Union. As a result, the risk horizon the Group focuses for
short term is between 1-3 years.
Medium-
term (4-
7 years)
2027 2030
As 2030 is the year set by the
EU
for the goal of “Fit for 55” (i.e., a 55% reduction
of GHG emissions below 1990 levels), the Group has also set 2030 as the medium
term risk horizon for the identification of C&E risks and opportunities. Therefore,
the time horizon for medium term is between 4-7 years. In addition, the Group is
committed to become carbon neutral by 2030 by reducing Scope 1 and Scope 2
GHG emissions by 2030, therefore C&E risks should be identified and managed in
a horizon of 4-7 years in order to achieve the target set.
Long-
term (8-
27
years)
2031 2050
The Group
considers a time horizon of over 8 years for chronic physical risks to
manifest. Additionally, the Group has set a target to become net zero by 2050,
following its commitment to the Paris Agreement, which indicates that Scope 1,
Scope 2 and Scope 3 GHG emissions should be reduced by 2050 to zero. For Scope
1 and Scope 2 own operations the reduction target is relevant for all time horizons.
However, the climate related risks associated with Financed Scope 3 GHG
emissions depend also on the useful life of the assets, which for the majority of the
current loan portfolio of the Group this translates to a maturity beyond 8 years. As
such a long-term time horizon has been set to 8–27 years to cover both the risks
as well as the strategic aspects of climate related risks within the organisation.
Under ’Pillar III - Risk management’ section of these TCFD further detail is provided on the transition and physical
climate-related risks identified in each time horizon that could have a material financial impact on the Group as
well as description of the processes on how the Group identifies and assesses the materiality of transition and
physical climate-related risks.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
104
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Climate-related and Environmental Risks and Opportunities (continued)
Climate-related opportunities have been identified across business segments and are informed by the
understanding of climate-related risks. They include strategies, products, services and advice to support clients
in the low-carbon transition, and to capture new areas of business growth, such as sustainable finance. The Group
has also identified opportunities in its operations to mitigate climate change, while improving efficiency and
resilience as can be shown in the table below.
Opportunity
Type
Climate-Related
Opportunities
Time Horizon Identified Impactful Activities
Resource
Efficiency
Use of more efficient
modes of transport
Medium/Long
i.
Upgrade of car fleet with net
-
zero cars
ii. Awareness of personnel and
culture change regarding
efficient and less polluting
modes of transport.
Use of recycling Short/Medium/Long
i.
Enhance the recycling actions of
the organisation.
ii. Support circular economy.
Move to more efficient
buildings
Short/Medium/Long
i.
Energy efficiency upgrades of
owned buildings.
ii. Transfer to more energy
efficient leased buildings.
Reduce water usage
and consumption
Short/Medium/Long
Increase efforts for the reduction of
water usage within the Group’s
premises.
Energy
Systems
Use of lower
-
emission
sources of energy
Short/Medium/Long
More strict procurement specifications
for new hardware and electronics.
Shift toward
decentralized energy
generation
Medium/Long
i.
Installation of photovoltaics on
owned premises.
ii. Enter into Power Purchase
Agreements with providers of
renewable energy.
Products
and
Services
Development and/or
expansion of low
emission products and
services
Short/Medium/Long
Expand the range of sustainable and
environmentally friendly products and
services. Refer to Green/Transition
Lending under ‘Pillar II - Strategy’
section of these TCFD.
Markets
Use of public-sector
incentives
Short/Medium/Long
Identify public funding schemes
stemming from the RRF in order to
further support interested parties and
assist in the acceleration of transition
efforts.
The development of
new revenue streams
from new/emerging
environmental markets
and products
Medium/Long
Through the net
-
zero strategy exercises
identify sectoral decarbonisation needs
and develop new products to assist the
clients to achieve their own net-zero
targets.
Improved ratings by
sustainability/ESG
indexes
Short/Medium/Long
Continuously improve internal
procedures and disclosures in order to
improve ESG ratings.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
105
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Net Zero Strategy
The Group has resolved to align with the target set by the Paris agreement, the EU Green Deal and the Cyprus
Government for a Net Zero goal by 2050.
Beyond the initiatives focusing on introducing the financing of sustainable products and services and designing
and embedding environmental procedures in the lending process, the Group monitors closely internal operations
in order to reduce and eliminate GHG emissions.
In supporting the net zero commitments, the Group’s Scope 1, Scope 2 and material non-Financed Scope 3
2
GHG
emissions were calculated for 2021 (baseline), using a widely accepted methodology and bringing the Group in a
position where it can set a feasible roadmap of actionable tasks to reduce its carbon footprint and achieve its
decarbonisation goals.
Given the fact that BOC PCL is the main contributor of GHG emissions of the Group, BOC PCL has formulated a
decarbonisation plan to reduce its own carbon footprint relating to Scope 1 and Scope 2 GHG emissions and
ultimately reach its Carbon Neutral target by 2030.
For the Group to reach carbon neutrality by 2030, Scope 1 and Scope 2 GHG emissions should be reduced by
42% by 2030 compared to 2021 baseline. The decarbonisation target on Scope 1 and Scope 2 is monitored
through the Sustainability Performance Report on a quarterly basis by the SC, EXCO and Board Committees.
BOC PCL plans to invest in energy efficient installations and actions and replace fuel intensive machineries and
vehicles from 2024 to 2025, which would lead to c.3-4% reduction in Scope 1 and Scope 2 GHG emissions by
2025 compared to 2021. The Group expects that the Scope 2 GHG emissions will be reduced further when the
energy market in Cyprus shifts further towards renewable energy. The Group is also considering several other
actions aiming to a further reduction of c.30% in Scope 1 and Scope 2 GHG emissions by 2030 compared to
2022. The actions planned by BOC PCL between 2024 to 2025 include:
i. Air-conditioning systems replacements
ii. Boiler replacements
iii. Roof insulation
iv. CO
2
sensors installation
v. Heat recovery installation
Similar energy efficiency actions are planned for the other operating subsidiaries of the Group.
Currently the Group does not plan to set specific targets for the material non-Financed Scope 3
1
GHG emissions
as the vast majority of its Scope 3 GHG emissions relate to Financed Scope 3 GHG emissions.
Apart from the strategy to reduce GHG emissions associated with its own operations, BOC PCL should design the
strategy to reduce GHG emissions associated with its loan portfolio (i.e. customers) and investment portfolio
which effectively will lead to less exposure to C&E risks. Therefore, BOC PCL became a member of the PCAF and
estimated GHG emissions derived from its loan, investment and insurance portfolio based on PCAF standard and
proxies. BOC PCL is integrating C&E risks into its Business Strategy through the following:
1. Sector limits;
2. Decarbonisation targets;
3. Green/Transition Lending;
4. ESG and Climate considerations in loan pricing.
2
The non-Financed Scope 3 GHG emissions of the Group comprise of GHG emissions from the business travel, waste
disposal, purchased good & services, employee commuting and transport and distribution categories.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
106
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Net Zero Strategy (continued)
1. Sector Limits
Certain sectors are inherently associated with higher transition risks due to the fact that their current operating
model is not considered sustainable under a low carbon economy. The fact that the current and prospective
regulatory environment is driving us towards that direction, indicates that the entities, operating in carbon
intensive sectors, might fail to adopt. Failure to adopt might impact customers’ profitability, liquidity,
creditworthiness and ultimately their sustainability in the longer term. In order to manage transition risks and be
aligned with Net Zero commitment, BOC PCL established certain sector lending limits to restrict its exposure to
sectors which are widely considered as carbon intensive sectors (i.e. cement, oil, gas, iron, steel, aluminium and
power generation through fossil fuels). The role of BOC PCL is to engage with the customers operating in carbon
intensive sectors, in order to educate them on the C&E risks that are exposed and support them in the transition
to low carbon economy by providing them Green or transition financing. The sector limits are not applicable to
Green or Transition financing or to entities, operating in carbon intensive sectors, with an externally validated
transition plan, so to motivate and support the customers to their transition to a low carbon economy. The
abovementioned sector limits have been reflected in the BOC PCL Concentration Policy. For more details refer to
‘Pillar III – Risk Management’ of these TCFD under section ‘e. Policies’.
2. Decarbonisation targets
BOC PCL by taking into account the MA performed on C&E risks, the available methodologies to estimate Financed
Scope 3 GHG emissions and Insurance associated GHG emissions as well as the available methodologies to set
decarbonisation targets on certain sectors and asset classes aligned with a climate scenario, determined to set
decarbonisation target on its Mortgage portfolio. Following the establishment of the decarbonisation target on
Mortgage portfolio BOC PCL designed the strategy to meet the target and align its Mortgage portfolio with the
International Energy Agency’s (‘IEA’) Below 2 Degree Scenario (‘B2DS’) by aiming to finance more energy efficient
residential properties. BOC PCL designed and introduced a “Green Housing” product, aligned with Green Loan
Principles (‘GLP’) of Loan Market Association (‘LMA’), in order to support the feasibility of the decarbonisation
target. The decarbonisation target on Mortgage portfolio and the new lending strategy to meet the target have
been incorporated in the Group’s Financial Plan for 2024-2027. The Group is also examining to set decarbonisation
target on Commercial Real Estate (‘CRE’) asset class as well as on Transportation and Storage business loan
sector of loan portfolio, within 2024.
3. Green/Transition Lending
BOC PCL, by taking into account the results of BES and the materiality assessment on C&E risks, has set Green
/Transition new lending targets for 2024 in order to support the transition of its customer and Cyprus to a low
carbon economy and limit its exposure to transition risks in certain sectors. Specifically, BOC PCL by taking into
account the results of the MA on C&E risks, the expected introduction of Green taxation in Cyprus, the
amendments adopted by the European Parliament on 14 March 2023 on the proposal for a directive of the
European Parliament and of the Council on the energy performance of buildings as well as the Cyprus Government
subsidies identified climate related opportunities and has set Green/Transition new lending targets on specific
sectors (i.e., Manufacturing, Trade, Construction and Accommodation) to enable the Green transition. The
Green/Transition new lending targets have been included in the Group’s Financial Plan for 2024 – 2027 and
monitored on a monthly basis by the Business Development Committee (‘BDC’) of the Group. Taking into account
that the Green/Transition new lending targets are incorporated for the first time in the Financial Plan of the Group,
those comprise of c.10% of total new lending projections for 2024 of Corporate & SME Division. Green / Transition
new lending is expected to increase in the upcoming years given the maturity of the market in climate spectrum.
In addition, BOC PCL offers a range of environmentally friendly products to manage transition risk and help its
customers become more sustainable. For example, a number of loan products are offered under the Fil-eco
Product Scheme. BOC PCL offers environmentally friendly Car Hire Purchase addressed to anyone who wants to
buy a new hybrid or electric car, providing its customers the opportunity to buy a new electric or hybrid vehicle
and to move away from transport options reliant on fossil fuels. Moreover, an environmentally friendly loan for
home renovation is offered to customers who want to renovate and upgrade the energy efficiency of their privately
owned primary residence or holiday home and achieve a higher energy efficiency rating. Further, the customers
may benefit from an Energy Loan for the installation of energy saving systems for home use. This product is
addressed to customers who seek financing for the installation of photovoltaic systems for home use and other
home energy-saving systems.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
107
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Net Zero Strategy (continued)
3. Green/Transition Lending(continued)
At the end of 2023, BOC PCL launched the “Green Housing” product, aligned with GLPs of LMA, in order to support
the decarbonisation of residential properties in Cyprus, ensure feasibility of the decarbonisation target and
effectively being exposed to lower level of transition risks. Looking forward, in 2024 the Group will continue to
build out its green product offering further.
The Group has set up a Sustainable Finance Framework which will facilitate the issuance of Green, Social or
Sustainable bonds. The proceeds from such bonds will be allocated to eligible activities and products as designated
in the Sustainable Finance Framework. The Group is in the process of gathering necessary data to identify an
eligible pool of assets for a potential issuance of a bond under the Sustainable Finance Framework.
Note: Car loans include loans to buy a new hybrid or electric car. Energy loans include loans to renovate and upgrade the energy efficiency of privately owned primary
residence or holiday homes and acquisition/installation of solar panels. Renewable energy projects relate to loans financing solar parks or wind parks.
4. ESG and Climate considerations in loan pricing
In addition, BOC PCL is recognizing the importance of promoting sustainability in its lending practices, so it has
developed a comprehensive plan aiming to integrate ESG and climate factors into its loan pricing framework to
ensure a long-term sustainable growth. The plan has two main phases, the Transition phase and the Long-term
phase.
Transition phase:
BOC PCL performed market research to identify the best practices to incorporate ESG and climate considerations
in the loan pricing. Following the market research, BOC PCL introduced margin discounts by taking into account
the customer’s ESG score and the transaction eligibility under Green Lending Framework. Essentially, a margin
discount, based on the client’s ESG and climate impact, will be implemented for both new and existing clients on
new lending requests, for all clients (all sectors) under Corporate Division, differentiating however between
carbon-intensive vs. non-carbon intensive sectors. BOC PCL linked the margin discount at the client level to the
borrower's “E” scoring (extracted from borrower’s “ESG” score). In addition, BOC PCL linked the margin discount
at the transaction level (i.e. whether lending is Green or not) utilizing the provisions of the BOC PCL's Green
Lending Framework.
Long-term phase:
BOC PCL has developed a longer-term plan for undertaking the necessary activities and analysis that will allow
for a structured approach to incorporate ESG and climate factors in the Lending Pricing Policy and Lending Pricing
Framework pricing components and where necessary associate pricing with defined KPIs. The plan is divided into
four distinct phases, each with specific objectives and activities designed to ensure successful integration:
i. Inception: the objectives are to develop an ESG and climate Pricing strategy that is aligned with the BOC
PCL's values, objectives, and risk appetite. Specifically, BOC PCL envisages to set the Strategic direction
to be followed and how this will accommodate the balance between the Strategic View Pricing approach
and Risk View Pricing approach.
1.3
1.8
17.8
20.9
5.8
2.0
16.7
24.5
Car loans Energy Loans Renewable Energy
Projects
Total
Environmentally Friendly Loans - Gross Loans (€million)
2022 2023
↑346%
↑11%
↓11%
↑17%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
108
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Net Zero Strategy (continued)
4. ESG and Climate considerations in loan pricing (continued)
ii. Preparation: the objectives are to undertake a feasibility analysis in relation to which pricing components
are the most prominent to analyse in terms of adjusting them to reflect any ESG and climate
considerations as well as to further specify the roles and responsibilities of each unit for ESG and climate
integration in loan pricing.
iii. Development: The Development phase of the ESG and climate pricing strategy plan is divided into two
parts, the Risk View and the Strategic View. Under the Risk View, BOC PCL aims to conduct analysis and
assessment of various ESG and climate factors to determine their relevance and importance and prioritise
them for inclusion in the pricing framework, in conjunction with the outcome of the feasibility analysis.
Under the Strategic View, BOC PCL aims to start defining pre-requisites that will allow, upon a more
mature state, to enhance its approach on strategic view to be more holistic than the one implemented on
Transition phase.
iv. Implementation: the objective is to perform the necessary actions to implement the selected approach
of incorporating ESG and climate considerations in pricing components so to become business-as-usual.
GAR
3
and Green Mortgage Ratio
4
As BOCH falls under the Non-Financial Reporting Directive it is mandatory to also comply with the EU Taxonomy
regulation for financial institutions. As such, BOCH is taking necessary actions and measures to estimate and
disclose its GAR, which presents the proportion of the share of a credit institution’s assets financing and invested
in EU Taxonomy-aligned economic activities as a share of total covered assets, such as those consistent with the
European Green Deal and the Paris agreement goals. The financial institutions are required to disclose the EU
Taxonomy eligible and aligned activities as a share of total covered assets for Climate Change Mitigation
5
(‘CCM’)
and Climate Change Adaptation
6
(‘CCA’) environmental objectives as at 31 December 2023. EU Taxonomy
required disclosures are provided in Part B of these ‘ESG Disclosures’.
BOCH has committed within its strategy to improve its GAR not only as part of its dedication to the EU Green
Deal and the Paris Agreement, but also because, through its increase it will significantly reduce its exposure to
C&E risks and potential capital impact, which consequently will also have a positive impact towards investors’
interest and will further establish BOCH and BOC PCL as a market leader in the sustainability space.
BOC PCL has in place a Green Lending Policy which aims to provide the framework and the requirements BOC
PCL will implement for the creation of green loans and to support borrowers in financing environmentally sound
and sustainable projects. The Policy sets the criteria for a loan to be categorised as “green” which include, among
others, clear environmental benefits, environmental sustainability objectives, the processes by which the
borrower identifies and manages perceived, actual or potential environmental and social risks associated with the
relevant green project(s) etc. To fully operationalise the policy, BOC PCL is in the process of preparing the relevant
guidelines, which will provide further guidance on the specific procedures to be followed. To support this goal,
the Group has developed a Green Lending Framework which currently follows the GLP but also uses the EU
Taxonomy as the main consideration to inform criteria for green or transition loans. This framework is expected
to be reviewed annually and to evolve as the EU Taxonomy expands.
3
The proportion of the share of credit institution’s assets financing and invested in EU Taxonomy-aligned economic activities
as a share of total covered assets.
4
The proportion of the share of credit institution’s assets financing EU Taxonomy-aligned mortgages (acquisition,
construction or renovation of buildings) as a share of total mortgages assets.
5
CCM: The process of holding the increase in the global average temperature to well below 2 C and pursuing efforts to limit it
to 1.5°C above pre-industrial levels, as laid down in the Paris Agreement.
6
CCA: The process of adjustment to actual and expected climate change and its impacts.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
109
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Sustainable Development Goals (‘SDGs’)
The Group has also identified, through several multi-stakeholder dialogue, numerous material areas of impact
that contribute to specific SDGs. As sustainability reporting is now a major source of information for investors,
combined with the fact that regulatory bodies are also increasing the requirements of aligned disclosures,
transparent reporting of SDGs is of high importance for the Group.
Due to its expertise and business model, the Group has selected to focus on the following SDGs:
These goals are the ones where the Group can have an impact based on its business environment and its
customers. These include the commitment to the Paris Agreement, which is an overarching commitment.
Committing to climate change mitigation means to actively support responsible tourism and consumption,
innovation in the local infrastructure, and supporting sustainable cities and communities.
Further information on the actions and list of KPIs can be found in the annual Sustainability Report.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
110
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Principles for Responsible Banking
In September 2022, BOC PCL voluntarily conducted an impact analysis, using its loan portfolio, in accordance
with the PRB’s impact analysis tools. In October 2023, BOC PCL has become the first Bank in Cyprus to sign the
United Nations PRB which is a single framework for a sustainable banking industry, developed through a
collaboration between banks worldwide and the UNEP FI.
The Principles are the leading framework for ensuring that banks’ strategies and practices align with the vision
society has set out for its future in the UN Sustainable Development Goals and the Paris Climate Agreement. BOC
PCL, by signing the Principles, commits to be ambitious in its sustainability strategy, working to embed
sustainability into the heart of its business, while allowing BOC PCL to remain at the cutting-edge of sustainable
finance.
Under the Principles, BOC PCL should identify and measure the environmental and social impact resulting from
its business activities, set and implement targets where it has the most significant impact, and regularly report
publicly on their progress. BOC PCL has already measured its environmental and social impact by voluntarily
applying the PRB’s impact analysis tools in order to identify and report on the material impacts arising from its
business activities (i.e. loan portfolio). The material impacts identified have been reported in the Sustainability
Report of 2022. The next step for BOC PCL is to set at least two targets associated with the PRB’s impact areas
which can have the most significant impact. For BOC PCL the two key impact areas are Climate Stability and
availability, accessibility, affordability & quality of resources and services. BOC PCL has set, in 2023, a
decarbonisation target on Mortgage portfolio which reflects the first SMART target set on loan portfolio for the
Climate stability impact area. For the performance against the decarbonisation target on Mortgage refer to section
“Pillar IV – Metrics and Targets” of these TCFD. BOC PCL is expected to set SMART target on the availability,
accessibility, affordability & quality of resources and services impact area in 2024.
Signatories to the Principles take on a leadership role, demonstrating how banking products, services and
relationships can support and accelerate the changes necessary to achieve shared prosperity for current and
future generations, building a positive future for both people and the planet. These banks also join the world’s
largest global banking community focused on sustainable finance, sharing best-practice and working together on
practical guidance and pioneering tools of benefit to the entire industry.
The endorsement of PRB by BOC PCL is fully aligned with and reinforces our strategic priority to become a market
leader for sustainable banking and lead the transition of Cyprus to a sustainable future. The Group aims not only
to deliver financial but also environmental and social value to our stakeholders. As such, our approach is
multidimensional: to maintain our leading role in supporting Cypriot society; to implement our commitments to
these Principles through effective governance and a culture of responsible banking; to reduce our own
environmental footprint as well as supporting our customers to reduce their GHG emissions and to continue
supporting our staff by providing training and upskilling opportunities as well as staff wellness initiatives.
BOC PCL is committed to the following principles:
1. Alignment: BOC PCL will align its business strategy to be consistent with and contribute to individuals’ needs
and society’s goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement and
relevant national and regional frameworks.
2. Impact & Target Setting: BOC PCL will continuously increase its positive impacts while reducing the
negative impacts on, and managing the risks to, people and environment resulting from its activities, products
and services. To this end, BOC PCL will set and publish targets where it can have the most significant impacts.
3. Clients & Customers: BOC PCL will work responsibly with its clients and its customers to encourage
sustainable practices and enable economic activities that create shared prosperity for current and future
generations.
4. Stakeholders: BOC PCL will proactively and responsibly consult, engage and partner with relevant
stakeholders to achieve society’s goals.
5. Governance & Culture: BOC PCL will implement its commitment to these Principles through effective
governance and a culture of responsible banking.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
111
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Principles for Responsible Banking (continued)
6. Transparency & Accountability: BOC PCL will periodically review its individual and collective
implementation of these Principles and be transparent about and accountable for its positive and negative
impacts and its contribution to society’s goals.
Group Financial and Business Plan Process
The Group enhanced the Group Financial and Business Plan manual to ensure the incorporation of consideration
on C&E risks in the Business Strategy. Specifically, during the planning phase of new lending the RMD and IR&ESG
provides the sectors associated with C&E risks, the preliminary impact assessment derived from BES process,
science-based targets (GHG emission reduction targets aligned with a climate scenario) set and the direction of
Green/Transition new lending based on BES. In addition, each Division, taking into account the preliminary impact
assessment (performed by RMD, IR & ESG and Strategy) on risk profile and strategy arising from the BES on
C&E risks as well as the MA on C&E risks, identifies which are the material C&E risks over the Financial plan period
and defines the actions, strategies and products to mitigate the C&E risks identified. IR&ESG department ensures
the adequacy, relevance and reasonableness of the business lines strategies to manage material C&E risks on
the main portfolios.
Business Environment Scan
BOC PCL, in 2023, established a structured and detailed process, with clear roles and responsibilities, to gather
a broad range of updates and developments, both internal and external, and link them with sectors/industries
and products/services so to assess their impact, across different time horizons, and identify C&E risks emerging
from these updates and developments and inform BOC PCL’s risk and strategic profile.
The BES process facilitates the ongoing monitoring of potential impacts of C&E risks on its business environment
across short-, medium- and long-term time horizons. This process involves the systematic monitoring of various
news, updates, and developments, including regulatory developments, macroeconomic trends, competitive
landscape, technological trends, as well as societal demographic developments and geopolitical updates. As part
of the process, BOC PCL collects external information, on a monthly basis, from various sources, such as news
articles, publications, policy and regulatory updates, as well as internal information such as strategy updates,
process changes and other relevant internal documentation.
The identified developments are then mapped to the relevant business lines, sectors/industries and portfolios
that might be impacted, as well as to specific products/services, where applicable. Developments are further
assessed in terms of their relevance across the various time horizons, and preliminary impact scores are assigned
based on the expected effect on the BOC PCL’s risk and strategic profile. Scores range from 0 (No impact) to 5
(Critical impact). BOC PCL has established a dynamic interaction between the BES and the MA to ensure that the
insights from both exercises continually inform and enhance each other, fostering a more robust and effective
C&E risks management and control.
BOC PCL has performed the first round of the BES and analysed recent regulatory and market updates, relevant
to BOC PCL’s business. The results of the first run of the BES have been considered and informed the MA and
Business Strategy, particularly developments which have been classified as having a “High” or “Critical” impact.
The preliminary impact assessment of key updates and developments on risk profile and strategy is conducted
and reported to the SC and EXCO on a quarterly basis. The final impact assessment of key updates and
developments on risk profile and strategy is conducted and presented to the SC, EXCO, NCGC and RC on an
annual basis.
BOC PCL established also a BES Working Group with specific responsibilities assigned to Compliance Division,
RMD and Strategy Department so to collectively perform the impact assessment arising from key updates and
developments on risk profile and strategy.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
112
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar II – Strategy (continued)
Resilience of strategy against climate change risks
The concept of climate resilience requires that organisations develop the adaptive capacity to respond to climate
change, leveraging opportunities and managing the associated transition and physical risks.
TCFD recommends that organisations describe the ability of their strategy to leverage opportunities related to
climate change, consistent with a scenario of orderly transition to a low-carbon economy, but also their resilience
to possible scenarios of increased climate risks.
BOC PCL developed a Framework to quantify transition risks. The framework addresses all sectors of the BOC
PCL’s portfolio, but dedicated models were created for those sectors that are more susceptible to transition risks,
based on their inherent activities and their exposures.
In terms of physical risks, efforts were focussed on estimating the impact on property value from the potential
materialisation of such risks. Granular data was obtained from an external vendor, providing granular, location
level information. The monetary impact (damage function) for each combination of property, hazard, scenario,
and year was estimated. At the moment, the damage function measurement, for wildfire hazard, has been
incorporated as part of the ICAAP process.
Moreover, the identified material risks are in the process of being incorporated into all relevant processes of the
RMD including the ICAAP and ILAAP scenario analysis.
For more details refer to section ‘Climate Risk Sensitivity and Stress Testing’ under ‘Pillar III Risk Management’
of these TCFD.
The resilience of the strategy in the face of 2°C or lower climate scenarios is reinforced by the fact that BOC PCL
has set ESG as one of its four strategic pillars, with a special focus on the fight against climate change and its
commitment to Net Zero by 2050. Aligned with its commitment, BOC PCL is gradually aligning its loan portfolio
with scenarios compatible with the Paris Agreement. BOC PCL in 2023, has set a decarbonisation target on its
Mortgage portfolio, following the IEA’s B2DS, and designed the new lending strategy to reach the relevant target.
BOC PCL performed several sensitivities on the new lending strategy and decarbonisation target to ensure the
strategy’s resilience. The decarbonisation target and new lending strategy to reach the relevant target are
embedded in the Group’s Financial Plan for 2024-2027.
The Group is also examining setting decarbonisation target on CRE asset class as well as Transportation and
Storage sector of loan portfolio, within 2024. For more details on the decarbonisation target on Mortgage and
sensitivities performed refer to section ‘Reduction of all GHG emissions to become Net Zero by 2050’ under ‘Pillar
IV – Metrics and Targets’ of these TCFD.
On the business side, the analysis is ongoing and the available results point to a resilient situation, given the
relatively low exposure to clients operating in carbon-intensive sectors which inherently carry increased climate
transition risks. In fact, BOC PCL loan exposures related to carbon-intensive sectors represent c.1.7% of Non-
Financial Corporations exposure of €4.9bn, and 0.8% of the total exposure of €10bn. BOC PLC, in 2023, has set
new lending sector limits to carbon intensive sectors to reduce its exposure to climate transition risks. The new
lending sector limits are not applicable to Green or Transition financing or to entities, operating in carbon intensive
sectors, with an externally validated transition plan so to motivate and support the customers to their transition
of low carbon economy. For more details refer to section ‘Sector Limits’ above.
Finally, by taking into account the BES results and MA on C&E risks, BOC PCL identified climate-related
opportunities and has set new Green/Transition lending targets on Corporate and SME customers which are
embedded in the Group’s Financial Plan 2024-2027.Refer to section ‘Green/Transition Lending’ above.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
113
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III – Risk Management
BOC PCL, as one of the systematic banks in Cyprus, is exposed to potential C&E risks and as such has taken the
necessary steps to commit in managing and integrating these risks in the overall risk management framework.
BOC PCL regularly oversees its exposure concentration in portfolios that are sensitive to C&E risks. To pursue
that, BOC PCL ensures that its policies and frameworks are in line with the applicable regulatory requirements
and following best banking practises.
Identification and MA of C&E risk drivers
BOC PCL has aligned its definitions of C&E risks with the requirements set in the ECB Guide on C&E risks
(November 2020) and additional specific remarks outlined in the TCFD framework. In particular, BOC PCL has
defined C&E risks as per the table below (Table 1). C&E risks can be split into two categories, (1) risks relating
to the transition to a lower-carbon economy (transition risks) and (2) risks relating to the physical impacts of
climate change (physical risks)
7
. Furthermore, physical risk is further categorised into acute and chronic for
physical hazards, whilst transition risk is further categorised into policy, legal, technology, market and
reputational risks.
Climate-
related risks
8
Climate-related risks are potential risks that may arise from climate change or from
efforts to mitigate climate change, changes in technology, regulation or the market.
Climate-related risks can be divided into physical risks from climate change and the risks
of transitioning to a carbon neutral economy.
Environmental
risks
9
Environmental risks can be divided into chronic and acute risks. Environmental chronic
risks are the risks arising from environmental degradation that are permanent or risks
that result from economic and human activities, including, for example, the pollution of
air, soil and water or changes in land use and deforestation. In addition to the
aforementioned, biodiversity loss, chronic degradation of habitat and the threatening of
species are also considered to be an environmental risk. Environmental acute risks, such
as earthquakes and tsunamis, refer to sudden and intense events or incidents that have
the potential to cause significant and immediate harm to the environment or human
activities.
Physical risk
Physical risk
refers to the financial impact of
changing climate, including more frequent
extreme weather events and gradual changes in climate, as well as of environmental
degradation, such as air, water and land pollution, water stress, biodiversity loss and
deforestation. It considers how chronic and acute climate events can directly damage
physical assets, impact their value or productivity, or indirectly lead to subsequent
events, such as the disruption of supply chains.
Transition risk
Transition risk
refers to the financial impact that can result, directly or indirectly, from
the process of adjustment towards a lower-carbon and more environmentally sustainable
economy. This could be triggered, for example, by a relatively abrupt adoption of climate
and environmental policies, technological progress or changes in market sentiment and
preferences. It considers how changes in these drivers can lead to changes in the value
of assets, commodities and companies.
Table 1: Overview of the key C&E risk terminology
7
E06 - Climate related risks and opportunities.pdf (tcfdhub.org)
8
ECB’s Guide on climate-related and environmental risks, November 2020.
9
ECB’s Guide on climate-related and environmental risks, November 2020.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
114
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III – Risk Management (continued)
C&E Risks Identification & Materiality Assessment (‘RIMA’) process
In 2023, BOC PCL has refined its MA of C&E risks as drivers of existing financial and non-financial risks, namely
Credit risk, Liquidity risk, Market risk, Operational risk, Strategic risk as well as Reputational and Legal risk,
taking into consideration its business profile and loan portfolio composition.
As part of the RIMA process, BOC PCL has enhanced the following steps to ensure a comprehensive and structured
MA process, having due consideration on the specificities of its business model, operating environment and risk
profile:
i. Identification and documentation of C&E risk drivers
ii. Definition of transmission channels for C&E risks
iii. Assessment of materiality of C&E risk drivers
Specifically, BOC PCL has conducted an assessment of the following C&E risks, as drivers of existing risks:
i. Climate-related physical risk drivers
ii. Climate-related transition risk drivers
iii. Environmental transition risk drivers (other than climate risks)
iv. Environmental physical risk drivers (other than climate risks)
The assessment has been conducted using both quantitative and qualitative methods. For data driven methods,
a combination of internally collected BOC PCL specific data and external data have been used.
In summary, as a first step, a more granular list of potential C&E risk drivers has been identified through the
enhancement of the inventory of C&E risks already developed by BOC PCL in the course of the previous C&E risk
assessment exercises. In particular, BOC PCL has proceeded with an additional classification and categorisation
of the C&E risks across four levels of granularity as per the following example:
i. Climate-related risk (Level-1)
ii. Physical risk (Level-2)
iii. Acute risk (Level-3)
iv. Wildfire (Level-4).
As a second step, the C&E risks have been mapped to the existing financial and non-financial risks through
respective transmission channels.
As a third step, a combination of qualitative and quantitative methods has been utilised for the purpose of the
performance of the MA of C&E risks using various materiality parameters and thresholds, depending on the
method and data used for the assessment. In addition, the evolution of C&E risks has been considered over the
short, medium and long-term time horizons.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
115
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III – Risk Management (continued)
C&E Risks Identification & Materiality Assessment (RIMA) process (continued)
An overview of the steps followed for the performance of the MA is presented in the following figure:
Figure 1: Overview of BoC’s C&E MA 2023 stages
The following table (Table 2), provides an overview of BOC PCL’s C&E risks inventory, which includes all C&E risks
considered as part of the MA performed. A further split of C&E risks has been considered accordingly by defining
thirty (30) underlying risk types.
ID
C&E risk
C&E risk
sub-type
C&E risk
sub-type
C&E risk sub-type
[Level 1] [Level 2]
[Level 3] [Level 4]
1
Climate-related Physical
Acute
(Extreme) Heat
2 Drought (increased frequency, intensity, duration)
3
High intensity / duration precipitation events (increase; causing
flooding)
4 Landslide
5 River flood
6 Storms (increased activity and/or intensity)
7 Wildfire
8 Chronic Desertification
Table 2: BOC’s list of identified C&E risks
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
116
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III – Risk Management (continued)
C&E Risks Identification & Materiality Assessment (RIMA) process (continued)
ID
C&E risk
C&E risk
sub-type
C&E risk
sub-type
C&E risk sub-type
[Level 1] [Level 2]
[Level 3] [Level 4]
9
Climate-related
Physical Chronic
Ocean acidity
10
Precipitation (decreased average precipitation)
11
Sea level rise (increasing risk from coastal flood)
12
Temperature (increase of average temperature)
13
Transition
Policy and
Regulation
Failure to comply with climate (ESG) disclosures and
GHG reporting obligations
14
Risks from litigation
15
Technology
Transition to low-emission alternative products and
services/business models
16
Market
Increased energy costs and costs of raw materials
17
Increased stakeholder concern or negative stakeholder
feedback / markets sentiment and preferences
18
Environmental
Physical
Acute
Earthquake
19
Tsunami
20
Chronic
Air pollution
21
Soil pollution
22
Water pollution
23
Biodiversity loss (incl. species extinction)
24
Deforestation (incl. habitat destruction) and land use
change
25
Water scarcity
26
Pests (increased prevalence)
27
Transition
Policy and
Regulation
Circular economy & waste management
28
Environmental protection requirement
29
Technology Environmentally friendly technologies
30
Market Environmentally driven consumer behaviour
Table 2: BOC’s list of identified C&E risks (continued)
Each C&E risk has been individually assessed as a driver of Credit risk, Liquidity risk, Market risk and Operational
risk, and individual risk scores have been assigned. For these categories of existing risks, the results of the
assessment have been aggregated at the level of physical and transition risks sub-types. The assessment of C&E
risks as drivers of Strategic risk, Reputational risk and Legal risk has been performed on the abovementioned
granularity level.
C&E Transmission Channels
C&E risks are recognized as drivers of the existing risks and may impact BOC PCL directly or indirectly through
counterparties, assets (microeconomic channels) or the broader economy in which the relevant clients and BOC
PCL operates (macroeconomic channels). BOC PCL has defined the transmission channels through which the C&E
risks can influence each of its existing risk categories. A more detailed description of each of the C&E risk
transmission channels with regard to the principal risks and the arising impact on BOC PCL is provided in Table 3
below.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
117
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III – Risk Management (continued)
C&E Transmission Channels (continued)
C&E Risk
Drivers
Transmission Channels
(Non-exhaustive List)
Potential Impact on the Group
Affected
Financial and
Non-Financial
Risk Types
Transition
Risks
i.
Impact on repayment ability of clients through:
i. Increased operating costs for compliance
and/or lower revenues
ii. Increased capital expenditures to comply
with regulatory standards
iii. Closure of business lines or facilities due to
transition to greener economies and public
sentiment
Increased Probability of Default (‘PD’) and Loss Given Default
(‘LGD’)
Credit Risk
10
i. Impact on the price of marketable instruments
(bonds/equity) and to Real Estate assets
ii. Impact on BOC PCL’s valuation if it does not reduce
its emissions and/ or increase its GAR
i.
Decrease in value of the REMU portfolio due to increase in
operational costs and decrease in the value of the assets
ii. Large/ small sell-off (of High Quality Liquid Assets
(‘HQLA’)) against reduced prices and/ or potential
difficulty to liquidate
iii. Interest rate and FX shocks, credit spreads changes
Market Risk
11
i. Inability to raise funding due to lack of climate
change action by the organisation
ii. Depletion of deposits to address increase operational
costs or mitigate transition risks
i.
Rapid withdrawal of customer deposits
ii. Unexpected significant expenses or charges that may
influence liquidity position and net outflows
iii. Lack of funding sources / negative changes in funding
structure
iv. Lower demand for BOC PCL’s capital issuance
v. Difficulties in selling assets / selling of assets with a
discount
Liquidity Risk
12
Table 3: Overview of the key transmission channels and potential impact on the Group through C&E risks
10
Including Counterparty risk, Settlement risk, Issuer risk, Concentration risk and Country risk.
11
Including Interest rate risk, FX risk, Real Estate risk, Credit Spread risk and Equity risk.
12
Including Liquidity risk and Funding risk.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
118
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III – Risk Management (continued)
C&E Transmission Channels (continued)
C&E Risk
Drivers
Transmission Channels (Non-exhaustive List) Potential Impact on the Group
Affected
Financial and
Non-Financial
Risk Types
Transition
Risks
Socio-economic changes (e.g. changing consumption
patterns / customer preferences)
i.
Losses due to
physical damages or shutdowns
ii. Increased operational costs for the buildings of BOC PCL
iii. Losses from lower productivity
iv. Losses from wrong decisions/ process issues
v. Additional significant operating or capital expenses
Operational
Risk
13
i. Inability to meet stakeholders' demands as a result
of changing market sentiment
ii. Reputational damage due to the financing of
environmentally harmful projects
i. Limited business opportunities/ lessened expansion potential
ii. Workforce fluctuations
iii. Client withdrawal
iv. Additional investments to improve internal processes and
comply with expectations
Reputational
Risk
Litigation risks due to financing of environmentally harmful
projects
i.
Litigation costs may reduce the value of the REMU portfolio
ii. Non-compliance with regulation and policy measures
iii. Investments in carbon intensive and unsustainable projects,
buildings or similar
iv. Misalignment of communicated targets and reality
Legal/Litigation
Risk
i.
Additional costs and regulatory repercussions
relating to, for example, exposure to real estate
portfolio without adequate EPC labels, or exposure
to high emitting/ polluting sectors
ii. Regulatory and / or market developments in
relation to financial institutions offering 'green'
products impacting BOC PCL's competitiveness
i.
Loss of revenues due to strategic reorientation (e.g. loss of
profitable business line)
ii. Inadequate definition and execution of the strategy (e.g.
incorrect or faulty assumptions, poor implementation)
iii. Expenses for the implementation of upcoming C&E regulatory
requirements / changes
iv. Limited business opportunities/ lessened expansion potential
Strategic Risk
Table 3: Overview of the key transmission channels and potential impact on the Group through C&E risks (continued)
13
Including Regulatory Compliance/Conduct risk, FEC risk, Internal/ External Fraud risk, People risk, BC risk, IT/ Cyber Risk, Technology risk, Data Accuracy and Integrity risk, Physical Security
and Safety risk, Statutory Reporting and Tax risk, Transaction Processing and Execution risk, Project risk, Model risk and Third Party risk.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
119
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
C&E Transmission Channels (continued)
C&E Risk
Drivers
Transmission Channels (Non-exhaustive List) Potential Impact on the Group
Affected
Financial and
Non-Financial
Risk Types
Physical Risks
i.
Increased operating costs due to retrofitting and/or
damage / substitution of assets
ii. Increase in insurance costs
iii. Lower revenues due to reduced productivity or
damage in value chain operations
iv. Decrease in value of property collateral
Increased PD and LGD Credit Risk
i. Impact on the price of marketable instruments
(bonds/equity) and to Real Estate assets
ii. Impact on BOC PCL’s valuation if it does not reduce
its emissions and/ or increase its GAR
i.
Decrease in value of the REMU portfolio due to increase in
operational costs and decrease in the value of the assets
ii. Large / small sell-off (of HQLA) against reduced prices and/
or potential difficulty to liquidate
iii. Interest rate and FX shocks, credit spreads changes
Market Risk
Depletion of deposits to address increase operational costs or
address or mitigate physical risks (e.g. to finance damage
repairs)
i.
Rapid withdrawal of customer deposits
ii. Unexpected significant expenses or charges that may
influence liquidity position and net outflows
iii. Lack of funding sources / negative changes in funding
structure
iv. Lower demand for Bank's capital issuance
v. Increase in funding costs
vi. Difficulties in selling assets/ selling of assets with a discount
Liquidity Risk
Table 3: Overview of the key transmission channels and potential impact on the Group through C&E risks (continued)
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
120
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
C&E Transmission Channels (continued)
C&E Risk
Drivers
Transmission Channels (Non-exhaustive
List)
Potential Impact on the Group
Affected
Financial and
Non-Financial
Risk Types
Physical Risks
Increased operating costs due to damage on premises,
operating locations and other facilities
i.
Losses due to physical damages or shutdowns
ii. Increased operational costs for the buildings of BOC PCL
(e.g. to comply with energy efficiency standards)
iii. Losses from lower productivity
iv. Losses from wrong decisions/ process issues
v. Unplanned or additional significant operating or capital
expenses
Operational
Risk
Increased operating costs arising from the management
of C&E risks
i.
Limited business opportunities/ lessened expansion potential
(including respective operating losses)
ii. Workforce fluctuations (including respective operating
losses)
iii. Client withdrawal (including respective operating losses)
iv. Additional investments to improve internal processes and
comply with expectations
Reputational
Risk
Litigation risks arising from BOC PCL's exposure to
physical climate-related and/ or environmental damages
i.
Litigation costs may reduce the value of the REMU portfolio
ii. Non-compliance with regulation and policy measures
iii. Investments in carbon intensive and unsustainable projects,
buildings or similar (knock on effects from reputational loss)
iv. Misalignment of communicated targets and reality
Legal/Litigation
Risk
Inadequacies in BOC PCL’s product offerings without
factoring in the potential damages resulting from physical
risks associated with climate change; this could result in
increased defaults on loans and negatively impact BOC
PCL's asset quality.
i.
Loss of revenues due to
strategic reorientation (e.g. loss of
profitable business line)
ii. Inadequate definition and execution of the strategy (e.g.
incorrect or faulty assumptions, poor implementation)
iii. Expenses for the implementation of upcoming C&E
regulatory requirements / changes
iv. Limited business opportunities
Strategic Risk
Table 3: Overview of the key transmission channels and potential impact on the Group through C&E risks (continued)
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED Annual Financial Report 2023
ESG Disclosures
121
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
Assessment of C&E risks as drivers of financial and non-financial risks
Following the mapping of C&E risks as potentially relevant or not-relevant drivers of the principal risks through
the transmission channels, follows the assessment of the C&E risks and their relevant impact based on the
principal risks. BOC PCL has applied a combination of both qualitative and quantitative methods. The following
methodologies have been applied:
a. Quantitative Geographic Assessment
This assessment is applicable to C&E physical risks as drivers of Credit, Market, Liquidity and Operational risks.
Specific physical climate-related hazards, namely Wildfire, Landslide, River Flood, Wind Gusts (Storms), and Sea
Level Rise have been considered using geolocation data (i.e. coordinates, postal codes, municipalities) with
respect to the following:
i. Credit risk: borrowers’ collateralized (secured) portfolio (geolocation coordinates of collateral properties)
and unsecured portfolio (postal codes or municipalities of borrowers’ location);
ii. Market risk: properties of BOC PCL’s REMU portfolio (geolocation coordinates of collateral properties);
iii. Liquidity risk: deposits held by Cyprus residents (postal codes or municipalities of deposit holders’
locations);
iv. Operational risk: BOC PCL’s physical locations (postal codes or municipalities of Bank’s facilities).
Furthermore, specific environmental hazards, namely Air Pollution, Soil Pollution and Earthquake have been
considered with respect to the following:
i. Property collateral for Credit risk secured portfolio (geolocation coordinates of collateral properties) - with
respect to Air pollution, Soil pollution and Earthquake;
ii. Borrowers for Credit risk unsecured portfolio (postal codes or municipalities of borrowers’ location) - with
respect to Air pollution, Soil pollution and Earthquake;
iii. Property collateral for the REMU portfolio for Market risk (geolocation coordinates of collateral properties)
- with respect to Earthquake;
iv. Deposits held by Cyprus residents for Liquidity risk (postal codes or municipalities of deposit holders’
locations) - with respect to Earthquake;
v. BOC PCL’s physical locations for Operational risk (postal codes or municipalities of BOC PCL’s facilities) -
with respect to Earthquake.
To further analyze the materiality of risk exposures to both physical and environmental hazards, a distribution
analysis of underlying credit exposures (for both secured and unsecured portfolios), deposit amounts and
employees count across risk scores (1-Low, 2-Medium, 3-High, 4-Critical) is performed. To conclude on the
materiality of a specific hazard based on the distribution analysis across risk scores, a decision tree logic has been
applied leading to one resulting risk score per hazard.
b. Quantitative Country and Industry Heatmaps
To inform the MA process, BOC PCL has performed a heatmapping exercise to determine how physical and
transition risks affect certain industries that BOC PCL is exposed to, and subsequently to determine the impact
on the overall BOC PCL’s risk profile and operations. Three different heatmaps have been constructed to assess
specific risks and segments as described below.
Country climate transition risk heat map
The heatmap was used to assess:
i. Liquidity risk: deposits held by non-Cyprus residents (foreign deposit amounts)
ii. Market risk: HQLA Bond portfolio (corresponding Conditional Value at Risk (‘CvaR’))
A corresponding risk score from the heat map has been assigned to foreign deposit holders based on the
underlying country of residence, and to bonds based on the underlying country of the issuer. As a next step, a
distribution analysis of deposit amounts and CVaR across risk scores has been performed.
Country climate physical risk heat map
The heatmap was used to assess:
i. Market risk and Liquidity risk: HQLA Bonds portfolio
ii. Operational risk: Foreign locations of BOC PCL’s third party outsourcing/ providers
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED Annual Financial Report 2023
ESG Disclosures
122
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
Assessment of C&E risks as drivers of financial and non-financial risks (continued)
Country climate physical risk heat map (continued)
A corresponding risk score from the heat map has been assigned to bonds based on the country of issuer and to
third party providers based on country of location. As a next step, a distribution analysis of HQLA balances (CVaR
for Market risk and market value for Liquidity risk) and number of employees (per country of third-party provider
location) across risk scores has been performed.
Industry climate transition risk heat map
The heatmap was used to assess:
i. Credit Risk: Secured and unsecured credit exposures
A corresponding risk score from the industry heat map has been assigned to borrowers of secured and unsecured
loans based on the economic sector of their activity. As a next step, a distribution analysis of secured and
unsecured credit exposures across risk scores has been performed.
In order to conclude on the materiality of climate transition and physical risks based on the distribution analysis
described above, the same logic as described in the quantitative geolocation methodology (decision tree) has
been applied, leading to a single resulting risk score (consistently, the same 4-level unique risk scale has been
applied).
c. Qualitative analysis based on Expert Judgement
Expert judgement has been also employed to assess certain risk drivers including those for Strategic, Reputational
and Legal risks. Expert judgement includes additional external sources and publicly available statistical data such
as consultation reports, scientific publications and other sources featuring Cyprus-specific data from Eurostat,
World Resource Institute, Climate Analytics, Climate Vulnerability Monitor etc.
d. Sectoral Analysis
To support Level-3 risk scores, i.e., at the level of chronic, acute etc. risks sub-types, for all existing financial and
non-financial risk categories, BOC PCL considered, among others, the impact of C&E risks at a sectoral level.
Such analysis included the sectoral breakdown (per NACE code):
- for each exposure type relevant to the given risk type
- for certain climate physical risks (level 4) such as Flood, Landslide, Sea Level Rise and Storms
In addition, for transition risks, the BOC PCL has used an industry heatmap with GHG emissions intensity as the
indicator of the sectors’ sensitivity to transition risks (the higher the GHG intensity, the higher exposure to
transition risks). As a next step, a distribution of the credit exposures to these emissions categories has been
allocated and an overall score for transition related risks was determined.
e. Determination of materiality
Different types of scores have been considered during the MA depending on the type of risks analysed and
methods considered. Determination of materiality was concluded at C&E Risks Level 3, i.e., at the level of chronic,
acute etc. risks sub-types, utilizing BOC PCL’s existing Risk and Control Self-Assessment methodology and thus
assessing Impact and Likelihood on a scale from one (1) to five (5), to ensure consistency.
The definitions of each Impact and Likelihood scores have been formulated, taking into account the nature of C&E
risks and encompassing different characteristics of the physical and transition risks, as well as the acute and
chronic drivers in a harmonised way. Thus, for the purposes of this MA, the definitions of Impact and Likelihood
have been tailored to describe the occurrence of severe C&E events or circumstances, since these are typically
responsible for the great majority of the potential risk. Following the assessment, score levels “High” and “Critical”
have been considered as “material” for the purposes of the MA, whilst “Low’ and “Medium” scores as “non-
material”.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED Annual Financial Report 2023
ESG Disclosures
123
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
Determination of materiality over different time horizons
BOC PLC’s categorisation of short-, medium-, and long-term horizons for C&E risk assessment is driven by several
key factors, as follows:
i. Internal risk management: Internal risk management processes including stress testing and capital
planning are crucial in establishing these timeframes. These efforts are tailored to match the maturity of
the portfolios, ensuring a comprehensive and aligned risk assessment.
ii. Strategic planning: strategic initiatives, including (“ESG”) principles and sustainability targets, such as
reaching carbon neutrality by 2030 and net-zero by 2050, play an important role in shaping these time
horizons.
iii. Regulatory alignment: BOC PCL maintains close alignment with EU sustainability directives, notably
the ‘Fit for 55’ framework, and adheres to ECB/ EBA requirements and recommendations. Incorporating
mandates and guidelines from the Corporate.
For more details on the time horizons set refer to ‘Pillar II – Strategy’ of these TCFD.
Materiality Assessment Results per Risk
The Group has taken several steps to ensure a concrete process by which C&E risks are fully considered and
subsequently assessed in order to carry out a robust MA. When assessing the materiality of C&E risks, a
proportionate approach was adopted, focusing only on the most negatively impactful risks. At the same time, it
is noted that impacts were assessed on a gross/aggregated basis, by not considering any particular approaches
to reduce potential risks.
Moreover, the identified material risks are in the process of being incorporated into all relevant processes of the
RMD including the ICAAP and ILAAP scenario analysis, thus BOC PCL will recognise various mitigation measures
to ensure that such risks are controlled to the extent possible.
Credit Risk
As part of the credit risk analysis, an assessment of secured (collateralized) and unsecured credit exposures has
been performed utilizing quantitative and qualitative methods. The analysis indicated that climate-related physical
risks, acute hazards are material due to BOC PCL’s significant exposure to high Wildfire risk. With respect to
climate-related transition risks, the assessment highlighted the need for attention to risk categories, particularly
concerning increased energy and raw material costs, as well as transition to lower-emission technologies.
Notwithstanding that most of the environmental risk categories have been assessed as not material, it should be
noted that risks related to earthquakes and water scarcity have emerged as material over the long term. The
overall score for environmental physical risks has been assessed as non-material for the short term.
Market Risk
For each of the identified C&E risks, a tailored combination of quantitative and qualitative methods was applied.
Based on this analysis, climate physical risks, acute hazards was identified as material due to the very high
exposure of the REMU portfolio to Wildfire risk. Wildfire has a relatively high impact and occurrence probability,
and thus can cause significant direct damage or broad devaluation of REMU properties. Other acute and chronic
physical risks pose a non-material level of concern for the REMU portfolio.
The Market Risk in connection with the CVaR of the HQLA portfolio has been assessed through a country heatmap
of physical risk and was also identified as a non-material. Other than acute physical climate risks, the remaining
C&E risk categories are found to be non-material as well.
Nevertheless, attention should be paid to the elevated Earthquake risk in Cyprus, which might also induce severe
depreciation of the REMU portfolio upon realisation of a severe event. Due to the very low likelihood of severe
earthquakes, the resulting materiality was however also assessed as non-material. Furthermore, all C&E risks
within climate-related transition risks were also assessed non-material mainly because of the potential
depreciation of aged REMU real estate assets which lag in terms of energy efficiency and other low-emission
standards and certifications. Environmental transition risks are assessed as non-material but they need to be
closely monitored due to potential stricter requirements in terms of environmental standards in the real estate
sector.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED Annual Financial Report 2023
ESG Disclosures
124
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
Materiality Assessment Results per Risk (continued)
Liquidity Risk
As part of the liquidity analysis, for each of the identified C&E risks, the combined materiality of the deposits and
the value of HQLA portfolio was assessed with a tailored combination of quantitative and qualitative methods.
The outcome of the assessment indicated that there are no material C&E risks identified with respect to Liquidity
Risk. However, within climate-related physical risks, the acute risk driver Wildfire has been identified as the
dominant cause of liquidity issues due to possible simultaneous deposit withdrawals upon a widespread wildfire
damage in Cyprus. Similar considerations are held for the environmental acute risk Earthquake, whose likelihood
is however extremely improbable for high magnitude events. Chronic physical risks are not relevant for liquidity
considerations due to their progressive and long-term character. In terms of transition risks, increased deposit
withdrawals might be triggered in the event of very high and volatile costs of energy and raw materials, an aspect
which is particularly sensitive for Cyprus because of its high import dependency.
Operational Risk
For each of the identified C&E risks, the materiality in connection with the operations of BOC PCL owned and
rented properties and third-party providers was assessed. Based on quantitative geolocation analysis and country
climate physical heatmap exercise, both physical and transition risks have been assessed accordingly. Although
the overall results indicate that C&E risks are non-material for BOC PCL, the need for close monitoring is required
to ensure ongoing operational resilience.
Reputational Risk
Reputational Risk may be affected by C&E risks directly or through the realisation of other principal risks, and
Strategic, Operational and Legal Risks. BOC PCL’s reputation has been assessed in terms of its business operations
and other key risk areas that could potentially impact BOC PCL’s reputation. Overall, all C&E risks regarding
physical and transition risks for Reputational risk have been assessed as non-material. This is the case as BOC
PCL has a good prevention and recovery plan in place to minimize risks from acute environmental hazards such
as earthquakes. Additionally, BOC PCL’s limited exposure in heavy manufacturing sectors reduces its exposure
to transition risks. This strategic position aligns BOC PCL with evolving environmental standards and stakeholder
expectations, thereby safeguarding its reputation.
Legal and Strategic Risk
The analysis of C&E risks as drivers of Legal and Strategic risk has been performed using qualitative analysis and
expert judgment across all C&E risk types. The analysis regarding Legal Risk has been conducted based on various
factors including, the regulatory requirements in Cyprus, shifts in consumer behavior and any technological
advancements. The assessment also includes considerations of compliance, customer due diligence, and litigation
risk. In terms of Strategic Risk, BOC PCL considers its exposure concentration, vulnerabilities and stakeholder
engagement to proactively manage and mitigate potential risks to its strategic objectives.
The overarching conclusion indicates that the Legal Risk for BOC PCL is generally low across different C&E risk
categories, however, climate-related transition risks are the higher risk from a reputational and legal perspective.
It should be noted that BOC PCL has implemented measures such as continuous monitoring, preventive plans,
and compliance checks to address potential legal implications arising from C&E factors. Ongoing efforts are
directed at minimizing risks and ensuring compliance with evolving standards and regulations. Therefore, BOC
PCL does not foresee worsening of the impact of C&E risk drivers over the time and it is expected that this impact
will remain low.
With regards to the Strategic risk, BOC PCL acknowledges that its concentration in Cyprus, with significant
exposure to Real Estate, Construction, and Accommodation sectors, makes it vulnerable to the impact of climate-
related physical risks, acute risks and primarily wildfire. In addition, most of the collaterals are real estate assets.
As such, the impact of physical risks could affect BOC PCL and its customers going forward in terms of the value
of these assets, insurance costs, and any associated cost to restore resulting damages from acute physical
climate-related hazards. The primary concerns are the potential effects on the value of real estate assets and
associated costs for restoring damages. It is expected that the impact of climate-related physical risk drivers will
remain material in the future as well. In conclusion, BOC PCL is proactively addressing C&E risk drivers,
recognizing their potential impact on strategic risk. BOC PCL is implementing measures, engaging with
stakeholders, and adapting its strategies to navigate the evolving landscape of climate and environmental
challenges. Ongoing monitoring, customer engagement, and strategic adjustments are integral to BOC PCL's
approach in managing these risks effectively.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED Annual Financial Report 2023
ESG Disclosures
125
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
Materiality Assessment Results per Risk (continued)
Table 4 below shows the aggregated results of the MA, across the assessed time horizons, with regards to the C&E risks, along with the approach that was used to assess
each type of principal risk.
C&E Risks Risk Approach
Materiality Result
Time Horizons
Short-term
(1-3 years)
Medium-term
(4-7 years)
Long-term
(8-27 years)
Climate-
related Risk
Physical Risk
Credit
Quantitative Assessment (Geographical/ Industry
Heatmapping)/ Qualitative Analysis (Expert Judgment)
Material Material Material
Market
Quantitative Assessment (Geographical/ Industry
Heatmapping)/ Qualitative Analysis (Expert Judgment)
Material Material Material
Liquidity
Quantitative Assessment (Geographical/ Industry
Heatmapping)/ Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Operational
Quantitative Assessment (Geographical/ Industry
Heatmapping)/ Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Reputational Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Legal Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Strategic Qualitative Analysis (Expert Judgment) Material Material Material
Transition Risk
Credit
Quantitative Assessment (Geographical/ Industry
Heatmapping)/ Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Market
Quantitative Assessment (Geographical/ Industry
Heatmapping)/ Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Liquidity
Quantitative Assessment (Geographical/ Industry
Heatmapping)/ Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Operational
Quantitative Assessment (Geographical/ Industry
Heatmapping)/ Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Reputational Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Legal Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Strategic Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Table 4: Overview of the aggregated results of the C&E risk MA
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED Annual Financial Report 2023
ESG Disclosures
126
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
Materiality Assessment Results per Risk (continued)
C&E Risks Risk Approach
Materiality Result
Time Horizons
Short-term
(1-3 years)
Medium-term
(4-7 years)
Long-term
(8-27 years)
Environmental
-related Risk
Physical Risk
Credit
Quantitative Assessment (Geographical/ Industry Heatmapping)/
Qualitative Analysis (Expert Judgment)
Non-material Non-material Material
Market
Quantitative Assessment (Geographical/ Industry Heatmapping)/
Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Liquidity
Quantitative Assessment (Geographical/ Industry Heatmapping)/
Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Operational
Quantitative Assessment (Geographical/ Industry Heatmapping)/
Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Reputational Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Legal Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Strategic Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Transition
Risk
Credit
Quantitative Assessment (Geographical/ Industry Heatmapping)/
Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Market
Quantitative Assessment (Geographical/ Industry Heatmapping)/
Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Liquidity
Quantitative Assessment (Geographical/ Industry Heatmapping)/
Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Operational
Quantitative Assessment (Geographical/ Industry Heatmapping)/
Qualitative Analysis (Expert Judgment)
Non-material Non-material Non-material
Reputational Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Legal Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Strategic Qualitative Analysis (Expert Judgment) Non-material Non-material Non-material
Table 4: Overview of the aggregated results of the C&E risk MA (continued)
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED Annual Financial Report 2023
ESG Disclosures
127
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
C&E Risk Management Tools & Processes
Climate risk is a growing consideration for financial institutions given the increasing effects of climate change
globally, the sharp regulatory focus on addressing the resultant risks as well as increasing stakeholder concern.
The Group is committed to integrate C&E risk considerations into all relevant aspects of the decision-making and
risk management and is taking steps to achieve this. Drawing from existing regulatory guidance and best practices
it has taken several actions to manage and mitigate C&E risks and it will continue to develop such practices going
forward. The section below provides an overview of those actions.
a. Business Environment Scan
BOC PLC has established the BES process to monitor C&E developments / updates as already described in ‘Pillar
II - Strategy’ section of these TCFD. The process is mainly used as a risk identification tool, that identifies C&E
risks emerging from relevant developments and their association with existing risk categories. As part of this
monthly scanning process, BOC PCL will gradually incorporate additional sources to monitor sector-specific
developments and updates, and in particular monitor developments for industries that might have significant
impact from C&E risks or new regulations that might heighten C&E transition risks. New developments identified
within the BES are carefully analysed for their relevance and potential impact on BOC PCL’s risk and strategic
profile. This integrated approach enhances BOC PCL’s ability to manage and control C&E risks effectively, thus,
associated risks arising from C&E risks will be closely monitored and analysed on regular basis and feed into the
MA.
BOC PCL has performed the first round of the BES and analysed recent regulatory and market updates, relevant
to BOC PCL’s business. The results of the first run of the BES have been considered and informed the MA with
the developments that have been classified as “High” and “Critical” with respect to their potential impact.
b. Risk Appetite Framework
BOC PCL maintains a RAF which sets out the level of risk that the Group is willing to take in pursuit of its strategic
objectives, outlying the key principles and rules that govern the risk appetite setting. It includes qualitative
statements as well as quantitative measures expressed relative to financial and non-financial risks. Within this
context, three Climate-related KRIs were introduced in its latest revision and include:
i. Financed Scope 3 GHG emissions of Mortgage Portfolio (Retail)
ii. Financing purchases of new commercial properties (Corporates / SMEs)
iii. Financing renovation of commercial properties (Corporates / SMEs)
The KRIs cover both the mortgage and the corporate portfolio and relate to the broader category of “buildings”
which are energy intensive during both the construction period and their operation.
Financed Scope 3 GHG emissions of Mortgage Portfolio
Considering the Financed Scope 3 GHG emissions of mortgages, the mortgage loan portfolio exposure and the
regulatory developments it was assessed that the mortgage portfolio of BOC PCL is exposed to transition risks.
Therefore, to manage those risks, BOC PCL decided to set decarbonisation target aligned with IEA B2DS and
gradually direct its new lending to more energy efficient buildings whilst offer incentives to retrofit buildings with
lower energy efficiency in the future. The KRI on decarbonisation target on Mortgage portfolio indicates increased
climate transition risk if the portfolio produces GHG emissions which are not aligned with the IEA B2DS
decarbonisation pathway.
Financing purchases of new commercial properties / Financing renovation of commercial properties
(Corporates / SMEs)
Emphasising on buildings, two additional KRIs were introduced to ensure that new lending for commercial
properties will only be directed to buildings with EPC class greater than C or in case of building renovations, an
improvement in energy performance will be achieved. The indicators are applicable to the corporate entities,
which includes SMEs and large corporates, and reflects the material portfolios of BOC PCL, namely those under
Construction, Accommodation & Food Service and Real Estate.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
128
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
C&E Risk Management Tools & Processes (continued)
c. Risk Monitoring & Reporting
The Group has introduced reporting around sustainability issues which will be progressively enhanced. Currently,
regular reporting primarily consists of:
i. Progress updates on the ESG Working Plan: this takes place through the SC mostly on a monthly basis.
Frequent updates (quarterly) are being provided to the NCGC and the RC.
ii. Climate Risk Report: the report was introduced during 2023 and was submitted to the RC through the SC
and EXCO. The report updates the committees on:
i. The progress made on the ESG Working Plan focusing on risk management related activities.
ii. The level of several KRIs and KPIs relating to transition and physical risks, Financed scope 3 GHG
emissions and environmentally friendly lending.
iii. The report has been included as part of the above Committees agendas and will be produced on
a regular basis.
iii. RAF dashboard reporting: a dedicated RAF report (Risk Profile) is produced on a quarterly basis. The
report includes all RAS indicators, including the ones related to climate risk, and is submitted to the EXCO,
RC and the BOD. Any interim breaches are assessed with respect to their Tier and breach severity and
are reported and / or escalated to the appropriate committee.
iv. Additional monitoring reports have been established in 2023:
i. Sustainability Performance Report: aims to facilitate the monitoring of decarbonisation targets
(Scope 1, Scope 2 and Scope 3), Green/Transition lending targets (Retail, Corporate and SME)
and Other wider ESG targets (Renewable energy, paper consumption, Sustainable Bonds
Investments etc.).
ii. BES monthly update report: the report provides update to the BES Working Group on the key
updates and developments on C&E area that might impact C&E risks and the Business Strategy.
iii. BES impact report: the report is produced on a quarterly basis summarizing the impact of key
updates and development on the C&E risks and the mapping to the traditional risk categories and
the Business Strategy per time horizon. In addition, the updates and developments arising from
the BES are further linked to sectors and relevant products. The quarterly impact assessment
(preliminary impact assessment) is presented to the SC and EXCO, on a quarterly basis. The
annual final impact assessment will be presented and discussed at the SC, EXCO, RC and NCGC.
d. ESG Due Diligence
During 2023, BOC PCL established an ESG Due Diligence process with the objective being to assess customers
(existing and new) on their performance against various aspects around ESG and climate risks. The process
involves the utilisation of structured questionnaires applied at the individual company level and has been initially
deployed to customers within the Corporate Division. The questionnaires focus more on the
Environmental/Climate risk pillar and aim to assess various aspects of each customer touching upon matters
around Governance, Training, Strategy & Business Planning, Energy metrics and other. The Social and
Governance pillars are also assessed through several relevant dimensions such as Corporate and Social
Responsibility, Human Rights, Board Composition etc.
The Due Diligence process is applied when granting new and/or reviewing existing credit facilities and is expected
to be fully incorporated into the loan origination process by the end of the first quarter of 2024. At that stage,
beyond the scoring of the customers, specific recommendations will be made to customers aiming to mitigate
ESG risks.
Syndicated Project
Currently BOC PCL is participating in a syndicated project across the Cypriot Banking system aiming to establish
a common platform that will allow the assessment of customers’ ESG factors. The platform will employ sector-
based questionnaires that will be used by all banks, ensuring a harmonized assessment approach and a level-
playing field. BOC PCL will re-adjust its internal processes to incorporate the new questionnaires and consider the
deployment of questionnaires to other business lines as well.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
129
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
C&E Risk Management Tools & Processes (continued)
e. Policies
BOC PCL has in place policies aiming to assist in managing its C&E risks. These include:
Environmental and Social Policy
BOC PCL is committed to identifying and managing potential negative impacts that any of its activities might have
to the environment, to society and to its customers. Under this commitment, BOC PCL has in place an E&S Policy
which guides all BOC PCL departments involved in the credit granting process and applies to:
ii. Granting of new funded / non-funded facilities to physical persons or legal entities, secured by mortgage
on immovable property.
iii. Granting of new funded facilities to legal entities.
The policy is applicable at the individual exposure level and requires that BOC PCL verifies acceptable levels of
environmental risk through, among other:
i. Screening out customers who are carrying out activities that appear on the “Exclusion and Referral
Sectors”. The Exclusion and Referral Sectors include a wide range of activities that can be harmful to
the environment or society.
ii. Making an initial assessment for the E&S risk based on the customer’s business sector and engaging
with the customer if assessed as “Medium” or “High” to ensure that any identified risks are mitigated.
Green Lending Policy
BOC PCL has in place a Green Lending Policy which aims to provide the framework and the requirements BOC
PCL will implement for the creation of green loans and to support borrowers in financing environmentally sound
and sustainable projects. The Policy sets the criteria for a loan to be categorised as “green” which include, among
others, clear environmental benefits, environmental sustainability objectives, the processes by which the
borrower identifies and manages perceived, actual or potential environmental and social risks associated with the
relevant green project(s) etc. To fully operationalise the policy, BOC PCL is in the process of preparing the relevant
guidelines, which will provide further guidance on the specific procedures to be followed.
Concentration Risk Policy
The Concentration Risk Policy captures any single exposure or group of exposures with the potential to produce
losses large enough, to threaten the financial institution’s health, reputation, or ability to maintain its core
operations. This Policy is aligned with the RAF, and applies at Group level by defining limits and the methodology
for limit setting for exposures in specific assets, liabilities and off-balance sheet items to ensure that the
concentration risk is within BOC PCL’s Risk Appetite.
Consequently, BOC PCL has introduced lending restrictions and sector limits on carbon intensive sectors, and
these have been reflected in the Concentration Risk Policy as mentioned on ‘Pillar II – Strategy’ section of these
TCFD. A limited amount of new lending, unless for green or transition purposes, will be allowed subject to approval
by the RC or BOC PCL’s highest credit committee.
The restricted sectors relate to certain activities within:
i. Coal Mining
ii. Oil
iii. Gas
iv. Cement
v. Iron & Steel & Aluminium
vi. Power Generation (excluding renewables)
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
130
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
C&E Risk Management Tools & Processes (continued)
e. Policies (continued)
Pricing Policy
BOC PCL has recognized the importance of promoting sustainability in its lending practices. In line with this, it
has developed a comprehensive plan aiming to integrate ESG and Climate factors into its loan pricing framework
to ensure long-term sustainable growth. The plan has two main phases, the Transition phase, and the Long-term
phase.
Transition Phase
The Transition phase has been based on BOC PCL's strategy to establish a more sustainable lending practice while
placing an emphasis on promoting environmental responsibility and not mitigating C&E risks by pricing them.
Long-Term Phase
Moving on from the Transition phase, BOC PCL has developed a longer-term plan for undertaking the necessary
activities and analysis that will allow for a structured approach to incorporate ESG and climate factors in pricing
components and where needed associate pricing with defined KPIs.
For more details on the Transition and Long-Term Phase please refer to ‘Pillar II – Strategy’ section of these TCFD
report.
f. Climate Risk Sensitivity and Stress Testing
i. Sensitivity Analysis
Scenario analysis and climate risk stress testing are methods which assist in evaluating and managing the possible
effects of C&E risks, to the Group’s business strategy and financial planning decisions.
To assess the potential impact of transition risks on the Business Model, a sensitivity analysis was carried out on
portions of the corporate and mortgage portfolios that were identified as being exposed to transition risks as per
the MA of March 2022. The analysis related to the Financial Plan for the period between 2023 – 2026 and reflected
the potential impact of a short-term disorderly scenario according to which a set of climate related policies are
implemented at the beginning of 2023.
Estimation of impact was done on a top-down basis considering the outcome of regulatory climate stress tests,
and specifically the outcome of the Bank of England Climate Biennial Exploratory Scenario. Considering the
specific composition of BOC PCL’s portfolio, such climate related policies would most likely affect customers in
the Construction, Real estate and Accommodation sectors and customers with mortgage loans granted prior to
2009 implying thus a less-energy efficient property. The outcome of the analysis thus provided a magnitude of
losses BOC PCL might face if both BOC PCL and its customers do not respond effectively to climate risks.
ii. Transition Risk Framework
BOC PCL developed a Framework to quantify transition risks. The framework addresses all sectors of the BOC
PCL’s portfolio, but dedicated models were created for those sectors that are more susceptible to transition risks,
based on their inherent activities and their exposures. Such sectors include Construction, Hotels, Real Estate and
Mortgages whilst the remainder of BOC PCL’s portfolio is catered through a generic model.
BOC PCL has executed an internal preliminary Stress-test exercise with Balance Sheet reference Date 30/09/2023
with Corporate Ratings having a reference date of 31/12/2022. The projections, in terms of PD impact of the
climate scenarios, were formed until 2050 on a counterparty level, with the outcome being aggregated to sector
level to allow for Sectoral analysis. The results of the stress testing do not include Balance Sheet Projection values
and impact on the Collaterals.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
131
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
C&E Risk Management Tools & Processes (continued)
f. Climate Risk Sensitivity and Stress Testing (continued)
ii. Transition Risk Framework (continued)
For the preliminary Stress Test run the following Network for Greening the Financial System (‘NGFS’) scenarios
have been selected:
i. NDCs – Nationally Determined Contributions, which for the case of Cyprus, almost coincides with the
“Below 2°C” scenario given the EU Members’ aspiration for climate Policies. “Below 2°C” scenario
gradually increases the stringency of climate policies, giving a 67% chance of limiting global warming
to below 2°C.
ii. Current – Current Policies scenario assumes that only currently implemented policies are preserved,
leading to high physical risks.
iii. Delayed Transition – Delayed Transition scenario is under the Disorderly scenario category. It
assumes annual emissions do not decrease until 2030. In addition, it requires strong policies to limit
warming to below 2°C and negative emissions are limited.
The PDs under the preliminary Stress Test on transition risks are substantially increased on the “Delayed
Transition” scenario between 2031-2040 compared to the “Current” scenario.
iii. Physical Risks
In terms of physical risks, efforts were focussed on estimating the impact on property value from the potential
materialisation of such risks. This is considered relevant to BOC PCL, given the concentration of clients in activities
relating to immovable properties such as Construction, Accommodation & Food Service, Real Estate, Mortgages
as well as the fact that a significant portion of BOC PCL’s collaterals are real estate assets.
To that end, granular data were obtained from an external vendor, providing granular, location level information.
For the purposes of the analysis which was also used as part of its RIMA process, the NGFS scenarios were
employed and used as a reference. In particular, the following scenarios were used and projected up to 2050:
i. Orderly transition: assume that climate policies are introduced early and gradually become more stringent.
Physical and transition risks are relatively small.
ii. Disorderly transition: explore higher transition risk due to delayed or divergent policies across countries
and sectors.
iii. Hot House World: assume that some climate policies are being implemented in some jurisdictions, but
that global efforts are insufficient to halt significant global warming. These scenarios pose serious physical
risks.
The analysis of the data allowed BOC PCL to gain an understanding of the assets vulnerable to the various physical
risks, their level of riskiness as well as potential concentrations across the island. Furthermore, following the
identification of physical risks, the monetary impact (damage function) for each combination of property, hazard,
scenario, and year was estimated. This monetary impact considered not only the geo-localisation features, but
also the asset-specific characteristics, i.e., commercial, industrial, residential, other use. At the moment, the
damage function measurement, for wildfire hazard, has been incorporated as part of the ICAAP process.
iv. ILAAP Updates
BOC PCL considered the C&E risks financial impact, and in particular transition risks, and how these might affect
BOC PCL’s counterparties efforts to meet any C&E requirements from the process of adjustment towards a lower
carbon economy.
Stress testing analysis was used to assess the effects on BOC PCL’s liquidity, focusing on sectors expected to be
impacted by transition risks. Higher outflows were assumed for the deposits of economic sectors which are
expected to be more vulnerable to C&E risks and more specifically to transition risk.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
132
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III - Risk Management (continued)
C&E Risk Management Tools & Processes (continued)
g. C&E Risks-related Data
BOC PCL determined to approach holistically the ESG and Climate Data, by developing an ESG and Climate Data
Gap & Strategy. Specifically, BOC PCL:
i. Established an ESG Data Working Group.
ii. Set up weekly catch-up calls for the ESG Data Working Group.
iii. Identified Data Gaps under various workstreams (Disclosures, Risk Management, Commitments, Business
Strategy).
iv. Determined the strategy to close the gaps.
v. Set indicative deadlines to close the gaps.
vi. Discussed with several third-party software providers on ESG and Climate Risk Management platform and
Disclosure platform.
vii. Determined the follow up actions on the ESG and Climate Data Gap & Strategy.
BOC PCL acknowledges that the ESG and Climate spectrum is extremely fast pacing, therefore the ESG and
Climate Data Gap & Strategy is an ongoing process and further actions are expected to be performed in the future
to further enhance the existing ESG and Climate Data Gap & Strategy.
The ESG Data Gaps have been identified by focusing to the main ESG risks’ workstreams run by BOC PCL as well
as strategic priorities:
i. Task Force on Climate related Financial Disclosures requirements (Annual report) - Disclosures
ii. Pillar 3 Disclosures on ESG risks (Six monthly) - Disclosures
iii. Sustainability Performance Report (Monitoring Key Performance Indicators) – Business Objectives
iv. Climate Risk Report (Internal risk reporting) – Risk Management Needs
v. ESG Questionnaires for Due Diligence purposes - Risk Management Needs
vi. Physical Risks & Transition Risks assessment, quantification and management - Risk Management Needs
vii. BOC PCL’s Sustainable Finance Framework - Business Objectives
viii. Net Zero by 2050
ix. Financed Scope 3 GHG emissions estimation of loan portfolio – Disclosures/ Risk Management
Needs/Business Objectives
BOC PCL initiated implementation of ESG and Climate Data Strategy in 2024.
h. UNEPFI Impact Analysis Tool
BOC PCL has employed the UNEP FI’s Impact Analysis Tool which provides for a two-step process to understand
and manage actual and potential positive and negative impacts of the financing it provides. As per the
methodology underpinning the tool (UNEP FI’s Holistic Impact Methodology) the impacts are analysed across the
spectrum of the three pillars of sustainable development articulated by the SDGs:
i. Human needs (the social pillar – people)
ii. Environmental conditions or constraints (the environmental pillar – planet)
iii. Economic development (the economic pillar – prosperity)
The tool allows the selection of the industries that BOC PCL has the biggest exposures to and following that it
maps which of them are particularly affected by sustainability trends.
For the Corporate portfolio, the impact analysis focussed on the fifty most important sub-sectors based on NACE
codes for a total of ten sectors, analysing €4.5 billion of exposures out of a total of €10 billion gross loan book as
of 31 December 2023. In terms of industries, Accommodation, Real Estate, Trade and Construction have the
highest share in BOC PCL’s portfolio. Sectors that are of less importance in terms of financed exposure but are
considered significant due to their impact on the Sustainable Development Goals, e.g., manufacturing,
transportation and agriculture, were also analysed. For Consumer banking, the impacts of the most prevailing
banking products were examined including credit cards, overdrafts, consumer loans, mortgage loans, student
loans and vehicle loans.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
133
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III – Risk Management (continued)
C&E Risk Management Tools & Processes (continued)
h. UNEPFI Impact Analysis Tool (continued)
Analysis
a) Corporate Portfolio
As a result of the analysis carried out, the most relevant impact areas of strategic importance were identified:
i. Employment, Wages and Social Protection (SDG 1 and SDG 8) - Social
ii. Health and Safety and Healthcare and Sanitation (SDG 3) - Social
iii. Healthy economies, Housing, Finance and Infrastructure (SDG 8, SDG 9 and SDG 11) - Social
iv. Climate Stability, Biodiversity and Healthy Ecosystems, Resource efficiency and Waste (SDG 6, SDG
12, SDG 13, SDG 14 and SDG 15) – Environmental
According to the analysis the biggest positive impact is in the following areas:
i. Employment, Wages and Social Protection which includes the overall financing in all areas of the
economy. According to our Environmental and Social Policy, for all financing to Legal Entities above
€100,000 a written confirmation is needed for proper business conduct, relevant licenses and work
permits. In cases where the Legal Entity is categorised as medium or high risk (as per EBRD’s E&S
Risk Categorisation List) additional safeguards are in place, such as due diligence reports by external
experts (i.e. professionals on the assessment of E&S risks). This contributes to the promotion of
wellbeing and to decent work for everyone.
ii. Health and Safety and Healthcare and Sanitation, including financing in the areas of manufacture of
medical products that contribute to health and wellbeing, as well as financing in the healthcare sector
that facilitates access to the corresponding care.
iii. Healthy economies, Housing and Infrastructure. This positive impact stems from the fact that BOC
PCL typically lends to sector wide small-medium-sized enterprises (‘SMEs’) which are the
cornerstones of a functional economy. SMEs account for the majority of companies in Cyprus and are
responsible for a large portion of the private sector employment. In addition, Construction and Real
estate financing can also contribute to the development of quality, reliable, sustainable and resilient
infrastructure, to support economic development and human well-being.
Focusing on the negative impacts, the analysis indicates that all the activities of the financed portfolio can
potentially affect the entire environmental pillar as expressed through the three distinct impact areas of:
i. Circularity,
ii. Biodiversity & healthy ecosystems, and
iii. Climate stability
Activities from the most prevailing financed sectors of BOC PCL such as Construction and Real Estate are
negatively associated with:
i. Biodiversity,
ii. Resource Intensity,
iii. Waste, and
iv. Climate Stability.
This is mainly due to the fact that these sectors are associated with the use of natural resources, produce waste
during the construction/operation phase, affect the climate through the GHG emissions of the properties and in
addition, the land/area they are built on may have adverse effects on the local ecosystems. Similarly, the
manufacturing and the transportation sectors are mainly associated with the consumption of fossil fuels and
production of GHG emissions (through energy usage and mobility). Agriculture is a sector where it takes up a lot
of land whereas livestock production causes the emission of fairly large amounts of GHG. The accommodation
sector, which is the largest in BOC PCL’s portfolio, it is not considered a key sector by the UNEP FI tool. However,
it is negatively associated with waste, pollution, and the cause of strain on land and local ecosystems.
b) Consumer Banking – Households
The analysis indicated that all consumer banking products have a significant impact on Finance (SDG 8 and SDG
9), which relate to the provision of affordable credit for to all the consumers as to cover their everyday needs.
Mortgage loans are positively associated with Housing (SDG 11) and negatively associated with Climate Stability
and Resource Intensity mainly due to the consumption of energy (GHG emissions). Similarly, vehicle loans are
adversely related to Climate stability and Resource intensity due to their GHG emissions. Student loans help to
promote education across the population and is thus positively associated with the Education (SDG 4).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
134
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar III – Risk Management (continued)
C&E Risk Management Tools & Processes (continued)
h. UNEPFI Impact Analysis Tool (continued)
c) Next Steps
The Group is constantly monitoring results and working on policies as to target specific industries and sectors
that will help it increase its positive impact (e.g., lending to renewable energy projects). For more details refer
to section ‘Principles for Responsible Banking’ in ‘Pillar II – Strategy’ of these TCFD.
i. Corporate Bond Investment Framework
ESG considerations are an important part of BOC PCL’s investment process and framework and are considered in
aiming to enhance sustainable investment outcomes. Therefore, BOC PCL aims to specify through this framework,
the approach followed for the risk assessment and limit allocation of corporate bond investments.
Controlling the set of portfolio characteristics based on the industry activity, BOC PCL ensures that only acceptable
industries are permitted for evaluation and analysis by the Market and Liquidity Risk Unit. The non-permissible
industries list used for preliminary industry assessment is the ‘Exclusion & Referral Sectors’ of the E&S Policy (see
section ‘e. Policies’ of ‘Pillar III- Risk Management’ of these TCFD).
Acceptable industries are further assessed with regards to their Moody’s credit impact score (‘CIS’) and issuer
profile score (‘IPS’), where corporates with CIS equal to 4 or 5 and IPS equal to 5 are not acceptable and no
limits are allocated. The resulting allocated limit is affected by the ESG score of only-acceptable industries
corporate bonds. Therefore, corporate bonds with low IPS score, receive lower score within the Qualitative
Assessments which eventually affects the final score and the resulting allocated limit.
j. Other Actions
BOC PCL has put in place several follow-up actions to mitigate existing risks and enhance the work carried out
so far. Indicatively, these include:
i. Further integration of C&E risks into BOC PCL’s Risk Strategy and Risk Appetite Statement;
ii. Further integration of client’s Due Diligence procedures at the origination and during regular monitoring
(on an ongoing basis);
iii. Integration of C&E risks in ICAAP/ ILAAP processes;
iv. Enhance monitoring processes for material risks and explore various methodologies for assessing and
quantifying potential effects from these risks.
Integrating ESG and C&E risks into BOC PCL’s three Lines of Defence Framework
Consistent with the Group’s overall risk management approach, ESG and climate risk has been incorporated into
the Three Lines of Defence Model for ESG and climate risk management purposes. For more details on roles and
responsibilities of Three Lines of Defence refer to ‘Pillar I – Governance Section’ of these TCFD.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
135
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV – Metrics and Targets
The Group has disclosed its performance on climate-related metrics and targets based on primary targets set
under the ESG strategy. The Group uses such metrics and targets to provide quantitative information on the
current status of climate strategy and performance. These figures are regularly assessed by Senior Management
through the governance arrangement as presented earlier in ‘Pillar I – Governance’ section of these TCFD. In the
upcoming pages, the Group summarises the operating and financial information to date to guide its progress
towards the established impact-reduction and financing goals and the net zero plan.
Reduction of scope 1 and 2 GHG emissions – Become Carbon neutral by 2030 and Net Zero by 2050
The Group aims to become carbon-neutral by 2030, by gradually eliminating its scope 1 and 2 GHG emissions.
The Group has estimated the Scope 1 and Scope 2 GHG emissions of 2021 relating to own operations in order to
set the baseline for carbon neutrality target. For the Group to meet the carbon neutrality target, the Scope 1 and
Scope 2 GHG emissions should be reduced by 42% (absolute target) by 2030. The absolute reduction target has
been set following the IEA’s B2DS. BOC PCL in 2022, designed the plan of actions to meet the carbon neutrality
target by 2030 and progress towards Net Zero target of 2050. The Group is designing the decarbonisation strategy
for the reduction of Scope 1 and Scope 2 GHG emissions of its subsidiaries.
BOC PCL’s efforts in 2022 and 2023 lead to the reduction in Scope 1 and Scope 2 GHG emissions by 2,265 tCO
2
e
in 2023 compared to 2021 which represents c.18% reduction. BOC PCL should perform additional decarbonisation
actions to reduce Scope 1 and Scope 2 GHG emissions by c.24% to achieve the carbon neutrality target by 2030.
(42%)
(5%)
FY2022
2030 Target
Group
-
Performance
on
Carbon Neutrality target
against
baseline of 2021
(16%)
FY2023
(42%)
(8%)
FY2022
2030 Target
BOC PCL
-
Performance
on
Carbon Neutrality target
against
baseline of 2021
(18%)
FY2023
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
136
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV – Metrics and Targets (continued)
Reduction of scope 1 and 2 GHG emissions – Become Carbon neutral by 2030 and Net Zero by 2050
(continued)
For the purpose of the calculation of the 2021, 2022 and 2023 Carbon footprint, the Group has set its
decarbonisation boundaries based on the operational control approach. The 2021, 2022 and 2023 carbon footprint
for Scope 1 and Scope 2 GHG emissions was estimated based on the methodologies described in the Greenhouse
Gas Protocol (‘GHG Protocol’) and ISO14064-1:2019 standard. The Group’s own carbon footprint will continue to
be calculated on an annual basis which will enable comparisons to be made and progress against decarbonisation
targets to be monitored.
Following the implementation of energy efficiency actions in 2022 and 2023 the Group achieved c.16% reduction
in Scope 1 and Scope 2 GHG emissions, in 2023 compared to 2021. At the end of 2022 and early in 2023, the
Group has installed solar panels to four owned buildings leading to reduction in Scope 2 GHG emissions in 2023.
BOC PCL has formulated a plan of actions to reduce Scope 1 and Scope 2 GHG emissions and meet carbon
neutrality target by 2030 and plans to invest further in energy efficient installations and actions and replace fuel
intensive machineries and vehicles from 2024 to 2025, which would lead to c.3-4% reduction in Scope 1 and
Scope 2 GHG emissions by 2025 compared to 2021. The Group expects that the Scope 2 GHG emissions will be
reduced further when the energy market in Cyprus shifts further towards renewable energy. The Group is also
considering several other actions aiming to a further reduction of c.30% in Scope 1 and Scope 2 GHG emissions
by 2030 compared to 2022.
A number of carbon reduction initiatives are already underway and contribute to the reduction of carbon footprint
in the immediate future. These energy and waste initiatives include:
i. implementation of Energy Management system;
ii. installation of electric chargers for cars;
iii. improvement of waste measurement;
iv. increase initiatives for waste recycling; and
v. reduction of paper use.
The Group has estimated Scope 1 and Scope 2 GHG emissions for 2023 in order to monitor the progress on
carbon neutrality target:
(Note: For the purpose of GHG emissions inventory, the Group includes BOC PCL, EuroLife Ltd (‘Eurolife’), Genikes Insurance of Cyprus Ltd (‘GI’) and Cyprus Investment
and Securities Corporation Ltd (‘CISCO’).)
251
220
643
11,906
13,020
230
220
584
10,529
11,563
Scope 1 –
Stationary
Combustion
Scope 1 - Mobile
Combustion
Scope 1 - Fugitive
Emissions
Scope 2 - Purchased
Electricity
Total Scope 1 and
Scope 2
Emissions (CO
2
e tonnes per year)
Group - Scope 1 and Scope 2 GHG emissions (tonnes)
2022 2023
↓8%
↓9%
↓12% ↓11%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
137
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV – Metrics and Targets (continued)
Reduction of scope 1 and 2 GHG emissions – Become Carbon neutral by 2030 and Net Zero by 2050
(continued)
(Note: The 2022 estimated Scope 1 and 2 GHG emissions presented here are slightly different to those reported in the 2022 ESG Disclosures due to the following factors:
the overestimation of certain Global Warming Potentials (GWP) for Scope 1 Stationary Combustion, re-estimation of Scope 1 Fugitive GHG emissions to include all
properties and reallocation of relevant GHG emissions between companies within the wider Group following revised ownership rights.)
Energy Management
The Group is implementing several actions to become more energy efficient and reduce GHG emissions on its
own operation.
168
197
619
10,415
11,399
157
186
560
9,283
10,186
Scope 1 –
Stationary
Combustion
Scope 1 - Mobile
Combustion
Scope 1 - Fugitive
Emissions
Scope 2 - Purchased
Electricity
Total Scope 1 and
Scope 2
Emissions (CO
2
e tonnes per year)
BOC PCL - Scope 1 and Scope 2 emissions
2022 2023
↓7%
↓6%
↓10%
↓11%
↓11%
9,283
1,043
132
70
10,415
1,194
219
78
BOC PCL
Eurolife
GI
CISCO
Scope 2 - Purchased Electricity (tCO
2
e)
2022 2023
↓10%
↓40%
↓13%
↓11%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
138
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV – Metrics and Targets (continued)
Reduction of scope 1 and 2 GHG emissions – Become Carbon neutral by 2030 and Net Zero by 2050
(continued)
Energy Management (continued)
BOC PCL reduced by c.11% Scope 2 – Purchased electricity GHG emissions in 2023 compared to 2022 due to
new solar panels connected to energy network in 2022 and early 2023 as well as buildings abandoned as part of
the digitalisation journey. GI achieved c.40% reduction in Scope 2 – Purchased electricity GHG emissions in 2023
compared to 2022 following relocation of its headquarters to Eurolife building.
Increase in renewable energy consumption and production supported the reduction of Scope 2 GHG emissions of
the Group. The Group aims to increase renewable energy utilisation in its own operations. The Group following
connection of solar panels with the energy network on four owned buildings increased the renewable energy
production and consumption by 65% in 2023.
Resource Management and Recycling
Throughout the year, the Group runs initiatives, environmental trainings, awareness sessions and internal
communication campaigns to increase environmental awareness, improve efficiency and performance, and reduce
resource consumption.
Initiatives focus on various environmental aspects, including energy consumption, paper consumption, printing,
use of A/C systems. The goal of this initiative was to motivate all employees to act and join the effort to become
more efficient when it comes to resource consumption.
173,593
285,907
2022 2023
Renewable energy consumption (Kwh)
66,283,631
51,203,197
50,855,267
44,849,252
37,814,801
2019 2020 2021 2022 2023
BOC PCL - Paper Consumption (kgs)
↓23%
↓12%
↓16%
↓1%
65%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
139
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV – Metrics and Targets (continued)
Reduction of all GHG emissions to become Net Zero by 2050
The Group is estimating GHG emissions on all material Scopes and Categories following the GHG protocol and
the available methodologies under PCAF.
Group’s GHG Emissions
Category
Absolute
tCO
2
e 2022
% to total
Absolute
tCO
2
e 2023
% to total
Scope 1
1,114 0.0% 1,034 0.0%
Scope 2
11,906 0.4% 10,529 0.3%
Scope 3
–
Purchased Goods
and Services
16,138 0.6% 16,512 0.5%
Scope 3
–
Upstream
transportation and
distribution
2,243 0.1% 2,348 0.1%
Scope 3
–
Waste generated
in operations
2,883 0.1% 2,821 0.1%
Scope 3
–
Business Travel
196 0.0% 277 0.0%
Scope 3
–
Employee
commuting
2,298 0.1% 2,062 0.1%
Financed Scope 3
–
Mortgages – Loan Portfolio
153,023 5.3% 152,251 4.7%
Financed Scope 3
–
Commercial Real Estate –
Loan Portfolio
63,832 2.2% 59,685 1.8%
Financed Scope 3
–
Business
Loans – Loan Portfolio
1,738,453 60.0% 1,763,963 54.4%
Financed Scope 3
–
Motor
Vehicles – Loan Portfolio
37,331 1.3% 61,879 1.9%
Financed Scope 3
–
Corporate Bonds –
Investment Portfolio
54,271 1.9% 79,819 2.5%
Financed Scope 3
–
Sovereign Bonds –
Investment Portfolio
800,908 27.7% 1,080,046 33.3%
Insurance associated Scope 3
– Commercial Lines –
Insurance Portfolio
7,436 0.3% 7,634 0.2%
Insurance associated Scope 3
– Motor Personal Lines –
Insurance Portfolio
3,660 0.1% 3,820 0.1%
Total
2,895,692 100% 3,244,680 100%
Note 1: For the purpose of GHG emissions inventory, the Group includes BOC PCL, Eurolife, GI and CISCO.
Note 2: The estimation of Financed Scope 3 GHG emissions associated with loan portfolio has been restated compared to those reported in ESG Disclosures of 2022
following revision of PCAF’s database and methodology.
Financed Scope 3 GHG emissions comprise of more than 98% of Group’s GHG emissions inventory. Therefore,
the Group primarily focus its decarbonisation efforts on Financed Scope 3 GHG emissions associated with loan
and investment portfolio.
The Group joined the PCAF in October 2022 and is following the recommended methodology for the estimation
of the Financed Scope 3 GHG emissions and Insurance associated GHG emissions. The Group has estimated
Financed Scope 3 GHG emissions relating to the loan portfolio based on PCAF standard and proxies for 2022 and
2023. The PCAF Standard has been reviewed by the GHG Protocol and conforms with the requirements set forth
in the Corporate Value Chain (Scope 3) Accounting and Reporting Standard for category 15 investment activities.
In addition, PCAF provides a data quality ranking for the estimation of Financed Scope 3 GHG emissions based
on data applied in the estimation for each asset class. The scale is between 1-5 with 1 being the highest quality
and 5 being the lowest quality.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
140
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV - Metrics and Targets (continued)
Reduction of all GHG emissions to become Net Zero by 2050 (continued)
The Group aims to continuously enhance the data quality used on the estimation of Financed Scope 3 GHG
emissions and eliminate the data gaps, therefore in 2023 a client questionnaire has been launched to gather the
relevant data, where possible, as well as continue to enhance the loan origination process. BOC PCL has already
established a policy in the loan origination process to gather Energy Performance Certificates (ratings and GHG
emissions per square meters) for the financed properties and collateral properties. Additional data gathering
actions will be performed during 2024 based on the ESG and Climate Data Gap & Strategy.
For the estimation of Financed Scope 3 GHG emissions relating to loan portfolio, the portfolio was classified in
the following PCAF asset classes which will facilitate the setting of decarbonisation targets in the future:
PCAF Asset
class
Definition
Business loans
Business loans include all loans and lines of credit for general corporate purposes (i.e., with
unknown use of proceeds as defined by the GHG Protocol) to businesses, non-profits, and any
other structure of organisation that are not traded on a market and are on the balance sheet
of the financial institution. Revolving credit facilities, overdraft facilities, and business loans
secured by real estate such as CRE-secured lines of credit are also included. Any off-balance
sheet loans and lines of credit are excluded.
Commercial
Real Estate
(CRE)
This asset class includes on
-
balance sheet loans for
specific corporate purposes, namely the
purchase and refinance of CRE, and on-balance sheet investments in CRE. This definition
implies that the property is used for commercial purposes, such as retail, hotels, office space,
industrial, or large multifamily rentals. In all cases, the building owner or investor leases the
property to tenants to conduct income-generating activities.
Mortgages
This asset class includes on
-
balance sheet loans for specific consumer purposes namely the
purchase and refinance of residential property, including individual homes and multifamily
housing with a small number of units. This definition implies that the property is used only for
residential purposes and not to conduct income-generating activities.
Motor vehicles
This
asset class refers to on
-
balance sheet loans and lines of credit for specific (corporate or
consumer) purposes to businesses and consumers that are used to finance one or several
motor vehicles. Corporate loans for acquisition of vehicles for trade purposes were classified
as “Business Loans”.
The Group estimated the Financed Scope 3 GHG emissions for c.89% of Gross Loans and advances portfolio which
fall under the above-mentioned asset classes. GHG emissions associated with loan portfolio are metrics of
transition risks that the portfolio is exposed.
Note 1: The estimation of Financed Scope 3 GHG emissions associated with loan portfolio has been restated compared to those reported in ESG Disclosures of 2022
following revision of PCAF’s database and methodology.
37,331
63,832
153,023
1,738,453
61,879
59,685
152,251
1,763,963
Motor Vehicles CRE Mortgages Business loans
Financed Scope 3 GHG emissions (tCO
2
e per year) - Loan Portfolio
2022 2023
↑66%
↓6%
↑1%
↓1%
DQS: PCAF Data Quality Score
DQS:5
DQS:4.9
DQS:4.5
DQS: 5
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
141
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV - Metrics and Targets (continued)
Reduction of all GHG emissions to become Net Zero by 2050 (continued)
The Group, by taking into account the GHG emissions estimated for loan portfolio, the most significant loan
exposures and the MA on C&E risks, it has decided to set a decarbonisation target on Mortgage portfolio. To limit
global warming to 1.5°C above pre-industrial levels (Paris Agreement and EU Green Deal), all sectors of society
need to decarbonise and collectively reach net-zero emissions by 2050. The transition to low carbon economy
triggers transition risks, therefore BOC PCL has set decarbonisation target on Mortgage portfolio in order to be
aligned with its Net Zero ambition and manage transition risk by directing its lending to more energy efficient
residential buildings.
The Group has estimated the GHG emissions per square meter, as at 31/12/2022, for the properties financed
under its Mortgage portfolio using the PCAF methodology and proxies. Then Group utilised the Science Based
Target Initiative’s tools in order to estimate the decarbonisation pathway that the Mortgage portfolio should follow
to be aligned with the IEA B2DS. The Group decided to align the Mortgage portfolio with IEA B2DS due to the
following reasons:
i. The scenario is consistent with Global warming projections (IEA and Intergovernmental Panel on Climate
Change (‘IPCC’)) and is considered a widely acceptable scenario.
ii. The scenario is considered more plausible compared to the IEA’s Net Zero Scenario given the fact that
Cyprus market is pre-mature in the climate field. Therefore, BOC PCL considers reasonable to initiate its
efforts based on a less intense scenario and then intensify its efforts when the overall Cyprus market is
more mature in the field.
iii. Lack of data, enhances the risk of not having a solid baseline, so BOC PCL considers that is more prudent
to initiate its efforts based on a less optimistic scenario until data availability and quality is enhanced.
iv. The scenario is more straightforward to obtain and use as it is aligned with Science Based Target Initiate’s
available tools.
In order to ensure the feasibility of the interim decarbonisation target and derive the decarbonisation strategy
of Mortgage portfolio, the Group has projected the GHG emissions per square meter for the properties financed
under its Mortgage portfolio as at 31/12/2030. In order to project the Mortgage portfolio as at 31/12/2030,
BOC PCL used various assumptions such as:
i. Projected new lending on Mortgage portfolio between 2024-2030;
ii. Projected square meters of each property financed under projected Mortgage new lending;
iii. Allocation of new lending on Mortgages to EPC classifications;
iv. PCAF proxies on GHG emissions per financed residential property;
v. Cyprus Government targets on the reduction of GHG emissions as well as the utilisation of renewable
energy on residential buildings by 2030;
vi. Expiration of Mortgage exposures between 2024-2030.
The Group performed several sensitivities on the assumptions used to project Mortgage portfolio as at 31/12/2030
in order to ensure the feasibility of the target. Under all scenarios (sensitivities) the decarbonisation target on
Mortgage on 2030 is achieved. In addition, sensitivities were performed to the baseline of 2022, given the lack
of sufficient data, in order to ensure that when data quality of the estimation is improved in the upcoming years
the adjusted decarbonisation target will be met. The decarbonisation target on Mortgage is also achieved after
the increase / decrease of baseline by 10%, under all scenarios.
At the end of 2023, the Group launched the “Green Housing” product, aligned with GLP of LMA, which drives the
decarbonisation strategy of Mortgage portfolio. The new lending strategy of the Group, embedded in the Financial
Plan for 2024-2027, includes projections on the new “Green Housing” product which comprise of c.40% of new
Housing lending of 2024. In 2024, BOC PCL will continue to build its green product offering under the Mortgage
portfolio to strengthen its decarbonisation strategy. The feasibility of the target is also enhanced by taking into
account that Cyprus legislation imposes residential properties to have an EPC A so to issue a building permit after
1 July 2020.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
142
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV - Metrics and Targets (continued)
Reduction of all GHG emissions to become Net Zero by 2050 (continued)
The decarbonisation target set on Mortgage portfolio is summarized on the table below:
Metric
Emissions
Scope
2022
Base
line
Target
year
Target
Target
reduction
Performance
as at
31/12/2023
Figure as at
31/12/2023
Methodology
kgCO
2
/m
2
S1 & S2 53.50 2030 30.65 (43%) (5%) 50.73 PCAF/SBTi
kgCO
2
/m
2
S1 & S2 53.50 2050 2.34 (96%) (5%) 50.73 PCAF/SBTi
The Group has set decarbonisation target on c.34% of Gross Loans and advances portfolio. The Group aims to
reduce by 43% the kilograms of GHG emissions financed per square meter (kgCO
2
e/m
2
) under the Mortgage
portfolio, by 2030 compared to 2022 baseline. The Mortgage portfolio as at 31/12/2023 produced 50.73
kgCO
2
e/m
2
which is 5% lower compared to the baseline due to increased installation of solar panels in residential
properties in Cyprus in 2023 leading to the reduction in the average proxy variables.
The Group’s Mortgage portfolio should be aligned with the abovementioned graph in order to be aligned with the
climate scenario of IEA B2DS and being exposed to lower transition risks. BOC PCL following the abovementioned
analysis determined its new Mortgage lending strategy to meet the decarbonisation target on Mortgage.
The Group monitors the performance against the new lending target in order to take remedial action on time:
i. By the SC, EXCO and NCGC through the Sustainability Performance Report (Quarterly)
ii. By the SC, EXCO and RC through the Climate Risk Report (Quarterly)
iii. By EXCO through the monthly performance pack (Quarterly)
iv. By BDC on a monthly basis.
54
51
48
46
43
40
37
34
31
28
26
23
21
19
17
16
14
13
11
10
9
8
6
5
5
4
4
3
2
-
10
20
30
40
50
60
2020 2025 2030 2035 2040 2045 2050
Carbon Intensity (kgCO
2
/m
2
)
Year
Carbon Intensity Target – Mortgage Portfolio
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
143
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV - Metrics and Targets (continued)
Reduction of all GHG emissions to become Net Zero by 2050 (continued)
Given that the majority of Financed Scope 3 GHG emissions of loan portfolio derive from Business Loan asset
class, the carbon concentrated sectors under Business Loan asset class have been identified and are considered
primary sectors for setting decarbonisation targets. The primary sectors identified under Business Loan asset
class are Transportation and storage (42%), Wholesale and retail trade (21%), Manufacturing (15%) and
Construction (6%). The GHG emissions of Transportation and storage sector corresponds to c.23% of GHG
emissions of the Group.
BOC PCL – Financed Scope 3 GHG emissions – Business loan asset class
2022 2023
NACE
Sector
OS Loan
Amount
(€million)
Emissions
(tCO
2
e per
year)
OS Loan
Amount
(€million)
Emissions
(tCO
2
e per
year)
H
TRANSPORTATION AND STORAGE
275
589
,
598
299
736
,
988
G
WHOLESALE AND RETAIL TRADE;
REPAIR OF MOTOR VEHICLES
AND MOTORCYCLES
785 397,788 745 377,354
C MANUFACTURING 360 300,944 331 256,115
F CONSTRUCTION 325 118,767 306 112,440
D
ELECTRICITY, GAS, STEAM AND
AIR CONDITIONING SUPPLY
48 106,127 86 85,758
A
AGRICULTURE, FORESTRY AND
FISHING
42 80,601 34 65,941
M
PROFESSIONAL, SCIENTIFIC AND
TECHNICAL ACTIVITIES
262 47,600 235 42,638
I
ACCOMMODATION AND FOOD
SERVICE ACTIVITIES
770 30,380 712 28,090
L REAL ESTATE ACTIVITIES 685 30,167 595 26,198
J
INFORMATION AND
COMMUNICATION
33 9,172 43 9,922
Q
HUMAN HEALTH AND SOCIAL
WORK ACTIVITIES
86 8,932 53 5,479
B MINING AND QUARRYING 12 6,360 8 4,144
N
ADMINISTRATIVE AND SUPPORT
SERVICE ACTIVITIES
24 4,026 22 3,794
K
FINANCIAL AND INSURANCE
ACTIVITIES
134 1,407 211 2,263
S OTHER SERVICE ACTIVITIES 18 2,303 16 2,038
R
ARTS, ENTERTAINMENT AND
RECREATION
15 1,810 15 1,816
P EDUCATION 44 1,671 40 1,501
E
WATER SUPPLY; SEWERAGE,
WASTE MANAGEMENT AND
REMEDIATION ACTIVITIES
4 800 4 1,484
Total 3,922 1,738,453 3,755 1,763,963
BOC PCL is taking into account the annual MA on C&E risks, the BES annual impact assessment and the loan
portfolio’s annual impact assessment based on UNEP FI tools, so to decide which sectors and asset classes should
approach in order to set additional decarbonisation targets. Furthermore, the data availability, the estimation of
Financed Scope 3 GHG emissions and decarbonisation target methodology availability are also considerations
taken into account to determine which sectors and asset classes to focus for target setting. The Group is
examining to set decarbonisation target on CRE asset class as well as Transportation and Storage sector of
business loan portfolio within 2024 as those are considered sectors exposed to transition risks following the
estimation of GHG emissions.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
144
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV - Metrics and Targets (continued)
Reduction of all GHG emissions to become Net Zero by 2050 (continued)
The Group has estimated the Financed Scope 3 GHG emissions of Investment portfolio for 2022 and 2023 using
the PCAF standard and proxies.
Note 1: BOC PCL has not estimated Financed Scope 3 GHG emissions of c.12% of Corporate and Sovereign bond portfolio due to lack of available
data mainly on Supranational Organisations.
BOC PCL – Financed Scope 3 GHG emissions – Bond portfolio – 31/12/2023
Investment
Class
Total investment
amount (€million)
Total GHG
Emissions
(tCO
2
e)
Emission
intensity
(tCO
2
e/€million)
Weighted data
quality score
Corporate
Bonds
1,710 79,819 44 4.7
Sovereign
Bonds
1,833 1,080,046 589 5.0
Total 3,543 1,159,865
BOC PCL – Financed Scope 3 GHG emissions – Bond portfolio – 31/12/2022
Investment
Class
Total investment
amount (€million)
Total GHG
Emissions
(tCO
2
e)
Emission
intensity
(tCO
2
e/€million
)
Weighted data
quality score
Corporate
Bonds
1,248 54,271 43 4.6
Sovereign
Bonds
1,247 800,908 642 5.0
Total
2
,
495
855
,
179
The increase in Financed Scope 3 GHG emissions for both Corporate and Sovereign bond portfolio is aligned with
the increase in investment exposure at each reporting date. Aligned with the strategy for loan portfolio, BOC PCL
has set sector limits on Corporate bond investments for carbon intensive sectors aiming to reduce GHG emissions
of Corporate portfolio. GHG emissions associated with Sovereign Bond portfolio comprise of c.33% of Group’s
GHG emissions inventory.
800,908
54,271
1,080,046
79,819
Sovereign Bonds Corporate bonds
Financed Scope 3 GHG emissions (tCO
2
e/yr) - Bond portfolio
2022 2023
↑35%
↑47%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
145
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV - Metrics and Targets (continued)
Reduction of all GHG emissions to become Net Zero by 2050 (continued)
The Financed Scope 3 GHG emissions of Sovereign bond portfolio are c.58% concentrated to BOC PCL’s exposure
to Cyprus Government bonds. As soon as, Cyprus intensifies its efforts to lead the country to a low carbon
economy the GHG emissions associated with Cyprus Government Bond are expected to be reduced. GHG
emissions associated with Cyprus Government Bonds comprise of c.19% of Group’s GHG emissions.
The Effort Sharing Regulation establishes for each EU Member State a national target for the reduction of GHG
emissions by 2030 in the following sectors: domestic transport (excluding aviation), buildings, agriculture, small
industry and waste. In total, the emissions covered by the Effort Sharing Regulation account for almost 60% of
total domestic EU emissions. In addition, EU members are committed to Net Zero by 2050. Therefore, any
decarbonisation strategy to be determined on Sovereign exposure should take into account the expected progress
against the EU targets regarding GHG emissions. Cyprus is committed to reduce GHG emissions in the above-
mentioned sectors by 32% by 2030.
In addition, BOC PCL is expected to inform its Sovereign bond investment decisions with the GHG emissions per
million euro invested in a country’s Government bond as well as any available ESG score assigned to the relevant
bond under examination. As at 31/12/2023, countries like Canada, Australia and Saudi Arabia have the highest
emission intensity per million of euro invested. Canada and Australia are countries that are committed under the
Paris agreement whilst Saudi Arabia is not.
Sovereign Bond Portfolio – 31/12/2023 – Analysis by country
Country
Investment
amount
(€million)
Financed Scope 3 GHG emission
(tCO
2
e)
Emission intensity
(tCO
2
e/€million)
Cyprus 925 631,139 682
Germany 119 59,175 496
Belgium 79 50,794 644
France 95 35,977 380
Saudi Arabia 40 33,117 831
Iceland 42 32,806 776
Israel 47 30,502 653
Finland 50 29,575 591
Canada 35 29,127 827
Austria 46 24,440 531
Croatia 39 18,889 488
Spain 41 16,726 412
Italy 36 15,664 433
Slovakia 18 13,521 756
Ireland 25 11,627 470
Chile 19 10,014 534
Greece 15 9,905 654
Luxembourg 11 8,330 762
Poland 10 6,701 651
Bulgaria 8 4,973 658
Australia 5 4,224 840
Slovenia 5 2,820 621
Total 1,710 1,080,046
The Group is exploring to set decarbonisation targets and design the decarbonisation strategy on Corporate and
Government Bond Investment portfolio based on methodology and data availability.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
146
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV - Metrics and Targets (continued)
Reduction of all GHG emissions to become Net Zero by 2050 (continued)
The Group has estimated the Insurance associated GHG emissions using the PCAF standard and proxies. Currently
PCAF standard covers the estimation of Insurance associated GHG emissions for certain Commercial lines and
Motor personal line. The following table summarizes the lines that, at the moment, are out of scope of PCAF
standard.
Segment Line of Business (‘LoBs')
Commercial insurance
Structured trade credit
Surety
Engineering lines: Construction all
-
risk, erection all
-
risk only
Corporate life and pensions, personal accident
Personal lines
Liability
Property
Travel assistance
Life and Health
Treaty reinsurance All LoBs
Facultative reinsurance All LoBs
As soon as the relevant methodology becomes available the Group will estimate Insurance associated GHG
emissions for the remaining lines of business.
Note 1: For 70% of Insurance associated GHG emissions estimated for in-scope Commercial lines, the Group utilized Group wide Scope 1, Scope
2 and Scope 3 GHG emission proxies rather than industry specific proxies due to lack of available data on which industry those customers operate.
The Group wide proxies are based on the industries of the remaining 30% of in-scope Commercial Lines customers.
The Group has estimated Insurance associated GHG emissions for 64% of in-force portfolio as at 31/12/2023.
The PCAF methodology has a fixed point in time approach for the estimation of Insurance associated GHG
emissions to avoid double counting and exclude any expiring insurance contracts before the selected fixed point
in time. For the purpose of the calculation the fixed point in time is the last day of the fiscal year, 31/12/2023
and 31/12/2022. By measuring insurance-associated emissions and using the intensity metrics the Group aims
to identify sectors and businesses in its portfolio that require the most support in their decarbonisation efforts
and independently determine how best to support the transition by developing innovative products and services.
Insurance associated GHG emissions comprise of c.0.3% of GHG emission inventory of the Group. Even though
it is not considered material, the Group is exploring to set decarbonisation targets and design the decarbonisation
strategy on Insurance contracts based on methodology and data availability.
3,660
7,436
11,096
3,820
7,634
11,454
Motor Personal Commercial Lines Total
Emissions (tCO
2
e per year)
Insurance associated Scope 3 GHG emissions (tCO
2
e/yr)
2022 2023
↑4%
↑3%
↑3%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
147
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Pillar IV - Metrics and Targets (continued)
Reduction of all GHG emissions to become Net Zero by 2050 (continued)
The increase of c.4% in Insurance associated GHG emission of Motor personal line is due to increase in Motor
insurance contracts (increase in by c.10%). For motor personal line, the calculation considers the Scope 1 and 2
GHG emissions of insured vehicles within the portfolio and multiplies them by an attribution factor. The attribution
factor represents the insurance industry’s share of the total cost of ownership of a vehicle, which includes other
costs such as depreciation, fuel, and maintenance. The carbon emissions of the insured vehicles are multiplied
by the industry attribution factor (calculated by PCAF as 6.99 %) to calculate the insurance-associated emissions.
Insurance associated GHG emissions for commercial lines are calculated by multiplying an attribution factor (i.e.,
for commercial lines this is the insurance premium divided by insured customer’s revenue) by the absolute GHG
emissions of the re/insured customer or asset. The attribution factor determines what share of the absolute
emissions of an insured customer or asset is attributable to GI. The movement in the Insurance associated GHG
emissions of Commercial lines is aligned with the increase/decrease in Gross Written Premiums (‘GWP’). As soon
as customer specific information become available more meaningful comparisons would be made available and
the data quality used in the estimation will be enhanced. The property line comprises c.44% of Insurance
associated GHG emission of in-scope Commercial lines.
GI – Insurance Associated GHG Emissions – Commercial Lines – 31/12/2023
Line of
Business
Total GWP
(€million)
Scope 1 & Scope
2 GHG emission
(tCO
2
e) absolute
Scope 3
emissions
(tCO
2
e)
absolute
Total
emissions
(tCO
2
e)
absolute
Intensity
(tCO
2
e/€million
per GWP)
Data
quality
score
Motor 4.1 207 857 1,064 260 5
Property 12.7 794 2,561 3,355 263 5
Liability 6.6 362 1,424 1,786 269 5
Other 5.1 305 1,125 1,430 281 5
Total 28.5 1,668 5,967 7,634
GI – Insurance Associated GHG Emissions – Commercial Lines – 31/12/2022
Line of
Business
Total
GWP
(€million)
Scope 1 & Scope
2 GHG emission
(tCO
2
e) absolute
Scope 3
emissions
(tCO
2
e)
absolute
Total
emissions
(tCO
2
e)
absolute
Intensity
(tCO
2
e/€million
per GWP)
Data
quality
score
Motor
3.1 160 698 858 278 5
Property
11.5 642 2,435 3,077 268 5
Liability
5.9 300 1,354 1,654 282 5
Other
6.2 348 1,499 1,847 299 5
Total 26.7 1,450 5,986 7,436
Climate physical risks metrics
Following the MA on C&E risks, the analysis indicated that climate-related physical risks, acute hazards are
material due to BOC PCL’s exposure to high Wildfire risk. Therefore, an internal indicator measuring the exposure
to wildfire hazard has been introduced through the Climate Risk Report. The metric indicates the immovable
property collaterals, which are potentially exposed to wildfire hazard.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
148
Task Force on Climate-related Financial Disclosures (TCFD) (continued)
Important information in climate disclosures
What is important to our investors and stakeholders evolves over time, and the Group aims to anticipate and
respond to these changes. Disclosure expectations in relation to climate change matters are particularly fast
moving, and differ from more traditional areas of reporting including in relation to the level of detail and forward-
looking nature of the information involved. Our climate disclosures take into account the wider context relevant
to these topics, which may include evolving stakeholder views, the development of our climate strategy, longer
timeframes for assessing potential risks and impacts, international long-term climate-based and nature-based
policy goals and evolving sustainability-related policy frameworks. Our climate disclosures are subject to more
uncertainty than disclosures relating to other subjects, given market challenges in relation to data reliability,
consistency and timeliness – the use of estimates, judgements and assumptions which are likely to change over
time, the application and development of data, models, scenarios and methodologies, the change in regulatory
landscape, and variations in reporting standards. These factors mean disclosures may be amended, updated, and
recalculated in future as market practice and data quality and availability develops, and could cause actual
achievements, results, performance or other future events or conditions to differ, in some cases materially, from
those stated, implied and/or reflected in any forward-looking statements or metrics included in our climate
disclosures. The Group gives no assurance as to the likelihood of the achievement or reasonableness of any
projections, estimates, forecasts, targets, commitments, ambitions, prospects or returns contained in our climate
disclosures and make no commitment to revise or update any such disclosures to reflect events or circumstances
occurring or existing after the date of such statements.
Disclaimers in climate disclosures
In preparing the climate content within the Group’s Annual Financial Report, the Group have:
i. Made certain key judgements, estimations and assumptions. This is, for example, the case in relation to
financed emissions, portfolio alignment, classification of environmental financing, operational emissions,
measurement of climate risk and scenario analysis.
ii. Used climate data, models, scenarios and methodologies, the Group considers to be appropriate and
suitable for these purposes as at the date on which they were deployed. This includes data, models,
scenarios and methodologies made available by third parties (over which the Group has no control) and
which may have been prepared using a range of different methodologies, or where the basis of
preparation may not be known to us. Climate data, models, scenarios and methodologies are subject to
future risks and uncertainties and may change over time. Climate disclosures in this document, including
climate-related data, models and methodologies, are not of the same standard as those available in the
context of other financial information and use a greater number and level of judgements, assumptions
and estimates, including with respect to the classification of climate and sustainable financing activities.
iii. Continued (and will continue) to review and develop our approach to data, models, scenarios and
methodologies in line with market principles and standards as this subject area matures. The data,
models, scenarios and methodologies used (including those made available by third parties) and the
judgements, estimates and/or assumptions made in them or by the Group are rapidly evolving, and this
may directly or indirectly affect the metrics, data points, targets, convergence points and milestones
contained in the climate content within the Annual Financial Report.
iv. Made certain forward-looking statements only as of the date they are made. The Group expressly
disclaims any obligation to revise or update these climate forward-looking statements, other than as
expressly required by applicable law.
Uncertainties in climate disclosures
i. The evolution of climate change and its impacts, changes in the scientific assessment of climate change
impacts, transition pathways and future risk exposure and limitations of climate scenario forecasts;
ii. Changes in the climate regulatory landscape including changes in government approach and regulatory
treatment in relation to climate disclosures and reporting requirements, and the current lack of a single
standardised regulatory approach to climate across all sectors and markets;
iii. Climate reporting standards are still developing and are not standardised or comparable across all sectors
and markets, new reporting standards in relation to different climate metrics are still emerging;
iv. The Group’s climate disclosures are limited by the availability of high-quality data in some areas and its
own ability to timely collect and process such data as required.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
149
PART B:
EU Taxonomy Disclosures in accordance with Article 8 of the Taxonomy Regulation
The preparation of the EU Taxonomy reporting is based on prudential consolidation of the Group. The
consolidation is in accordance with the supervisory reporting of financial institutions as defined in Regulation (EU)
No 575/2013 of the European Parliament and of the Council, and the Commission Implementing Regulation (EU)
2021/451 (FINREP). The EU Taxonomy is a classification system of economic activities that make a substantial
contribution to environmental sustainability under Taxonomy Regulation (EU) 2020/852. In addition, the
preparation of reporting is based on the Delegated Act supplementing Article 8 of the Taxonomy Regulation
(Disclosures Delegated Act 2021/2178). Article 3 of the EU Taxonomy Regulation sets out the criteria that an
economic activity must meet to qualify as environmentally sustainable. This includes economic activity that is
carried out in compliance with the minimum safeguards and contributes substantially to one or more of the
environmental objectives.
The EU Taxonomy has six environmental objectives namely:
• climate change mitigation (CCM);
• climate change adaptation (CCA);
• sustainable use and protection of water and marine resources (WTR);
• transition to a circular economy (CE);
• pollution prevention and control (PPC); and
• protection and restoration of biodiversity and ecosystems (BIO).
Minimum Safeguards
As part of the assessment of environmentally sustainable economic activities, it is required that economic activity
is carried out in compliance with minimum safeguards as part of Article 18 of the EU Taxonomy Regulation. The
purpose of the minimum safeguards is to ensure compliance with minimum human and labour rights standards,
preventing activities that breach key social principles by aligning with the OECD Guidelines for Multinational
Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set
out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation
on Fundamental Principles and Rights at Work and the International Bill of Human Rights. In the Taxonomy
reporting, compliance with minimum safeguards is an integral part of the non-financial undertakings’ Taxonomy
KPIs that the Group applies to exposures.
Substantial contribution to the EU environmental objectives
Through its financing of large undertakings subject to the Non-Financial Reporting Directive (‘NFRD’) and
investments in bonds, the Group supports a variety of economic activities that contribute to the EU environmental
objectives. In addition, the Group’s sustainable finance products including green housing, green home
improvement loans and green motor loans contributes to the EU environmental objective of climate change
mitigation. To classify sustainable products as Taxonomy-Aligned there are further criteria that must be adhered
in addition to the contribution to EU environmental objectives.
Taxonomy KPIs
For the first time, the Group is reporting on Taxonomy KPIs and green asset ratios (GAR). Reporting includes
input on turnover and CapEx from Taxonomy KPIs. The total GAR covers the two climate-related (CCM and CCA)
EU environmental objectives.
The Group’s total GAR based on turnover amounted to 0% of total covered assets, with the total GAR based on
CapEx equivalent to 0.01% of total covered assets as at year end 2023. The Taxonomy-aligned activities
amounted to €1 million at year end 2023. Gross carrying amount of total covered assets amounted to €14,497
million as at year end 2023. Total green asset ratio: Taxonomy-aligned activities as a proportion of total covered
assets. Total covered assets: Total assets excluding exposures to sovereigns and trading book. Total assets are
defined according to the prudential consolidation of the Group per FINREP.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
150
EU Taxonomy - Disclosures in accordance with Article 8 of the Taxonomy Regulation (continued)
Taxonomy KPIs (continued)
Climate Delegated Act The Complementary Climate Delegated Act 2022/1214 including specific nuclear and gas
energy activities published in July 2022, requires the Group to assess and disclose taxonomy eligibility and non-
eligibility of nuclear and fossil gas-related activities at 31 December 2023. The Group has no direct exposure
through lending to customers that have economic activities related to the production of electricity or heating
using nuclear installations or electricity generation facilities that produce electricity from nuclear processes. The
Group also has exposure to customers involved in the operation of electricity generation facilities that produce
electricity using fossil gaseous fuels. See supplementary information in the section ‘Additional Information – EU
Taxonomy Disclosure Tables’ of Annual Financial Report under Annex XII of the Delegated Act.
Enhancing our EU Taxonomy Disclosures
As companies' transparency in line with the EU Taxonomy increases, it will enable expanded reporting against
the Taxonomy. The adoption of CSRD and European Sustainability Reporting Standards (‘ESRS’) will support the
further implementation of the EU Taxonomy Regulation into our business strategy, systems, and investment and
lending processes.
Limitations in data when assessing Taxonomy-eligible and Taxonomy-aligned activities for financial and non-
financial undertakings, actual published information provided by counterparties is required. However, a complete
data collection has been limited as published reporting on Taxonomy-alignment KPIs from financial and non-
financial undertakings is not yet available at the reporting date.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED Annual Financial Report 2023
ESG Disclosures
151
EU Taxonomy - Disclosures in accordance with Article 8 of the Taxonomy Regulation (continued)
Summary of KPIs
The following table is a summary of KPIs to be disclosed by credit institutions under Article 8 of the EU Taxonomy Regulation. See supplementary
information in section ‘Additional Information – EU Taxonomy Disclosure Tables’ of Annual Financial Report for additional EU Taxonomy tables reported under Annex VI
of the Disclosures Delegated Act and taxonomy aligned activities.
Limitations in data Reporting on Taxonomy-aligned activities for FY 2023 has been constrained due to current limitations on the availability of relevant information across
key categories:
a. When assessing Taxonomy-eligible and Taxonomy-aligned activities for financial and non-financial counterparties, actual information published by counterparties
is required:
i. published reporting on Taxonomy-alignment KPIs from financial undertakings is not available at the reporting date;
ii. non-financial undertakings have not yet published data for FY2023; consequently, the Taxonomy reporting of eligibility and alignment for non-financial undertakings
is based on published data from FY2022;
iii. furthermore, reporting on Taxonomy-eligibility for the four additional environmental objectives implemented in 2023 is not possible for FY2023 as non-financial
undertakings are only reporting on these objectives from FY2023, with financial undertakings reporting on these objectives from FY2025; and
iv. exposure to non-financial counterparties in the Group’s corporate lending portfolio currently considered taxonomy eligible is limited due to the eligibility criteria
requiring counterparties to be large companies publicly listed in the EU.
b. When assessing Taxonomy-eligible and Taxonomy-aligned activities for lending to households, other data limitations impact reporting:
i. Hybrid and Electric Vehicles lending exposures originated since the beginning of FY2023 are considered eligible per taxonomy criteria. However, they are not
classified as aligned due to the lack of available information in the industry to assess the vehicles against the Taxonomy DNSH (Do No Significant Harm) criteria.
14
Based on the Turnover KPI of the counterparty.
15
Based on the CapEx KPI of the counterparty.
16
Percentage of assets covered by the KPI over the total assets.
17
Trading book and Fees and Commissions KPIs only apply starting 2026.
Total
environmentally
sustainable
assets (€million)
KPI
turnover
14
%
KPI
CapEx
15
%
% coverage
(over total
assets)
16
% of assets excluded
from the numerator of
the GAR
% of assets excluded
from denominator of
the GAR
Main KPI Green asset ratio (GAR) stock 1 0% 0.01% 30% 26% 44%
Additional
KPIs
GAR (flow) 1 0% 0% 46% 29% 25%
Trading book
17
n/a
n/a n/a
Financial guarantees
-
0% 0%
Assets under management
-
0% 0%
Fee and commission income
17
n/a
n/a n/a
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED Annual Financial Report 2023
ESG Disclosures
152
PART C:
Non-financial information statement
The Group plays a key role in driving economic growth of Cyprus with a long presence and a dominant market
position. Sustainable development, social progress, environmental integrity, climate stability and a viable
economy are all among the Group’s key targets for 2023 and beyond.
The Group publishes its Annual Non-Financial Results based on the Global Reporting Initiative (‘GRI’) and the
Sustainability Accounting Standards Board (‘SASB’) guidelines and standards, which identify and include all the
above information. The Corporate Sustainability Report 2023 will be available at the Group's website
http://www.bankofcyprus.com (Group/Sustainability/Our Sustainability Reports). Going forward, the Group will
align its disclosures with the Corporate Sustainability Reporting Directive (‘CSRD’) and the International Financial
Reporting Standards (‘IFRS’) for Climate (S2) and Sustainability Disclosures (S1).
Commitment to Sustainability
Climate change and transition to a sustainable economy is one of the greatest challenges. As part of its vision to
be the leading financial hub in Cyprus, the Group is determined to lead the transition of Cyprus to a sustainable
future. The Group continuously evolves towards its ESG agenda and continues to make progress towards building
a forward-looking organisation embracing ESG in all aspects of business as usual.
The Group acts with transparency and accountability, in line with its code of ethics, and aspires to lead in an era
characterised by exponential change, disruption and digitalisation through its innovative approach. The Group
remains consistent and committed towards all its stakeholders; investors, customers, shareholders, employees
and the society.
The ESG strategy formulated in 2021 is continuously expanding. The Group is maintaining its leading role in the
Social and Governance pillars and focus on increasing the Group’s positive impacts on the Environment by
transforming not only its own operations, but also the operations of its customers.
Employees
The Group recognises the significance of investing in employee empowerment and development.
Employee Engagement
As of 31 December 2023, the Group employed 2,830 employees compared to 2,889 persons as at 31 December
2022. Analysis per geographical location of the Group’s average number of employees (full time) and analysis of
the average number of employees in Cyprus per business line for 2023 is disclosed in Note 14 of the Consolidated
Financial Statements. The Group has developed policies to safeguard gender equality, diversity and inclusion.
Policies, procedures, training and a series of tools are available to ensure the Group fosters a culture of
meritocracy and fairness. Following the agreement with the Cyprus Union of Bank Employees for the renewal of
the collective agreement for the years 2022 and 2023 a performance-based pay structure was introduced across
the Group to drive greater alignment with Group’s strategy and ambition.
In 2023, under the ‘Organisational Health’ project, the Group executed a full survey to reassess peoples’
perspectives, management’s commitment and engagement around the Group’s business pillars and management
practices. The four selected health priorities (Personal Ownership, Knowledge Sharing, Employee Involvement
and Career Opportunities) were significantly improved through tailor made initiatives that the Group launched
and dedicated workshops and brainstorming sessions for next steps planned with the Senior Management and
Culture Ambassadors.
One of the highlights of 2023, was the successful launch of the 1
st
BOC Intrapreneurship Competition “Think
Tank”. The vision was to empower creativity, increase engagement, nurture a Culture of Innovation, and identify
talent. More than 70 idea submissions were received and 9 Think Tank finalists presented their ideas to the
committee in a final pitching event. The 3 winning ideas were around ESG, Digital Transformation and New
products.
The Group has continued to upgrade its staff’s skill set by providing training and development opportunities to
all staff, and capitalising on modern delivery methods. In 2023, the Group heightened its emphasis on staff
wellness by offering webinars, team building activities and family events with sole purpose to enhance mental,
physical, financial and social health, attended by approximately, 2,000 employees, through its ‘Well-at-Work
program’.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
153
Non-financial information statement (continued)
Commitment to Sustainability (continued)
Employees (Continued)
Learning and Development
Under the Group's Learning and Development Policy, in 2023 the training programmes delivered were based on
the following training pillars:
i. Reskilling - Provide reskilling opportunities to unlock our people’s potentials and help them to better cope
with the ongoing changing professional needs and skills. Focus on systems training and data analytics.
ii. Upskilling - Advance leadership and management skills to better manage and engage with people. Invest
and emphasize on Customer Service & Selling Skills to improve customer experience and maximise sales
effectiveness of Consumer Banking
iii. Business Essentials - Provide ongoing training opportunities to keep our people up to date with regulatory,
compliance, information security and knowledge, to perform with integrity and professionalism. Provide
training and ensure that our people are adequately trained to promote the new digital banking services.
The training programs offered to members of staff increased by 7% in 2023 in comparison to 2022 and total
training hours offered increased by 11% in comparison to 2022. In 2023, 100% of employees received training,
with a total of 72,888 training hours being offered. Further to the provision of e-learnings and live webinars, BOC
PCL provided 103 physical trainings and programs totalling 31,149 hours during 2023.
Health and Safety
The Health and Safety (‘H&S’) of employees, customers and associates is of primary responsibility for the Group.
The objective has always been to prevent work-related injuries and ensure H&S at the workplace through the
effective management of related risks.
In 2023 the Group H&S Policy and the internal procedures were revised so as to ensure compliance with the
new H&S regulations. Employees were trained on H&S issues and procedures through an e-learning course. In
addition, training sessions were conducted for the Presidents of the Safety Committees and key persons of the
H&S team, the Compliance Liaisons and the First Aiders. The Group conducts evacuation exercises once a year
nationwide for the emergency procedures, including earthquakes and fire. Identified risks through the risk
assessments have been properly addressed throughout the year. Our approach is to provide assurance that risks
are being properly managed and make our people feel safe. In 2023, the Group continued emphasizing staff
wellness offering seminars on Healthy Eating and Mental Health in the workplace, through its ‘Well at Work
program’.
Society
The Group’s CSR Strategy and CSR Programme contribute to the Social Pillar of the ESG Strategy and support
the Group’s selected UN SDGs. The Group’s CSR programme and all relevant initiatives are compatible with its
core business and enhance the Group’s overall strategy and vision. The CSR Strategy clearly indicates the move
from issuing a cheque and requesting logo placement, to examining, contributing, engaging and finally,
committing to the cause of support and the Group’s engagement with key partners, customers and other
stakeholders which aim to create sustainable social impact and material difference to the community.
The Group’s Social Programme responds when:
i. A compelling societal need exists,
ii. The said need is not fully served by the public sector,
iii. The proposed actions/strategies best serve all the Group’s stakeholders (investors, customers,
employees, shareholders, regulators etc.).
In 2023 the Group continued to undertake sustainable support to the local community with Health Pillar initiatives,
and Education Pillar initiatives, based on the relevant policy and strategy. Additionally, the Group continued to
develop initiatives that aimed to preserve local culture and history, through the Bank of Cyprus Cultural
Foundation and to enhance innovation and start-ups through the IDEA Innovation Centre. The Group successfully
continued and expanded the operation of the award winning SupportCY network of companies and Non
Governmental Organisations (‘NGOs’).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
154
Non-financial information statement (continued)
Commitment to Sustainability (continued)
Society (continued)
SupportCY was created in March 2020, in order to support public services performing frontline duties during the
COVID-19 pandemic, its actions led by the Group expanded in supporting various societal needs. At the same
time, it continued to generate Social Capital which is both sustainable and more effective, by bringing businesses
and organisations together to share what each does best, in responding to specific needs. By 31 December 2023,
the SupportCY network had more than 180 members, while the SupportCY Crises and Disasters Respond Center,
the SupportCY Volunteers Corps and SupportCY House, continue to operate and expand in order to satisfy and
cover even more needs of the Cyprus society, and beyond. Since establishment, the SupportCY initiative
contribution to society, reached €1 million worth in funds services and products with the Group contributing most
of the monetary support.
To support actions for the society, the Group contributed approximately €700,000 for the support and
enhancement of more than 100 NGOs, associations, charity organisations, municipalities, schools, sports
federations, and sports academies, while offering refurbished computers and other office equipment to schools,
associations and NGOs from the Group’s stock.
The main sustainable support actions within the three pillars of Health, Environment and Education, are indicated
below.
Health pillar main actions:
i. More than 50,000 patients have been treated at the Bank of Cyprus Oncology Centre since its
establishment by the Group and the Cyprus Government in 1998, while the Group continued offering
extensive support, financial and otherwise, towards the Centre. The cumulative contribution of the Group
to the Bank of Cyprus Oncology Centre is approximately €70 million.
ii. The Group coordinated for one more year the fundraising campaign with the Cyprus Anticancer Society
(‘CAS’) under the new slogan “Be there”. The campaign resulted in fund raising of €416,000 for CAS. In
2023, the Group repeated its provision of financial and other medical support to families in need through
key NGOs, based on the Donations, Sponsorships and Partnerships Policy, and within the SupportCY
network. Additionally, the Group partners work with, and support several Patient Associations.
Education pillar main actions:
i. The Bank of Cyprus Cultural Foundation (‘the Foundation’) is a non-profit organisation established in
1984, protecting cultural heritage and supporting youth, curating two museums and five rare collections.
The main strategic objectives of the Foundation are the promotion of research, the study of Cypriot
culture in the fields of archaeology, history, art and literature, the preservation and dissemination of the
cultural and natural heritage of Cyprus, with particular emphasis on the international promotion of the
long-standing Greek culture on the island, the shift to research and development of cultural sustainability
through European grants and the upgrading and promotion of the educational role of the Foundation. In
addition, the Foundation is developing and upgrading the institution’s social role for
vulnerable/disadvantaged groups, aiming at permanent changes/adaptations in its museums and actions
that promote and facilitate the participation of all vulnerable/disadvantaged groups in culture. The
Foundation has more than 250 Cyprological editions, has organised and participated in more than 60
exhibitions in Cyprus and abroad, 100 conferences and more than 10,000 children have participated in
its educational programmes since establishment.
ii. In 2023 IDEA successfully completed its 8th cycle, introducing its revamped Startup Program. The
comprehensive business-creation training Program was redesigned to leverage on current trends to
optimise efficiency and empower entrepreneurs. Through its extensive panel of more than 80 high-profile
mentors and trainers working mostly pro-bono, participating startups work closely with industry experts
to receive feedback, mentoring, consultation and professional services. In 2023 IDEA has brought to life
innovative businesses relating to HR, eCommerce, booking & social platforms and real estate sectors,
through its current start-ups: Hello Radius, Freyia Labs, Park in Town, Design Inspiration Group and
Insavior. During 2023, 7 Start-ups joined IDEA, and 7 New companies were established, totaling 89 start-
ups supported by 2023. In 2023, 5 companies successfully completed the IDEA Startup Program, and
55 mentors and 40 trainers took part. Financial support provided in 2023 amounted to €100,000 (€20,000
to 5 companies), with a total number of 210 entrepreneurs being trained since 2015 and more than 100
new jobs being created by 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
155
Non-financial information statement (continued)
Commitment to Sustainability (continued)
Society (continued)
iii. In 2023, the Group repeated the partnerships with various organisations to boost efforts around
education, innovation and ingenuity. Additionally, the Group awards excellence and creativity among
students, but also recognises students who stand out in international and local competitions, through
awards and prizes. The Group also awarded talented youth in sports, through sport associations and
academies.
iv. In 2023, the Group announced the 'Mathainoume Allios' (Update your skills) programme promoting
economic and digital literacy. The programme is geared at senior citizens, but also any member of the
public wishing to learn in simple terms and with images how to carry out their banking transactions easily
by making use of the available technology and digital tools, through a series of presentations to
municipalities and communities.
v. Road Safety is one more sub-pillar in Education that the Group is actively involved, through the
organisation and support of campaigns such as friendly tire and mechanical inspections on vehicles, and
activities in schools on road safety education, in partnership with expert NGOs, the Police and the Ministry
of Transportation.
Environment
The Group aspires to increase its positive impact on environment and maintain its leading role in the social and
governance pillars by transforming not only its own operations, but also the operations of its customers. Further
details on the Group’s strategy and actions to deliver on the Group’s ambitions are disclosed in Part A- TCFD of
these ‘ESG Disclosures’ and in Section ‘Business Overview’ in the Directors’ Report.
During 2023, the Group initiated more environmental programmes in partnerships with expert NGOs and other
entities, focusing on climate change impacts and the prevention, response to and recovery of forest fires,
biodiversity and sea pollution.
Environmental pillar main actions:
i. The ‘Melissa Zoi’ Centre, a bee artificial insemination project for biodiversity, was inaugurated in June
2022, by the Group and the Rotary Clubs of Cyprus. The initiative aims to revitalise the environment and
restore economic activity to areas where honey is produced, and which were devastated by wildfires. The
2021 wildfires affected about 75% of beehives so the project aims to revive the destroyed ecosystem,
revitalising the affected honey-producing communities. The goal is to provide the necessary support to
nature and to the communities that suffer environmentally, financially and professionally. The Centre’s
operation will benefit nine communities and 38 small and medium-sized honey-making businesses.
ii. ‘Seammahia’, a joint Sea Venture, is a project funded by the Group and includes the study and installation
of two pilot systems for monitoring the quality of sea water; one in the area of the Ayia Napa Marina and
one in the Blue Lagoon (Akamas peninsula) in Cyprus. The purpose is to monitor and record important
water quality parameters in real time, for the provision of early detection of pollution indices, which in
turn will provide warnings for necessary corrective actions to ensure environmental protection.
iii. The Bank of Cyprus SupportCY network of businesses and organisations joined forces and supported the
Forest Department and the Cyprus Fire Services in the prevention and protection of Cypriot forests.
Prevention measures and actions related to public awareness on the protection of forests, as well as fire
protection programmes in the forests of Cyprus, were launched in the summer of 2023. Based on official
statistical surveys, prevention is the most important factor in the protection of forests. A series of forest
patrols has been programmed by the SupportCY Volunteers Corps and the Crises and Disasters Centre.
Concurrently, educational and informative actions have been planned in shopping centres and rural
municipalities with the collaboration of the Forest Department.
iv. Members of the SupportCY Volunteers Corps flew to Greece immediately after the deadly floods in the
Larissa area to help the locals with the water pumping from buildings and houses. More specifically, with
the use of their own pumps, SupportCY volunteers pumped tons of water out of the local elementary
school, and in return students and teachers at the school organised an emotional ceremony, one month
after the floods, to thank and honour them.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
156
Non-financial information statement (continued)
Political donations
Political donations are required to be disclosed under the Electoral Act 1997 of Ireland (as amended). Based on
the Donations, Sponsorships and Partnerships Policy of the Group, the Group does not sponsor political parties,
or any associations/organisations related directly, or indirectly, to one. The Directors, on enquiry, have satisfied
themselves that there were no political donations made during the year ended 31 December 2023.
Human Rights and Equal Opportunities
The Group’s Code of Ethics sets out clearly the ethical moral principles and values upheld by the Group and
provides a framework for expected behaviour and guides the Group's workforce to appropriate conduct. The
Group acknowledges its responsibility to respect human rights as set out in the International Bill of Human Rights
and follows internationally acclaimed directives, principles and initiatives to protect human rights, such as the
Core Labour Conventions of the International Labour Organisation (‘ILO’) and the Universal Declaration of Human
Rights (‘UDHR’).
The Group has policies to ensure gender equality, diversity and inclusion and operates based on objective criteria
related to ability, ethics and experience, regardless of colour, race, national/ethnic origin, disability, age, gender,
religion, sexual orientation or political opinion. Policies and procedures, as well as training and a range of tools
are available to ensure that the Group promotes a culture of equality. The zero-tolerance policy on discrimination,
harassment and bullying is designed to effectively manage and ultimately eliminate any form of harassment,
discrimination or unfair treatment.
In order to mitigate against human rights risk, or violations that may occur, BOC PCL has comprehensive due
diligence procedures in place, which include: the implementation of the Code of Conduct which defines specific
behaviours, practices, responsibilities and rules for staff of the Group to follow and uphold as staff members of
the Bank of Cyprus Group and a suite of reporting mechanisms to support the timely reporting of issues.
Combating bribery and issues related to corruption
The Group’s fundamental values and principles governing its business activities emphasise the importance of
ensuring ethical conduct at all times. Protecting the integrity of the financial system from financial crime risks
including money laundering, terrorist financing and bribery and corruption is of intrinsic importance to the Group.
The Group abides by a zero-tolerance policy on money laundering, tax evasion, funding of terrorist activity,
bribery, corruption fraud and market abuse. A strong anti-bribery policy, a gift registry, a conflict-of-interest
registry and frequent reminders contribute to achieving high-level compliance. Protecting money, privacy and
data of the Group’s customers is the key to its Anti-Bribery and Corruption Policy. Key Codes and policies in
managing such matters are the Group’s Code of Ethics, the Group’s Code of Conduct, the Group’s Anti-Bribery
and Corruption Policy, the Conflicts of Interest Group Policy, the Group Whistleblowing Policy and the Group Policy
Relating to the Prevention of Money Laundering and Terrorism Financing.
Training programs on anti-money laundering and anti-corruption policies and procedures are carried out by the
employees on an annual basis.
The Group maintains an Anti-Financial Crime Framework. An enhanced risk-based approach with regard to the
risk scoring of the customers is followed and this is reflected in the Group’s Customer Acceptance Policy.
Customers are risk-scored for AML purposes, according to a set of parameters that take into account geographical
factors, products purchased, distribution channels, transactional behaviour and other risk indicating factors.
Customers go through the Group's due diligence process at the on-boarding stage and on an ongoing basis, which
is driven by the risk assessment of the customer. Some customers and beneficial owners present higher risk (e.g.
politically exposed persons (‘PEPs’) and/or customers established/residing in 'high-risk' third countries). For these
customers enhanced due diligence is applied. Further, the Group commits itself to safeguarding the personal data
of its customers, suppliers and partners. Customers retain control of their personal data and exercise their rights
as per the EU GDPR with regard to the way their personal data is collected, processed and secured. The Group
applies Data Protection Impact Assessment (‘DPIAs’), to promptly identify and mitigate any privacy risks.
All employees and Directors are made aware of the Regulatory Compliance Policies and standards.
Diversity Report
The Group's diversity report is contained in the ‘Diversity’ section of the Corporate Governance Report.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
ESG Disclosures
157
Non-financial information statement (continued)
Business Model
The business model of the Group is described in the ‘Business Overview’ and 'Strategy and Outlook' sections of
the ‘Directors' Report’ within the Annual Financial Report 2023.
Risk Management
A description of the principal risks, their impact on business activity, and the way they are managed is disclosed
in section 'Principal risks and uncertainties - Risk management and mitigation' of the ‘Directors' Report’ and
section 'Pillar III – Risk Management' of Part A - TCFD of these ‘ESG Disclosures’ and in the ‘Risk and Capital
Management Report’ all forming part of this Annual Financial Report.
The risks related to the Group’s corporate responsibility actions and the actions undertaken by the Group in order
to address them are covered within each pillar of responsibility.
Key Performance Indicators
An analysis of KPIs relevant to the Group is disclosed in the ‘Financial Results’ section of the Directors' Report.
Climate and Environmental KPIs are disclosed in the ‘Pillar IV – Metrics and Targets’ section of Part A - TCFD of
these ‘ESG Disclosures’.
158
Annual Corporate Governance Report
2023
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
159
1. Introduction
Part A
The Corporate Governance Report for 2023 of BOCH
1
sets out how corporate governance standards are
applied across the Group
2
, and how they are overseen by the Board
3
, how the Board operates, and how
the Board evaluated its effectiveness during 2023. It includes reports from the four statutory Board
Committees
4
and one non-statutory Board Committee
5
, which further illustrate how the principles of
good governance are embedded. The Board is cognisant of its role in creating sustainable, long-term
value for our shareholders and in contributing to society.
Throughout the year, BOCH has ensured that its governance frameworks and practices are adequate,
transparent, and conform to the prevailing regulatory standards. The Board and Executive Committee
6
have worked meticulously to foster a culture of integrity, accountability, and excellence, ensuring that
the Group’s operations are conducted ethically and effectively to maximize shareholder value.
The Group acts with transparency and accountability, in line with its code of ethics, and aspires to lead
in an era characterised by exponential change, disruption and digitalisation through its innovative
approach. The Group remains consistent and committed towards all its stakeholders; investors,
customers, shareholders, employees and the society. The Group’s ability to continue to operate
effectively in the current environment was supported strongly by the Group’s corporate governance
framework, which the Board continually seeks to enhance through regular reviews and challenge.
The Board is devoted to reaching elevated levels of governance to safeguard the long-term interests of
shareholders as well as other stakeholders, while promoting the highest standards of transparency,
integrity, and accountability. It holds itself accountable to the shareholders for steering and overseeing
the strategy and management of the Group.
An adequate governance structure is in place, featuring necessary systems of scrutiny and balances to
bolster accountability and proficient decision-making throughout the Group. Policies and procedures have
also been instituted to guarantee the proficient operation of the Board and its Board Committees.
A key objective of the Group’s governance framework is to ensure compliance with applicable corporate
governance requirements. During 2023, the Group complied fully with the following regulations:
1. The Central Bank of Cyprus (‘CBC’) Directive on Internal Governance of Credit Institutions (the
‘CBC Directive on Internal Governance’) (available on www.centralbank.cy), as amended;
2. The European Banking Authority (‘EBA’) Guidelines on internal governance under Directive
2013/36/EU, as amended;
3. The Cyprus Stock Exchange Code (5th revised edition – January 2019) (the ‘2019 CSE Code’)
(available on www.cse.com.cy), as amended;
4. The UK Corporate Governance Code 2018 published by the Financial Reporting Council in the UK
(the ‘2018 UK Code’) (available on www.frc.org.uk));
5. The Joint European Securities and Markets Authority (‘ESMA’) and EBA Guidelines on the
assessment of the suitability of members of the management body (‘The Joint Guidelines on
Suitability’), as amended;
6. The CBC Directive on the assessment of the suitability of members of the management body and
Key Function Holders (the ‘CBC Directive on Suitability’) (available on www.centralbank.cy); and
7. The Companies Act 2014 of Ireland (as amended) (the ‘Irish Companies Act’).
1
The term BOCH or the Company, refers to Bank of Cyprus Holdings Public Limited Company, a public limited
company, registered in Ireland under Part 17 of the Companies Act 2014. The Bank of Cyprus Public Company Limited
(the ‘Bank’ or ‘BOC PCL’) (a public company duly registered under the Cyprus Companies Law, Cap. 113 in the
Republic of Cyprus with registration number HE 165) (the Bank) is the subsidiary of BOCH.
2
The term Group comprises the Company, its subsidiary, BOC PCL, and the subsidiaries of BOC PCL.
3
The term Board refers to the Board of Directors of the Bank and BOCH.
4
The statutory Board Committees include the Risk Committee (RC), Audit Committee (AC), Human Resources and
Remuneration Committee (HRRC) and Nominations and Corporate Governance Committee (NCGC).
5
The non-statutory Board Committee refers to the Technology Committee (TC).
6
The Executive Committee comprises the CEO, Deputy CEO & Chief of Business, Executive Director Finance, Executive
Director People and Change and Executive Director Technology and Operations and Chief Risk Officer.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
160
1. Introduction (continued)
Part B
The Group fully adheres to the provisions of the 2019 CSE Code and complies with all applicable corporate
governance requirements. All provisions of the 2019 CSE Code have been incorporated in the Group’s
Corporate Governance Policy and Framework and of all its principles are fully implemented. During 2023
BOCH maintained full compliance with the provisions of the 2019 CSE Code. For more information on the
Group Corporate Governance Policy and Framework can be found here. The Remuneration Policy Report
follows on page 221.
The Group, in a demonstration of its commitment to upholding the highest standards of corporate
governance and ethical conduct, voluntarily adheres to the provisions of the 2018 UK Code. This reflects
the Group’s proactive approach in embracing a comprehensive governance framework that promotes
transparency, integrity, and accountability in its operational and strategic endeavours. The Group has
applied the principles and complied with the provisions of the 2018 UK Code, other than with the
provisions set out herein:
1. The composition of the Human Resources and Remuneration Committee (HRRC) between 1
January 2023 to 1 July 2023 did not meet Provision 32 of the 2018 UK Code in accordance with
which the Remuneration Committee must comprise of at least three independent non-executive
directors, since Mr. Ioannis Zographakis at the time was a non-independent non-executive Board
Director as he had served on the Board for nine years. Mr. Ioannis Zographakis’ membership can
be attributed to the fact that he had obtained invaluable skills, knowledge, and experience during
his nine-year tenure. In this respect, his membership for the period from 1 January 2023 to 1 July
2023 on the Human Resources and Remuneration Committee (HRRC) would further enrich the
Human Resources and Remuneration Committee (HRRC) with his support, skills and knowledge
and impart these skills and knowledge to the remaining members of the Human Resources and
Remuneration Committee (HRRC).
2. The composition of the Risk Committee (RC) between 1 January 2023 to 1 July 2023 did not
comply with Provision 25 of the 2018 UK Code in accordance with which a separate board risk
committee must comprise of independent non-executive directors. Mr. Ioannis Zographakis who
at the time was a non-independent non-executive Board Director, as he had served on the Board
for nine years, was a member of the Risk Committee (RC) from 1 January 2023 to 1 July 2023.
Mr. Ioannis Zographakis’ membership can be attributed to the fact that he had obtained invaluable
skills, knowledge, and experience during his nine-year tenure. In this respect, his membership for
the period from 1 January 2023 to 1 July 2023 on the Risk Committee (RC) would further enrich
the Risk Committee (RC) with his support, skills and knowledge and impart these skills and
knowledge to the remaining members of the Risk Committee (RC). This was considered to be
beneficial to the overall governance and operational effectiveness of the Risk Committee (RC).
3. Adherence to Principle 5 of the 2018 UK Code is partial. This is attributed to the fact that the
Human Resources and Remuneration Committee (the ‘HRRC’), despite its engagement with issues
pertaining to human resources, cannot be fully recognised as a formal advisory panel. The Board,
via the HRRC, continues to receive regular updates and exercises vigilant oversight over the
advancement of initiatives related to human resources, which are aligned with the Group’s principal
strategy objectives.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
161
1. Introduction (continued)
Part B (continued)
In accordance with section 225 of the Irish Companies Act 2014, the Directors acknowledge that they
are responsible for securing the Company’s compliance with its relevant obligations (as defined in section
225(1)). The Board confirms that a compliance statement has been drawn up setting out the Company’s
policies, and that appropriate arrangements and structures have been put in place that are, in the Board’s
opinion, designed to secure material compliance with the relevant obligations. The Board continually
monitors and reviews internally, at least once a year, its governance framework and that of the Group’s
subsidiary companies (where applicable) through effective oversight.
2. Board of Directors
2.1. Board of Directors
The Board derives its authority to act from the Articles of Association of BOCH and the prevailing
companies’ laws, stock exchange and banking laws, the directives of the CBC, as well as the CSE and
UK Codes. The role of the Board and its committees is well described and analysed in the Group Corporate
Governance Policy and Framework, which is annually reviewed and incorporates all responsibilities that
emanate from the regulatory framework as well as best practices.
BOCH is the sole shareholder of the Bank. A common board and committee structure applies, with the
same directors sitting on the Board of Directors of the Bank and BOCH and on the committees of each
of the two Boards. The Board has a consistent oversight of the Bank and BOCH’s risk profile and internal
control framework.
The Board has delegated authority to committees of the Board to support its oversight of risk and control.
The committees’ terms of reference are reviewed annually by the relevant committees and are approved
by the Board and are available on the Group’s website www.bankofcyprus.com.cy/group or by request
to the Company Secretary.
Appropriate cross-membership of key Board committees, including between the Audit Committee (‘AC’)
and the Risk Committee (‘RC’) and Human Resources and Remuneration Committee (‘HRRC’), is
ensured. The NCGC reviews the composition and purpose of the Board committees annually on behalf of
the Board. Details of these committees are set out in section 3 of this report.
The minutes of all meetings of Board committees are circulated to all directors for information and are
formally noted by the Board. Papers for all Board Committee meetings are also made available to all
directors, irrespective of membership. Where there might be a conflict of interest or issues of personal
confidentiality, circulation of minutes and papers is restricted. The chair of each Committee reports on
matters discussed during committee meetings to the subsequent scheduled meeting of the Board. The
final minutes of the meetings of the Board, the AC and the RC are submitted to the Cyprus Central Bank
within one month from the date of the meeting.
2.2. The role of the Board
The Board is collectively responsible for the long-term success of the Group, and is committed to effective
leadership, which contributes to wider society. The Board’s role is to promote the Group’s vision, values,
culture, and behaviour, within a framework of adequate controls, which enables risk to be identified,
assessed, measured, and managed. The Board approves the Group Risk Framework on an annual basis
and receives regular updates on the Group’s risk environment and exposure to the Group’s material risk
types. Further information on risk management and the Board’s role in the risk governance of the Group
is set out in section 3.3 of this report on pages 199-205.
The Board is responsible for ensuring that management maintains an adequate and effective internal
governance framework and internal control system, which includes a clear organisational structure and
the smooth operation of independent risk management, regulatory compliance, internal control and ICT
and security risk management functions with adequate powers and resources for the performance of
their duties. Furthermore, the Board has the responsibility to present a fair, balanced and understandable
assessment of BOCH’s and Group’s position and prospects, including in relation to the annual and interim
financial statements and other price-sensitive public reports and reports required by regulators and by
law.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
162
2. Board of Directors (continued)
2.2. The role of the Board (continued)
The Board sets the Group’s strategic objectives and risk appetite to support the strategy; integrates
sustainability into the way business is conducted; ensures that the necessary financial and human
resources are in place for the Group to meet its objectives; ensures that the Group’s purpose, values,
strategy, and culture are all aligned and reviews management performance in that regard. The Board
recognises the need to be adaptable and flexible to respond to changing circumstances and emerging
business priorities, whilst ensuring the continuous monitoring and oversight of core issues.
The Board is the decision-making body for all matters of importance because of their strategic, financial,
or reputational implications or consequences. A formal schedule of matters reserved for approval by the
Board ensures that control of these key decisions is maintained by the Board. The schedule of matters
reserved for the Board is reviewed at least annually to ensure that it remains relevant and to reflect any
enhancements required under evolving corporate governance requirements and industry best practice.
A full schedule of matters reserved for the Board can be found at www.bankofcyprus.com.cy/group.
Moreover, the Board is responsible for endorsing the appointment of individuals who may have a material
impact on the risk profile of the Group. Their appropriateness for the role is monitored on an ongoing
basis. The removal from office of the head of a ‘control function’ as defined in the CBC Directive on
Internal Governance, is also subject to Board approval.
2.3. Members of the Board of Directors
2.3.1. Non-executive Directors
Efstratios-Georgios Arapoglou (Chairman)
Mr. Arapoglou has had an earlier career in International Capital Markets and Corporate & Investment
banking based in London and later in managing, restructuring, and advising publicly listed Financial
Institutions and Corporates, primarily in Southeast Europe and the Middle East.
Most recent executive assignments include Managing Director and Global Head of the Banks and
Securities Industry for Citigroup; Chairman and CEO of the National Bank of Greece; CEO of Commercial
Banking at EFG-Hermes Holding SAE.
He is currently holding the following non-executive board positions: (i) Chairman of Bank of Cyprus
Group, listed on the LSE, (ii) Chairman of Tsakos Energy Navigation (TEN) Ltd, listed on the NYSE, and
(iii) Board member of EFG-Hermes Holding SAE, listed on the Cairo Stock Exchange and the LSE.
Mr. Arapoglou holds an MSc in Finance and Management from the University of Brunel, London, a BSc in
Naval Architecture and Ocean Engineering from the University of Glasgow and a BA in Mathematics and
Physics from the University of Athens.
He has extensive experience in international capital markets and in corporate, commercial and
investment baking in Southeast Europe, the UK, the Middle East, and Africa.
Term of Office:
External Appointment:
Appointed to the Board of
the Bank and BOCH
in June 2019
Tsakos Energy Navigation (TEN) Ltd
EFG
-
Hermes Holding SAE
Independent:
Committee Membership:
Yes, on an
ongoing basis.
(Mr. Arapoglou commits the appropriate time for
the Group’s business, approximately 60-70 days
per year. He has no remuneration from the
Group other than as Chairperson of the Board
and chairperson of the NCGC).
Chairman of the NCGC
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
163
2. Board of Directors (continued)
2.3. Members of the Board of Directors (continued)
2.3.1. Non-executive Directors (continued)
Lyn Grobler (Vice-Chairperson)
Ms. Grobler is an experienced executive with a strong track-record in technology and IT roles. She was
appointed as a Group Chief Information Officer (CIO) at Howden Group Holdings (formerly Hyperion
Insurance Group) in 2016. Prior to this she was Vice President and CIO Corporate Functions at BP where
she led the transformation of both the organization and the digital landscape through introducing
sustained change in process, capability and technology, having held a variety of roles across IT and
global trading for over 16 years. Before BP, Mrs Grobler managed large scale global technology projects
and strategies within banking and trading based in both London and South Africa.
She holds a Higher National Diploma in Computer Systems from Durban University in South Africa and
a National Diploma in Electronic Data Processing from Cape Peninsula University in South Africa.
Mrs Grobler has significant experience in IT and digital transformation and benefits from oversight
experience in a number of external directorships.
Term of Office:
External Appointment:
Appointed to the Board
of the Bank and BOCH
in February 2017
Howden Group
Titan Cement International S
.
A
.
Independent:
Committee Membership:
Yes
Member of the
RC
Member of the Human
Resources & Remuneration
Committee
Member of the Nominations & Corporate
Governance Committee
Constantine Iordanou (Senior Independent Director)
Mr. Iordanou was Chairman and Chief Executive Officer (CEO) of Arch Capital Group Limited (‘Arch’),
since August 2003 and Director since January 2002 (retired in September 2019). Before joining Arch as
one of its founders in 2002, Mr. Iordanou served in various capacities for Zurich Financial Services
(‘Zurich’) and its affiliates, including as Senior Executive Vice President of group operations and business
development of Zurich Financial Services, President of Zurich-American Specialties Division, Chief
Operating Officer and CEO of Zurich American, as well as CEO of Zurich North America. Before joining
Zurich in March 1992, he was President of the commercial casualty division of the Berkshire Hathaway
Group and Senior Vice President of the American Home Insurance Company, a member of the American
International Group.
He holds an Aerospace Engineering degree from New York University.
Mr. Iordanou has significant experience in insurance business and benefits from oversight experience in
a number of external directorships.
Term of Office:
External Appointment:
Appointed to the Board of the Bank and BOCH
in November 2021
Vantage Group Holdings Ltd (Non
-
Executive
Director)
Independent:
Committee Membership:
Yes
Chair of the AC
Chair of the HRRC
Chair of the Technology Committee
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
164
2. Board of Directors (continued)
2.3. Members of the Board of Directors (continued)
2.3.1. Non-executive Directors (continued)
Monique E. Hemerijck (Chair of the RC)
Ms. Hemerijck has 30 years of work experience in various senior/executive roles in Risk/Financial
Management in Banking & Insurance, as well as, with the Dutch Central Bank. During the last 10 years
she fulfilled the roles of CRO and member of the Executive Board within NN Group and ING Group. Since
December 2021, she has been appointed as a Non-Executive Board Member of the Portuguese bank
Caixa Geral de Depósitos in Lisbon. Her key responsibilities have been related to risk & finance, corporate
governance and strategy, balance sheet & capital management and financial/risk reporting & disclosures.
Prior to joining the ING Group, she worked for the Dutch Central Bank having performed various roles in
Econometric Research, Monetary Policy, Asset Management and Supervision of International
Conglomerates. She has extensive experience within the financial services industry, experience as (Non)
Executive Board member and in Supervision, expertise on finance & risk, asset management, balance
sheet & capital management.
Ms. Hemerijck has a master’s degree in Economics from Tilburg University. She has also obtained a
certificate from the Advanced International Corporate Finance Programme from INSEAD for CFOs and
other senior management.
She is an experienced executive in risk management and has oversight experience from a number of
external directorships.
Term of Office:
External Appointment:
Appointed to the Board of the Bank and BOCH
in
August 2023
Caixa Geral de Depósitos S.A.
Independent:
Committee
Membership:
Yes
Chair of the
RC
Member of the
HRRC
Adrian J. Lewis
Mr. Lewis has wide experience within equity capital markets and investment banking. From 2013-2020
he was Head of ECM for EMEA at HSBC. Prior to that he worked for 20 years at UBS Investment Bank,
mainly within equity capital markets. He currently works supporting early-stage companies with the
London-based boutique advisor Namier Capital.
He studied Maths and Philosophy at the University of Oxford (M.A. Hons).
Term of Office:
External Appointment:
Appointed to the Board of the Bank and BOCH
in
November 2023
Bumblebee Power Ltd
Independent:
Committee Membership:
Yes
Member of the AC
Information on NEDs resigned effective as of 31 December 2023
Below bibliography information on the 2 NEDs who served as members of the Board throughout the year
2023 and resigned from the Board effective as of 31 December 2023 is provided. It is noted that
information on External Appointments and Committee Membership is for the year 2023 until their
resignation.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
165
2. Board of Directors (continued)
2.3. Members of the Board of Directors (continued)
2.3.1. Non-executive Directors (continued)
Ioannis Zographakis
Mr. Zographakis started his career in 1990 with Citibank in Greece as a management associate for
Europe, Middle East & Africa (EMEA). He then worked as the deputy treasurer and treasurer for the
Citibank Consumer Bank in Greece, before moving to the United States in 1996 as the director of finance
for Citibank CitiMortgage. In 1997, he became the financial controller for Citibank’s consumer finance
business in the United States and then he was the director of finance and acting chief financial officer
for the consumer assets division. From 1998 to 2004, he worked in the Student Loan Corporation, a
Citigroup subsidiary and a New York Exchange traded company. He started as the chief financial officer,
became the chief operations officer and in 2001 he was named the chief executive officer. In 2005, he
moved back to Europe as Citibank’s consumer lending head for EMEA and head of its UK Retail Bank. In
2006, he took the position as Citibank’s Retail Bank head in Greece where he stayed until 2011, before
moving back to Cyprus consulting on financial services when requested.
He has been a director for the SLC in the United States, a director for Tiresias (Greek Credit Bureau),
and the secretary of the audit committee, a director and member of the audit committee for Diners Club
Greece, the vice-chairman of the Citi Insurance Brokerage Board in Greece and the chairman of the
Investments and Insurance Supervisory Committee in CitiBank Greece. He has also served as a non-
executive director for the National Bank of Greece group during 2018-2019.
He holds a master’s degree in Business Administration (management) from Carnegie Mellon University
in the United States and a bachelor’s degree in Civil Engineering from Imperial College in London.
Term of Office:
External
Appointment:
Appointed to the Board of
the Bank and BOCH
in
September 2013
Resigned from the Board of the Bank and BOCH
on 31 December 2023
Eternity Capital Management Ltd
Attica Bank
Five Guys Wines Ltd
Independent:
Committee Membership:
No
Member of the Technology Committee
Member of the NCGC
Paula Hadjisotiriou
Ms. Hadjisotiriou started her accountancy career at Howard, Wade & Jacob before moving to
PricewaterhouseCoopers. Following an eight-year tenor at the Latsis Group of Companies as Deputy
General Manager of Internal Audit, she embarked on a career in Banking in Greece, between 1990-2015,
first with Eurobank Ergasias S.A. as Group Chief Financial Officer, and then with National Bank of Greece
as Deputy Chief Executive Officer & Chief Financial Officer. Currently, Ms Hadjisotiriou serves as an
advisor to the EFG International Group in Switzerland and the UK.
Ms Hadjisotiriou is a Chartered Accountant (Institute of Chartered Accountants of England and Wales
(ICAEW)).
Mrs Hadjisotiriou has significant experience in financial institutions and benefits from oversight
experience in a number of external directorships.
Term of Office:
External Appointment:
Appointed to the Board of the Bank and BOCH in
August 2018
Resigned from the Board of the Bank and BOCH
on 31 December 2023
Credit Suisse (Europe) SA
EFG Private Bank Limited
Titan Cement International S.A.
Independent:
Committee Membership:
Yes
Member of the RC
Member of the AC
Member of the Technology Committee
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
166
2. Board of Directors (continued)
2.3. Members of the Board of Directors (continued)
2.3.2. Executive Directors
Panicos Nicolaou (CEO)
Mr. Nicolaou is the Chief Executive Officer and since 1 September 2019 he has been an Executive
Member of the Board of Directors.
He joined the Bank in January 2001 and started his career serving at various positions, mainly in the
Corporate and Credit Risk departments. He was the Manager in the Restructuring and Recoveries Division
from April 2014 until June 2016. From June 2016 until August 2019, he served as Director of Corporate
Banking Division.
He holds a diploma (5-year degree) in Mechanical Engineering from National Technical University of
Athens (Metsovio Polytechnic) in Greece, and an MSc in Mechanical & Industrial Engineering from the
University of Illinois at Urbana-Champaign in the USA. He also holds a BSc in Financial Services/ACIB
from the School of Management, UMIST in the UK.
Mr. Nicolaou is Chairman of the Board of Directors of the Association of Cyprus Banks (ACB), Chairman
of the Board of Directors of the Employers’ Association of Cyprus Banks, and member of the Board of
Directors of the European Banking Federation (EBF). He is also Board member and member of the
Executive Committee of the Cyprus Employers & Industrialists Federation (OEB).
Term of Office:
External Appointment:
Appointed to the Board of the Bank and BOCH in
September 2019
Association of Cyprus Banks
(ACB)
Employers’ Association of Cyprus Banks
European Banking Federation (EBF)
Cyprus Employers & Industrials Federation (OEB)
Independent:
Committee Membership:
No
None
Eliza Livadiotou (Executive Director Finance)
Ms. Livadiotou is the Executive Director Finance and since 6 October 2021 she has been an Executive
Member of the Board of Directors. She is responsible for Finance, Treasury, Strategy and Corporate
Finance, Investor Relations, ESG, Real Estate Management, Restructuring & Recoveries, Regulatory
Affairs, Procurement and Economic Research. She began her career in 1995 with the audit firm Arthur
Andersen in Cambridge, UK, where she qualified as a Chartered Accountant. In 1999 she joined Bank of
Cyprus, as Assistant to the Group Chief General Manager. In 2005, she moved to the Finance Division.
In December 2013, Ms. Livadiotou was appointed Chief Financial Officer (CFO), and from 2016 to late
2021 she was responsible for the Finance and Treasury Divisions.
Ms. Livadiotou studied Economics at the University of Cambridge (MA Hons). She is a member of the
Board of Trustees of the Bank of Cyprus Oncology Centre, a Non-Independent and Non-Executive
member of the Board of Directors of CISCO, and a member of the banking committee of the Institute of
Chartered Accountants in England and Wales.
Term of Office:
External Appointment:
Appointed to the Board of the Bank and BOCH
in October 2021
None
Independent:
Committee
Membership:
No
None
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
167
2. Board of Directors (continued)
2.4. Leadership
There is a clear separation between the role of the Chairperson, who is responsible for the leadership
and effectiveness of the Board, and the Chief Executive Officer (‘CEO’), who is responsible for the running
of the business of the Bank and BOCH. This clear division of responsibility is documented in the Group
Corporate Governance Policy and Framework, which has been approved by the Board. The Group
Corporate Governance Policy and Framework is available on the Group’s
website (https://www.bankofcyprus.com/globalassets/who-we-are/our-governance/group-corporate-
governance-policy.pdf). The day-to-day operations of the Group have been delegated to management.
2.4.1.1. Role of the Chairperson
The Chairperson oversees the Board’s operation and effectiveness, including ensuring the agenda covers
the key strategic items confronting the Group; sets the style and tone of Board discussions; encourages
the active participation of members of the Board in the discussions and activities of the Board and sets
clear expectations regarding the Group’s culture, values, and behaviour. The Chairperson also ensures
that there is effective communication with shareholders and promotes compliance with corporate
governance standards. During the 2023 Triennial Board evaluation, the Board concluded that the Chair
meets successfully the leadership needs of the Board. The Board expressed a high level of satisfaction
with the manner in which the Chair facilitates Board discussions. Notably, the Chair has been appraised
for fostering an environment where the Board feels at liberty to articulate their perspectives, while
actively promoting critical discourse and constructive challenge.
2.4.1.2. Role of Vice-Chairperson
The Vice-Chair provides support and guidance to the Chairperson as required and in coordination with
the Chairperson, acts as an ambassador for the Board and Group in its relationship with regulators,
employees and clients, and deputises the Chairperson at the Board, general shareholder or other
meetings when the Chairperson is unable to attend.
2.4.1.3. Role of Senior Independent Director
The Senior Independent Director (the ‘SID’) is available to shareholders and members of the Board if
they have concerns that have not/cannot be dealt with through normal communication channels. The
SID provides a sounding board for the Chairperson, as well as support to the Chairperson in delivering
their objectives.
The SID chairs an executive session of the non-executive directors to assess the performance of the
Chairperson as part of the annual evaluation of Board performance and takes responsibility for an orderly
succession process for the Chairperson working closely with the NCGC. The SID also attends meetings
with major shareholders to ensure that there is a balanced understanding of the issues and concerns
that they may have.
2.4.1.4. Non-Executive Directors
Non-executive directors (‘NEDs’) are responsible for monitoring executive activity and contributing to
the development of strategy of the BOCH. They are not employees of the Bank and BOCH and do not
participate in the daily management of the Group.
Their role is to (i) constructively challenge management, (ii) scrutinize the performance of senior
management in meeting agreed goals and objectives, and (iii) monitor the reporting of the performance.
Non-executive directors must also satisfy themselves with the integrity of financial information and that
the systems of financial controls, compliance and risk management frameworks and the internal control
framework being adequate. The NEDs (including the Chairperson and the Deputy Chairperson) bring
independent challenge and judgement to the deliberations of the Board through their character,
objectivity, and integrity.
Regular meetings are held between the non-executive directors in the absence of the executive directors
and at least once a year in the absence of the Chairperson.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
168
2. Board of Directors (continued)
2.4. Leadership (continued)
2.4.1.5. Executive Directors
Executive Directors have executive functions in the Group in addition to their Board duties. The role of
Executive Directors, led by the CEO, is to propose strategies to the Board and, following challenging
Board scrutiny, to execute the agreed strategies to the highest possible standards.
The CEO is an employee of the Bank. The CEO’s termination of employment is subject to six months’
notice to that effect to be given to the executive director, without cause but at the sole discretion of BOC
PCL. The CEO’s service contract is reviewed at least every five years. In December 2022, the CEO’s
contract was renewed for a further four years. The Executive Director Finance (‘EDF’) is also an employee
of the Bank. The EDF’s employment is mainly based on the provisions of the collective agreement in
place, which provides for notice or compensation by the Bank based on years of service and for a four-
month prior written notice by the executive director in the event of a voluntary resignation.
2.4.1.6. Role of the CEO
The CEO is responsible for the execution of the approved strategy and has ultimate executive
responsibility for the Group’s operations, performance and compliance. In the day-to-day management
of the Group, as delegated by the Board, the CEO is supported with recommendations and advice from
the Executive Committee (‘ExCo’), which the CEO chairs.
2.5. Information and Support
The Board meets on a regular basis and has a formal schedule of matters for consideration, which evolves
based on business needs and which the Board formally reviews annually. Performance against delivery
of the agreed key financial priorities is reviewed at every meeting with particular reference to the detailed
Group management accounts. The CEO and the EDF comment on strategy, current business
performance, the market, regulatory and other external developments at each meeting and present
comparative data. The Board receives regular reports and presentations from other senior management
on developments in the operations of the Group. The Board considers reports from each of the Board
committees, while regular reports are also provided on the Group’s risk appetite, top and emerging risks,
risk management, the ESG agenda, credit exposures and the Group’s loan portfolio, asset and liability
management, liquidity, litigation, compliance, and reputational issues.
Under the supervision of the Chairperson of the Board, the Company Secretary’s responsibilities include
facilitating the flow of information within the Board and its committees, between senior management
and non-executive directors and between heads of internal control functions and non-executive directors,
as well as facilitating the induction, development, and evaluation of members of the Board.
All members of the Board have access to the advice and services of the Company Secretary and the
Chief Compliance Officer (the ‘CCO’), who can provide relevant information related to Board procedures
and the CSE and UK Codes. The Company Secretary is responsible for ensuring that the directors are
provided with relevant information on a timely basis to enable them to consider issues for decision, and
to discharge their oversight responsibilities. Both the appointment and removal of the Company
Secretary is a matter for the Board as a whole.
The Board also has access to the advice of the Group’s external legal advisors, and independent
professional advice at the Group’s expense if and when required. Committees of the Board have similar
access and are provided with sufficient resources to undertake their duties. The Company Secretary
provides dedicated support for members of the Board on any matter relevant to the business on which
they require advice separately from or additional to that available in the normal board process. All
members of the Board benefit from directors’ and officers’ liability insurance in respect of legal actions
against them.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
169
2. Board of Directors (continued)
2.5. Information and Support (continued)
Occasionally, the Board holds deep dive sessions with key business lines to provide members with a
deeper insight into key areas of strategic focus, enable better quality of debate and enhance knowledge.
The deep dives usually include presentations and opportunity for discussion. In 2023, discussions took
place on the ICAAP, and the Minimum Requirement of own funds and Eligible Liabilities (MREL) Funding
Plan, including discussions with the regulators. Other extensive discussions were on the initiatives to
further improve the risk culture of the Group, on the ESG Strategy, assessment of the Group’s loan
portfolio and the Long-Term Incentive Plan.
The following is an outline of material matters considered by the Board throughout the year per area.
Matters considered by the Board in 2023
Group Strategy
Group Financial Plan 2024-2027.
Updates on strategic projects of the Group.
Sustainability Strategy.
JST/ECB updates.
The Bank’s contribution to environmental integrity and social equity.
Internal controls.
Regular Updates
Group Performance Report.
Financial report including budgets, reforecasts, and capital positions.
CEO’s Report.
Cyprus Political and Economic Developments.
Reports from the chairperson of the Board Committees.
2023 SREP – Supervisory Dialogue.
Business Environment
Quarterly Economic Reports.
Investors and stakeholders’ perspectives.
CEO’s Report.
Cyprus Political and Economic Developments.
Market Updates.
Financials
Quarterly Economic Reports.
Minimum Requirement of own funds and Eligible Liabilities (MREL) Funding Plan.
Internal Capital Adequacy Assessment Process (ICAAP) Report.
Internal Liquidity Adequacy Assessment Process (ILAAP) Report.
Long-Term Incentive Plan (LTIP).
PricewaterhouseCoopers (PwC) Audit fees 2023.
Business performance
Review of the Group Performance Report.
Performance update against Real Estate Management Unit (REMU).
Credit Portfolio Overview.
Review of the performance of Corporate Finance projects.
Culture
Risk and Compliance culture.
Guidance for further enhancing the Bank’s ethical business culture.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
170
2. Board of Directors (continued)
2.5 Information and Support (continued)
Risk management
Group Recovery Plan.
Pillar III Disclosures.
Risk Appetite Statement Indicators.
Group Risk Appetite Framework.
Progress of implementation of SREP recommendations.
Regulatory interactions.
Oversight of local subsidiaries.
Litigation.
Governance and Regulatory Compliance
Review and approval of various Group Policies.
Conflicts of interest management.
Appointment of new Board Directors.
Succession Planning.
Ongoing supervisory dialogue and communication with the regulatory authorities.
Presentation by Morrow Sodali on the Triennial Non-Executive (NED) Remuneration Benchmarking Report.
The strategic pillars of the Group remain intact:
1. Grow revenues in a more capital efficient way; by enhancing revenue generation via growth in
high quality new lending, diversification to less capital intensive banking and other financial
services (such as insurance and the digital economy) as well as prudent management of the
Group’s liquidity.
2. Achieve a lean operating model; by ongoing focus on efficiency through further automations
facilitated by digitisation.
3. Maintain robust asset quality; by maintaining high quality new lending via strict underwriting
criteria, normalising cost of risk and reducing other impairments.
4. Enhance organisational resilience and ESG (Environmental, Social and Governance) agenda; by
leading the transition of Cyprus to a sustainable future and building a forward-looking organisation
embracing ESG in all aspects.
2.6. Composition of the Board of Directors
As of 31 December 2023, the Board is comprised of seven members: the Group Chairperson, who was
independent on appointment and remains independent, two executive directors (Mr. Panicos Nicolaou
and Ms. Eliza Livadiotou) and four non-executive directors (Ms. Lyn Grobler, Mr. Adrian J. Lewis, Ms.
Monique Hemerijck and Mr. Constantine Iordanou). In accordance with the provisions of the CBC
Directive on Suitability, five of the non-executive directors are independent. The names and brief
biographical details including each director’s background, external directorships, and whether these are
executive or non-executive, experience and independent status are set out in section 2.3 of this report.
In the section where biographical details are presented information on the two NEDs who resigned on
31 December 2023 but had served on the Board throughout 2023 is also included.
Further to the latest resignations on 31 December 2023 and although fully functional, the Board currently
goes through a transitional phase with two newly nominated members, highly experienced in the areas
of ESG and technology as well as cybersecurity, pending approval and looking to further enhance its
composition with another one or two members. Once this transitional phase is completed, the Board’s
size will allow for a good balance between having the full range of skills and experience necessary on the
Board and to populate its committees while retaining a sense of accountability by each director for Board
decisions; to govern the business effectively, while enabling full and constructive participation by all
directors given the size and operations of the Group, and the time demands placed on the directors. The
Board recognises the need to identify the best qualified and available people to serve on the Board. In
accordance with the Board Nominations and Diversity Policy, all appointments are made on merit against
objective criteria (including skills and experience) with due regard for the benefits of diversity on the
Board. The Board plans for its own renewal with the assistance of the NCGC, which regularly reviews
Board composition and tenure and ensures plans are in place for orderly succession to both the Board
and Executive positions.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
171
2. Board of Directors (continued)
2.6. Composition of the Board of Directors (continued)
Both on an individual and a collective basis, the directors are considered to have the range of skills,
understanding, experience and expertise necessary to ensure the effective leadership of the Group and
that high corporate governance standards are maintained.
The NCGC ensures a formal, rigorous, and transparent procedure when considering candidates for
appointment to the Board and maintains continuous oversight of the Board’s composition to ensure it
remains appropriate and has regard for its purpose, culture, major business lines, risk profile and
governance requirements.
The NCGC reviews, at least annually, the structure, size, and composition of the Board (including skills,
knowledge, experience, independence, and diversity), and recommends to the Board the skills and
experience required to provide sound governance oversight. These include experience in banking,
insurance, markets and regulatory environments, risk management, financial management, strategy
development, technology as well as cybersecurity and operations experience and knowledge of law,
governance, compliance, audit and ESG. As noted above, the areas of ESG and technology/cybersecurity
will be enhanced upon the appointment of Mr. Christian Hansmeyer as well Mr. Stuart Birrell respectively.
Assessing the skills profile of the Board ensures that the Board and committees comprise of members
having an all-embracing perception of the Group’s activities and the risks associated with them. The
composition of the Board remains under continuous review and the NCGC maintains a constant focus on
succession planning to ensure the continuation of a strong and diverse Board, which is appropriate to
the Group’s purpose and the industry within which it operates.
The NCGC’s succession planning process has regard for the impact of expected retirements of directors,
and the Group’s desired culture and strategic direction. As part of the process, the NCGC prepares a
detailed role profile, based on its analysis of the skills and experience needs, and selects, where
appropriate, an experienced third-party professional search firm to facilitate the process. The search firm
develops an appropriate pool of candidates and provides independent assessments of the candidates.
The NCGC works with the search firm to shortlist candidates, conduct interviews/meetings (including
meetings with members of the NCGC) and carry out comprehensive due diligence.
The NCGC adheres to the requirements of the Group Suitability Policy, which is fully aligned with the CBC
Directive on Suitability (and the Joint ESMA and EBA guidelines on the assessment of the suitability of
members of the management body) and ensures a robust assessment of potential candidates which
includes an interview by the NCGC and recommendation to the Board prior to the submission of suitability
applications to the regulator for consideration.
In accordance with the Board Nominations and Diversity Policy, the assessment and due diligence process
is extensive and includes self-certification confirmations of probity and financial soundness as well as
external checks involving a review of various publicly available sources. All potential candidates are
assessed to ensure they have the ability to act with integrity, lead by example and promote the desired
culture, which evidences a commitment to high standards and values. The process also involves the
NCGC satisfying itself as to the candidate’s ability to devote sufficient time to the role, his/her
independence and suitability. At the same time, the NCGC assesses and documents its consideration of
possible conflict of interest. Finally, an assessment of collective suitability is performed following which
the NCGC makes recommendations to the Board, according to the provisions of the Joint Guidelines on
Suitability.
Regulatory assessment and formal approval are required and given for all Board appointments.
The Group carries out a review of the ongoing suitability of Board members on an annual basis, whereby
they are required to confirm any changes in their circumstances in relation to their compliance with the
CBC Directive on Suitability. All changes in circumstances disclosed, are assessed and their materiality
determined. The Board concluded that each of the directors has the requisite standard of fitness, probity,
and financial soundness to perform his/her functions effectively and commits the necessary time for the
execution of his/her duties.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
172
2. Board of Directors (continued)
2.7. Meetings of the Board
A yearly planner is prepared by the Company Secretary, with input from all Board members, to map out
the flow of key items of business to the Board. The Group has a comprehensive and continuous agenda
setting and escalation process in place to ensure that the Board has the right information at the right
time and in the right format to enable the directors to make the right decisions. The Chairperson leads
the process assisted by the Company Secretary.
The process ensures that sufficient time is being set aside for strategic discussions and business critical
items. Matters may be added to agendas in response to external events, non-executive directors’
requests, and regulatory initiatives.
The Company Secretary is closely involved in preparing the schedule of all Board and committee
meetings, and the agendas for these meetings, in conjunction with the Chairperson, ensuring that
relevant information is dispatched timely to all members of the Board.
Agendas and papers are circulated in a timely manner prior to each meeting and all members of the
Board are informed in writing of forthcoming Board meetings to allow them adequate time to review the
relevant information and enable them to fully discharge their duties. Meetings packs are typically
uploaded a week in advance of the meetings and communicated to all members of the Board via a secure
electronic Board portal to ensure they have sufficient time to review the matters, which are to be
discussed and to seek clarifications or any additional information they may require.
Generally, members of the senior management team and other senior management members are invited
to attend part of the meetings to ensure effective interaction with the Board. Board meetings have certain
standing items such as a report from the CEO and the EDF on Group performance, reports from the
chairs of committees and updates from other senior management members. In addition to formal
meetings, the Board meets as necessary to consider matters of a time-sensitive nature. The Chairperson
and the chairs of each committee ensure Board and committee meetings are structured to facilitate
discussions.
Committee meetings are held prior to Board meetings with the chairperson of each committee then
reporting matters discussed to the Board. Topics for deep dives or additional items are discussed when
required and include business, governance, and regulatory update.
During 2023, the Board of BOCH held 18 meetings. Meetings were held both physically and virtually.
Further details on the number of the meetings held by the Board and its committees and attendance by
individual directors are set out below. The offsite meeting was held on 27 to 29 of September 2023.
During the year, the Chairperson and the non-executive directors met physically, without the executive
directors present, to discuss a range of business matters.
The Board makes full use of technology such as teleconferencing, an electronic Board portal and tablets
in its meeting arrangements. This leads to greater flexibility, security and efficiency in Board paper
distribution and meeting arrangements. Minutes and matters arising from the meetings are produced
and circulated to the directors for review and feedback. Matters arising are followed up in subsequent
meetings through relevant updates.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
173
2. Board of Directors (continued)
2.7. Meetings of the Board (continued)
Attendance of BOCH Board of Directors and Committees in 2023
The table below shows the attendance of the Directors at the Board and Committee meetings throughout
2023 for BOCH.
Name
Board of
Directors
AC HRRC NCGC RC
Efstratios-Georgios
Arapoglou (Chairperson)
18 x x 13 x
Lyn Grobler (Vice-Chair) 17 x 10 13 20
Paula Hadjisotiriou
9
17 20 x x 21
Constantine Iordanou 18 19 5 x x
Monique Hemerijck 6 x 2 x 9
Adrian J. Lewis 1 1 x x x
Eliza Livadiotou 17 x x x x
Panicos Nicolaou 17 x x x x
Nicolaos Sofianos
10
18 20 x x 19
Ioannis Zographakis
11
18 x 5 10 10
Maria Philippou
7
14 x 8 4 x
Arne Bergren
8
3 5 x 2 x
Total meetings
18 20 10 13 21
2.8. Terms of Appointment, Retirement and Re-election of Directors
Non-executive directors are appointed for an initial three-year term and are typically expected to serve
a further term of three years, assuming satisfactory performance and subject to the needs of the
business, shareholder re-election and continuing suitability. The Board may invite directors to serve
additional periods. A non-executive’s term of office will not extend beyond 12 years in total. Any re-
appointment beyond six cumulative years is considered on an annual basis and has regard for a number
of factors including performance, independence, the need for progressive refreshing of the Board over
the medium to long-term and the best interest of the shareholders.
The Board may at any time appoint any person who Is willing to act as director and who fulfils the criteria
as these are determined in the Board Nominations and Diversity Policy, either to fill a vacancy or as an
addition to the existing Board, but the total number of directors should not exceed 13. Any director so
appointed is subject to election at the AGM following his/her appointment. The NCGC considers, inter
alia, whether a potential director is able to devote the requisite time and attention to the affairs of BOCH
and the Bank, prior to the Board’s approval of the individual’s appointment.
According to the Articles of Association of BOCH, all directors retire each year and if eligible offer
themselves for re-election. The following directors, being eligible, offered themselves for re-election at
the AGM on 26 May 2023: Efstratios-Georgios Arapoglou, Lyn Grobler, Paula Hadjisotiriou
9
, Panicos
Nicolaou, Maria Philippou
7
, Nicolaos Sofianos
10
, Ioannis Zographakis
11
, Constantine Iordanou and Eliza
Livadiotou.
The names of directors submitted for election or re-election are accompanied by sufficient biographical
and other relevant information in the AGM documentation and are available on the Group’s website to
enable shareholders to take an informed decision.
7
Maria Philippou resigned from the Board of the Bank and BOCH effective as of 13 October 2023.
8
Arne Bergren resigned from the Board of the Bank and BOCH effective as of 31 March 2023.
9
Paula Hadjisotiriou resigned from the Board of the Bank and BOCH effective as of 31 December 2023.
10
Nicolaos Sofianos resigned from the Board of the Bank and BOCH effective as of 11 December 2023.
11
Ioannis Zographakis resigned from the Board of the Bank and BOCH effective as of 31 December 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
174
2. Board of Directors (continued)
2.9. Conflict of interest
The Group Policy on Conflict of Interest focuses on principles, procedures and arrangements for the
prevention, identification, documentation, escalation, and management of actual, potential, or perceived
conflict of interest. The policy is reviewed and approved by the Board annually and is communicated
throughout the Group.
The Group Corporate Governance Policy documents procedures specifically relating to directors’ conflict
of interest, and sets out how these are to be identified, reported, and managed in order to ensure that
the directors act at all times in the best interests of the BOCH. The Group Corporate Governance Policy
and Framework is reviewed and approved by the Board, at least annually.
The Board has adopted a Dealing Code for transactions in the Company’s securities by Persons
Discharging Managerial Responsibilities (PDMRs). The Dealing Code complies with the European Market
Abuse Regulation. All PDMRs have been informed of their obligations under the Dealing Code in writing.
All directors have complied with the Dealing Code during 2023.
None of the directors had, during the year or at year end, a material interest, directly or indirectly in any
contract of significance with the Group (Information on transactions between the Directors and the Group
are disclosed in Note 49 of the Consolidated Financial Statements).
2.10. Time commitment
The NCGC ensures that individual Board directors have sufficient time to dedicate to their duties, having
regard to applicable regulatory limits on the number of directorships which may be held by any individual
director. The Board has determined the time commitment expected of non-executive directors to be 35-
40 days per annum. Time devoted to the Group can be considerably more when serving on Board
committees.
The Bank has been classified as a ‘significant institution’ under the European Union (Capital
Requirements) Regulation 2014. The CBC Directive on Suitability, which incorporates the provisions of
Article 91 of the European Capital Requirements Directive (‘CRD IV’) on management bodies of credit
institutions, determines that a director cannot hold more than one of the following combinations:
1. One executive directorship with two non-executive directorships; or
2. Four non-executive directorships.
Executive or non-executive directorships held within the same group, count as a single directorship.
Directorships in organisations, which do not pursue predominantly commercial objectives do not count
for the purposes of the above guidelines.
The ECB, which supervises the Bank following the European Union Regulation 468/2014, which
established the framework for cooperation within the Single Supervisory Mechanism (SSM) between the
ECB and national competent authorities, may in exceptional cases and taking into consideration the
nature and complexity of the business of the Group, authorise members of the Board to hold one
additional directorship. All Board Directors were within the directorship limits set out for ‘significant
institutions’.
All newly appointed members of the Board are provided with a comprehensive letter of appointment
detailing their responsibilities as directors, the terms of their appointment and the expected time
commitment for the role. A copy of the standard terms and conditions of appointment of non-executive
directors can be inspected during normal business hours by contacting the Company Secretary. Members
of the Board are required to devote adequate time to the business of the Group, which includes
attendance at regular meetings and briefings, preparation time for meetings and visits to business units.
In addition, non-executive directors are normally required to sit on at least one Board committee, which
involves the commitment of additional time. Certain non-executive directors such as the Vice-Chair, the
Senior and committee chairpersons are required to allocate additional time in fulfilling those roles.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
175
2. Board of Directors (continued)
2.10. Time commitment (continued)
Before their appointment, Board Directors disclose details of their other significant commitments along
with a broad indication of the time committed to such appointments. The Board Directors’ positions on
the management bodies of other companies are noted in their biographical details included in section
2.3 of this report. Such participation does not prevent them from devoting the necessary time and
attention to their duties as members of the Board of BOCH and is within the limits set by the CBC
Directive on Suitability. Before accepting any external appointments, which may affect existing time
commitment for the Board’s business, approval must be obtained from the NCGC and depending on the
nature of the proposed commitment, the Board must approve as well.
During 2023, all Board Directors complied with the Board process and sought approval in advance where
required. All Directors are reminded of their obligation under the Group Corporate Governance Policy and
Framework when appointed to any external roles.
It was estimated that in 2023, each non-executive director spent at least 40 days on Board-related
duties. The Board considered the time commitment of all directors and concluded that each director
devotes the requisite time for the effective performance of his/her duties as described in the Joint
Guidelines on Suitability. The Chairman has devoted approximately 60-70 days on Board-related duties
and provides ongoing support.
2.11. Board Balance and Independence
The NCGC and the Board determine the independence status of each director on appointment. In
addition, the Board considers each individual against the criteria set out in the 2018 UK Code, the 2019
CSE Code, the CBC Directive on Suitability and the Joint Guidelines on Suitability. It also considers their
contribution and conduct at Board meetings, including how they demonstrate objective judgement and
independent thinking, annually, to ensure that the determination regarding independence remains
appropriate.
In 2023, the Board considered the principles relating to independence and determined that six out of
seven Non-Executive Directors in office by 31 December 2023 (including Ms. Hadjisotiriou and Mr.
Zographakis who resigned as of 31 December 2023) were independent in character and judgement and
free from any business or other relationships with the Group, which could affect their judgement.
Pursuant to the 2018 UK Code, the independence of a member of the Board is potentially jeopardised
when the member has served on the board for more than nine years from the date of their first
appointment. Furthermore, the CBC Directive on Suitability indicates that ‘a member of the board
potentially ceases to be independent when the member has completed a total term as a member of the
management body of the ACI for a period of nine (9) years, on a continuous basis or not’. This is also
confirmed by the 2019 CSE Code. The NED for whom the independence was potentially compromised
was Mr. Zographakis since he served as non-executive director on the Board of the Company for more
than nine years. Mr. Zographakis resigned from the Board of the Company effective as of 31 December
2023.
The Chairperson, Mr. Arapoglou, was independent on appointment and continues to operate in a manner
that is independent in character and remains objective in his opinions having no other relationship or
circumstances to affect his judgement. He commits the appropriate time for the Group’s business, which
is slightly more than the other non-executive directors, and approximately it amounts between 60-70
days per year. He has no other remuneration from the Group other than as Chairperson of the Board and
chairperson of the NCGC.
The status of each director is presented in the biographical details in section 2.3 of this report.
A relevant ‘Confirmation of Independence’ based on the independence criteria of provision A.2.3 of the
2019 CSE Code is signed annually by each of the independent non-executive directors and is submitted
to the Cyprus Stock Exchange together with the Annual Corporate Governance Report.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
176
2. Board of Directors (continued)
2.12. Diversity
The Group recognises the benefits of having a diverse Board and workforce, creating a work environment
where everyone has an opportunity to fully participate in creating business success, and where each
person is valued for their distinctive skills, experiences, and perspectives. In reviewing Board composition
and identifying suitable candidates, the NCGC considers the benefits of all aspects of diversity including
the skills identified as relevant to the business of the Group, industry experience, nationality, gender,
age and other relevant qualities, in order to maintain an appropriate range and balance of skills,
experience and background on the Board.
All Board appointments are made on merit, in the context of the skills, experience, independence and
knowledge which the Board as a whole is required to have to be effective and the diversity benefits each
candidate can bring to the overall board composition.
The Group’s approach to Board diversity is set out in full in the Board Nominations and Diversity Policy,
which can be found online at https://www.bankofcyprus.com/globalassets/who-we-are/our-
governance/group-board-nominations-policy.pdf.The Board Nominations and Diversity Policy recognises
that a truly diverse Board will include and make good use of the differences in skills, experience,
background, race, gender and other distinctions brought by each director, with such differences being
considered in determining the optimum composition of the Board.
Non-executive members of the Board possess a wide range of skills, knowledge and extensive experience
acquired from executive and/or non-executive appointments as directors of other companies, that
combine to provide independent perspective, insights and challenge needed to support good decision-
making and effective board dynamics. The effectiveness of the Board depends on ensuring the right
balance of directors with banking or financial services experience and broader commercial experience.
Directors bring their individual knowledge, skills, and experience to bear in discussions on the major
challenges facing the Group. The participation of executives on the Board enhances the banking expertise
of the Board and ensures that the Board is provided with direct, precise, and up-to-date information
about significant issues concerning the Group.
In
the 2023 review of knowledge, experience, and
skills, the Nomination and Corporate Governance
Committee (NCGC) concluded that the Board's
skills profile, both academic and professional,
aligns well with the diverse needs of the Group's
business. This includes sectors such as banking,
insurance, manufacturing, audit and accounting,
economics, risk management, interactions with
competent authorities, strategy and business
modelling, capital markets, information
technology, and human resource management.
However, it was identified that the areas of
Environmental, Social, and Governance (ESG) and
Digital/Technology/Cybersecurity require further
strengthening to align with the Group's strategic
direction. This enhancement is anticipated to be
achieved through the prospective appointments of
Mr. Christian Hansmeyer and Mr. Stuart Birrell.
These appointments are pending approval from
the European Central Bank (ECB). Following the
recent resignation of Mr. Nicolaos Sofianos, there
is a need for the Board to appoint a new Non-
Executive Director (NED) with robust audit
qualifications and experience. This is essential to
maintain the high standards of governance and
oversight that the Board aspires to uphold.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
177
2. Board of Directors (continued)
2.12. Diversity (continued)
During 2023, the NCGC reviewed the Board Nominations and Diversity Policy, which aims to maintain
diversity with appointments based on merit in the context of the skills and experience required. The
quantitative gender diversity of BOCH is set at 40% female representation. BOCH has been implementing
an action plan approved by the NCGC describing all key intervening milestones leading to the
accomplishment of this target. The changes in the composition of the Board in 2023 increased diversity
at 43%. The Board remains committed to maintaining its set target. The Board Nominations and Diversity
Policy applies to the Board and its Committees.
The Board also places high emphasis on ensuring the development of diversity in the senior management
roles within the Group. A number of Group policies ensure unbiased career progression opportunities.
The Code of Conduct similarly ensures equal opportunities to all members of staff and treats diversity
with fairness and respect aiming to provide fair treatment for everyone at work. A primary ESG target
approved under the ESG strategy by the Board is ≥30% women in Group’s management bodies by 2030.
As of 31 December 2023, there is a 33% representation of women in Group’s management bodies
(defined as the ExCo) and a 41,35% representation of women at key positions such as Managers, Heads,
Leads, Team Heads (defined as the wider Group Leaership).
As per the required FCA Diversity disclosures
12
, the following is applicable in relation to the Bank as from
1 January 2023 to 31 December 2023:
 43% of the individuals on the Board are women.
 The Chief Financial Officer, Eliza Livadiotou is a woman.
 The Board recognises the challenges in setting diversity targets. Cyprus is the geographical
provenance of the Group’s customer and employee base and having also regards to the ethnic
background of Cyprus population, at this time, the Board has not set a target for having at least
one member of the Board from a non-white ethnic minority background. Notwithstanding this,
when considering Board appointments, the Board will have regard to the requirements under the
UK FCA Listing Rules.
Number
of Board
members
Percentage
of the
Board
Number of
senior
positions on
the board
(CEO, CFO,
SID, and Chair)
Number
in
ExCo
Percentage
of ExCo
Number in
wider
Group
Leadership
Percentage
in wider
Group
Leadership
Men
4 57% 3 4 67% 61 59%
Women
3 43% 1 2 33% 43 41%
12
LR 14.3.33
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
178
2. Board of Directors (continued)
2.13. Directors’ induction and ongoing development
On appointment, each director receives a full, formal induction plan, tailored to his or her specific
requirements including committee membership. All incoming directors are provided on appointment with
an information pack which includes, among others, the Group Corporate Governance Policy and
Framework, key legislation, directives and regulations and the Company’s Articles of Association, to
facilitate their understanding of how the Group operates and the key issues that it faces.
Meetings are arranged with senior management on Group and divisional strategy, deep dives on
businesses, an overview of the Group’s risk appetite and Group Risk Framework, corporate governance,
internal control systems, regulatory environment, people strategies, technology, and payments.
Furthermore, the Company Secretary, under the supervision of the Chairperson, develops programmes
based on the directors’ individual needs. A Policy on Induction and Training of Board members has been
approved by the Board and is available on the Group's website.
Ongoing education is provided for the Board, informed by the effectiveness reviews of the Board and
individual directors, as well as emerging external developments. Focused training of the Board is
arranged in conjunction with scheduled Board meetings where information is provided to ensure that
directors receive adequate insight into a particular area through presentations by Group business units
and control functions and briefings with senior management. Dedicated training sessions also take place
on particular issues (refer to table below for 2023 training schedule which includes both internal and
external trainings), usually identified by the directors themselves and the Company Secretary. A training
schedule is prepared at the beginning of each year and directors are expected to attend accordingly. In
the performance of their roles, executive directors hold regular interactions, meetings, and briefings with
senior management.
The training material is distributed to all directors regardless of attendance. In 2023, all trainings
completed in the form of e-learning sessions are available, and the directors can access this at any time,
and once the training is completed, it is recorded on the system to provide a full audit trail.
Directors are also offered the option of attending suitable external educational courses, events or
conferences designed to provide an overview of current issues of relevance to directors. The Company
Secretary ensures all directors are provided with relevant information on a timely basis to enable them
to consider issues for decision-making and discharge of their oversight responsibilities.
The Company Secretary provides the Board with comprehensive guidance on Board procedures and
dedicated support for directors on any matter relevant to the business on which they require advice
separately from or additional to that available in the normal board process.
#
Topic Type of training
1.
Info. Security Awareness Q1 e-learning
2.
Info. Security Awareness Q2 e-learning
3.
Info. Security Awareness Q3 e-learning
4.
Info. Security Awareness Q4 e-learning
5.
AML Essentials 2023 e-learning
6.
Training on BASEL III On-line
7.
Climate Change risk identification and
its implementation within the credit
approval process
On-line
8.
DATA REPORT QUALITY Physical
9.
Conflicts of Interest and Market
Abuse
Online
10.
ESG matters Online
11.
Training on credit scoring by BOC Online
12.
AML Physical
13.
Competition Law Physical
14.
CG Policy and Framework Physical
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
179
2. Board of Directors (continued)
2.14. Board Performance Evaluation
The Board seeks to continually enhance its operations and conducts a formal effectiveness evaluation of
the Board, Board Committees, and individual Board Directors. In addition to reviewing the Board’s
operations, composition and overall effectiveness, the evaluation reviews past performance with the aim
of identifying possible opportunities for improvement, determines whether the Board and its Committees
are collectively effective in discharging their responsibilities and, in the case of individual Directors,
determines whether each individual Director contributes effectively to the collective suitability of the
Board.
The external triennial board evaluation review for the year 2023 was conducted in accordance with Article
16 of the CBC Governance Directive and was completed in February 2024. The external Board
Performance Evaluation performed by Morrow Sodali and the relevant findings are outlined in section
2.15.8 below.
2.15. Stakeholder engagement
2.15.1. Institutional equity investors and analysts
It is incumbent upon the Chairman to ascertain efficacious communication pathways with shareholders,
while fostering a comprehensive understanding among the Directors regarding the perspectives of major
investors. Investor Relations has primary responsibility for managing and developing the Group’s
external relationships with existing and potential institutional equity/debt investors and analysts.
The Group maintains a dynamic and meticulously structured Investor Relations agenda, facilitating
regular meetings with the CEO, Executive Directors, selected Senior Executives, the Manager of Investor
Relations & ESG, and other officials, in conjunction with the Group’s principal institutional shareholders,
additional investors, financial analysts, and brokers. In the year 2023, 182 meetings were held. Every
meeting is scrupulously conducted to prevent the disclosure of price-sensitive information.
The Group’s website features a specialised Investor Relations section, offering unhindered access to
relevant information, including presentations, publications, and public announcements. Ms. Annita
Pavlou, Manager Investor Relations & ESG is responsible for the communication between shareholders
and the Group since 30 August 2016. Information concerning the Group is provided to shareholders,
prospective investors, brokers, and analysts in a prompt and unbiased manner free of charge.
2.15.2. Engagement with major shareholders
To facilitate the Board’s understanding of the views of major shareholders, the Directors receive an
investor relations update from management at all scheduled meetings of the Board. The content of this
update includes market updates, details of recent equity and debt investor interactions, share price and
valuation analysis, analyst updates, and share register analysis. The Group facilitates direct dialogue
with investors since it is striving for the greatest possible transparency. The Group also works towards
integrating feedback in its corporate strategy. This is achieved through participation in conferences,
private meetings, road shows (physically and virtually), frequent conference calls and at least quarterly
updates following the publication of financial results and corporate transactions. The CEO, the Executive
Director Finance and the Manager Investor Relations engaged extensively in 2023 with existing
shareholders, and potential new investors during individual or group meetings and on roadshows and
investor conferences.
The Chairman and the Senior Independent Director maintain direct contact with investors and are
available to all shareholders if they have concerns that cannot be resolved through the normal channels.
2.15.3. Customers
The Group’s strategy encompasses a multichannel communication approach, personalised banking
services, and comprehensive customer support to foster enhanced customer engagement and service
delivery. It integrates physical branches with digital platforms, social media, and traditional
communication methods for effective outreach. Personalisation is achieved through tailored banking
solutions informed by customer data, including personalised offers and dedicated bankers for specific
customer segments, ensuring services are relevant and valuable. Customer support is broad, featuring
extensive online and mobile services, a responsive call centre, and specialized in-branch roles to educate
and assist customers, along with initiatives aimed at promoting financial literacy.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
180
2. Board of Directors (continued)
2.15. Stakeholder engagement (continued)
2.15.3. Customers (continued)
This approach highlights the dedication of the Group to customer-centricity, leveraging technology and
personalized services to meet the evolving needs of its customer base. This comprehensive approach to
customer engagement and service not only meets the evolving needs of the Group's customer base but
also reinforces the principles of good corporate governance, ensuring that the Group remains
accountable, transparent, and responsive to all stakeholders.
2.15.4. Employees
The Board, through the HRRC, continues to receive regular updates, and diligently monitors the progress
of Human Resources initiatives that are anchored on key strategic goals. These goals are strategically
designed to enable the Organisation of Tomorrow, enhance Career Advancement Opportunities, empower
a High-Performance Culture, and achieve Organisational Health Excellence
13
in specific priority areas,
notably under the banner of Project Sunrise
14
.
The CEO throughout the year has been actively engaging with staff through various initiatives, including
breakfast meetings with management teams, presentations and open discussions on financial results,
participation in staff events, and regular messages to all staff to keep everyone informed and connected.
In addition, an open channel email has been established (‘AskCEO’), providing direct access for all
employees to engage with our CEO along with a dedicated corner on our intranet where they can find
relevant material prepared by the CEO.
The Organisation of Tomorrow referred to above is meticulously sculpting the future by incorporating a
series of pivotal initiatives aimed at revitalizing and optimizing various operational aspects. A
fundamental focus is placed on enhancing HR’s strategic role, enabling it to be a powerhouse that drives
organizational success through people management and strategy alignment. Emphasis is also laid on
adopting a leaner organizational structure that fosters efficiency, agility, and responsiveness in navigating
the ever-evolving business landscapes.
Workforce planning is another crucial area of focus, ensuring that the organization is well-prepared to
meet future challenges and opportunities with a competent and agile workforce. In tandem with this,
there’s a robust concentration on learning and development, promoting a culture of continuous
improvement and adaptability that propels the organization towards achieving its strategic objectives.
In an ongoing commitment to employee engagement and continuous improvement, the HRRC
meticulously reviews feedback from the Group’s staff surveys. Significant strides have been made in
implementing actions responsive to staff feedback, ensuring that the organisation evolves in alignment
with employee insights and aspirations. The Board has remained particularly attentive to promoting and
adhering to the Code of Conduct
15
and reinforcing the integrity of the speak up channels, thereby
fostering an environment where ethical conduct is prioritized.
Throughout 2023, the Bank witnessed a commendable emphasis on the enhancement of whistleblowing
mechanisms, spearheaded by Mr. Nicos Sofianos, the Chairman of the AC. Acting as the Group’s
Whistleblowing Champion, Mr. Sofianos communicated extensively with all staff members, emphasizing
the significance of whistleblowing in safeguarding organisational integrity. His communications stressed
the imperative nature of speaking up and reporting incidents, reaffirming the organisation’s staunch
commitment to ensuring anonymity, confidentiality, and the thorough investigation of all reported
incidents.
13
Organisational Health Excellence outlines the practices and behaviours that are required by or prohibited to
employees. It sets out the actual rules, so it lays down the dos and don’ts. Employees are responsible to adhere to it
and are held accountable for any violation.
14
Project Sunrise is the transformation programme of the Group. It is a dynamic and multifaceted effort, which
includes various stages, from the evaluation of the operational model and procedures, the optimization of the
customers’ banking experience, the increase in profitability and cost reduction as well as strengthening the
‘organizational health’ of the Group.
15
The Code of Conduct is part of the Code of Ethics, which is published on the website of the Group
(https://www.bankofcyprus.com/globalassets/who-we-are/our-culture/ethicscode_eng.pdf).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
181
2. Board of Directors (continued)
2.15. Stakeholder engagement (continued)
2.15.4. Employees (continued)
Furthermore, the Board has sustained open and responsive communication channels, notably the ‘Ask
the Board’ initiative. This platform allows staff members direct access to the Board of Directors, enabling
them to file questions or queries, thereby fostering a culture of transparency, inclusivity, and mutual
respect.
These structured initiatives and strategic goals collectively aim to bolster the organisation’s human
resources framework, cultivating a thriving and ethically sound operational environment, and steering
the organisation towards a future marked by innovation, excellence, and continuous improvement.
2.15.5. Regulators and Government
The Chairman along with the Board acknowledge the critical role that interpersonal relationships and
dynamics play in bolstering mutual trust essential for on-site governance and proficient management of
business risks. In light of this, the Chairman along with the Board Directors conscientiously engage in
regular meetings with pivotal representatives from various regulatory and government entities. These
entities include the European Central Bank (ECB) Senior management, the Joint Supervisory Team (JST),
the Central Bank of Cyprus (CBC) as the National Competent Authority, Single Resolution Board (SRB)
and the Ministry of Finance (MoF), amongst other notable Government and Supervisory Bodies.
The main areas of discussion in these meetings predominantly revolve around vital themes such as
regulation and supervision, risk governance and oversight, imminent challenges permeating the banking
industry, strategic adversities, and the renovation of trust and culture within the organisation. The
Chairman, in collaboration with the Group CEO, ensures the Board remains consistently updated on the
outcomes and critical insights gleaned from these engagements with regulators and government
representatives.
Based on the established framework of the Regulatory Affairs, systematic meetings are held throughout
the year, facilitating impactful discussions and exchanges between the Chairman, Board Directors, the
Executive management of the Bank, Internal control functions, and other pivotal Senior management
personnel. The coordination of these essential meetings is adeptly handled by the Regulatory Affairs
Department. To further facilitate the Board’s understanding of the regulator’s views, directors receive
regular updates (i.e. quarterly) from the Regulatory Affairs Department which include important written
and verbal communication, details of on-site / off-site reviews and progress of implementation of
regulatory requirements and recommendations.
It is imperative to highlight the Group’s management's unwavering commitment towards fostering a
continuous, transparent, and constructive dialogue with the Regulatory and Supervising bodies. This
strategic engagement is aimed at augmenting their confidence and trust, securing their esteemed
respect, and diligently working towards the minimisation of the Group’s regulatory risks. Through such
steadfast initiatives, the Bank profoundly emphasises its strong dedication to upholding and enhancing
essential regulatory relationships and operational standards.
2.15.6. Social Role of the Bank
The Corporate Social Responsibility Strategy and CSR Programme contribute to the Social Pillar of the
ESG Strategy and support the Group’s selected United Nations Sustainability Development Goals (SDGs).
The Bank’s CSR Programme and all relevant initiatives are compatible with its core business and enhance
the Bank’s overall strategy and vision. The CSR Programme infolds within three Pillars: Health, Education
and Environment. All initiatives operate in collaboration with expert Non-Governmental, Non-Profitable
Organisations, other entities and public services.
During 2023, the Bank introduced the Financial Education sub-pillar within the Education Pillar. More
specifically, the Bank initiated an educational programme targeting elderly citizens with basic financial
terms and advises and the use of the Bank's digital channels for banking transactions. Additionally, within
the same pillar, the Bank continued awarding and promoting Youth Excellence focusing on STEAM
(Science-Technology-Engineering-Art-Mathematics) subjects and sport youth talents.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
182
2. Board of Directors (continued)
2.15. Stakeholder engagement (continued)
2.15.6. Social Role of the Bank (continued)
Within the Health Pillar, the Bank continued to undertake sustainable support to the local community
with health-related initiatives, focusing on cancer patients and having the Bank of Cyprus Oncology
Centre as its flagship with an overall investment of c.€70 million since 1998, whilst 60% of diagnosed
cancer cases in Cyprus are being treated at the Centre.
Within the Environment Pillar, the Bank continued programmes on climate change impacts and the
prevention, respond and recovery of forest fires, biodiversity, and sea pollution. Additionally, the Bank
continued to develop initiatives that aimed to preserve local culture and history, through the Bank of
Cyprus Cultural Foundation (BOCCF) and to enhance innovation and start-ups through the IDEA
Innovation Centre.
In 2023, the BOCCF undertook several innovative projects such as ‘AISTHISEIS’ - Multi sensory museum
experience for people with disabilities as well as the ReInHerit programme facilitating innovation and
research cooperation between European museums and heritage continuing also into 2023, with 16,542
people participating in events at the Cultural Foundation between January to June 2023. Between October
2023 and June 2024, BOCCF is hosting the ΣΗΚΩ ΨΥΧΗ ΜΟΥ (SIKO PSIXI MOU) - Pictures and music of
the 1922 refugees' exhibition - of the Hellenic Parliament Foundation for Parliamentarianism - that
commemorates the 101st anniversary of the Asia Minor Catastrophe. The exhibition traces the role and
importance of music and song as identity, collective memory and driving force for Greek refugees across
the globe.
Furthermore, the IDEA Innovation Centre, invested c.€4 million in start-up business creation since its
incorporation, supported creation of 89 new companies to date, and provided support to 210+
entrepreneurs through its Startup program since incorporation.
Staff have continued to engage in voluntary initiatives to support charities, foundations, people in need
and initiatives to protect the environment.
Finally, the Bank successfully continued and expanded the operation of the award winning SupportCY
network of companies and NGOs. SupportCY was created by the Bank in March 2020, in order to support
public services performing frontline duties during the COVID-19 pandemic. Its actions, led by the Bank
expanded in supporting various societal needs. In 2023, SupportCY had more than 180 members, while
the SupportCY Volunteers Corps, continue to offer assistance and support in Cyprus and abroad.
2.15.7. Environmental, Social, Governance (ESG)
The ESG strategy formulated in 2021 is continuously expanding. The Group is maintaining its leading
role in the Social and Governance pillars and focus on increasing the Group’s positive impacts on the
Environment by transforming not only its own operations, but also the operations of its customers.
The Group has committed to the following primary ESG targets, which reflect the pivotal role of ESG in
the Group’s strategy:
1. Become carbon neutral by 2030.
2. Become Net Zero by 2050.
3. Steadily increase Green Asset Ratio.
4. Steadily increase Green Mortgage Ratio.
5. ≥30% women in Group’s management bodies (defined as the Executive Committee (EXCO) and
the Extended EXCO) by 2030.
For the Group to continue its progress against its primary ESG targets and address the evolving
regulatory expectations, it further enhanced in 2023, its ESG working plan which was established in
2022. Progress on the ESG working plan is closely monitored by the Sustainability Committee, the
Executive Committee and the Board Committees on a quarterly basis.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
183
2. Board of Directors (continued)
2.15. Stakeholder engagement (continued)
2.15.7. Environmental, Social, Governance (ESG) (continued)
Environmental Pillar
The Group has estimated the Scope 1 and Scope 2 greenhouse gas (GHG) emissions of 2021 relating to
own operations in order to set the baseline for carbon neutrality target. The Bank being the main
contributor of GHG emissions of the Group, designed in 2022 the strategy to meet the carbon neutrality
target by 2030 and progress towards Net Zero target of 2050. For the Group to become carbon neutral
by 2030, Scope 1 and Scope 2 emissions should be reduced by 42% by 2030. The Group, following the
implementation of various energy upgrade actions in 2022 and 2023, achieved a c.16% reduction in
Scope 1 and Scope 2 GHG emissions in 2023 compared to the baseline of 2021. The Group plans to
invest in energy efficient installations and actions as well as replace fuel intensive machineries and
vehicles from 2024 to 2025, which would lead to c.3-4% reduction in Scope 1 and Scope 2 emissions by
2025 compared to 2021. The Group expects that the Scope 2 emissions will be reduced further when
the energy market in Cyprus shifts further towards renewable energy. The Group achieved a reduction
of c.8% in Scope 1 - Mobile and Stationery Combustion GHG emissions and c.11% in Scope 2 – Purchased
electricity GHG emissions in FY2023 compared to FY2022 due to new solar panels connected to energy
network in 2022 and early 2023 as well as buildings abandonment as part of the digitalization journey.
The Group is also considering several other actions aiming to a further reduction of c.30% in Scope 1
and Scope 2 GHG emissions by 2030 compared to 2022. The Bank achieved an increase of 65% in
renewable energy production, from 173,593 Kwh to 285,907 Kwh, in FY2023 compared to FY2022.
The Bank is gradually integrating climate-related and environmental (C&E) risks into its Business
Strategy. The Bank was the first bank in Cyprus to join the Partnership for Carbon Accounting Financials
(PCAF) in October 2022, and has estimated and published the Financed Scope 3 GHG emissions
associated with its lending portfolio using the PCAF standards, methodology and proxies. Following the
estimation of Financed Scope 3 GHG emissions of loan portfolio, the Bank established a decarbonization
target on Mortgage loan portfolio. The decarbonization target on Mortgage portfolio was established by
applying the International Energy Agency’s Below 2 Degree Scenario. For the Bank’s Mortgage portfolio
to be aligned with the climate scenario and effectively being associated with lower transition risks, the
baseline as at 31 December 2022 of 53.5 kgCO
2
e/m
2
should be reduced by 43% by 31 December 2030.
The carbon intensity of the Bank’s Mortgage portfolio as at 31 December 2023 was estimated at 50.73
kgCO
2
e/m
2
achieving a c.5% reduction compared to baseline, due to increased installation of solar panels
in residential properties in 2023. A Green Housing product was launched at the end of 2023 to support
the Bank to meet the decarbonization target on Mortgage and effectively limit the level of climate
transition risk that is exposed. In addition, the Bank has set lending and investment limits on specific
carbon intensive sectors which are widely considered to be associated with high climate transition risk.
Further, having introduced and implemented a Business Environment Scan process, the Bank developed
green/transition new lending targets in certain sectors to support its customer’s transition to a low carbon
economy and effectively manage climate transition risks.
During 2023, the Bank has made considerable progress in integrating climate-related and environmental
risks into its risk management approach and risk culture. The Bank revised and enhanced the Materiality
assessment process on C&E risks. The Bank has carried out a comprehensive identification and
assessment of C&E risks as drivers of existing financial and non-financial risks considering its business
profile and loan portfolio composition. As part of this process, the Bank has identified the risk drivers,
both physical and transition, which could potentially have an impact on its risk profile and operations
and has assessed the severity of each risk driver for all the existing categories of risks. The Bank has
implemented an ESG Due Diligence process designed to enhance data collection, score customers on
their performance against various aspects around C&E risks and provide guidance on remediation
actions. This process involves the utilization of structured ESG questionnaires applied at the individual
company level for customers of the Corporate Division to derive an ESG score. The Bank established a
structure and detailed Business Environment Scan process to monitor the impact of C&E risks on its
business environment in the short, medium and long-term. The results of the preliminary (quarterly)
and final (annually) impact assessment have been incorporated in the Materiality assessment of C&E
risks as well as informed the Bank’s Business Strategy.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
184
2. Board of Directors (continued)
2.15. Stakeholder engagement (continued)
2.15.7. Environmental, Social, Governance (ESG) (continued)
Environmental Pillar (continued)
The gross amount of environmentally friendly loans as at 31 December 2023 was €24.5 million compared
to €20.9 million as at 31 December 2022.
During 2023, in order to enhance the awareness and skillset on ESG matters, the Group performed
relevant trainings to the Board of Directors and Senior Management as well as to members of control
functions and other members of staff.
Further information on climate and environmental matters is disclosed in ‘ESG Disclosures Report’
included in the Annual Financial Report.
For Social Pillar refer to earlier section 2.15.6 ‘Social Role of the Bank’ in this report.
Governance Pillar
The Group continues to operate successfully within a complex regulatory framework of a holding
company which is registered in Ireland, listed on two Stock Exchanges and run in compliance with a
number of rules and regulations. Its governance and management structures enable it to achieve present
and future economic prosperity, environmental integrity, and social equity across its value chain. The
Group operates within a framework of adequate controls, which enable risk assessment and risk
management based on the relevant policies under the leadership of the Board of Directors. The Group
has set up a Governance Structure to oversee its ESG agenda. Progress on the implementation and
evolution of the Group’s ESG strategy is monitored by the Sustainability Committee and the Board of
Directors. The Sustainability Committee is a dedicated executive committee set up in early 2021 to
oversee the ESG agenda of the Group, review the evolution of the Group’s ESG strategy, monitor the
development and implementation of the Group's ESG objectives and the embedding of ESG priorities in
the Group’s business targets. The Group’s ESG Governance structure continues to evolve, so as to better
address the Group’s evolving ESG needs. The Group’s regulatory compliance continues to be an
undisputed priority. For more details on the ESG and Climate Governance structure refer to ‘Pillar I –
Governance’ of TCFD, included in ESG Disclosures of the Annual report.
Finally, the Group’s aspiration to achieve a representation of at least 30% women in Group’s management
bodies (Defined as the EXCO and the Extended EXCO) by 2030, has been reached earlier with 33%
representation of women, as at 31 December 2023, in Group’s management bodies, following the
appointment of two female General Managers in Eurolife and General Insurance of Cyprus.
In 2023, the BOC PLC received a rating of AA (on a scale of AAA-CCC) in the MSCI ESG Ratings
assessment. The Institutional Shareholder Services (ISS) upgraded our Bank’s Corporate Governance &
Ethics rating (as part of its overall ESG Corporate Rating) to B+ in 2021.
2.15.8 2023 Triennial Board Evaluation performed by Morrow Sodali
As referred to above in section 2.14, in August 2023, the Group retained Morrow Sodali to perform an
externally facilitated evaluation of the effectiveness of the Board in line with the Bank’s Policy for the
annual evaluation of the Board. In 2020, Morrow Sodali (previously named Nestor Advisors) was chosen
through a Request For Proposal (RFP) process to perform the 2021 triennial board evaluation. It is a
common practice that the same external consultant performs the triennial board evaluation for two
consecutive years. The purpose of this is twofold; first, Morrow Sodali already possesses a deep
understanding and unique insight of the Board and Board Committees since they have already performed
the triennial review in 2021 and, additionally, in light of the fact that Morrow Sodali performed the
previous triennial review, they will be in a position to provide a thorough comparison between the results
of the two triennial reviews.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
185
2. Board of Directors (continued)
2.15. Stakeholder engagement (continued)
2.15.8 2023 Triennial Board Evaluation performed by Morrow Sodali (continued)
The objective of the 2023 Triennial Board Evaluation is to assess the Board’s strengths and its areas for
improvement and provide recommendations for improving Board effectiveness. Notably, the evaluation
aims to:
 Enhance the effectiveness of the Board and Board Committees by identifying possible
improvements in their composition, structure, functioning, ability to work as a team and
capacity to constructively challenge management.
 Develop shared views among Board members on how the Board can better guide and
contribute to the Group’s performance.
 Enhance comfort among Board members regarding the adequate fulfilment of their
collective responsibilities.
 Ensure compliance with the provisions of the CBC Governance Directive in relation to Article
16, which relates to the Evaluation of the management body.
 Facilitate alignment with developing best practice national and international
corporate governance standards particularly within the banking sector.
 Maintain and further bolster the confidence of shareholders and stakeholders in the
Board governance practices.
The evaluation of the Board was carried out with the following inputs:
1. Document review: A review and analysis of the constitutional documents and Board documentation
was carried out. This included documents such as the Corporate Governance Policy and Framework,
Board Committee Terms of Reference, Board and Committee packs and presentations.
2. Online questionnaire: Each Board member was asked to complete a web-based questionnaire
containing 157 questions, tailored to his/her position as Board member, Chair and Vice Chair of the
Board, Committee Chair and Committee member. The questionnaire was grouped into sections, each
dedicated to a key governance area derived from the Board evaluation.
3. Individual interviews: Following the confidential questionnaires, seven Board Directors were
interviewed in-person, and two Board Directors were remotely interviewed. In these interviews,
Board Directors were asked to elaborate further on specific challenges highlighted in their
questionnaire responses and other challenges with regards to the Board’s effectiveness. After each
Board Director interview, all NEDs completed a ‘Ranked Questionnaire,’ a brief set of multiple-choice
questions relating to the Group and the Board. These multiple-choice questions were used to further
assess the Board's cohesiveness and shared understanding of the strategy and key risks. Interviews
were also conducted with the Company Secretary, as well as key rapporteurs to the Board such as
the Chief Risk Officer, Internal Audit Director, and Chief Compliance Officer.
4. Meeting observation: Morrow Sodali attended the Board meeting that took place on the 19
th
of
December 2023 to observe Board process and dynamics present among Board members.
5. Judgment and past assessment comparison: The report on the 2023 Triennial Board
Performance Evaluation is primarily based on the responses to the questionnaire and views expressed
in the interviews. However, Morrow Sodali have also used their own experience and judgement to
identify some of the strengths and areas for improvement for the Board. They have also drawn upon
the findings from the Group’s 2022 internal Board evaluation and the 2020 Board evaluation, in order
to highlight the Group’s progress and identify further areas for improvement or continued gap with
best practice.
The key points raised during the 2023 Triennial Board Evaluation include the below:
1. The Board effectively allocates sufficient time to strategy discussions and performance monitoring,
with annual offsite meetings significantly aiding in focusing on the Group's long-term strategic
goals.
2. Additionally, it was identified that the Board maintains a clear distinction between its role and
management, ensuring a balanced approach to strategic and operational oversight.
3. Oversight of the Group's risk profile and internal control framework remains consistent, featuring
clear reporting lines and improved communication between the Chief Risk Officer and Risk
Committee Chair.
4. Improvements in sustainability efforts have been noted since the 2021 Triennial Board Evaluation
and the forthcoming inclusion of a sustainability expert i.e. Mr. Christian Hansmeyer on the Board
is seen as a positive step.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
186
2. Board of Directors (continued)
2.15. Stakeholder engagement (continued)
2.15.8 2023 Triennial Board Evaluation performed by Morrow Sodali (continued)
5. During the assessment, the Board's composition significantly contributed to its effectiveness,
featuring an appropriate mix of skills, diversity, and a balance between local and international
perspectives, well-suited to the Group's needs.
6. The Chair's leadership is notably effective, earning commendation for his preparedness, ability to
manage agendas, and foster innovative and meaningful discussions.
7. The Board operates efficiently, characterized by high-quality deliberations, constructive
contributions from directors, and a strong sense of team spirit. Effective communication is
maintained both among directors and between directors and senior management, underlining the
Board's cohesive and functional dynamics.
As part of the review, some key recommendations were identified to further enhance the Group’s
corporate governance framework. These recommendations are integral to the Group’s ongoing efforts to
uphold best practices in governance and stakeholder engagement. Firstly, the report underscores the
importance of maintaining a strong commitment to gender diversity within the Board. It advises that the
Board should persistently prioritize gender diversity as a critical agenda item, reflecting the Group’s and
Board’s dedication to fostering an inclusive and diverse leadership environment. Secondly, the evaluation
highlights the crucial role of the Senior Independent Director in facilitating transparent and effective
communication between the Board and the Bank's shareholders and other key stakeholders. It
recommends that the Senior Independent Director continues to report to the Board on his engagements
with shareholders and stakeholders. Thirdly, the report highlights the fact that the Board should continue
to identify opportunities for updates and training on developments on key areas – on banking, regulatory
compliance, ESG and other key topics. Additionally, the report explicitly suggests that the Board
recognises the critical importance of sustainability, technology, and digitalization in shaping the Group's
future. While time constraints have limited in-depth discussions, the Board sees great value in further
fostering informal discussions among all members to delve into these essential topics.
2.16. Interaction with principal subsidiaries
There are close interactions between the material subsidiary boards and the Board and their respective
committees, including the requirement for appointments to material subsidiary boards to be approved
by the Board. The chairs of the subsidiary audit and risk committees submit an annual report to the
respective Group Board committees on the effectiveness of these subsidiaries and attend and present at
the Group Board committees annually an account of the subsidiary board committees. The chairpersons
of the Company’s AC and RC are invited, respectively, to participate occasionally in the subsidiary audit
and risk committee meetings as observers. In addition, the CCO and other heads of control functions are
invited to attend these meetings as observers. The NCGC annually reviews and approves the Corporate
Governance Guidelines for Group Subsidiaries.
2.17. Loans to Directors and Other Transactions
Details of credit facilities to directors and other transactions with the Group are set out in Note 49 of the
Consolidated Financial Statements for the year ended 31 December 2023.
It is hereby confirmed that the credit facilities to Company directors (and related parties) or to its
subsidiary or associated company directors are granted in the normal course of the Company’s business,
under normal commercial and employment terms and with transparency. Furthermore, it is confirmed
that all relevant cases of bank facilities to Company directors and its subsidiary company directors are
forwarded for approval to the Board after the relevant proposal of the RC. The interested member of the
Board is neither present nor participates in the procedure.
All members of the Board complied with the relevant provisions of the 2019 CSE Code and the CBC
Suitability Directive as of 31 December 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
187
2. Board of Directors (continued)
2.18. Internal Controls
The Board is responsible for the adequacy and effectiveness of the system of internal controls, corporate
governance and risk management framework of the Group, which ensure amongst others that:
1. The governance framework is effective, monitored and periodically assessed.
2. The compliance framework is appropriate.
3. The integrity and internal controls of the accounting and financial reporting systems, as well as
the compliance with relevant legal / supervisory requirements and reporting standards, are
adequate.
4. The information security framework for the protection of confidential information is appropriate.
5. The process of taking appropriate steps to timely address any deficiencies is effective.
The system of internal controls, corporate governance and risk management framework have been
designed in accordance with the nature, scale, and complexity of the Group’s operations, in order to
provide reasonable but not absolute assurance against material misstatements, errors, losses, fraud or
breaches of laws and regulations.
The overall system of internal controls, corporate governance and risk management framework of the
Group include amongst others:
 A transparent organisational structure with clear reporting lines to Senior Management and the
Board.
 Board and executive committees with clear responsibilities.
 Three lines of defence model for the effective risk management and compliance across the Group.
 Formal policies and procedures.
 Monthly reporting by business lines to enable progress to be monitored, trends to be evaluated
and variances to be acted upon.
 Monthly meetings of committees to review performance.
 Code of Ethics setting out the principles and expectations governing the behaviour of all officers
and employees.
 Code of Conduct setting out the standards expected of all officers and employees.
 Whistleblowing policy, including processes and procedures, to be followed for independent
investigation of concerns raised by staff.
 Anti-Bribery policy in line with the UK regulatory guidance as well as with ISO37001.
 Conflict of Interest policy.
 Quarterly representations by all Divisions of the Bank to the CEO on the effectiveness of the
system of internal controls (policies, procedures and monitoring activities).
 Annual representations by all control functions of the Bank (Compliance, Risk, Information
Security) to the CEO on the effectiveness of the system of internal controls (policies, procedures,
monitoring activities).
The Board confirms that, through the AC and the RC, it has conducted reviews for the year ended 31
December 2023, regarding the effectiveness of the Group’s internal control and information systems, as
well as in relation to the procedures used to ensure the accuracy, completeness and validity of the
information provided to investors. The reviews covered all systems of internal controls, including
financial, operational and compliance systems, as well as risk management systems. In carrying out
their reviews, the AC and the RC receive regular business and operational risk assessments, regular
reports from the Internal Audit Director, the Compliance Director, the Chief Information Security Officer
and the Chief Risk Officer, other internal memos and external audit reports, as well as regulatory reports.
The Board receives a confirmation on an annual basis by the CEO for the effectiveness of compliance,
risk management and information security system of internal controls. Additionally, the Board, through
the AC and RC, has received confirmation that executive management has taken or is taking the
necessary actions to remedy all significant weaknesses identified through the operation of the Company’s
framework of internal controls, corporate governance, and risk management processes, and to
continuously modify or enhance the system of internal controls, corporate governance and risk
management framework as required by the Bank’s current transformation.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
188
2. Board of Directors (continued)
2.18. Internal Controls (continued)
Based on the internal audit work carried out in 2023, reasonable assurance is provided, with emphasis
on specific matters, on the design adequacy and operating effectiveness of the Group’s internal control
framework, corporate governance and risk management processes, for managing significant risks,
according to the risk appetite set by the Board. Emphasis is placed on the areas of Compliance and
Corporate Governance, Information Systems, Data Quality and Governance as well as Environmental,
Social and Corporate Governance (ESG), which require management’s attention to further manage
current, as well as any future risk exposures.
Overall, the Board through its committees, has reviewed the effectiveness of the system of internal
controls, corporate governance and risk management processes of the Group for the year ended 31
December 2023 and confirms their overall effectiveness either through the effective design and operation
of controls and has monitored management’s responses and actions to the findings and
recommendations and any mitigating actions in response.
The Group’s financial reporting process is controlled using documented accounting policies and
procedures supported by instructions and guidance on reporting requirements, issued to all reporting
entities within the Group in advance of each reporting period. The submission of financial information
from each reporting entity is subject to sign off by the responsible financial officer.
The internal control system also ensures that the integrity of the accounting and financial reporting
systems, including financial and operational controls and compliance with legal and supervisory
requirements and relevant standards, is adequate. The Group has in place an adequate financial
statement closing process by which transactions and events reflected in the Group’s accounting records
are processed to produce the financial statements, related disclosures and other financial reports which
relies either on the effective design and operation of controls or compensating controls and other
mitigating factors where these were inefficient. Where occasionally areas of improvement are identified,
these become the focus of management’s attention in order to resolve them and thus strengthen the
procedures that are in place. Areas of improvement may include design or operating deficiencies
identified, the formalisation of existing controls and the introduction of new information technology
controls, as part of the Company’s on-going digital journey.
Τhe Annual Financial Report and Interim Financial Report and quarterly financial results prior to their
submission to the Board are reviewed and approved by the ExCo. The Board, through the AC scrutinises
and approves the financial statements, results, announcements, and the Annual and Interim Financial
Reports and ensures that appropriate disclosures have been made. Detailed papers are prepared for
review and approval by the AC covering all accounting issues including presentations and disclosures.
This governance process enables both management and the Board to challenge the Group’s financial
statements and other significant disclosures before their publication.
The Group has developed an Integrated Risk Identification Framework which provides for the
identification, evaluation and management of the principal risks faced by the Group. The Group is
forward-looking in its processes to ensure emerging risks are identified. A separate section on emerging
risks is included in the periodic risk reports to the RC. The Key Risk Matrix is thus updated and is approved
by the RC and the Board through the ICAAP process. The Board is responsible for determining the nature
and extent of the principal risks the Group is willing to take in achieving its strategic objectives and
ensuring the maintenance of an effective risk management and oversight process across the Group.
The Board approves the Group Risk Appetite Statement on an annual basis and receives regular updates
on the Group’s risk environment and exposure to the Group’s material risk types through the Risk Report
reviewed monthly. A consolidated risk report and risk appetite dashboard is regularly reviewed by the
RC to ensure the risk profile remains within the Group’s risk appetite and satisfactory mitigating actions
are in place.
The Board confirms that it carries out a robust assessment of both principal and emerging risks, including
risks that might threaten the Group’s business model, future performance, liquidity etc.
Business continuity risks are mitigated to ensure that the Bank has business resilience and continuity
plans. They also ensure that the Bank operates on an on-going basis and limits potential losses in the
event of a severe business disruption.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
189
2. Board of Directors (continued)
2.18. Internal Controls (continued)
The Group’s risk management and internal control systems are regularly reviewed by the Board and are
consistent with the Guidance on Risk Management, Internal Control and Related Financial and Business
Reporting issued by the Financial Reporting Council and compliant with the requirements of Capital
Requirements Directive. They have been in place for the year under review and up to the date of the
approval of the annual report.
Information relating to the principal risks the Group faces and mitigation actions and risk management
is set out in Notes 44 to 47 of the Consolidated Financial Statements and in the ‘Risk and Capital
Management Report’, both of which form part of the Annual Financial Report for the year ended 31
December 2023, and in the ‘Pillar III Disclosures 2023’.
2.19. Going concern
The Board have made an assessment of the Group’s ability to continue as a going concern for a period
of 12 months from the date of approval of the 2023 Consolidated Financial Statements. The Directors
have concluded that there are no material uncertainties which would cast significant doubt over the
ability of the Group, the Company and BOC PCL to continue to operate as a going concern for a period
of 12 months from the date of approval of the Consolidated Financial Statements and the Financial
Statements of the Company. Detailed information relating to going concern is set out in section ‘Going
Concern’ of the Directors’ Report of the 2023 Annual Financial Report.
2.20. Group Code of Conduct and Whistleblowing Policy
The Group has set out the standards that are expected from all employees and directors of the Group in
a Code of Conduct along with guidance on how these standards should be applicable. The Code of
Conduct and a dedicated Code of Ethics are publicly available on the Group’s website.
The Group has a Whistleblowing Policy and a relevant written procedure in place for all employees,
including directors, which are in accordance with international practice. The policy is reviewed annually.
Its general principles are:
1. Concerns in good faith, about wrongdoing or malpractice can be raised in confidence without fear
of victimisation, discrimination, disadvantage, or dismissal.
2. Procedures for the reporting of any matters of concern are clearly provided. The persons concerned
must be able to bypass the main channels for whistleblowing if these prove inappropriate and use
the anonymous reporting line.
3. Disclosures are managed in a timely, consistent, and professional manner; and
4. The appointment of the Chairperson of the AC, an independent non-executive director, as a
Whistleblowing Champion with specific responsibilities.
The Board and the CEO are committed to this policy, which encourages staff to raise concerns. Regular
messages from the CEO to staff to speak up and bi-annual e-learning sessions, are addressed to all staff
and the Board of Directors to further increase awareness.
The Board, through the Audit Committee, reviews the effectiveness of the Whistleblowing Policy annually.
The Audit Committee also monitors the effectiveness of the Group’s whistleblowing procedures.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
190
2. Board of Directors (continued)
2.21 Other matters
Attendance of BOC PCL Board of Directors and Committees in 2023
The table below shows the attendance of the Directors at the Board and Committee meetings throughout
2023 for BOC PCL. Directors who complete three years since their previous election, retire and offer
themselves for re-election.
Name
Board of
Directors
AC HRRC NCGC RC TC
RC&AC
NCGC&HRRC
RC&TC
Efstratios-Georgios
Arapoglou
(Chairperson)
22 x x 13 x x x 6 x
Lyn Grobler (Vice-
Chair)
21 x 10 13 20 x 9 6 2
Paula Hadjisotiriou
16
21 20 x x 21 7 10 x 2
Constantine Iordanou 22 19 5 x x 7 10 4 2
Monique Hemerijck
17
10 x 2 x 9 x 3 2 1
Adrian J. Lewis
18
4 1 x x x x 1 x x
Eliza Livadiotou 22 x x x x x x x
Panicos Nicolaou 22 x x x x x x x x
Nicolaos Sofianos
19
19 20 x x 19 x 9 x 2
Ioannis Zographakis
20
21 x 5 10 10 6 5 6 2
Maria Philippou
21
14 x 8 4 x x x 4 X
Arne Bergren
22
4 5 x 2 x 2 2 2 x
Total meetings
22 20
10 13 21 7 10 6 2
2.22. Company Secretary
The Board appointed Ms. Katia Santis as the Company Secretary.
2.23. Internal Audit Director
The Board appointed Mr. George Zornas as the Internal Audit Director.
2.24. Chief Compliance Officer
The Board appointed Mr. Marios Skandalis as the Chief Compliance Officer.
16
Paula Hadjisotiriou resigned from the Board of the Bank and BOCH as of 31 December 2023.
17
Monique Hemerijck appointed to the Board of the Bank and BOCH as of 10 August 2023.
18
Adrian J. Lewis appointed to the Board of the Bank and BOCH as of 17 November 2023.
19
Nicolaos Sofianos resigned from the Board of the Bank and BOCH as of 11 December 2023.
20
Ioannis Zographakis resigned from the Board of the Bank and BOCH as of 31 December 2023.
21
Maria Philippou resigned from the Board of the Bank and BOCH as of 13 October 2023.
22
Arne Bergren resigned from the Board of the Bank and BOCH as of 31 March 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
191
3. Board Committees
The Board is assisted in the discharge of its duties by a number of Board committees whose purpose is
to consider in greater depth than would be practicable at Board meetings, matters for which the Board
retains responsibility. It is, therefore, crucial that effective linkages are in place between the committees
and the Board as a whole given that it is impractical for all independent directors to be members of all
the committees. Mechanisms are in place to facilitate these linkages including ensuring that there are
no gaps or unnecessary duplication between the remit of each committee and appropriate cross-
participation between committees where necessary. Alongside cross-participation the chairperson of each
committee reports on matters discussed during committee meetings to the subsequent scheduled
meeting of the Board. It is common practice that the Chair of the AC is a member of the RC, and the
Chair of the RC is a member of the AC. This common committee participation facilitates effective
governance across all finance and risk issues. Agendas can be aligned and overlap responsibilities can
be avoided.
The minutes of all meetings of Board committees are circulated to all directors for information and are
formally noted by the Board. Papers for all Board committees are also made available to all directors,
irrespective of membership. Such circulation of minutes and papers is restricted should there be a conflict
of interest or issues of personal confidentiality.
The statutory committees are the AC, the RC, the NCGC and the HRRC. Each committee operates under
terms of reference approved by the Board annually. The remit of each committee is set out in brief in
the diagram above, and more information about the committees and their work can be found further
below. The terms of reference of the committees are reviewed annually by the relevant committees and
by the Board, are based on the relevant provisions of the 2019 CSE Code and 2018 UK Code and the
CBC Directive on Internal Governance (where applicable) and are available on the Group’s website
(www.bankofcyprus.com.cy/group) or by request to the Company Secretary.
In addition to the statutory committees, the Board has in place a Technology Committee (‘TC’), which is
mandated to drive the digital transformation of the Bank and BOCH. Each of the committees’ structure
facilitates open discussion and debate, with steps taken to ensure adequate time for members of the
committees to consider proposals which are put forward. In carrying out their duties, Board committees
are entitled to take independent professional advice, at the Group’s expense, where deemed necessary
or desirable by the committee members.
The overall responsibility for approving and monitoring the Group’s strategy, risk appetite and policies
for managing risks lies with the Board, which exercises this responsibility through two of its main
committees, namely the RC and the AC.
Board of Directors
NCGC
Reviews the
composition of
the Board
Recommends the
appointment of
new Directors
Considers
succession plans
for key Board and
ExCo positions
Oversees the
annual Board
effectiveness
review
Group's
sustanability
strategy
HRRC
Sets overarching
principles and
parameters of
remuneration across
the Group
Considers and
approves
remuneration for the
Chair, Vice-Chair,
Executive Directors,
other senior
executives and
certain Group
employees
Oversees
remuneration issues
AC
Assesses the integrity
of the Group’s
financial statements
Evaluates the
effectiveness of the
Group’s internal
controls
Scrutinises the
activities and
performance of
internal and external
auditors
Reviews and monitors
the Group’s
whistleblowing
policies
RC
Monitors and
recommends the
Group’s risk appetite
Monitors the Group’s
financial, operational,
conduct and legal risk
profile
Oversees conduct and
the leadership of the
Risk and Information
Security functions
Considers and reports
on key financial and
non-financial risk issues
Oversees ESG and
cultural/ethical risks
TC (Non-
Statutory)
Oversees the
overall role of
technology in
executing the
business strategy
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
192
3. Board Committees (continued)
3.1 Nominations and Corporate Governance Committee
NCGC purpose and responsibilities
The NCGC plays a critical role in shaping the composition and functionality of the Board, as elucidated in
its terms of reference available at www.bankofcyprus.com.cy/group. Annually reviewed and approved by
the Board, these guidelines delineate the NCGC's core responsibilities, which include ensuring the Board
comprises members proficient in fulfilling directors' duties and responsibilities in accordance with the
requirements set out in the CBC Suitability Directive. The NCGC assists the Board with member
recruitment, making informed recommendations considering the existing Board’s composition and
effectiveness.
Moreover, the NCGC is instrumental in proposing appointments of Key Function Holders, except for the
heads of control functions, and scrutinising succession plans for directors and senior management. It
also meticulously oversees the creation of a diverse succession pipeline. An additional responsibility
involves the continual review and enhancement of the Board's governance arrangements, ensuring
alignment with prevailing best corporate governance practices and standards.
Furthermore, the NCGC has an oversight role in subsidiary governance and the Group’s sustainability
strategy, ensuring each aligns with proportionate governance arrangements and contributes towards
achieving economic prosperity, environmental integrity, and social equity, respectively. The NCGC also
actively supports the Board in strategic oversight, facilitating the development and execution of the
Strategic Plan. A record of the matters deliberated, and actions undertaken by the NCGC throughout the
year is presented in a subsequent table, underscoring its pivotal role in the selection, appointment, and
succession planning of executive directors and senior managers.
NCGC activities in 2023
The NCGC, in 2023, actively communicated its activities and decisions to the Board, ensuring
transparency and accountability in how it managed its responsibilities. A pivotal area of focus was
bolstering the composition of the Board, demonstrating a commitment to continuous improvement and
adaption in governance practices. Furthermore, the Committee diligently oversees the Group's
governance structures to ascertain that the highest standards and practices of corporate governance are
consistently maintained throughout the Group and its subsidiaries. This oversight includes an annual
review and approval of the Committee's terms of reference by the Board, ensuring their relevance and
effectiveness in guiding the Group's governance objectives.
NCGC membership and meeting attendance
Details on NCGC Members, meetings, and attendance at meetings during 2023 are outlined below:
NCGC members Meetings held Meetings attended
Efstratios
-
Georgios (Takis)
Arapoglou
13 13
Ioannis Zographakis
23
13 10
Lyn Grobler 13 13
Arne Bergren
24
13 2
Maria Philippou
25
13 4
23
Ioannis Zographakis became a member of the NCGC as of 31 March 2023 until his resignation from the Board of
BOCH and the Bank as of 31 December 2023.
24
Arne Bergren resigned from the Board of BOCH and the Bank as of 31 March 2023.
25
Maria Philippou resigned from the Board of BOCH and the Bank as of 13 October 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
193
3. Board Committees (continued)
3.1. Nominations and Corporate Governance Committee (continued)
Matters considered and actions taken by the NCGC in 2023
Board Composition and succession
NCGC considerations NCGC conclusions
1. Nomination of Ms. Monique Hemerijck.
Nomination of Mr. Adrian J. Lewis.
The NCGC recommended to the Board for
approval the nomination of Ms. Monique
Hemerijck and Mr. Adrian J. Lewis. The NCGC
noted that their appointment will enhance the
overall collective suitability of the Board.
2. Enhancement of the knowledge, skills, and
experience template of Directors to
accurately record the nature of the
skills/experience (executive level, board
level, or both) as well as the depth of the
skills/experience, so that a holistic
approach in relation to the nature and
depth of skills and experience of Directors
is adopted.
The template submitted to the NCGC for approval
contained key areas of expertise to fit and proper
assessment and records the nature of the
skills/experience (i.e. executive, board or both) as
well as the depth of the skills/experience. As it
was noted during the meeting, in this manner, a
holistic approach was adopted in relation to the
nature of the skills/experience of Directors as well
as for the depth of the skill/experience in
question. All Board Directors have been asked to
complete this template to facilitate the finalisation
of the first 2-year Succession Strategy Plan. The
NCGC recommended the template to the Board
for approval.
3. Nomination of Mr. Christian Hansmeyer on
the Board as an ESG and sustainability
expert.
The NCGC recommended the nomination of Mr.
Christian Hansmeyer to the Board for approval.
The NCGC concluded that the appointment of Mr.
Hansmeyer will significantly enhance the overall
in-depth knowledge of the Board on ESG and in
general sustainability matters. This is a vital
addition in relation to the overall collective
suitability of the Board.
4.
Board guidance for further enhancement of
the Group’s ethical business culture in
relation to the twelve pillars for the
development of an improved business
culture issued by the Institute of Business
Ethics.
It was decided by the NCGC that in cooperation
with the Chief Compliance Officer, any
suggestions/ recommendations on any action that
needs to be taken, shall be submitted to the
NCGC and the Board.
5. The 2-year Board Succession Strategy
Plan.
The members of the NCGC exchanged views and
approved the 2-year Board Succession Strategy
Plan. It was noted that the 2-year Board
Succession Strategy Plan aims to ensure full
adherence with the CBC Governance Directive
and the CBC Suitability Directive. The 2-year
Board Succession Strategy Plan sets an accurate
picture of the Board and ensures that the Board
in the next 2 years addresses key succession
changes.
6. Assessment of the suitability and
nomination of Mr. Stuart Birrell as a non-
executive independent board member.
The NCGC recommended the nomination of Mr.
Stuart Birrell to the Board for approval. The NCGC
further concluded that based on his extensive
experience, Mr. Stuart Birrell’s appointment will
significantly enhance the Board’s experience and
skillset in cybersecurity and technology matters.
7. Appointment of Ms. Monique Hemerijck as
Chair of the RC.
As of 1 October 2023, Ms. Monique Hemerijck
replaced Ms. Paula Hadjisotiriou as Chair of the
RC.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
194
3. Board Committees (continued)
3.1. Nominations and Corporate Governance Committee (continued)
Annual Board Effectiveness Evaluation
NCGC considerations NCGC conclusions
1. The 2023 Triennial independent evaluation
of the Board.
The Committee recommended to the Board for
approval, the external process in relation to the
evaluation of the Board, Board committees, the
Chairman and individual Board Directors,
engaging Morrow Sodali, a specialist corporate
governance agency to support the Board in this
external review.
Disclosure and Governance
NCGC considerations NCGC conclusions
1.
Review and approval of
the
revision of the
Corporate Governance Framework of the
Group.
2. Approval of the 2023 action plan for
corporate governance compliance with best
practices.
3. Review and recommendation for approval
to the Board of the Group Corporate
Governance Policies including the Board
Nominations and Diversity Policy, the
Group Policy on the Suitability of Members
of the Management Body and Key Function
Holders, the Group Induction and Training
Policy and the Corporate Governance Policy
and Framework.
4. Review of the Annual Corporate
Governance Report.
5. Review of the quarterly corporate
governance reports.
6. Committee Terms of Reference.
7. Enhancement of the fitness and probity
process in relation to the appointment of
the new Board Directors.
The Committee approved changes to internal
policies to ensure continued compliance with all
applicable corporate governance requirements
and best practice guidelines.
As of 31 December 2023, there was 43% female
representation on the Board. The Board
Nominations and Diversity Policy included a target
of ensuring a 40% female representation on the
Board.
The Group remains compliant with applicable
regulations in respect of the Board level
governance. More details on the Group’s
compliance with corporate governance
requirements can be found on pages 159 to 161
of this report.
The NCGC also noted the overall enhancements in
the suitability assessment process both on an
individual and collective basis, and the training of
the Board with the deployment of external
consultants.
Independence and Time commitments
NCGC considerations NCGC conclusions
1. The Committee assessed appointment of
Board Directors on the Board of third
companies, any potential conflicts of
interest and time commitment.
The NCGC assessed cases where directors of the
Board were nominated for appointment to boards
of third companies for possible conflict of interest,
time commitment issues and limits to the number
of directorships a director can hold at any time.
All non-executive independent directors (i.e.
other than Mr. Zographakis who was considered
not to be independent at the time) remained
independent as to character and judgement. All
directors are considered to have appropriate roles
including capabilities and skills.
The NCGC also noted the annual and bi-annual
declarations (Conflicts of Interest, Declaration of
Independence as well the Annual Statement of
Changes).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
195
3. Board Committees (continued)
3.1. Nominations and Corporate Governance Committee (continued)
Sustainability
NCGC considerations NCGC conclusions
1. Review of ESG disclosures in Pillar III.
2. Approval of the Annual Sustainability
Report.
3. Review of the ESG Working Plan.
The NCGC members were briefed in relation to the
updated Sustainability and ESG disclosures, which
were reflected in the Annual Sustainability Report
as well as the relevant ESG disclosures
incorporated within the Annual Financial Report
and Pillar III Disclosures. The disclosures enhance
uniformity with other EU banks.
The relevant disclosures and reports were
approved by the Committee.
Subsidiary oversight
NCGC considerations NCGC conclusions
1.
The Committee continued to focus on the
subsidiary governance policy and practice
of material subsidiaries and related
appointments.
2. The Committee reviewed and approved the
revision of the Corporate Governance
Guidelines for Group Subsidiaries.
3. Approval of appointment of Board Directors
of subsidiaries to the Boards of third
entities.
Alignment of the corporate governance
framework of the subsidiaries with that of the
Group taking into consideration proportionality.
Approval of appointment of a subsidiary NED to
the board of Jinius Ltd.
3.2 Human Resources and Remuneration Committee
HRRC purpose and responsibilities
The HRRC oversees core human resources activities including, inter alia, the performance related
process, talent management, learning & development, and staff optimisation. It also reviews human
resources initiatives that foster employee engagement, such as the Organisational Health Index project
(‘OHI’), the application of a holistic internal communication programme, the implementation of the ‘Well-
at-Work’ initiative - an employee wellbeing/care programme, and the application of fair and transparent
recognition initiatives across the Group.
The HRRC holds delegated responsibility from the Board for the oversight of the Group-wide
Remuneration Policy with specific reference to the senior management, heads of, and senior officers in,
internal control functions and those employees whose activities have a material impact on the Group’s
risk profile. The HRRC is responsible for overseeing the annual review of the Group Remuneration Policy
with input from the Control Functions which is then proposed to the Board for ratification. In addition,
the Board, through the HRRC, is ultimately responsible for monitoring the implementation of the Group
Remuneration Policy. The remuneration of non-executive directors is determined by the Board following
the recommendation of the Chairperson of the Board while the remuneration of the Chairperson and
Vice-Chair is recommended by the HRRC. Both are subject to approval by the shareholders. No director
is involved in decisions regarding his/her own remuneration.
The HRRC exercises oversight of negotiations with the labour union in Cyprus and provides guidance
and support to management. It advises the Board on the approval of the collective agreements and
reviews the framework of industrial relations and collective agreements to ensure they are relevant to
best practices and conducive to good performance.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
196
3. Board Committees (continued)
3.2 Human Resources and Remuneration Committee (continued)
HRRC purpose and responsibilities (continued)
The HRRC reviews any voluntary retirement / separation schemes for BOC PCL and material subsidiaries
in cooperation with the Human Resources Division (‘HRD’) and succession planning for all divisions and
subsidiaries for senior management throughout the Group. It also reviews the annual training plan as
prepared by HRD and approved by the CEO and ensures that it creates and/or develops the right
competencies and behaviours that are necessary for meeting the Group’s strategic priorities.
The HRRC reviews and approves the content of any resolutions submitted for approval at the general
meeting of the shareholders. These resolutions are prepared by the Company Secretary in cooperation
with the Group’s legal advisers in accordance with Annex 3 of the CSE Code and concern possible plans
for the compensation of members of the senior management in the form of shares, share warrants or
share options.
HRRC activities in 2023
In 2023, the HRRC focused on several key priorities. Firstly, there was an emphasis on the continuous
modernisation of pay practices, which included the implementation of the Long-Term Incentive Plan in
2022 (the ‘LTIP’) and the design, approval, and announcement of a Short-Term Incentive Plan (the
‘STIP’) in 2023. Secondly, attention was given to the Senior Management’s performance evaluations and
succession planning. Lastly, the progress of transformational and people-related initiatives, such as
Organizational Health, was prioritised.
The LTIP was approved by the 2022 AGM, which took place on 20 May 2022, and is effective for 10 years
since its adoption. It involves the granting of share awards to eligible participants and is driven by
scorecard achievement, with measures and targets set to align pay outcomes with the delivery of the
Group’s strategy. The employees eligible for the awards are the members of the Extended EXCO. The
LTIP stipulates that performance will be measured over a 3-year period for financial and non-financial
objectives to be achieved. At the end of the performance period, the performance outcome will be used
to assess the percentage of the awards that will vest. The LTIP represents a further step in the Group’s
efforts to enhance its remuneration structure by introducing a variable pay component within the total
compensation package of the members of the eligible group, as per best practice and in accordance with
EU banking industry regulations.
In August 2023, the Board via the HRRC approved the granting of awards for the 3-year performance
period FY2023-2025, as per the terms of the approved LTIP and the relevant authority provided from
the Shareholders at the 2022 AGM. The design parameters, eligibility and target award levels are the
same as those for the 2022 awards. The Key Performance Indicators (the ‘KPIs’), and relevant weights
are also the same as those of the 2022 awards, but with updated targets/thresholds for this performance
period, (as per the Group’s strategic plan).
In March 2023, the Board via the HRRC approved the implementation of a short-term incentive plan
(‘STIP’). The Plan introduces pay-at risk for a wide group of employees, including executive directors of
the Company, and is expected to assist in the further enhancement of a pay for performance culture,
drive performance against the Group’s annual objectives and enable the attraction and retention of
talent. STIP awards will be granted on an annual basis in the form of cash (subject to any applicable
regulatory restrictions), provided the Group achieves its pre-defined financial targets. The performance
of the Group and each eligible employee will be evaluated after the end of each respective performance
period.
The Board is informed through the HRRC on staff surveys and is updated on progress in implementing
actions in response to staff feedback. The main source of feedback relates to the Group Organizational
Health Index (OHI) which focuses on – and simultaneously examines - all aspects of the Group’s work
culture as well as the way it operates as an organization. The first full OHI Survey took place in 2021
and action plans were set in place for all priority areas identified. Four members of the Senior
Management Team act as sponsors to each priority area (such as knowledge sharing, career
opportunities, personal ownership, and employee involvement) and various initiatives have been - and
continue to be - launched under each area, with the support of more than 25 Health Champions. Two
pulse surveys took place in 2022 and a second full OHI Survey followed in October 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
197
3. Board Committees (continued)
3.2. Human Resources and Remuneration Committee (continued)
HRRC activities in 2023 (continued)
The HRRC considered and recognised the strength of the mechanisms in place to engage with and hear
from employees; in particular, there are methods of gathering and documenting workforce views and
considering how themes and viewpoints of the workforce are presented to and considered by the Board
for discussion and debate, with the aim of encouraging a meaningful dialogue between the Board and
the workforce on a timely basis.
The Board agreed to adopt an alternate approach to the workforce engagement methods set out in the
2018 UK Code. The primary reason for taking a different approach is that there is regular interaction
with the labour union which represents 97.7% of staff. Remuneration within the Group is based on
collective agreements including remuneration of executive management except that of the CEO which is
a fixed-term contract and there are certain restrictions on variable remuneration for all employees
including executive directors. The Remuneration Policy covers all employees including executive
directors. The information from surveys, the whistleblowing process, other information reported from
the Working Team on culture, disciplinary actions, grievance’s themes etc., were reported to and
discussed by the HRRC before being reported to the Board. It is hereby confirmed that the workforce
engagement method that the Board has settled on, is through internal communication initiatives
facilitated by the HRD and reported to the Board. The HRD engaged with the workforce by conducting
numerous meetings with the purpose of providing a detailed explanation in relation to the processes and
procedures affecting the granting of merit pay. Furthermore, meetings at a divisional level with the
employees were also held with the aim to enhance transparency and clarity in relation to the matter of
merit pay. The Group engages with staff representatives (trade union) during the annual process of
granting pay increases, including the granting of merit pay awards. In addition, staff representatives
have been informed with regards to the granting of STIP awards. Also, disclosures regarding the LTIP
have been provided, relating to the level of the awards, the conditions and the vesting cycles.
HRRC membership and meeting attendance
Details on HRRC Members, meetings, and attendance at meetings during 2023 are outlined below:
HRRC members Meetings held Meetings attended
Maria Philippou
26
10 8
Constantine Iordanou
27
10 5
Lyn Grobler 10 10
Monique Hemerijck
28
10 2
Ioannis Zographakis
29
10 5
26
Maria Philippou was the Chair of the HRRC until her resignation on 13
October 2023.
27
Constantine Iordanou became the Chair of the HRRC as of 13
October 2023.
28
Monique Hemerijck became a member of the HRRC on 13 October 2023.
29
Ioannis Zographakis was a member of the HRRC from 1 January 2023 until 1 July 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
198
3. Board Committees (continued)
3.2. Human Resources and Remuneration Committee (continued)
HRRC membership and meeting attendance (continued)
Matters considered and actions taken by the HRRC in 2023
Remuneration Policy & Practices
HRRC considerations HRRC conclusions
 Group Remuneration Policy
The HRRC
reviewed and recommended to the
Board the approval of the revised Remuneration
Policy, which was updated in accordance with the
regulatory framework. The HRRC commented on
and acknowledged the boundaries of the
Collective Agreement on the remuneration policy
and encouraged the enhancement of performance
based pay practices as a future direction.
 Material Risk Takers
The HRRC (jointly with NCGC)
considered the
process for the identification and oversight of the
Group’s Material Risk Takers and reviewed and
approved the list of Material Risk Takers (via the
RC).
 Implementation of a Short-Term Incentive
Plan & STIP Framework
The HRRC engaged with management in respect
of the establishment of short-term variable
remuneration for employees and Executive
Directors considering also established best
practises. The HRRC reviewed and recommended
to the Board the implementation of a Short-Term
Incentive Plan (‘STIP’ or the ‘Plan’) and approved
the STIP Framework.
 Long-Term Incentive Plan – 2023 Award
The HRRC reviewed and recommended to the
Board the granting of awards for the 3-year
performance period FY2023-2025, as per the
terms of the approved LTIP and the relevant
authority provided from the Shareholders at the
2022 AGM.
 Merit Pay
The HRRC has been kept informed about the
progress of implementation of merit pay.
Disclosure & Governance
HRRC considerations HRRC conclusions
 Revision of Terms of Reference of HRRC
The HRRC recommended amendments to its
terms of reference to ensure continued
compliance with applicable regulation.

Approval of the Remuneration Policy Report
in the Annual Financial Report
The Report was reviewed and approved.
 2022 HRRC Self-Assessment Results (part of
the Annual Board Performance Evaluation)
The HRRC reviewed and discussed the 2022 Self-
Assessment Results, which were presented to the
HRRC for noting and 2023 Key Areas of Focus.
 Proposal for organizational changes and
salary increases of Control Functions
The HRRC reviewed and recommended for Board
of Directors approval changes in the
organisational structure and salaries of Senior
Officers of Control Functions (via the respective
Committees).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
199
3. Board Committees (continued)
3.2. Human Resources and Remuneration Committee (continued)
HRRC membership and meeting attendance (continued)
Performance Appraisal, Talent & Succession
HRRC considerations HRRC conclusions
 2022 Performance Appraisals and 2023 OKRs
for Senior Management (excl. Control
Functions)
The HRRC, jointly with NCGC, recommended to
the Board of Directors the approval of the 2022
Performance Appraisals and the 2023 OKRs for
Senior Management.
 2023 Succession Plan
The HRRC, jointly with NCGC, recommended to
the Board of Directors the approval of the
succession plan.
 2022 Group Performance Appraisals –
Results & Key Findings
The HRRC was provided a detailed analysis report
of the 2022 Performance Appraisals, as well as
main findings, development areas and key
activities planned for 2023.
3.3 Risk Committee
RC purpose and responsibilities
The Committee ensures the implementation of a comprehensive risk management framework across the
Group, meticulously reviewing the aggregate risk profile. This includes a thorough evaluation against the
predetermined risk appetite for various risk types and confirming the continued suitability of both the
risk profile and risk appetite.
The Committee aids the Board in executing the Group’s risk strategy, guaranteeing a robust approach to
risk management. A critical function involves overseeing the identification, assessment, control, and
monitoring of diverse risk categories. These include financial/economic risks as well as non-financial risks
like operational, technological, tax, legal, information security, model, reputational, compliance risks,
and Environmental, Social, Governance (ESG)/Climate-related and Environmental (C&E) risks, in
collaboration with the respective Board Committees. The Committee is responsible for contemplating,
challenging, and recommending the Group's overall Risk Appetite to the Board. It reviews the Group's
aggregated Risk Profile and performance against the set Risk Appetite/tolerance, reporting its findings
to the Board.
Further to the above, the Committee remains vigilant about potential impacts of new developments that
might affect the Group’s risk profile. It focuses on identifying and evaluating future potential risks,
particularly those that might not have been sufficiently addressed in previous reviews due to their
uncertainty and novelty.
The Committee gives detailed consideration to existing and emerging risks, through a balanced agenda
which ensures sufficient focus on standing areas of risk management through the Group Risk
Management Framework, together with specific attention being given to those emerging risks which
could significantly impact the Group and/or its customers.
The Committee ensures that the Group's overall Risk Profile and Risk Appetite remain suitable in the
evolving external environment. The Committee guarantees effective, continuous oversight of the Group's
risk management and mitigation activities. This includes supervising the Group's control processes,
training, culture, information and communication systems and procedures for ongoing evaluation of their
effectiveness.
Additionally, to the above, the Committee also takes responsibility for managing all risks associated with
third-party interactions and outsourcing.
Learning & Development
HRRC considerations HRRC conclusions
 2023 Training Plan
The HRRC has been
presented an overview of the
training offered to staff in 2022 and an outline of
the 2023 Training Plan and approach.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
200
3. Board Committees (continued)
3.3. Risk Committee (continued)
RC activities in 2023
The Committee's role included, amongst others, recommending the Group's Risk Appetite Framework
and Risk Appetite Statement. In this context, the Committee dealt with breaches of risk appetite,
developed remediation plans and oversaw necessary communications.
Further to the above, the Committee was instrumental in formulating policies for managing credit,
market, liquidity, and cyber/information security risks. This involved approving other essential risk
policies as well. A significant part of the RC responsibility included regularly assessing the Group’s overall
risk profile and emerging risk themes. This assessment was bolstered by direct inputs from the Chief
Risk Officer and Chief Information Security Officer and involved a thorough review of risk reports and
the risk appetite dashboard.
Reports on the Group’s operational and technology capability were another key area of focus for the
Committee, especially updates on cyber risk management, IT resilience, IT Service Continuity
Management and Data Management.
The Committee's agenda also included a detailed review and challenge of the assumptions, scenarios,
and outputs of the 2023 Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity
Adequacy Assessment Process (ILAAP). Recommendations from these reviews were then presented to
the Board for approval. In addition to these tasks, the Committee stayed informed about the latest and
impending regulatory developments, receiving monthly updates and reviewing the risk report, which
highlighted key issues and provided insights into the Group's Risk Appetite Statement, as well as top
and emerging risks. The emerging risks and risk profile were reviewed on a quarterly basis, with updates
provided through risk report submissions including for the insurance subsidiaries.
To ensure a unified approach across subsidiary companies, the Committee established core terms of
reference for subsidiary company committees. This included endorsing any significant changes to these
terms and appointments to the committees. Furthermore, detailed information relating to Group risk
management was outlined in specific sections of the Consolidated Financial Statements and the Risk and
Capital Management Report.
Deep dive discussions were a regular feature, concentrating on areas such as REMU, Corporate & SME
Banking, International Banking, Consumer Banking, and the RRD End-to-End process. These discussions
also planned to encompass areas like Wealth, Treasury, and the Digital Economy Platform (DEP). In-
depth discussions on SREP results and data governance issues were also a significant part of the
Committee's work. Additionally, the Committee reviewed and approved or recommended for approval
various credit facilities exceeding €100 million, relating to restructurings and/or contractual or non-
contractual write-offs.
Lastly, the Committee was kept abreast of developments and market practices through dedicated training
sessions. These sessions covered a wide range of topics, including Basel III Implementation, Quantitative
Impact analysis for Capital Adequacy and Leverage, Data & Report Quality Framework, IFRS 9,
Information Security & Cyber Security, and the Bank’s models.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
201
3. Board Committees (continued)
3.3. Risk Committee (continued)
RC membership and meeting attendance
Details on RC Members, meetings, and attendance at meetings during 2023 are outlined below:
RC members Meetings held Meetings attended
Paula Hadjisotiriou
30
21 21
Monique Hemerijck
31
21 9
Lyn Grobler 21 20
Ioannis Zographakis
32
21 10
Nicolaos Sofianos
33
21 19
Matters considered and actions taken by the RC in 2023
Risk management Division (RMD)
RC considerations RC conclusions
1. Annual review and update of the Risk Appetite
Framework and Risk Appetite Statements.
2. Risk Appetite Framework of Digital Economic
Platform.
3. Annual and quarterly ICAAP & ILAAP,
including assumptions, stress scenarios and
reverse stress scenarios.
4. Financial Plan Risk Assessment
5. Resolution planning activities
6. Annual Recovery Plan.
7. Risk Management Division (RMD) Charter,
Budget, Strategy and RMD goals monitoring
and Annual and Monthly Updated Risk
Management Report (including HR issues and
quarterly update on insurance business).
8. Revision of all Risk Management Division
Policies and other key policies.
9. New Emerging risks report.
10. REMU (Real Estate Management Unit) update
including review of property portfolio.
11. Regulatory update/Review of regulatory
correspondence. Follow-up of SREP and on-
site inspections (OSI IFRS 9, OSI BCBS 239).
12. Risk Management Division (RMD) Declaration
of Independence.
13. Renewal of BBB, D&O and Cyber Insurance
Policies.
14. Management of IRRBB.
15. Risk Culture dashboard.
16. Organisational changes in Credit Underwriting
process.
17. Review of material risk takers.
1. The Risk Appetite Framework was approved by
the RC.
2. New indicators, as well as changes to existing
RAS indicators’ thresholds were reviewed,
discussed, and approved by the Committee.
3. The RC has reviewed and approved the ICAAP
and ILAAP exercises, including the assumptions
used in the Stress Scenarios. Furthermore, on a
quarterly basis the Committee has reviewed
and discussed the quarterly ICAAP and ILAAP
results.
4. The Recovery Plan was approved.
5. The revision of all Risk Management Division
Policies and other key policies were discussed
and approved.
6. The REMU updates were noted.
30
Paula Hadjisotiriou was the Chair of the RC until 30 September 2023. Paula Hadjisotiriou resigned on 31
December 2023.
31
Monique Hemerijck has been the Chair of the RC since 1 October 2023.
32
Ioannis Zographakis has ceased to be a member of the RC as of 1 July 2023.
33
Nicolaos Sofianos resigned on 11 December 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
202
3. Board Committees (continued)
3.3. Risk Committee (continued)
RC membership and meeting attendance (continued)
Credit Risk
RC considerations RC conclusions
1.
Credit quality dashboard.
2. Asset Quality Target Setting.
3. Credit Exposures greater than €100m and
proposed strategies to reduce, increase or
maintain.
4. Analysis of Stage 2 loans.
5. Review of large exposures and Capital
Repayment At Maturity (CRAM) limits.
6. Update on CRAM loans.
7. Exceptions to policies approved by Credit
Committee 3 in 2023.
1.
The Credit Quality Dashboard provides a
monthly and quarterly update on asset quality
and analysis of the main credit risk areas of
the Group. The context of the report is
updated to cover areas of focus during periods
of time or specific portfolios. The report is
discussed by the RC which regularly considers
the overall asset quality and credit risk profile
of the Group.
2. The RC reviewed and approved the Credit Risk
related policies.
3. The RC reviewed and approved the Credit
Applications approved by Credit Committee 3.
4. The review of large exposures and Capital
Repayment At Maturity (CRAM) limits were
considered by the Committee at regular
intervals.
Capital/Market/Liquidity Risk
RC considerations RC conclusions
1.
Annual Review of Credit Limits
(counterparty & country).
2. Annual Review of Market Risk Limits.
3. Authorisation Levels for Market Risk
Related Limits.
4. Report on Property Risk.
5. Revision of Market Risk policies.
6. MREL Compliance plan.
7. Economic Capital Recalibration.
8. Stress Test Results.
9. Interest Rate Risk Hedging Strategy.
10. Bond Investment Strategy.
1.
The RC has reviewed, challenged
and
approved the Bond Investment strategy.
2. The RC has reviewed and approved market,
country and counterparty limits.
3. The revision of the Market Risk policies was
discussed and approved by the RC.
4. The Stress Test Results were discussed, and
the RC noted the submission.
5. In relation to the MREL Compliance Plan 2023
the RC recommended submission to the
Board for approval.
6. The Interest Rate Hedging Strategy was
formulated with the aim to protect the Bank’s
NII from reductions in market interest rates.
Various hedging options available were
discussed and analysed in the meetings.
ESG
RC considerations RC conclusions
1.
Climate & environmental risk
implementation plan update.
2. Feedback from regulator on climate-related
and environmental risks activities and
progress on activities of implementation
plan was closely monitored by the RC.
3. Materiality assessment and risk
identification for climate risks.
1.
The Climate & environmental risk
implementation plan was noted.
2. The RC considered and approved the
Materiality Assessment for Climate Risk.
3. The RC received reports on climate risk
management, while maintaining oversight of
delivery plans to ensure that the Group
develops robust climate and environmental
risk management capabilities.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
203
3. Board Committees (continued)
3.3. Risk Committee (continued)
RC membership and meeting attendance (continued)
Operational Risk
RC considerations RC conclusions
1.
Annual RCSA, Specialised Fraud
Assessment and BCP reviews & Test Plan
for Y2023.
2. Revision of Policies.
3. Business Continuity Plans’ test results.
4. Annual Outsourcing Risks Report.
1.
The Committee received regular reporting on
key operational risk indicators and was
briefed by management on a number of
operational risks topics, including those
relating to technology risk, fraud, third party
risk management, cyber and information
security.
2. The Annual RCSA, Specialised Fraud
Assessment and BCP reviews & Test Plan for
Y2023 was approved by the RC.
3. Operational Risk Policies were approved by
the RC.
Information Security
RC considerations RC conclusions
1.
Monthly Information Security Reports (incl.
Penetration Test results).
2. Technology Risk Report.
3. Annual Information Security Report.
4. Revision and approval of comprehensive
list of ICT/IS KRIs.
5. Updates on related regulatory compliance
efforts with regards to Information
Security.
6. Updates on Cyber/Information Security
Incidents - Update on the results of the
Enterprise Yearly Penetration Testing
Results.
7. Update on the Information Security
Maturity Assessment.
8. Approval of Information Security Division
Charter and Yearly Budget.
9. Information Security Yearly Declaration of
Independence.
1.
The monthly updates with regards to
Information Security were presented at the
RC meeting throughout 2023 on a monthly
basis.
2. The semi-annual Technology reports for
Y2023 was reviewed by the RC.
3. The Annual Information Security Report for
Y2023 was reviewed and approved by the RC.
4. The suggested changes for the ICT/IS KRIS
for Y2023 were reviewed and approved by the
RC.
5. The RC was briefed on a monthly basis for the
regulatory compliance with regards to
Information Security.
Subsidiaries’ oversight
RC considerations RC conclusions
1.
Semi
-
annual reports of the subsidiary risk
committees of Eurolife & General Insurance
Ltd.
2. Quarterly update on insurance business
through the monthly risk report.
The reports
in relation to the subsidiary risk
committees were discussed by the members of
the RC.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
204
3. Board Committees (continued)
3.3. Risk Committee (continued)
RC membership and meeting attendance (continued)
Governance
RC considerations RC conclusions
1.
Terms of Reference of the
RC
.
2. Appraisal of the Chief Risk Officer and the
Chief Information Security Officer.
3. Review of the effectiveness of the
Committee.
1.
The revisions made in relation to the Terms of
Reference were noted and discussed.
2. The effectiveness of the Committee was
discussed through the results of the Self-
Assessment questionnaires completed by the
members of the Committee. An improvement
was noted in relation to the results in
comparison with last year’s assessment
results.
Deep dives
RC considerations RC conclusions
1.
REMU
2. Corporate & SME Banking
3. International Banking
4. Consumer Banking
5. RRD End-to-End process Update
1.
The REMU
d
eep
-
dive
was presented at the
RC
meeting in March 2023.
2. The Corporate and SME banking deep-dive
report was presented at the RC meeting in
May 2023. The report related to the strategic
priorities for the year for the Corporate and
SME Banking.
3. The International Banking deep-dive was
presented at the RC meeting in June 2023.
The RC was briefed on the main highlights of
the international banking.
Effectiveness of the Risk Management Division:
The Group has a healthy balance sheet and its assets comprise of good quality performing loans, bonds,
and balances with central bank. On the Credit risk side, the underwriting standards have been enhanced
to meet the challenges of high inflation and tightening monetary environment, credit policies have been
re-engineered and simplified ensuring that they meet regulatory standards. Automations and limit setting
are in place to ensure adherence to credit risk policies and to facilitate proper monitoring. In addition,
policy awareness is continuously enhanced through presentations and trainings. Key training areas on
the Credit Risk side during 2023, include credit underwriting process, Valuation Policy, E&S Policy,
Developers. Monitoring has been further automated with the introduction of new flags in the Group’s
systems to extract information and analyse the overall Group’s portfolio with the use of appropriate
qualitative measures and KPIs on dedicated risk areas to promote Risk Accountability and enhance
adherence to credit risk policies and procedures. Furthermore, analysis and reporting on areas of internal
or regulatory concern and on focus areas are performed, based on recent market and geopolitical
developments. At the same time close monitoring of asset quality is carried out to identify early signs
of deterioration and inform business lines for remedial actions.
The IFRS9 Expected Credit Loss (ECL) models are being updated as part of their annual review.
Management overlays are under constant review and refinement to ensure that are fit for purpose and
capture the risks at the appropriate granularity level when these might not be fully captured by the
models. Management overlays are under constant review and refinement to ensure that they are fit for
purpose and capture the risks at the appropriate granularity level when these are not captured by the
models. During the year, the Early Warning Models have been recalibrated to include additional forward-
looking factors.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
205
3. Board Committees (continued)
3.3. Risk Committee (continued)
Effectiveness of the Risk Management Division: (continued)
In relation to Non-Financial Risks, the Risk Control Management System (RCMS) has been enhanced with
the inclusion of control types hence strengthening control identification and classification in the system.
Furthermore, the enhanced RCSA process aiming to improve controls identification for Branch Operations
(Consumer Banking) has been completed with additional two enhanced RCSAs in progress (Wealth
Management and Retail Advances). Moreover, the introduction of Business Risk and Control Officers
(dedicated liaisons) at the areas of Consumer Banking, Corporate and Wealth Management has proven
the value of having strong control function liaisons on the frontline for the better understanding and
active management of risks. The Fraud risk team has enhanced the cards fraud system and has
completed the dedicated Fraud risk assessments in the Small Medium Enterprises and Retail Banking
Network processes. The Third-Party risk team has revamped the risk assessment of outsource providers
and has introduced new KRIs to monitor third party risks. The Business Continuity team has completed
all scheduled BCP reviews and tests as per the annual plan approved by the RC. Bank wide e-learnings
have been rolled out in 2023 for Operation Risk, Fraud Risk and Third-Party Risk/Outsourcing.
Risk Operations have been heavily involved in the Bank-wide ESG action plan, guiding and coordinating
deliverables with a particular focus for the current year on credit risk. At the same time, in co-operation
with the Data Office and Risk Analytics the calculation of the Risk Culture Dashboard was calculated both
at the Bank and Frontline Divisions level and separate discussions were held with the Frontlines aiming
to ensure that their Risk Culture targets are met. Furthermore, our risk reporting has been enhanced to
include a separate report on emerging risks which are defined as risks that can threaten the execution
of our strategy over a medium-term horizon. Regular reporting on our Risk Profile (RAS indicators) has
been maintained and any breaches have been timely notified with an accompanying plan to remediate
them.
The Strategy and Markets department delivered key enhancements to the ICAAP and ILAAP processes..
Simultaneously, the risk quantification and the model validation framework are continuously enhanced,
and a risk-based bonds limits methodology has been developed, which will allow the careful expansion
of the bonds portfolio within the Group’s risk bearing capacity including purchases of fixed-rate
instruments that will also protect the NII from drops in interest rates.
Effectiveness of the Information Security Division:
Throughout 2023, the Group has continued to improve the security controls throughout the environment
of the Group through continuous assessment and improvement of implemented controls. The progress
has been evident from the increase of the control’s maturity score, but also from the satisfactory and
within risk appetite Information Security Controls Effectiveness score.
In addition, the Information Security and ICT KRIs have been revised to provide an enhanced and more
comprehensive risk awareness/monitoring of ICT and Information Security controls/processes.
Throughout 2023, a series of Risk Assessments have been performed across the Group environment to
identify risks related with Business Applications, Payment Services, Critical Infrastructures and Third
Parties. In addition, risk management activities have been ongoing and focused on mitigating high risks
and risks relevant to sensitive areas of the Group.
From a Security Awareness perspective, trainings have been delivered to all staff, Executives and Board
of Directors Members on a quarterly basis. Monthly phishing simulation exercises have been performed
and continued throughout the year in an attempt to make staff more aware on phishing emails. The %
of staff clicking on simulated phishing links was maintained throughout the year at a value aligned with
industry best practices. In addition, an internal SOC (Security Operations Centre) team has been
established, along with the replacement of the existing external SOC vendor and tool, to enhance the
monitoring, detection, and technology capabilities of the Group in identifying and managing cyber
security incidents. With regards to Identity and Access Management, the established program to improve
the maturity of IAM (Identity and Access Management) operations activities has been concluded with
significant benefits and improvements from a risk management, governance and effectiveness
perspective.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
206
3. Board Committees (continued)
3.4 Audit Committee
Committee responsibilities
The AC serves a critical function in appraising the effectiveness of the internal control structures of the
Group. These systems are intentionally established to mitigate fraud, safeguard assets, and ensure the
veracity of financial reports. The AC conducts thorough reviews of policies and procedures, thereby
reinforcing an adequate internal control environment. The AC is responsible for overseeing the Internal
Audit function, which is an independent and objective assurance function. The AC ensures that the
internal audit department is independent and has the necessary resources and access to information in
order to carry out its mandate effectively. The Committee reviews and approves, inter alia, the internal
audit plan and the internal audit budget, monitors the progress of audit activities, and evaluates the
effectiveness of the internal audit function.
Further to the above, the AC bears the responsibility of reviewing and evaluating the Company’s the
Bank’s and the Group’s financial statements. It is the duty of the Committee to ensure that these financial
reports are precise, comprehensive, and adhere to the International Financial Reporting Standards
(IFRS), as well as to relevant laws and regulations. Additionally, the Committee scrutinizes any
alterations in accounting policies and practices, confirming their suitability and alignment with the
Group's overarching financial objectives. The Committee holds the responsibility for the appointment,
compensation, and oversight of the Group's external auditor. The Committee ensures the external
auditor's independence and verifies their qualifications to perform effectively. It reviews the auditor's
plan, findings, and recommendations, and oversees the Group's response to any issues identified.
The Group operates in a highly regulated environment, and the AC is responsible for ensuring that the
Group complies with all applicable laws, regulations, and standards. The AC reviews the compliance
policies and procedures and monitors performance against key regulatory requirements. The AC also
liaises with regulators and addresses any concerns or findings that may arise from regulatory inspections
or examinations. In addition to the latter, the AC assesses the soundness of the methodologies and
policies management the Group uses to develop ESG metrics and other disclosures and to assess the
key vendors’ plans about sustainability. The AC is responsible for establishing and maintaining an
effective whistleblowing mechanism that enables employees and other stakeholders to report concerns
about potential misconduct or unethical behaviour. The Committee ensures that the whistleblowing policy
protects whistleblowers from retaliation and provides for a thorough and objective investigation of
reported concerns. More information in relation to whistleblowing and fraud prevention can be found on
page 189 of this report. The chairperson of the Committee holds the role of Whistleblowing Champion
and has specific responsibility for the integrity, independence and effectiveness of the Group’s policies
and procedures on whistleblowing, including the procedures for protecting employees who raise concerns
from possible discriminatory or retaliatory actions.
AC activities in 2023
The AC and the Risk Committee liaise closely and in joint committee meetings, review the
appropriateness and completeness of the system of internal controls, management’s recommendations
in respect of provisions for impairment of loans and advances and other impairment losses and charges
as reported in the Group’s financial statements. The AC is primarily responsible to review the manner
and framework in which management ensures and monitors the adequacy of the nature, extent, and
effectiveness of internal controls system, including accounting control systems, thereby maintaining an
overall effective system of internal controls and monitors management’s responses and actions to the
findings and recommendations and any mitigating actions in response.
The AC provides guidance to the Board in relation to risk related issues that emerge in the context of
enhancing the Group’s ethical culture. In this respect, the AC submits recommendations to the Board for
any actions that should be taken in the context of enhancing the ethical culture of the Group. In August
2023, the Board was informed in relation to the IBE Guidance for Board members on developing an
ethical business culture, issued by the Institute of Business Ethics (IBE), where the twelve pillars for
further enhancement and promotion of an ethical business culture were discussed. During the last few
years, the Bank and primarily its Board, has undertaken significant initiatives in establishing a business
culture that fosters ethics and integrity and the IBE’s paper is a good benchmark to discuss and evaluate
this work and determine possible further actions to reinforce this objective. Relevant recommendations
for action were noted by the Board, and it was decided that the Chair of the Audit Committee in
cooperation with the Chief Compliance Officer, will proceed with the creation of a plan during the first
quarter of 2024 to enhance the ethical framework of the Bank even further.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
207
3. Board Committees (continued)
3.4 Audit Committee (continued)
Committee responsibilities (continued)
AC activities in 2023 (continued)
The progress of addressing IT audit findings was also discussed during 2023 with regards to availability
and continuity of IT services.
The Committee reports to the Board on how it discharges its responsibilities and makes recommendations
to the Board on key matters. While not intending to be an exhaustive list of the Committee’s
considerations and activities in 2023, a number of areas that were subject to Committee focus during
the year are outlined below.
Internal Audit
As stated above, the Committee is responsible for overseeing the Internal Audit function, which is an
independent and objective assurance function. The Committee ensures that the internal audit division is
independent and has the necessary resources and access to information in order to carry out its mandate
effectively. In monitoring the activities and effectiveness of the Internal Audit Division, the Committee
approved, amongst others, the Internal Audit Charter, the Annual Audit Plan and Internal Audit budget
and reviewed the progress of the Annual Audit Plan throughout the year. The Committee received regular
reports from the Internal Audit Division on internal audit activities across the Group which outlined details
of the audit approach, management engagement and areas identified during audits requiring further
strengthening across the Group’s risk management and internal control framework. These reports also
covered matters of relevance to the Committee’s assessment of the effectiveness of the internal controls
over the financial reporting processes. Reports are rated based on the strength of the control
environment in operation, management’s awareness of the risks facing their business areas and the
controls in place to mitigate those risks.
External Audit
The Committee oversees the relationship with the Group’s external auditors (currently
PricewaterhouseCoopers (‘PwC’). During the year, the Committee considered PwC terms of engagement
(including remuneration), independence and objectivity, audit quality/performance and plans for the
interim review and year-end audit. The Committee considers that the Group has appropriate safeguards
in place to protect the independence and objectivity of PwC. To ensure the objectivity and independence
of the external auditor, the policy formalises certain restrictions on the provision of non-audit services.
This Group’s Non-Audit Services policy, which outlines the types of non-audit fees for which the use of
the external auditor is pre-approved or requires specific approval, was reviewed and approved by the
Committee, and all non-audit services and fees were approved in accordance with Group policy.
Further information on fees to the independent auditors of the Group for audit and other professional
services provided during the year are set out in Note 15 of the Consolidated Financial Statements. In
considering the independence and effectiveness of the external audit process, the Committee reviewed
the robustness and quality of performance across key categories of process, delivery, reporting, people,
and service. The Committee concluded that it was satisfied with the independence, quality, and
performance of PwC.
Financial reporting
A key activity for the Committee is the consideration of significant matters relating to the annual financial
report, with key accounting judgements and disclosures subject to in-depth discussion with management
and PwC. The Committee provides robust challenge to key judgements in advance of making a
recommendation to the Board that all financial reports are considered to be a fair, balanced and
understandable assessment of the Group’s financial position. Further information on some of these
significant items is set out in Note 5 of the Consolidated Financial Statements. Overall, following review
and challenge of the disclosures, the Committee recommended to the Board that the Annual Financial
Report, taken as a whole, was fair, balanced and understandable. Periodic Pillar 3 reporting is also
subject to robust governance and review processes, and the Committee jointly with the RC reviewed and
approved the quarterly, annual and interim Pillar 3 disclosures. In 2023, the Committee jointly with the
RC reviewed and approved the new Task Force on Climate-Related Financial Disclosures Report prepared
for the first time as part of the 2022 Annual Financial Report.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
208
3. Board Committees (continued)
3.4 Audit Committee (continued)
AC membership and meeting attendance
Details on AC Members, meetings, and attendance at meetings during 2023 are outlined below:
AC members Meetings held Meetings attended
Constantine Iordanou
34
20
19
Nicolaos Sofianos
35
20
20
Paula Hadjisotiriou
36
20
20
Adrian John Lewis
37
20
1
Arne Bergren
38
20
5
Matters considered and actions taken by the Committee in 2023
Internal Controls
Committee considerations Committee conclusions

CEO’s Annual Assurance as to the
effectiveness of the internal controls of
2022.
 Annual review of the effectiveness of the
Group’s internal controls.
 Review of the IT Action Plan to address
audit findings.
 Ongoing interaction with external
auditors for exchange of information and
evaluation in the context of use of the
work of Internal Audit, as allowed by the
International Standard on Auditing (ISA)
610 ‘Using the work of Internal Auditors’.

The Committee obtained confirmation from
the CEO on the effectiveness of the internal
controls for 2022.
 Based on the work carried out, reasonable
assurance is provided, with emphasis on
specific matters, on the design, adequacy
and operating effectiveness of the Group’s
internal control framework, corporate
governance and risk management
processes, for managing significant risks,
according to the risk appetite set by the
Board of Directors. Emphasis is placed in
the areas of Digitization, Information
Systems and Data Governance, current, as
well as any future, risk exposures.
 The progress of addressing IT audit findings
was discussed with regards to availability
and continuity of IT services.
34
Constantine Iordanou became the Chairman of the Committee on 11 December 2023.
35
Nicolaos Sofianos resigned from the Board of the Bank and BOCH on 11
December 2023.
36
Paula Hadjisotiriou resigned from the Board of the Bank and BOCH on 31
December 2023.
37
Adrian John Lewis became a member of the Committee on 11 December 2023.
38
Arne Bergren resigned from the Board of the Bank and BOCH on 31 March 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
209
3. Board Committees (continued)
3.4 Audit Committee (continued)
AC membership and meeting attendance (continued)
Internal Audit
Committee considerations Committee conclusions
Internal Audit Activity through
the Annual
Audit Report
The Committee discussed the Internal Audit Activity.
Internal Audit’s (IA) Annual Audit Plan for
the year
Internal Audit’s (IA) Annual Audit Plan was approved as
part of the Annual Audit Report by the Board of Directors
through the AC.
Independence, adequacy and effectiveness
of IA
The adequacy, effectiveness and independence of the
internal audit function was assessed as being adequate
and relevant confirmation was provided to the Board.
IA budget
The IA budget was discussed and approved.
IA quarterly activity and follow up reports

Investigation reports, internal audit report findings and
recommendations were discussed as well as
management’s response and actions.
 The completion rate of recommendations to mitigate
findings deriving from IA and external reports was
monitored by the Committee.
IA staffing needs and skills assessment
The Committee was
informed through the Quarterly
Activity Report, the Mid-year Revision of the Annual
Audit Plan and the Annual Audit Report.
Complaints received through the
whistleblowing line
The Committee was updated through the Mid
-
year
Revision of the Annual Audit Plan and the Annual Audit
Report.
Revised IA policies and procedures,
including the IA Charter.
The Committee approved the IA policies and procedures.
Considered the periodic self
-
assessment
results for the conformance of Internal
Audit Activity to the International Internal
Auditing Standards.
The Committee was informed on the conformance of the
Internal Audit Activity with the International Internal
Auditing Standards.
External Reporting
Committee considerations Committee conclusions
Review and recommendation for approval
of the annual and interim reporting.
The Committee closely considered the Group's financial
reporting disclosures and provided feedback. Having
evaluated all of the available information, the
assurances by management and underlying processes
used to prepare the published financial information, the
Committee concluded and recommended to the Board
for approval.
Review and approval of the quarterly
financial results.
Alternative performance measures
disclosures
Approved changes in accordance with
International Financial Reporting Standards
(IFRS) and International Accounting
Standards (IAS)
The Committee approved the IFRS 17 Transition
assumptions and judgements required for calculation of
the opening IFRS 17 liabilities at 1 January 2023 and
restated information for 2022 and concluded that
related disclosure was as required by IAS 8.
IAASA letter on review of 2022 Financial
statements.
The Committee was informed of IAASA findings and
approved the response to the IAASA letter.
PwC representation letter.
The Committee reviewed the letter and recommended
it to the Board for approval.
Assurance as to External Auditors’
independence.
PwC provided the necessary assurances that were
noted by the AC. Moreover, the Committee noted the
Compliance report on the same matter.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
210
3. Board Committees (continued)
3.4. Audit Committee (continued)
AC membership and meeting attendance (continued)
External Auditors
Committee considerations Committee conclusions
2023 Audit fees.
The Committee approved the PwC Audit fees
for 2023.
Approval of permissible non-audit services.
The Committee reviewed various requests
during the year and approved the provision
of permissible non-audit services by PwC.
Private session with the auditors.
During the private sessions with the auditors
the committee discussed communication and
co-operation with the Group and concluded
that it was adequate.
Evaluation of external auditors’ performance.
The Committee discussed the
assessm
ent
of
the effectiveness of PwC as the Group’s
external auditor, which was overall
satisfactory. The Committee Chair
undertook to discuss with the PwC
responsible partner to discuss findings from
the questionnaire and provide feedback on
the interaction with the PwC audit team.
PwC report on Internal Control Findings 2022.
The Committee discussed the PwC findings
and decided that the implementation of PwC
recommendations on internal control
findings should be monitored by Internal
Audit and AC should receive regular updates.
2023 External Audit Plan 2023.
PwC presented their annual audit plan to the
AC, with particular emphasis on significant
and elevated risks and materiality level.
Policy on the provision of Non audit Services by the
statutory audit firm.
The Committee approved the annual revision
of this policy which also incorporated an
internal cap on the fees payable to external
auditors as a percentage of the audit firm’s
revenues.
Governance
Committee considerations Committee conclusions
2022 Corporate Governance report
The AC reviewed the
report and
recommended its approval to the Board.
Review of the 2022 Audit Committee Self-Assessment
results.
The Committee requested the completion of
the re-design and alignment of all
Committees’ assessments.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
211
3. Board Committees (continued)
3.4. Audit Committee (continued)
AC membership and meeting attendance (continued)
Compliance
Committee considerations Committee conclusions
Compliance Division Organisational Structure.
The Committee approved the Compliance
Division organizational structure and requested
clarifications on the appraisal of Compliance
Liaisons and Subsidiary Compliance liaisons.
Update on the completion of SREP 2020 and OSI 2021
review points.
The Committee reviewed the Compliance action
plan progress reports for the SREP 2020 and
2021 OSI findings and recommendations and
agreed to notify the JST for their status of
completion.
Update on the completion of SREP 2022 and OSI 2023
review points.
The Committee reviewed the Compliance action
plan progress reports for the SREP 2022 and
OSI 2023 findings and recommendations and
agreed to notify the JST for their status of
completion.
Compliance Quarterly reports.
The Committee was informed of the
Compliance assurance reviews carried out each
quarter and discussed key findings.
Annual Data Privacy Officer report.
The Committee requested an enhancement in
the Data Privacy Officer report to indicate the
areas of concern, the feedback from subsidiary
DPOs and the maturity evolution of key privacy
indicators.
Annual assurance as to compliance with Irish Companies
Act 2014 for Directors’ Compliance Statement
The Committee was assured that all material
obligations were met.
Compliance Division declaration of independence
The Committee confirmed the independence of
the Compliance Division.
Customers Complaints Management report The report was noted.
Annual appraisal and Goals setting for the Chief
Compliance Officer (CCO).
The Committee discussed the performance of
the CCO and agreed the appraisal score.
Compliance policies, Charter, and RAS.
The Committee discussed the changes to the
policies and approved the revised versions.
The Committee also approved the Compliance
Charter and Risk Appetite Statement in relation
to MLTF.
Enhanced Group role for Data Privacy.
The Committee discussed the enhanced role
that the DPO needs to have in overseeing the
subsidiaries and requested quarterly reporting
on their progress and responsiveness.
Compliance Data Analytics Strategy and 3-year Action
plan.
The Committee requested a common approach
to be followed in the Bank on Data Analytics to
ensure knowledge-sharing and co-ordination
among the Data Analytics teams.
Key Highlights on important regulatory developments.
The Committee received this report monthly
and discussed the impact of regulatory
developments.
Compliance Division Action Plan.
The Committee approved the Compliance
Division annual action plan and any required
deviations.
Compliance Division Review Methodology.
The AC approved the Enhanced Unified
Compliance Division Review Methodology.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
212
3. Board Committees (continued)
3.4. Audit Committee (continued)
AC membership and meeting attendance (continued)
Going Concern
Committee considerations Committee conclusions
Viability statement and going concern assessment.
The Committee
considered management’s
assessment of the appropriateness of
preparing the financial statements of the
Group on a going concern basis and the
viability assessment. Matters considered in
making this assessment included the
performance of the Group, profitability
projections, funding and capital plans under
base and stress scenarios and recommended
it to the Board for approval.
Internal Audit & Compliance Divisions’ effectiveness
The Internal Audit and Compliance Divisions report directly to the Board through the AC. They are
organisationally independent of units with other executive functions and are not subordinated to any
other unit of the Company, except for the Chief Compliance Officer, who reports administratively to the
CEO.
The AC received regular reports from Internal Audit on internal audit activities across the Group which
outline details of the audit approach, management engagement and areas identified during audits for
further strengthening of the Group’s risk management and internal control framework. These reports
cover matters of relevance to the AC in assessing the effectiveness of the internal controls. Reports are
rated based on the design adequacy and operating effectiveness of control environment, as well as
management’s control awareness of the risks facing their business area. In conjunction with Internal
Audit reports, the AC considers management’s responses to, and the timeliness of the remediation of
identified issues.
Through regular meetings held with and reports provided by the Internal Audit Director on internal audit
issues, including the effectiveness and adequacy of resources, the Committee has satisfied itself that the
Internal Audit Division was effective and adequately resourced.
The AC reviewed the internal audit planned activities for the year. Management’s responses to Internal
Audit’s findings and recommendations, as well as the implementation progress of recommendations
provided in internal and external reports were reviewed and monitored. The quarterly reports issued by
the Internal Audit Director enable the AC to focus discussion on specific areas of concern and to track
remediation progress over time.
Regular reports are submitted by Compliance Division to the AC on matters relating to regulatory risk
across the Group. The AC also received reports from the Money Laundering Compliance Officer on the
operation and the effectiveness of the systems and controls established by the Group to manage Financial
Crime & Sanctions Compliance (‘FCSC’) risk. FCSC incorporates money laundering, terrorist financing,
sanctions and bribery and corruption and is a key area of Committee focus. There is zero-tolerance on
money laundering and terrorism financing incidents and no violations of the relevant legislation or
breaches of the Group’s internal policies, procedures and its compliance framework are permitted.
The AC proposes to the Board the appointment, replacement, transfer or removal of the Internal Audit
Director and the Chief Compliance Officer. It also approves and monitors the Objectives and Key Results
of the Internal Audit Director and the Chief Compliance Officer. It submits a report to the Board on the
assessment and monitoring of the independence, adequacy and effectiveness of Internal Audit and the
Compliance Division.
Assurances have been sought and received by the AC concerning the resourcing of the Internal Audit
and Compliance functions.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
213
3. Board Committees (continued)
3.4. Audit Committee (continued)
Arrangements relating to the external auditors
The AC oversees the relationship with the external auditors. During the year, the AC considered PwC’s
terms of engagement, including remuneration, its independence, audit quality / performance, objectivity
and considered the plans for the interim review and year-end audit.
Appropriate safeguards are in place to protect the independence and objectivity of PwC. The AC operates
a Group Policy on the Provision of Non-Audit Services by the Group’s statutory auditors in line with the
applicable EU Directive and the Auditors’ Law to regulate the use of the statutory auditors for non-audit
services. In order to ensure the objectivity and independence of the PwC, the policy formalises certain
restrictions in the provision of non-audit services by PwC and requires that any engagement of the
external auditors for services must be approved in advance by the AC.
The AC is responsible for overseeing all matters relating to the relationship between the Group and its
statutory auditors, including the external audit plan, terms of engagement, audit and non-audit fee
arrangements, interim findings and audit finding reports.
The Group is committed to ensuring the independence and objectivity of the statutory auditors; on a
semi-annual basis the AC formally reviews the effectiveness, independence and performance of the
external auditors. The AC also reviews the external auditors’ approach and strategy for the annual audit
and audit findings.
The process for assessing the effectiveness of the audit process using AQIs, is supported by tailored
questionnaires completed by the AC members and relevant senior management personnel. The
responses received are collated and presented to the AC for discussion.
The external auditors do not provide internal audit services to the Group. The AC reviews annually a
detailed analysis of the audit and non-audit fees relating to work done by the external auditors, to
confirm their independence and refers this analysis to the Board.
Information on fees to the independent auditors of the Group for audit and non-audit services provided
during the year ended 31 December 2023 are set out in Note 15 of the Consolidated Financial
Statements.
In accordance with the provisions of the European Directive on statutory audits and following a
transparent and competitive tender process in 2017, the AC recommended to the Board the appointment
of PwC for accounting periods commencing 1 January 2019. The AGM held on 26 May 2023 considered
the continuation in office of PwC as Auditors of the Company and authorised the Board to fix their
remuneration. The AC assessed the independence of the statutory auditors prior to the commencement
of the audit period and continues to assess their independence on a six-monthly basis. The AC concluded
that it was satisfied with the independence, quality, and performance of PwC. The lead partner for the
audit engagement is Mr. Kevin Egan. The external auditor is required to rotate audit partner every five
years. PwC’s term as statutory auditor ends in 2027. PwC’s performance and independence shall be
continuously reviewed, and they shall remain subject to reappointment each year, pending the selection
of a new audit firm ahead of their departure in 2027.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
214
3. Board Committees (continued)
3.5 Technology Committee
TC purpose and responsibilities
The objective of the TC is to fortify the Board in its supervisory role, ensuring the optimised infusion of
technology in orchestrating the Group’s business strategies. Entrusted with a gamut of responsibilities,
the TC facilitates oversight across various facets such as significant technology investments, formulation
and implementation of technology strategies, operational performance, and the assimilation and analysis
of evolving technology trends that could potentially reverberate through the Group’s client portfolio and
overall operational modalities.
Operating under the aegis of the authority delegated by the Board, the TC plays a pivotal role in
scrutinizing and approving the Group’s technology planning and strategies, ensuring they resonate within
the overarching strategic paradigms established by the Board. It holds the mantle of reviewing and
sanctioning key technology investments and expenditures, aligning with the regulatory frameworks and
constraints delineated by the Board, barring those specifically earmarked for the Board’s exclusive
consideration.
In its evaluative capacity, the TC continuously monitors and assesses current and emergent technology
trends, fostering an adaptive strategic approach that is consonant with industry evolutions and
prospective technological shifts. Furthermore, it supervises the operational effectiveness of the Group’s
technology deployments, focusing on diverse areas such as project realization, technical operationality,
technological structural design, and the impactful assessment of substantial technology investments.
Ensuring the robust application of Information Security policies also falls within the TC’s purview,
safeguarding the Group’s technological spheres through vigilant oversight and ensuring alignment with
prevailing security norms and benchmarks.
TC activities in 2023
The Committee meticulously monitored the evolution of the digital transformation, focusing keenly on
the expansion of digital channel utilization, as evidenced by Key Performance Indicators (KPIs). The
success in customer adoption of Digital Transactions heralded a shift in focus towards bolstering the
implementation of Digital Sales. A notable enhancement was observed, with digital engagement
escalating to 84.06% in December 2023, a substantial increase from 81.69% in the corresponding period
of the previous year.
The Committee observed a vigorous uptake in the utilization of Digital channels as a pivotal sales avenue
for new products. An year-over-year growth was witnessed across various strategic digital products and
services, including Bancassurance products and digital account openings, among others.
Additionally, the Committee facilitated the expansion of essential digital sales capabilities, underpinned
by the integration of novel remote sales and Marketing Technology functionalities. A periodic review and
monitoring mechanism was instituted to oversee the technological advancements and digital
transformation initiatives of the insurance subsidiaries.
A precise oversight was maintained on technology projects, ensuring their adherence to established
timelines. Strategic directives were furnished by the Committee, focusing on modernization initiatives,
including the enhancement of Financial Management Systems and the implementation of a unified
Regulatory Reporting System.
Moreover, the Committee engaged in the detailed supervision of the Group’s Cloud Strategy, emphasizing
the progress of related initiatives, risk management, and cost-effectiveness. Key technology trends and
their impact on the banking sector, including Decision Automation and Artificial Intelligence, were closely
examined, alongside a proactive management approach to significant IT incidents.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
215
3. Board Committees (continued)
3.5. Technology Committee (continued)
TC activities in 2023 (continued)
In conclusion, the Committee conducted a thorough evaluation of the Annual Information Security
Report, ensuring the implementation of action plans designed to mitigate operational risks and foster
advancements in the existing operational models.
TC membership and meeting attendance
Details on TC Members, meetings, and attendance at meetings during 2023 are outlined below:
TC members Meetings held Meetings attended
Constantine Iordanou 7 7
Ioannis Zographakis
39
7 6
Paula Hadjisotiriou
40
7 7
Arne Berggren
41
7 2
Matters considered and actions taken by the Committee in 2023
Group’s technology planning and strategy
Committee considerations Committee conclusions
Monitor the Progress of Digital Adoption and
implementation of Digital Transaction Migration
and Digital Sales.
The Committee
monitored metrics in connection
with the digital evolution and associated
transformation, discussed the metrics on Digital
Adoption and implementation of Digital Transaction
Migration and Digital Sales.
Digital KPIs and roadmap overview
Committee considerations Committee conclusions
Digital KPIs and digital sales and adoption KPIs
were discussed.
During the
year the Committee received and
discussed the evolution of digital KPIs and noted the
increasing trends demonstrating a shift of customers
towards technology and digital channels.
Cloud Adoption
Committee considerations Committee conclusions
The
Committee was briefed in relation to the
latest update on Cloud adoption.
The Bank received approval from the JST for
implementing CRM dynamics on the Cloud.
The Committee discussed the cloud adoption and
how a cloud adoption strategy can support on
improving innovation, time–to-market and
efficiency.
Jinius Update
Committee considerations Committee conclusions
The Committee was briefed in relation to the
progress achieved regarding the Jinius
Platform.
The Committee
received regular updates on
progress of implementation of various milestones
on the launch of the Digital Economy Platform
(Jinus) and reviewed various metrics.
39
Ioannis Zographakis resigned from the Board of the Bank and BOCH on 31
December 2023.
40
Paula Hadjisotiriou resigned from the Board of the Bank and BOCH on 31
December 2023.
41
Arne Berggren resigned from the Board of the Bank and BOCH on 31 March 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
216
4. Remuneration Policy Report
The Remuneration Policy Report was prepared by the Board following a proposal by the HRRC in
accordance with Annex 1 of the 2019 CSE Code, the Irish Companies Act and the UK Code. It is presented
in the 2023 Annual Financial Report of the Group, within the Corporate Governance section of the Annual
Financial Report and follows after section 5 below. Information on the remuneration of the members of
the Board for the year 2023 is disclosed in Note 49 of the Consolidated Financial Statements of the
Group, as well as in the Remuneration Policy Report.
5. Shareholder Relations
It is a priority for the Group to communicate with shareholders. The responsibilities of the Chairperson
include ensuring effective communication with shareholders and ensuring that directors develop an
understanding of the views of major investors. Investor Relations Department has primary responsibility
for managing and developing the Group’s external relationship with existing and potential institutional
investors and analysts. The Chairperson, the SID, the CEO, the EDF and the Manager Investor Relations
engage extensively with existing shareholders and potential new investors during individual or group
meetings and on roadshows and investor conferences. All meetings with shareholders are conducted in
such a way as to ensure that price sensitive information is not divulged. Mrs Annita Pavlou, Manager
Investor Relations Department & ESG, is the Investor Relations Officer, responsible for the
communication between shareholders and the Group since 30 August 2016. Information concerning the
Group is provided to shareholders, prospective investors, brokers and analysts in a prompt and unbiased
manner free of charge.
The Group uses its website (www.bankofcyprus.com/en-gb/group) to provide shareholders and potential
investors with recent and relevant financial information, including the annual, the mid-year financial
report and quarterly results announcements and presentations. The Investor Relations section of the
Group’s website is updated with all announcements published on the LSE and CSE as these are made. It
also contains the contact details of the Investor Relations Department. Directors receive an investor
relations update from management at all scheduled Board meetings. This update typically includes
market updates, share price and valuation analysis, updates on analysts’ reports, investors’ feedback
and share register analysis.
One of the responsibilities of the Chairperson of the Board is to ensure that the views, issues, and
concerns of shareholders are effectively communicated to the Board and to ensure that directors develop
an understanding of the views of major investors. The Board considered the views of major shareholders
on company strategy and performance and assessed investor sentiment more broadly in conjunction
with the Group’s corporate brokers. The SID, Constantine Iordanou, is available to shareholders if they
have concerns that are not resolved through the normal communication channels.
All shareholders of BOCH are treated on an equal basis. There are no shareholders with special control
rights. Shareholders are promptly and accurately informed of any material changes regarding the Group,
including its financial position, financial results, ownership, and governance.
Under the Irish Companies Act 2014, one or more members holding at least 3% of the issued share
capital of BOCH, representing at least 3% of the total voting rights of all the members who have a right
to vote at the meeting to which the request for inclusion of the item relates, has the right to: (a) put an
item on the agenda of the AGM provided that the item has been accompanied by stated grounds justifying
its inclusion or a draft resolution to be adopted; and (b) to table a draft resolution for an item on the
agenda of a general meeting.
Such a request must have been received by BOCH at least 42 days prior to the relevant meeting.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
217
5. Shareholder Relations (continued)
Any change or addition to the Articles of Association of BOCH is only valid if approved by a special
resolution at a meeting of the shareholders. Major shareholders do not have different voting rights from
those of other shareholders. As of 31 December 2023, BOCH has been advised of the following notifiable
interest in the share capital of BOCH:
1. Lamesa Investments Limited 9.27%.
2. CarVal Investors 9.07%.
3. Senvest Management LLC 8.56%
42
.
4. Caius Capital LLP 5.58%.
5. European Bank for Reconstruction and Development 5.02%.
6. Cyprus Popular Bank Public Co Ltd 4.81%.
7. Provident Fund of the Cyprus Bank Employees 4.74%.
8. Osome Investments 3.32%.
The Annual General Meeting (the ‘AGM’) of BOCH was held at the Headquarters of the Bank on Friday,
26 May 2023. The AGM was attended by 6 Shareholders & Depository Interest Holders, either in person
or by proxy, who represented 150.314.105 shares, that is 33,69% of the total issued share capital of
BOCH.
The AGM considered the Financial Statements for the year ended 31 December 2022 together with the
reports of the Directors and the Auditors and fixed the ordinary remuneration of the Board Directors.
The AGM authorised the Board of Directors to fix the remuneration of PricewaterhouseCoopers as the
Company’s Statutory Auditors for the year 2023. The following Directors were re-elected to the Board of
Directors:
1. Efstratios-Georgios (Takis) Arapoglou.
2. Lyn Grobler.
3. Paula Hadjisotiriou.
4. Panicos Nicolaou.
5. Maria Philippou.
6. Nicolaos Sofianos.
7. Ioannis Zographakis.
8. Constantine Iordanou.
9. Eliza Livadiotou.
In April 2023, BOCH obtained the approval of the European Central Bank to pay a dividend. Following
this approval, the Board of BOCH recommended to the shareholders a final dividend of €0.05 per ordinary
share in respect of earnings for the year ended 31 December 2022 (‘Dividend’). The proposed final
dividend was declared at the Annual General Meeting (‘AGM’) which was held on 26 May 2023. The
Dividend amounted to €22.3 million in total and was equivalent to a payout ratio of 14% of the FY2022
Group’s adjusted recurring profitability or 31% based on FY2022 profit after tax (as reported in the 2022
Annual Financial Report). The Dividend was paid in cash on 16 June 2023.
The 2023 AGM received and considered the Annual Remuneration Report of the Remuneration Committee
for the year ended 31 December 2022 and the Revised Remuneration Policy. The AGM also declared a
final dividend of €0.05 per ordinary share for the financial year ended 31 December 2022.
The AGM further resolved to:
1. Consider and authorise the Directors to allot and issue shares.
2. Consider and authorise the Directors to dis-apply the pre-emption provisions of Section 1022 of
the Companies Act.
3. Consider and authorise the Directors to dis-apply the pre-emption provisions of Section 1022 of
the Companies Act in respect of financing a transaction.
42
Senvest Management LLC as of 31 December 2023 also held 0.30% in Financial Instruments with similar economic
effect according to Regulation 17(1)(b) of the Transparency (Directive 2004/109/EC) regulations 2007 of Ireland as
amended.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
218
5. Shareholder Relations (continued)
4. Consider and authorise the Directors to issue, allot, grant options over or otherwise dispose of
ordinary shares on the conversion or exchange of Additional Tier 1 Contingent Equity Conversion
Notes.
5. Consider and authorise the Directors to dis-apply the pre-emption provisions of Section 1022 of
the Companies Act in respect of shares issued pursuant to Resolution 10.
6. Consider and authorise the Directors to make market purchases of the ordinary shares of BOCH.
7. Consider and determine the re-issue price range at which treasury shares may be re-allotted.
8. Consider and allow for the convening of an Extraordinary General Meeting by at least 14 clear
days’ notice.
The following resolutions were approved at the 2023 AGM:
1. That, the Directors of BOCH be and are hereby generally and unconditionally authorised to exercise
all the powers of BOCH, to allot and issue relevant securities (within the meaning of section 1021
of the Companies Act 2014 (as amended) (the ‘Companies Act’)) of BOCH, up to an aggregate of:
(a) 147,245,977 ordinary shares of €0.10 each; and
(b) a further 147,245,977 ordinary shares of €0.10 each provided that:
(i) they are equity securities (within the meaning of section 1023(1) of the Companies Act); and
(ii) they are offered by way of a rights issue or other pre-emptive issue to holders of ordinary
shares at such record dates as the Directors may determine where the equity securities
respectively attributable to the interests of the ordinary shareholders are proportionate (as nearly
as may be practicable) to the respective numbers of ordinary shares held by them on any such
record dates, but subject to such exclusions or other arrangements as the Directors may deem
necessary or expedient to deal with legal or practical problems in respect of overseas shareholders
or shareholders or persons holding an interest in shares (including derivative or beneficial interest
or an interest in any entity whether held directly or through one or more intermediary entity or
interest) subject to legal restrictions or sanctions, fractional entitlements or otherwise.
2. That, the Directors be and are hereby generally authorised, to allot and issue equity securities
(within the meaning of section 1023(1) of the Companies Act) for cash pursuant to the authority
conferred on the Directors by Resolution 8 as if section 1022(1) of the Companies Act did not apply
provided that this power shall be limited to:
(a) the allotment of equity securities in connection with any rights issue or other pre-emptive
issue in favour of ordinary shareholders (other than those holders with registered addresses
outside the State (Ireland) to whom an offer would, in the opinion of the Directors, be
impractical or unlawful in any jurisdiction) on the register of members at such record date
as the Directors may determine where the equity securities respectively attributable to the
interest of such ordinary shareholders are proportionate (as nearly as may be) to the
respective number of ordinary shares held by them and subject to such exclusions or other
arrangements as the Directors may deem necessary or expedient to deal with regulatory
requirements, legal or practical problems in respect of overseas shareholders or
shareholders or persons holding an interest in shares (including derivative or beneficial
interests or an interest in any entity whether held directly or through one or more
intermediary entity or interest) subject to legal restrictions or sanctions, fractional
entitlements or otherwise; and
(b) the allotment of equity securities for cash (otherwise than under Paragraph (a) above)
together with all treasury shares (as defined in section 1078 of the Companies Act) re-issued
while this authority remains operable shall not exceed 22,309,997 ordinary shares of €0.10
each.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
219
5. Shareholder Relations (continued)
3. That, the Directors be and are hereby authorised, to issue and allot equity securities (as defined
in section 1023 of the Companies Act) for cash and/or treasury shares (within the meaning of
section 1078 of the Companies Act) for cash under the authority given by that resolution as if sub-
section (1) of section 1022 of the Companies Act did not apply to any such issue or allotment,
such authority to be:
(a) limited to the allotment of equity securities up to 22,309,997 ordinary shares of €0.10 each;
and
(b) used only for the purposes of financing (or refinancing, if the authority is to be used within
twelve months after the original transaction) a transaction which the Directors determine to be
either an acquisition or other specified capital investment of a kind contemplated by the Statement
of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group
prior to the date of this Notice.
4. That, the Directors be and are hereby generally empowered pursuant to section 1021 of the
Companies Act to issue, allot, grant options over or otherwise dispose of:
(a) Additional Tier 1 contingent equity conversion notes that automatically convert into or are
exchanged for ordinary shares in BOCH in prescribed circumstances (‘AT1 ECNs’) where the
Directors consider that the issuance of AT1 ECNs would be desirable in connection with, or for the
purposes of, complying with or maintaining compliance with the regulatory capital requirements
or targets applicable to (i) BOCH and/or (ii) BOCH and its subsidiaries and/or (iii) its subsidiaries
in each case from time to time; and
(b) ordinary shares pursuant to the conversion or exchange of AT1ECNs, or to agree to do any of
the foregoing acts, provided that the power conferred by this resolution shall:
(i) be limited to the issue, allotment, grant of options over or other disposal of ordinary shares of
an aggregate nominal amount of €6,692,999 and of AT1 ECNs convertible or exchangeable into
ordinary shares up to such maximum aggregate nominal amount; and
(ii) expire on 23 August 2024 or at the close of business on the date of the next AGM, whichever
is earlier, but so that BOCH may make offers and enter into agreements before the authority
expires which would or might require AT1 ECNs or ordinary shares to be issued or rights to
subscribe for or to convert or exchange any security into ordinary shares to be granted after the
authority expires and the Directors may allot shares or grant such rights under any such offer or
agreement as if the authority had not expired.
5. That, BOCH and/or any of its subsidiaries be and they are hereby generally authorised to make
purchases on a securities market (within the meaning of section 1072 of the Companies Act) of
ordinary shares of BOCH on such terms and conditions and in such manner as the Directors, or as
the case may be, the director of such subsidiary, may from time to time determine but subject to
the provisions of the Companies Act and to the following restrictions and provisions:
(a) the maximum number of ordinary shares authorised to be acquired pursuant to the terms of
this resolution shall not exceed 44,619,993 ordinary shares of €0.10 each;
(b) the minimum price (excluding expenses) which may be paid for any ordinary share shall be
the nominal value of the ordinary share;
(c) the maximum price (excluding expenses) which may be paid for any ordinary share in the
BOCH (a “Relevant Share”) shall be the higher of:
(i) 5% above the average of the closing prices of a Relevant Share taken from the Official List
of the London Stock Exchange in the case of a purchase on the London Stock Exchange or
the respective list of the Cyprus Stock Exchange in the case of a purchase on the Cyprus
Stock Exchange, for the five business days prior to the day the purchase is made; and
(ii) The amount stipulated by Article 3(2) of Commission Delegated Regulation (EU) 2016/1052
and any corresponding provision of any replacement legislation, (being the value of a
Relevant Share calculated on the basis of the higher of the price quoted for:
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
220
5. Shareholder Relations (continued)
A. the last independent trade of; and
B. the highest current independent bid or offer for any number of Relevant Shares on the
trading venue where the purchase pursuant to the authority conferred by this resolution will
be carried out). If the means of providing the foregoing information as to dealings and prices
by reference to which the maximum price is to be determined is altered or is replaced by
some other means, then a maximum price shall be determined on the basis of the equivalent
information published by the relevant authority in relation to dealings on the London Stock
Exchange in the case of a purchase on the London Stock Exchange, or Cyprus Stock
Exchange in the case of a purchase on the Cyprus Stock Exchange, or its equivalent.
6. That, for the purposes of sections 109 and/or 1078 of the Companies Act the re-allotment price
range at which any treasury shares for the time being held by BOCH may be re-allotted (including
by way of re-allotment off-market) shall be as follows:
(a) the maximum price at which a treasury share may be re-allotted shall be an amount equal
to 120% of the Appropriate Price; and
(b) the minimum price at which a treasury share may be re-allotted shall be the nominal value
of the share where such a share is required to satisfy an obligation under an employees’
share scheme (as defined by section 64 of the Companies Act) operated by BOCH or, in all
other cases, an amount equal to 95% of the Appropriate Price.
For the purposes of this resolution the expression “Appropriate Price” shall mean the average of
the five amounts resulting from determining whichever of the following (i), (ii) or (iii) specified
below in relation to shares of the class of which such treasury share is to be re-allotted shall be
appropriate in respect of each of the five business days immediately preceding the day on which
the treasury share is re-allotted, as determined from information published on the London Stock
Exchange reporting the business done on each of these five business days:
(i) if there shall be more than one dealing reported for the day, the average of the prices at
which such dealings took place; or
(ii) if there shall be only one dealing reported for the day, the price at which such dealing took
place; or
(iii) if there shall not be any dealing reported for the day, the average of the closing bid and
offer prices for the day,
and if there shall be only a bid (but not an offer) or an offer (but not a bid) price reported, or if
there shall not be any closing price reported, for any particular day, then that day shall not count
as one of the said five business days for the purposes of determining the Appropriate Price. If the
means of providing the foregoing information as to dealings and prices by reference to which the
Appropriate Price is to be determined is altered or is replaced by some other means, then the
Appropriate Price is to be determined on the basis of the equivalent information published by the
relevant authority in relation to dealings on the London Stock Exchange PLC or its equivalent.
The above Special Business resolutions are valid until the next AGM or 23 August 2024, whichever is the
earlier. In accordance with Listing Rule 14.3.6, copies of the resolutions that do not constitute ordinary
business at an annual general meeting will be submitted to the National Storage Mechanism and will be
available after 6:00 pm (Cyprus Time).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
221
Remuneration Policy Report for the year 2023
1. Introduction
In accordance with the provisions of the CSE Code published by the CSE (5
th
Edition (Revised) January
2019), and in particular Annex 1 of the CSE Code, and the Irish Companies Act, the HRRC prepares the
Annual Board of Directors’ Remuneration Policy Report, which is ratified by the Board and submitted to
a non-binding advisory vote at the shareholders’ AGM. The Board of Directors Remuneration Policy
Report for the year 2023 was ratified by the Board on 28 March 2024. The Group’s objective to attract,
develop, motivate and retain high value professionals is considered fundamental in achieving the goals
and objectives of the Group, and ensuring that the right people are in the right roles whilst managing
the Group’s remuneration strategy and policies in a manner aligned with the interests of the Group’s
shareholders.
2. Human Resources and Remuneration Committee
The HRRC’s primary role is to ensure that staff members contribute to sustainable growth by staying
ahead of challenges and opportunities. The Group aims to review its remuneration policies and practices
on an ongoing basis and amend them where necessary, in order to ensure that they are consistent with
and promote sound and effective risk management. Every year, the HRRC proposes to the Board the
Annual Remuneration Policy Report as part of the Annual Report of the Group, which is submitted to the
shareholders’ AGM. The composition of the HRRC is described in section 3.2 of the Annual Corporate
Governance Report on pages 195-199.
2.1 Terms of Reference of the Human Resources and Remuneration Committee
The role of the HRRC is described in detail in section 3.2. of the Annual Corporate Governance Report on
pages 195-199. In respect of remuneration the HRRC undertakes the following:
 To propose adequate remuneration considered necessary to attract and retain high value-adding
professionals;
 To consider the remuneration arrangements of the executive directors of the Group, senior
management and the Group Remuneration policy bearing in mind the European Banking Authority
(‘EBA’) Guidelines on sound remuneration policies, the CBC Directive on Internal Governance, the
CSE Code; the UK Code and any other applicable or regulatory requirements;
 To oversee the implementation of Strategic HR initiatives which promote and are aligned with the
Group’s ESG ambition, strategy and objectives.
 To review the implementation and effectiveness of the Remuneration Policy and ensure this is in
compliance with the Remuneration Framework of the CBC Directive on Internal Governance.
The HRRC ensures that internal control functions are involved in the design, review and implementation
of the Remuneration Policy and that staff members who are involved in the design, review and
implementation of the Remuneration Policy and practices have relevant expertise and are capable of
forming independent judgement on the suitability of the Remuneration Policy and practices, including
their suitability for risk management.
The Group’s aim is to align its Remuneration Policy and human resources practices, with its business
strategy, objectives, values and long-term interests of the Group and ensure that they are consistent
with and promote sound and effective management of risk and long-term sustainable success and do
not encourage excessive risk-taking.
The Policy aims to ensure the application of a fair, transparent and gender-neutral pay management
process that applies equally to all staff, aligns their remuneration with job value, individual performance
and potential and takes into account market conditions. At the same time, the principles set out in the
Policy aim to encourage responsible business conduct, fair treatment of customers and to avoid conflicts
of interest.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
222
Remuneration Policy Report for the year 2023 (continued)
2. Human Resources and Remuneration Committee (continued)
2.1 Terms of Reference of the Human Resources and Remuneration Committee
(continued)
In developing its Remuneration Policy, the Group takes into account the provisions that are included in
the CSE Code, the UK Code, the CBC Directive on Internal Governance which came into effect in October
2021,the Irish Companies Act, and incorporates the requirements for Remuneration Policies included in
the European Capital Requirements Directive (‘CRD V’), the EBA Guidelines on sound remuneration
policies issued in July 2021, MiFID II and other Guidance of the EU as well as regulatory restrictions
currently pertinent to the banking sector and the Group in particular.
The HRRC reviews and approves the content of any resolutions submitted for approval at the AGM of the
shareholders, which are prepared by the Company Secretary in cooperation with the Group’s legal
advisers in accordance with Annex 3 of the Code which may concern possible plans for the compensation
of members of the Board in the form of shares, share warrants or share options.
The HRRC (jointly with NCGC) reviews and recommends for approval to the Board the remuneration
packages of executive members of the Board.
Also, the HRRC reviews and recommends for approval to the Board the remuneration packages of other
Senior Management (recommended by the CEO or by the respective Board Committees, for heads of
control functions and other staff reporting to Board committees).
The Committee reviews and approves appointments, transfers and dismissals of Group divisional
directors, senior managers and subsidiaries’ general managers (except heads of internal control
functions), recommended by the CEO, and ensures that all contractual obligations are adhered to.
The chairperson of the HRRC is available to shareholders at the AGM to answer any questions regarding
the Remuneration Policy of the Group. Workforce engagement is described in section 2.15.4 of the Annual
Corporate Governance Report.
3. Governance of Group Remuneration Policy
3.1 Principles of the CSE Code of Corporate Governance
Companies should implement official and transparent procedures for developing policies concerning the
remuneration of executive directors and fixing the remuneration of each Board member separately. The
level of remuneration should be sufficient to attract and retain talent required for the efficient operation
of the Company. Part of the remuneration of executive directors should be determined in such a way as
to link rewards to corporate and individual performance. Resolution, or any other authority allowing,
variable pay should be linked to performance.
The Company’s Corporate Governance Report includes a statement of the Remuneration Report and
relevant criteria, as well as the total remuneration of the executive and non-executive members of the
Board.
3.2 EBA Guidelines
The EBA Guidelines aim to ensure that an institution’s remuneration policies and practices are consistent
with and promote sound and effective risk management. The Group seeks to ensure it implements
remuneration policies which are in compliance with regulatory guidelines, while at the same time
operating under legal, industrial and regulatory constraints.
In accordance with EBA guidelines for identification of those employees whose professional activities are
deemed to have a material impact on the Group’s risk profile, the Group maintains a list of these
employees known as Material Risk Takers which is reviewed and approved by the -Joint NCGC/HRRC
(subject to any comments from RC) annually.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
223
Remuneration Policy Report for the year 2023 (continued)
4. Remuneration
4.1 Remuneration of Non-executive Directors
The remuneration of non-executive directors is not linked to the profitability of the Group. It is related
to the responsibilities and time devoted for Board meetings and decision-making for the governance of
the Group, and for their participation in the committees of the Board and any participation in the boards
of Group subsidiary companies. The shareholders’ AGM held on 26 May 2023 approved an increase in
the annual remuneration of the Chairperson of the Board and the remuneration of the NCGC members.
The remuneration of the remaining members remained at the same levels of remuneration as those
approved by the shareholders’ AGM on 26 May 2020.
The remuneration of non-executive directors is determined and approved by the Board. Neither the
Chairperson nor any director participates in decisions relating to their own personal remuneration. The
HRRC proposes fees payable to the Chairperson and the Vice-Chair, while the Chairperson makes
recommendations for the remuneration of the non-executive directors to the Board for approval by the
AGM, considering the following factors:
3. Τhe time allocated and effort exerted by non-executive directors to meetings and decision-making
in the management of the Group;
4. Τhe undertaken level of risk;
5. Τhe increased compliance and reporting requirements;
6. Τhe requirement not to link remuneration of non-executive directors to the profitability of the
Group;
7. Τhe requirement that non-executive directors do not participate in the pension schemes of the
Group;
8. Τhe requirement not to include variable remuneration or share options as remuneration of non-
executive directors.
Neither the Chairperson nor any non-executive directors received any performance related
remuneration. The remuneration of the non-executive directors is set out below:
Position
Annual Remuneration
(€000)
Chairperson 220
Vice-Chair 90
Senior Independent Director 80
Non-Executive Members 55
Chairpersons
Audit Committee 45
Risk Committee 45
Human Resources and Remuneration Committee 30
Nominations and Corporate Governance Committee 30
Technology Committee 30
Membership
Audit Committee 25
Risk Committee 25
Human Resources and Remuneration Committee 20
Technology Committee 20
Nominations and Corporate Governance Committee 20
Additionally, the Group reimburses all directors for expenses incurred in the course of their duties.
The non-executive directors have letters of appointment which can be inspected during normal business
hours by contacting the Company Secretary.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
224
Remuneration Policy Report for the year 2023 (continued)
4. Remuneration (continued)
4.2 Remuneration and Other Benefits of Executive Directors
The HRRC, jointly with the NCGC, reviews and recommends for approval to the Board the remuneration
packages of Executive Directors vis-a-vis their performance. In line with the UK Code the following
factors are also considered: clarity, simplicity, risk, predictability and proportionality and finally
alignment to culture. Both, the CEO and the Executive Director Finance are employees of BOC PCL.
For 2023, fixed remuneration of the Executive Directors has remained unchanged, noting a small change
in the remuneration of Eliza Livadiotou, EDF and executive member of the Board, due to an increase in
the Cost of Living Adjustment (COLA). This is part of the collective agreement.
For the performance year FY2023 a Short-Term Incentive Plan (variable remuneration) was set up, in
which Executive Directors are eligible to participate – a description is provided below in Bonus (Short
Term Incentive Plan). The assessments for the Executive Directors have been completed and amounts
to be granted for the performance FY2023 have been approved by the Board on 28 March 2024 and
disclosed further below.
Contracts of Employment
The remuneration (salary and bonus) of executive directors is set out in their employment contracts
which have a maximum duration of five years, unless any of the executive directors is an appointed
member of the senior management team, in which case the terms of employment are based on the
provisions of the collective agreement in place, except for the CEO.
The employment contract of the CEO is for a period of five years commencing on 1 September 2019.
The CEO’s service contract is reviewed at least every five years. In December 2022, the CEO’s contract
was renewed for a further four years. The employment of the Executive Director Finance, the other
executive director, is mainly based on the provisions of the collective agreement in place.
The Group at present does not grant guaranteed variable remuneration or discretionary pension
payments.
Service Termination Agreements
The employment contract of Panicos Nicolaou, CEO, includes a clause for termination, by service of six
months’ notice to that effect by the executive director on grounds of change of control.
The terms of employment of Eliza Livadiotou, EDF and executive member of the Board, are mainly based
on the provisions of the collective agreement in place, which provide for notice or compensation by the
BOC PCL based on years of service and for a four-month prior written notice by the executive director,
in the event of a voluntary resignation.
Bonus (Short-Term Incentive Plan)
An amendment to the Directors’ Remuneration Policy was approved at the 2023 AGM to facilitate the
introduction of a Short-Term Incentive Plan involving the granting of awards to eligible employees of the
Company and/or its subsidiaries, including Executive Directors of the Company, subject to the terms and
conditions of the Short-Term Incentive Plan and any regulatory restrictions.
The STIP award may be granted either in cash or a combination of cash and shares in case amount for
an individual exceeds a certain threshold, in line with applicable regulatory requirements and other
remuneration restrictions. A retention period of 12 months will be applicable to each tranche of vested
shares.
During 2023 no bonus was paid in relation to the performance year FY2022.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
225
Remuneration Policy Report for the year 2023 (continued)
4. Remuneration (continued)
4.2 Remuneration and Other Benefits of Executive Directors (continued)
Bonus (Short-Term Incentive Plan) (continued)
For the performance year FY2023 a Short-Term Incentive Plan was set up and communicated to
employees, in which Executive Directors are eligible to participate, subject to the achievement of certain
financial criteria and performance conditions. Specifically, in March 2023, the Board of Directors
approved a proposal for the implementation of a Short-Term Incentive Plan (STIP) across the
organisation. The allocation criteria are to be decided on an annual basis by the HRRC. The annual bonus
pool will vary in accordance with the Group’s performance/profitability for each financial year.
Performance will typically be assessed based on a one-year performance period. For the 2023 STIP, it
was decided that this would be activated if the Group met a pre-defined financial target threshold of
ROTE.
Once the distribution of an STIP qualifies and the relevant pool is determined, the individual STIP awards
for Executive Directors are set as a percentage of salary, adjusted in line with the Group’s performance
as well as individual performance against their Objectives and Key Results (OKRs).
At the end of FY2023, the STIP was activated once the Group met the target set relating to FY2023
ROTE. The STIP bonus pool, was calculated at 2.1% of the Group’s FY2023 Profit After Tax amounting
to €10.6m gross (including estimated employer’s payroll contributions).
For the Executive Directors, following the assessment of the performance of each individual by the Joint
NCGC /HRRC and the Board of Directors, and taking into consideration their performance and the delivery
of their objectives and key results (OKRs/KPIs) as set for the FY2023, the % of fixed salary used for the
purposes of the 2023 STIP award was set to 40% for the CEO and c.33% for the Executive Director
Finance.
The awards under the 2023 STIP granted to the Executive Directors in respect of the reporting year FY2023
will comprise both a cash (50%) and a share portion (50%), both of which will vest in tranches as per the
vesting cycle below. Therefore, the majority of the FY2023 STIP award is generally deferred for the
Executive Directors.
All tranches will consist of an equal proportion (50%-50%) of cash and shares. The actual number of shares
to be granted will be determined at the time where approval for the granting of the award is obtained.
Shares vesting as part of the short-term incentive award are subject to one-year retention period and the
entire amount of the award is subject to clawback provisions.
The 2023 STIP award of the Executive Directors will be subject to the below vesting cycle, 40% in the year
of the grant and the remaining in equal tranches over a period of 5 years.
2024 2025 2026 2027 2028 2029
40% 12% 12% 12% 12% 12%
The STIP amounts shown in section 5 below are the total amounts scheduled to be released in relation
to the STIP award approved in 2024 in respect of the performance period FY2023.
Retirement Benefit Schemes
The CEO participates in a defined contribution plan largely on the same basis as other employees. The
EDF participates in a defined contribution plan on the same basis as other employees.
The main characteristics of the retirement benefit schemes are presented in Note 14 of the Consolidated
Financial Statements for the year ended 31 December 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
226
Remuneration Policy Report for the year 2023 (continued)
4. Remuneration (continued)
4.2 Remuneration and Other Benefits of Executive Directors (continued)
Share Options
No share options were granted to the executive directors during 2023 or 2022.
Long-term incentive plan(‘LTIP’)
The LTIP was approved by the 2022 AGM, which took place on 20 May 2022. The LTIP involves the
granting of share awards and is driven by scorecard achievement, with measures and targets set to align
pay outcomes with the delivery of the Group’s strategy. Currently, under the plan, the employees eligible
for LTIP awards are the members of the Extended EXCO, including the executive directors. The LTIP
stipulates that performance will be measured over a 3-year period and sets financial and non-financial
objectives to be achieved. At the end of the performance period, the performance outcome will be used
to assess the percentage of the awards that will vest. The LTIP represents a further step in the Group’s
efforts to enhance its remuneration structure by introducing a variable pay component within the total
compensation package of the members of eligible group, as per best practice and in accordance with EU
banking industry regulations.
As per the applicable regulatory framework, it is noted that awards cannot exceed 50% of each eligible
participant’s fixed pay (shareholders’ consent is required to increase this limit to 100%) and that up to
100% of the awards will be subject to malus and clawback provisions in accordance with applicable
legislation and regulations. For any award to vest the employee must be in the employment of the Group
up until the date of the vesting of such an award. Under certain circumstances the HRRC has the
discretion to determine whether the award will lapse and/or the extent to which the award will be vested.
For good leavers unvested awards could, under circumstances, vest immediately, in total for performance
periods completed or pro-rata where a performance period has not expired, and provided that these
shall be subject to the satisfaction of the performance conditions.
The LTIP is at the discretion of the HRRC.
Share awards have been awarded under a long-term incentive plan to the executive directors during
2023 and 2022 as described further below.
Other Benefits
Other benefits provided to the executive directors include other benefits provided to staff (e.g. car
allowance), medical fund contributions and life insurance. The relevant costs for the key management
personnel are disclosed in Note 49 of the Consolidated Financial Statements for the year ended 31
December 2023.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
227
Remuneration Policy Report for the year 2023 (continued)
5. Information Regarding the Remuneration of Directors for Year 2023
Table: Directors’ total remuneration – 2023 (audited)
Notes:
* Exclusive of employer’s contributions to social security and related funds
** Benefits include taxable amount for Benefit in kind - car
*** Refers to amounts under LTIP cycles for which the performance period ended during the reporting period. No LTIP cycles had a performance period ended in 2023, therefore no amounts are reported. Information on amounts granted
under the LTIP in 2023 is disclosed below.
**** The STIP amounts shown above are the full amounts scheduled to be released to the STIP award approved in 2024 in respect of the performance period FY2023 and includes both amounts expected to vest in 2024 and amounts to be
deferred in following years. Subject to the approval of a revised remuneration policy at the 2024 AGM, the STIP award will be partially deferred and released over a period of 5 years. For further details on the STIP awards, see 4.2 (Bonus –
Short Term Incentive Plan) above.
(1) Arne Bergren resigned from the Board of the Bank and BOCH on 31 March 2023.
(2) Monique Hemerijck’s appointment to the Board of the Bank and BOCH was approved by the ECB on 10 August 2023
(3) Paula Hadjisotiriou resigned from the Board of the Bank and BOCH on 31 December 2023.
(4) Adrian John Lewis’ appointment to the Board of the Bank and BOCH was approved by the ECB on 17 November 2023.
(5) Maria Philippou resigned from the Board of the Bank and BOCH on 13 October 2023.
(6) Nicolaos Sofianos resigned from the Board of the Bank and BOCH on 11 December 2023.
(7) Ioannis Zographakis resigned from the Board of the Bank and BOCH on 31 December 2023.
2023
Remuneration
for
services*
€
Remuneration
for participation
in the Board of
Directors and
its Committees*
€
Total
remuneration
for services
€
Remuneration
and benefits
from other Group
companies
€
Assessment of
the value of
benefits that
are considered
to form
remuneration
€**
Annual
contribution
to retirement
benefits
€
Total Fixed
Remuneration
€
Remuneration
in the form of
Shared-based
payment
(LTIP)***
€
Remuneration
in the form of
Bonus
payment
(STIP)****
€
Total
Variable
remuneration
€
Total
Remuneration
€
Executive Directors
Panicos Nicolaou 750,000 - 750,000 - 10,868 67,500 828,368 - 300,000 300,000 1,128,368
Eliza Livadiotou 293,112 - 293,112 - 6,907 26,380 326,399 - 100,000 100,000 426,399
Non-Executive
Directors
Efstratios -Georgios
Arapoglou
- 250,000 250,000 - - - 250,000 - - - 250,000
Lyn Grobler - 155,000 155,000 - - - 155,000 - - - 155,000
Arne Berggren
1
- 30,000 30,000 - - - 30,000 - - - 30,000
Monique Hemerijck
2
- 38,397 38,397 - - - 38,397 - - - 38,397
Paula Hadjisotiriou
3
- 140,706 140,706 - - - 140,706 - - - 140,706
Adrian John Lewis
4
- 8,152 8,152 - - - 8,152 - - - 8,152
Constantine Iordanou - 148,288 148,288 - - - 148,288 - - - 148,288
Maria Philippou
5
- 76,753 76,753 - - - 76,753 - - - 76,753
Nicolaos Sofianos
6
- 117,112 117,112 - - - 117,112 - - - 117,112
Ioannis Zographakis
7
- 112,500 112,500 - - - 112,500 - - - 112,500
1,043,112 1,076,908 2,120,020 - 17,775 93,880 2,231,675 - 400,000 400,000 2,631,675
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
228
Remuneration Policy Report for the year 2023 (continued)
5. Information Regarding the Remuneration of Directors for Year 2023 (continued)
Table: Directors’ total remuneration – 2022 (audited)
* Amounts presented above for comparative year 2022 were restated (compared to how they were presented in the 2022 Annual Financial Report) so as to exclude employer’s contributions to social security and related funds, as they are
considered to be a cost to the Group and do not form part of the Directors’ remuneration. Employer’s contributions are disclosed in Note 49 of the Consolidated Financial Statements for the year ended 31 December 2023. Similarly, in
respect of variable remuneration, only amounts under the STIP awarded for the performance year are included; whereas amounts under the LTIP are included in the year the performance period of an LTIP cycle ends.
Notes:
* Exclusive of employer’s contributions to social security and related funds
** Refers to amounts under LTIP cycles for which the performance period ended during the reporting period. No LTIP cycles had a performance period ended in 2022, therefore no amounts are reported. Information on amounts granted
under the LTIP in 2022 is disclosed below.
*** No Short-term Incentive Plan was in place for the performance year 2022.
1 Following the shareholders' vote on 20 May 2022, Mr Maksim Goldman and Dr. Michael Heger were not re-elected to the Board of Directors of the Company.
2022
Remuneration
for
services*
€
Remuneration
for participation
in the Board of
Directors and
its Committees*
€
Total
remuneration
for services
€
Remuneration
and benefits
from other Group
companies
€
Assessment of
the value of
benefits that
are considered
to form
remuneration
€
Annual
contribution
to retirement
benefits
€
Total Fixed
Remuneration
€
Remuneration
in the form of
Shared-based
payment
(LTIP)**
€
Remuneration
in the form of
Bonus
payment
(STIP)***
€
Total
Variable
remuneration
€
Total
Remuneration
€
Executive Directors
Panicos Nicolaou 750,000
-
750,000
-
10,868
60,009
820,877 -
- -
820,877
Eliza Livadiotou 278,483
-
278,483
-
6,907
22,279
307,669 -
- -
307,669
Non-Executive
Directors
Efstratios -Georgios
Arapoglou
-
250,000
250,000
-
-
-
250,000
-
-
-
250,000
Lyn Grobler -
160,000
160,000
-
-
-
160,000
-
-
-
160,000
Arne Berggren -
120,000
120,000
-
-
-
120,000
-
-
-
120,000
Constantine Iordanou -
92,715
92,715
-
-
-
92,715
-
-
-
92,715
Ioannis Zographakis -
152,704
152,704
-
-
-
152,704
-
-
-
152,704
Maria Philippou -
105,000
105,000
-
-
-
105,000
-
-
-
105,000
Nicolaos Sofianos -
125,000
125,000
-
-
-
125,000
-
-
-
125,000
Paula Hadjisotiriou -
128,641
128,641
- - - 128,641
- - - 128,641
Maksim Goldman
1
-
38,737
38,737
-
-
-
38,737
-
-
-
38,737
Michael Heger
1
-
38,737
38,737
-
-
-
38,737
-
-
-
38,737
1,028,483 1,211,534 2,240,017 - 17,775 82,288 2,340,080 - - - 2,340,080
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
229
Remuneration Policy Report for the year 2023 (continued)
5. Information Regarding the Remuneration of Directors for Year 2023 (continued)
5.1 Comparison of Directors’ and Employees’ remuneration
The following table provides information regarding the annual change in the total remuneration of
members of the Group’s Board of Directors, as compared with the Group performance as well as the
annual change in the remuneration, on a full-time equivalent basis, of the employees, between 2023
and 2020.
Table: Annual Percentage Change (audited)
Annual Change Note*
Percentage
change in
2023
Percentage
change in
2022
Percentage
change in
2021
Percentage
change in
2020
Directors’ Remuneration-Executive
Directors
Panicos Nicolaou, CEO 1 37% 6% 42% 75%
Eliza Livadiotou, Executive Director Finance 1 39% 1% 39% 14%
Directors’ Remuneration-Non-Executive
Directors (NEDs)
2
Efstratios-Georgios Arapoglou (Chairman) 0% 20% 40% 81%
Lyn Grobler -3% 7% 14% 46%
Arne Berggren 3 -75% 9% 1% -5%
Maksim Goldman 4 -100% -65% -3% -5%
Paula Hadjisotiriou 9% 12% 8% 12%
Michael Heger 4 -100% -65% -3% -5%
Constantine Iordanou 5 60% n/a n/a n/a
Maria Philippou 6 -27% -9% 16% 53%
Nicolaos Sofianos 7 -6% 29% n/a n/a
Ioannis Zographakis -26% -21% -4% 29%
Monique Hemerijck 8 n/a n/a n/a n/a
Adrian John Lewis 9 n/a n/a n/a n/a
Average Remuneration on a full-time
equivalent basis of employees
Employees of the Group – excluding STIP
10 9.2% 2.5% 5.8% -3.7%
Employees of the Group – including STIP
10 16.0% 2.5% 5.8% -3.7%
Company performance
Operating profit as per Underlying basis 11 136.9% 61.5% 2.2% -10.0%
Cost to Income Ratio excluding special levy on
deposits and other levies/contributions
12 -18 p.p. -11 p.p. 0 p.p. +1 p.p.
* Notes below apply to changes in remuneration between 2022-2023, noting that the percentage change for comparative years was
restated so as to exclude employer’s contributions to social security and related funds as they are considered to be a cost to the Group
and do not form part of the Directors’ remuneration. Amounts under the LTIP will be included in the year the performance period of
the relevant LTIP cycle ends, and the percentage change for comparative years was restated to this respect. In respect of STIP,
amounts are included in amounts of the year of performance the STIP award relates to. As the STIP was only established in 2023, no
STIP related remuneration is included in amounts for prior years.
1. The % change in FY2023 relates mainly to the cost of the STIP amounts scheduled to be released to the STIP award approved in 2024 in
respect of the performance period FY2023.
2. The fees of the non-executive Directors include fees as members of the Board of Directors of the Company and its subsidiaries, as well
as of committees of the Board of Directors.
3. Resigned on 31 March 2023.
4. Following the shareholders' vote on 20 May 2022, Mr Maksim Goldman and Dr. Michael Heger have not been re-elected to the Board of
Directors of the Company.
5. Appointed on 29 November 2021 hence the %age change is n/a for 2020-2022.
6. Resigned on 13 October 2023.
7. Resigned on 11 December 2023.
8. Appointed on 10 August 2023 hence the %age change is n/a for years presented.
9. Appointed on 17 November 2023 hence the %age change is n/a for years presented.
10. The change in average remuneration is based on annual employees cost (excluding employer’s contributions) divided by the average
number of employees (full time). Annual employees cost as per Note 15.1 of the Consolidated Financial Statements (excluding Voluntary
Staff Exit Plan Cost and Exit cost and other termination benefits-Note 14.1 of the Consolidated Financial Statements). The increase of
9.2% in the financial year 2023 relates primarily to the cost of living adjustments (COLA) and the annual salary increments. When
considering the accrual for the 2023 STIP this increases to 16%.
11. Operating profit on the underlying basis comprises profit before loan credit losses (as defined), impairments of other financial and non-
financial assets, provisions for pending litigations, regulatory and other provisions (net of reversals), tax, profit attributable to non-
controlling interests and non-recurring items (as defined). The reconciliation to the statutory information is included in section
‘Reconciliation of the Consolidated Income Statement for the year ended 31 December 2023 between the audited statutory basis and
the underlying basis’ of the Directors’ Report.
12. Defined as total operating expense as per underlying basis (excluding other non-recurring items, VEP, Special levy on deposits and other
levies/contributions and provisions for litigation, regulatory and other matters) divided by total income.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
230
Remuneration Policy Report for the year 2023 (continued)
6. Long-Term Incentive Plan
2022
In December 2022, the Group granted to eligible employees being the members of the Extended ExCo
share awards under the long-term incentive plan.
The award cycle for the 3-year performance period for FY2022 – FY2024 is shown below:
2023
In October 2023, the Group granted to eligible employees being the members of the Extended ExCo
share awards under the long-term incentive plan.
The award cycle for the 3-year performance period for FY2023 – FY2025 is shown below:
6.1. LTIP awards granted-Executive Directors
LTIP awards granted
in 2023
Number
of
shares*
Face value
at grant*
€’000
Performance
period
Panicos Nicolaou
127
,
110
375
2023
-
2025
Eliza Livadiotou
39
,
950
118
2023
-
2025
LTIP awards granted
in 2022
Number
of
shares*
Face value
at grant*
€’000
Performance
period
Panicos Nicolaou
221
,
890
375
2022
-
2024
Eliza Livadiotou
65
,
910
111
2022
-
2024
* This is the maximum number of shares that can be granted / vested for each of the Executive Directors and the
value is based on the share price that was applicable on the date of the Award Notification.
The applicable scorecards for Executive Directors are shown below (for FY2022 – FY2024 and FY2023 –
FY2025), noting that a different scorecard applies to eligible participants of control functions. It is noted
that individual performance conditions are also applicable as per the Plan Rules.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
231
6. Long-Term Incentive Plan (continued)
6.2. Scorecard FY2022 - FY2024
Area KPI Weight
Target
(end of
FY2024)
Threshold
(end of
FY2024)
Measurement
Profitability
Return on Tangible Equity
(ROTE)
20%
More or equal
to 10%
8%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Cost to Income (excluding
levy & SRF)
10%
Less or equal
to 50%
55%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Asset
Quality
NPE Ratio 10%
Less than
5%
7%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
REMU stock 10%
Less or
equal to
€0,6bn
€0,7bn
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Arrears < 3dpd (excluding
RRD)
10%
Less or equal
to 1%
2%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Capital
CET1 Ratio 10%
More or equal
to 14,5%
13,5%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
MREL Ratio 5%
More or equal
to 23%
22%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Risk &
Compliance
Information Security
and ICT Controls
Effectiveness
5%
More or equal
to 95%
90%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Audit & ECB findings
overall completion rate
5%
More or equal
to 90%
85%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
RCSAs actions overall
completion rate
5%
More or equal
to 90%
85%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Compliance findings/
recommendations
overall completion rate
5%
More or equal
to 90%
85%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
ESG
External ESG Ratings
Score
5% AA rating n/a
Worse than target: 0%
At or better than target: 100%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Annual Corporate Governance Report
Remuneration Policy Report for the year 2023
232
6. Long-Term Incentive Plan (continued)
6.3. Scorecard FY2023 - FY2025
Area KPI Weight
Target
(end of
FY2025)
Threshold
(end of
FY2025)
Measurement
Profitability
Return on Tangible
Equity (ROTE)*
20%
More or equal
to 13%
11%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Cost to Income
(excluding levy &
SRF)
10%
Less or equal
to 45%
50%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Asset Quality
NPE Ratio 10%
Less than
3%
5%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
REMU stock 10%
Less or
equal to
€0,5bn
€0,6bn
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Arrears < 3dpd
(excluding RRD)
10%
Less or equal
to 1%
2%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Capital
CET1 Ratio 10%
More or equal
to 15%
14%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
MREL Ratio 5%
100bps Binding
Requirement
Binding
Requirement
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Risk &
Compliance
Information Security
and ICT Controls
Effectiveness
5%
More or equal
to 95%
90%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Audit & ECB findings
overall completion
rate
5%
More or equal
to 90%
85%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
RCSAs actions overall
completion rate
5%
More or equal
to 90%
85%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
Compliance findings/
recommendations
overall completion
rate
5%
More or equal
to 90%
85%
Worse than threshold: 0%
Between threshold and target: 50%
At or better than target: 100%
ESG
External ESG Ratings
Score
5% AA rating n/a
Worse than target: 0%
At or better than target: 100%
* From FY2023 ROTE is calculated as Profit/(loss) after tax (attributable to the owners of the Company)
(annualised), divided by the quarterly average of Shareholders’ equity minus intangible assets after
deducting and the amounts approved/recommended for the distribution in respect of earnings of the
relevant year the distribution relates to.
Consolidated Financial Statements for 2023
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Consolidated Financial Statements
for the year ended 31 December 2023
Contents
Page Page
Consolidated Income Statement
235
Consolidated Statement of Comprehensive Income 236
Consolidated Balance Sheet
237
Consolidated Statement of Changes in Equity 238
Consolidated Statement of Cash Flows 240
Notes to the Consolidated Financial Statements
1. Corporate information 242
2. Summary of accounting policies 242
2.1 Basis of preparation 242
2.2 Accounting policies and changes in accounting
policies and disclosures 243
2.3 Standards and Interpretations that are issued but
not yet effective 260
2.4 Basis of consolidation 261
2.5 Foreign currency translation 262
2.6 Segment reporting 263
2.7 Turnover 263
2.8 Revenue from contracts with customers 263
2.9 Recognition of interest income/expense and
income/expense similar to interest 264
2.10 Employee benefits 266
2.11 Tax 266
2.12 Financial instruments - initial recognition
267
2.13 Classification and measurement of financial assets
and financial liabilities 268
2.14 Reclassification of financial assets and liabilities 273
2.15 Derecognition of financial assets and financial
liabilities 273
2.16 Modification of financial assets 273
2.17 Impairment of financial assets 274
2.18 Write-offs 281
2.19 Financial guarantees, letters of credit and undrawn
loan commitments 282
2.20 Offsetting financial instruments 282
2.21 Hedge accounting 282
2.22 Cash and cash equivalents 283
2.23 Insurance business 283
2.24 Repurchase and reverse repurchase agreements 284
2.25 Leases 284
2.26 Property and equipment
285
2.27 Investment properties 286
2.28 Stock of property 286
2.29 Intangible assets
287
2.30 Share capital
287
2.31 Share-based compensation plans 288
2.32 Other equity instruments 288
2.33 Treasury shares 288
2.34 Dividends on ordinary shares 288
2.35 Provisions for pending litigations, claims,
regulatory and other matters 289
2.36 Business combinations 289
2.37 Investments in associates and joint ventures 289
3. Going concern 290
4. Economic and geopolitical environment 290
5. Significant and other judgements, estimates and
assumptions 291
6. Segmental analysis 301
7. Interest income and income similar to interest income
307
8. Interest expense and expense similar to interest expense 308
9. Fee and commission income and expense 308
10. Net foreign exchange gains 309
11. Net gains/(losses) on financial instruments 309
12. Net insurance result 310
13. Other income 312
14. Staff costs 313
15. Other operating expenses 321
16. Credit losses on financial assets and impairment net of
reversals of non-financial assets 323
17. Income tax 324
18. Earnings per share 328
19. Cash, balances with central banks and loans and advances
to banks 328
20. Investments 329
21. Derivative financial instruments 334
22. Fair value measurement 339
23. Loans and advances to customers 348
24. Life insurance business assets attributable to
policyholders 350
25. Property and equipment 351
26. Intangible assets 352
27. Stock of property 353
28. Prepayments, accrued income and other assets 354
29. Funding from central banks
355
30. Customer deposits 356
31. Insurance and reinsurance contracts
357
32. Debt securities in issue and Subordinated liabilities 359
33. Accruals, deferred income, other liabilities and other
provisions 360
34. Share capital 361
35. Dividends 362
36. Retained earnings 363
37. Fiduciary transactions 363
38. Provisions for pending litigations, claims, regulatory and
other matters 363
39. Contingent liabilities and commitments 369
40. Additional information on cash flow statement 370
41. Cash and cash equivalents 370
42. Leases 371
43. Analysis of assets and liabilities by expected maturity 373
44. Risk management - Credit risk 374
45. Risk management - Market risk 401
46. Risk management - Liquidity and funding risk
407
47. Risk management - Insurance risk 414
48. Capital management 416
49. Related party transactions 418
50. Group companies
427
51. Investments in associates and joint venture 429
52. Country by country reporting 430
53. Events after the reporting period 431
234
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Consolidated Income Statement
for the year ended 31 December 2023
2023
2022
(restated)
Notes €000 €000
Interest income
7
920,078 428,849
Income similar to interest income
7
65,450 22,119
Interest expense 8 (146,899) (65,721)
Expense similar to interest expense
8
(46,412) (14,840)
Net interest income 792,217 370,407
Fee and commission income 9 188,343 202,583
Fee and commission expense 9 (7,320) (10,299)
Net foreign exchange gains 10 28,588 31,291
Net gains/(losses) on financial instruments 11 12,780 (614)
Net gains on derecognition of financial assets measured at amortised cost 6,361 5,235
Net insurance finance income/(expense) and net reinsurance finance income/(expense) 12 960 784
Net insurance service result 12 73,528 60,530
Net reinsurance service result 12 (21,000) (16,748)
Net gains/(losses) from revaluation and disposal of investment properties 1,043 (999)
Net gains on disposal of stock of property
27
8,972 13,970
Other income
13
18,337 16,681
Total operating income 1,102,809 672,821
Staff costs 14 (192,266) (285,154)
Special levy on deposits and other levies/contributions
15
(42,380) (38,492)
Provisions for pending litigations, claims, regulatory and other matters (net of reversals) 38 (28,464) (11,880)
Other operating expenses
15
(151,093) (157,916)
Operating profit before credit losses and impairment 688,606 179,379
Credit losses on financial assets 16 (79,830) (59,087)
Impairment net of reversals on non-financial assets 16
(46,852) (29,549)
Profit before tax
561,924 90,743
Income tax
17
(72,980) (31,312)
Profit after tax for the year
488,944 59,431
Attributable to:
Owners of the Company
487,207 56,565
Non-controlling interests
1,737 2,866
Profit for the year
488,944 59,431
Basic profit per share attributable to the owners of the Company
(€ cent)
18
109.2 12.7
Diluted profit per share attributable to the owners of the Company
(€ cent)
18
109.0 12.7
235
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
2023
2022
(restated)
Notes €000 €000
Profit for the year
488,944 59,431
Other comprehensive income (OCI)
OCI that may be reclassified in the consolidated income statement
in subsequent periods
2,975 (13,309)
Fair value reserve (debt instruments)
3,069 (11,197)
Net gains/(losses) on investments in debt instruments measured at fair
value through OCI (FVOCI)
3,401 (9,935)
Transfer to the consolidated income statement on disposal
(332) (1,262)
Foreign currency translation reserve
(94) (2,112)
(Loss)/profit on translation of net investments in foreign subsidiaries
(81) 1,967
Losses on hedging of net investments in foreign subsidiaries
21
(13) (4,079)
OCI not to be reclassified in the consolidated income statement in
subsequent periods
10,198 (6,059)
Fair value reserve (equity instruments)
(712) (2,015)
Net losses on investments in equity instruments designated at FVOCI
(712) (2,015)
Property revaluation reserve
10,290 244
Net fair value gains before tax
25
13,524 -
Deferred tax
17
(3,234) 244
Actuarial gains/(losses) on defined benefit plans
620 (4,288)
Remeasurement gains/(losses) on defined benefit plans
14
620 (4,288)
Other comprehensive income/(loss) for the year net of taxation
13,173 (19,368)
Total comprehensive income for the year
502,117 40,063
Attributable to:
Owners of the Company
500,156 37,197
Non-controlling interests
1,961 2,866
Total comprehensive income for the year
502,117 40,063
236
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Consolidated Balance Sheet
as at 31 December 2023
31 December
2023
31 December
2022
(restated)
1 January
2022
(restated)
Assets
Notes €000 €000
€000
Cash and balances with central banks 19 9,614,502 9,567,258 9,230,883
Loans and advances to banks 19 384,802 204,811 291,632
Reverse repurchase agreements 403,199 - -
Derivative financial assets 21 51,055 48,153 6,653
Investments at FVPL 20 135,275 190,209 199,194
Investments at FVOCI 20 443,420 467,375 748,695
Investments at amortised cost 20 3,116,714 2,046,119 1,191,274
Loans and advances to customers 23 9,821,788 9,953,252 9,836,405
Life insurance business assets attributable to policyholders 24 649,212 542,321 551,797
Prepayments, accrued income and other assets 28 584,919 609,054 583,777
Stock of property
27
826,115 1,041,032 1,111,604
Investment properties 62,105 85,099 117,745
Deferred tax assets
17
201,268 227,934 265,942
Property and equipment
25
285,568 253,378 252,130
Intangible assets 26 48,635 52,546 54,144
Non-current assets and disposal groups held for sale - - 358,951
Total assets
26,628,577 25,288,541 24,800,826
Liabilities
Deposits by banks 471,556 507,658 457,039
Funding from central banks 29 2,043,868 1,976,674 2,969,600
Derivative financial liabilities 21 17,980 16,169 32,452
Customer deposits 30 19,336,915 18,998,319 17,530,883
Insurance contract liabilities 31 658,424 597,981 622,398
Accruals, deferred income, other liabilities and other provisions 33 469,265 381,193 358,090
Provisions for pending litigations, claims, regulatory and other
matters
38
131,503 127,607 104,108
Debt securities in issue 32 671,632 297,636 302,555
Subordinated liabilities 32 306,787 302,104 340,220
Deferred tax liabilities
17
32,306 34,634 39,817
Total liabilities
24,140,236 23,239,975 22,757,162
Equity
Share capital 34 44,620 44,620 44,620
Share premium 34 594,358 594,358 594,358
Revaluation and other reserves 89,920 76,939 99,541
Retained earnings
36
1,518,182 1,090,349 1,062,711
Equity attributable to the owners of the Company
2,247,080
1,806,266 1,801,230
Other equity instruments 34 220,000 220,000 220,000
Non-controlling interests
21,261 22,300 22,434
Total equity
2,488,341 2,048,566 2,043,664
Total liabilities and equity
26,628,577 25,288,541 24,800,826
237
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Attributable to the owners of the Company
Share
capital
(Note 34)
Share
premium
(Note 34)
Treasury
shares
(Note 34)
Other
capital
reserves
(Note 14)
Retained
earnings
(Note 36)
Property
revaluation
reserve
Financial
instruments
fair value
reserve
Life insurance
in-force
business
reserve
Foreign
currency
translation
reserve
Total
Other equity
instruments
(Note 34)
Non-
controlling
interests
Total
equity
€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000
31 December 2022
44,620 594,358 (21,463) 322 1,041,152 74,170 7,142 101,301 16,768 1,858,370 220,000 22,300 2,100,670
Impact of retrospective application of IFRS 17
adoption (Note 2.2.1)
- - - - 49,197 - - (101,301) - (52,104) - - (52,104)
31 December 2022 (restated)/1 January
2023
44,620 594,358 (21,463) 322 1,090,349 74,170 7,142 - 16,768 1,806,266 220,000 22,300 2,048,566
Profit for the year - - - - 487,207 - - - - 487,207 - 1,737 488,944
Other comprehensive income/(loss) after tax for
the year
- - - - 620 10,066 2,357 - (94) 12,949 - 224 13,173
Total comprehensive income/(loss) after tax for
the year
- - - - 487,827 10,066 2,357 - (94) 500,156 - 1,961 502,117
Dividends (Note 35) - - - - (22,310) - - - - (22,310) - - (22,310)
Share-based benefits - cost (Note 14) - - - 595 - - - - - 595 - - 595
Payment of coupon to AT1 holders (Note 34) - - - - (27,339) - - - - (27,339) - - (27,339)
Dividends paid to non-controlling interests - - - - - - - - - - - (3,000) (3,000)
Issue of other equity instruments (Note 34) - - - - (3,530) - - - - (3,530) 220,000 - 216,470
Repurchase of other equity instruments (Note
34)
- - - - (6,820) - - - - (6,820) (220,000) - (226,820)
Transfer to the consolidated income statement - - - - - 62 - - - 62 - - 62
Transfers to retained earnings
- - - - 5 (59) 54 - - - - - -
31 December 2023
44,620 594,358 (21,463) 917 1,518,182 84,239 9,553 - 16,674 2,247,080 220,000 21,261 2,488,341
238
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Attributable to the owners of the Company
Share
capital
(Note 34)
Share
premium
(Note 34)
Treasury
shares
(Note 34)
Other
capital
reserves
(Note 14)
Retained
earnings
(Note 36)
Property
revaluation
reserve
Financial
instruments
fair value
reserve
Life insurance
in-force
business
reserve
Foreign
currency
translation
reserve
Total
Other
equity
instruments
(Note 34)
Non-
controlling
interests
Total
equity
€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000
1 January 2022
44,620 594,358 (21,463) - 986,623 80,060 23,285 113,651 17,659 1,838,793 220,000 22,434 2,081,227
Impact of retrospective application of IFRS 17
adoption (Note 2.2.1)
- - - - 76,088 - - (113,651) - (37,563) - - (37,563)
1 January 2022 (restated)
44,620 594,358 (21,463) - 1,062,711 80,060 23,285 - 17,659 1,801,230 220,000 22,434 2,043,664
Profit for the year - - - - 56,565 - - - - 56,565 - 2,866 59,431
Other comprehensive (loss)/income after tax for
the year
- - - - (4,288) 244 (13,212) - (2,112) (19,368) - - (19,368)
Total comprehensive income/(loss) after tax for
the year
- - - - 52,277 244 (13,212) - (2,112) 37,197 - 2,866 40,063
Share-based benefits - cost (Note 14) - - - 322 - - - - - 322 - - 322
Defence contribution - - - - (4,983) - - - - (4,983) - - (4,983)
Payment of coupon to AT1 holders (Note 34) - - - - (27,500) - - - - (27,500) - - (27,500)
Dividends paid to non-controlling interests - - - - - - - - - - - (3,000) (3,000)
Transfers to retained earnings
- - - - 7,844 (6,134) (2,931) - 1,221 - - - -
31 December 2022
44,620 594,358 (21,463) 322 1,090,349 74,170 7,142 - 16,768 1,806,266 220,000 22,300 2,048,566
239
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
Year ended
31 December
2023
2022
(restated)
Note €000 €000
Profit before tax 561,924 90,743
Adjustments for:
Depreciation of property and equipment and amortisation of intangible assets 34,253 34,203
Impairment net of reversals on non-financial assets
46,852 29,549
Credit losses on financial assets 79,830 59,087
Net gains on derecognition of financial assets measured at amortised cost (6,361) (5,235)
Amortisation of discounts/premiums and interest on debt securities (64,185) (21,344)
Dividend income (856) (940)
Net loss on disposal of investment in debt securities measured at FVOCI 438 2,384
(Gain)/loss from revaluation of financial instruments designated as fair value hedges (1,655) 51,839
Interest on subordinated liabilities and debt securities in issue 39,854 28,515
Interest on reverse repurchase agreements (3,219) -
Negative interest on loans and advances to banks and balances with central banks
- 23,184
Interest/(negative interest) on funding from central banks 67,194 (18,418)
Share-based benefits cost 14 595 322
Net gains on disposal of stock of property and investment properties (11,400) (15,886)
(Profit)/loss on sale and write offs of property and equipment and intangible assets (53) 13
Interest expense on lease liability 1,453 114
Premium tax included in net insurance service result as directly attributable expense 2,222 1,960
Net losses from revaluation of investment properties 1,385 2,915
Net exchange differences
7,926 (20,922)
756,197 242,083
Change in:
Loans and advances to banks
(30,478) 28,996
Deposits by banks
(36,102) 50,619
Obligatory balances with central banks
55,358 52,450
Customer deposits
338,596 1,467,436
Life insurance business assets attributable to policyholders and Insurance contract liabilities
(46,448) (14,941)
Loans and advances to customers
48,568 (223,579)
Prepayments, accrued income and other assets
65,668 (13,067)
Provisions for pending litigations, claims, regulatory and other matters
3,129 4,132
Accruals, deferred income, other liabilities and other provisions
59,878 15,801
Derivative financial instruments
(1,091) (57,783)
Investments measured at FVPL
54,934 8,985
Stock of property
132,979 153,311
1,401,188 1,714,443
Tax paid
(20,142) (6,716)
Net cash from operating activities
1,381,046 1,707,727
Cash flows from investing activities
Purchases of debt, treasury bills and equity securities
(1,557,117) (1,101,030)
Purchase of reverse repurchase agreements
(400,000)
-
Proceeds on disposal/redemption of investments in debt and equity securities
555,666 454,145
Interest received from debt securities
36,334 30,929
Dividend income from equity securities
856 940
Proceeds on disposal of held for sale portfolios
- 332,151
Payment for purchase of Velocity 2 (3,649) -
Purchases of property and equipment
25
(7,454) (6,752)
Additions to intangible assets
26
(14,949) (17,347)
Proceeds on disposals of property and equipment and intangible assets
77 517
Proceeds on disposals of investment properties
9,924 41,400
Net cash used in investing activities
(1,380,312) (265,047)
240
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
Year ended
31 December
2023
2022
(restated)
Note €000 €000
Cash flow from financing activities
Payment of AT1 coupon 34 (27,339) (27,500)
Issue of other equity instruments (net of transaction costs) 34 216,470 -
Repurchase of other equity instruments 34 (226,820) -
Payment of defence contribution
- (4,983)
Net (repayments)/proceeds of funding from central banks
- (979,389)
Repayments of subordinated liabilities - (35,605)
Proceeds from the issue of debt securities in issue (net of costs) 347,689 -
Dividend paid on ordinary shares
(20,345) -
Interest on subordinated liabilities
(19,875) (23,334)
Interest on debt securities in issue
(7,500) (7,858)
Negative interest on loans and advances to banks and balances with central banks
- (23,184)
Principal elements of lease payments
(7,846) (6,884)
Dividend paid by subsidiaries to non-controlling interests
(3,000) (3,000)
Net cash from/(used in) financing activities
251,434 (1,111,737)
Net increase in cash and cash equivalents
252,168 330,943
Cash and cash equivalents 1 January
9,586,153 9,255,210
Cash and cash equivalents 31 December
41
9,838,321 9,586,153
Additional information on the cash flow statement is provided in Note 40.
241
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
1. Corporate information
Bank of Cyprus Holdings Public Limited Company (the 'Company') was incorporated in Ireland on 11 July
2016, as a public limited company under company number 585903 in accordance with the provisions of the
Companies Act 2014 of Ireland (Companies Act 2014). Its registered office is 10 Earlsfort Terrace, Dublin 2,
D02 T380, Ireland. The Company is domiciled in Ireland and is tax resident in Cyprus.
Bank of Cyprus Holdings Public Limited Company is the holding company of Bank of Cyprus Public Company
Limited ('BOC PCL' or the 'Bank') with principal place of business in Cyprus. The Bank of Cyprus Holdings
Group (the 'Group') comprises the Company, its subsidiary, BOC PCL, and the subsidiaries of BOC PCL. Bank
of Cyprus Holdings Public Limited Company is the ultimate parent company of the Group.
The principal activities of BOC PCL and its subsidiary companies (the 'BOC Group') involve the provision of
banking services, financial services, insurance services and the management and disposal of property
predominately acquired in exchange of debt.
BOC PCL is a significant credit institution for the purposes of the SSM Regulation and has been designated
by the CBC as an 'Other Systemically Important Institution' (O-SII). The Group is subject to joint
supervision by the ECB and the CBC for the purposes of its prudential requirements.
The shares of the Company are listed and trading on the London Stock Exchange (LSE) and the Cyprus
Stock Exchange (CSE).
Consolidated Financial Statements
The Consolidated Financial Statements of the Company for the year ended 31 December 2023 (the
Consolidated Financial Statements) were authorised for issue by a resolution of the Board of Directors on 28
March 2024.
The statutory financial statements prepared in accordance with ESEF are published on the Group's website
www.bankofcyprus.com (Group/Investor Relations/Financial Results).
2. Summary of accounting policies
2.1 Basis of preparation
The Consolidated Financial Statements have been prepared on a historical cost basis, except for properties
held for own use and investment properties, investments at fair value through other comprehensive income
(FVOCI), financial assets (including loans and advances to customers and investments) at fair value through
profit or loss (FVPL) and derivative financial assets and derivative financial liabilities that have been
measured at fair value, non-current assets held for sale measured at fair value less costs to sell and stock of
property measured at net realisable value where this is lower than cost. The carrying values of recognised
assets and liabilities that are hedged items in fair value hedges, and otherwise carried at cost, are adjusted
to record changes in fair value attributable to the risks that are being hedged.
Statement of compliance
The Consolidated Financial Statements have been prepared in accordance with the International Financial
Reporting Standards (IFRSs) as adopted by the European Union (EU) and with those parts of the Companies
Act 2014 applicable to companies reporting under IFRSs.
Presentation of the Consolidated Financial Statements
The Consolidated Financial Statements are presented in Euro (€) and all amounts are rounded to the
nearest thousand, except where otherwise indicated. A comma is used to separate thousands and a dot is
used to separate decimals.
The Group presents its balance sheet broadly in order of liquidity. An analysis regarding expected recovery
or settlement of assets and liabilities within twelve months after the balance sheet date and more than
twelve months after the balance sheet date is presented in Note 43.
Comparative information
Comparative information was restated following the adoption of IFRS 17 'Insurance Contracts' on 1 January
2023 as described further below in Note 2.2.1.
242
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.1 Basis of preparation (continued)
Furthermore, comparative information on 'Turnover' in Note 6 w as restated, in order to align the definition
of 'Turnover' to the Country-by-Country Reporting (Note 52). T he Turnover definition is now aligned with
the 'Total operating income' caption as presented in the Consolidated Income Statement and is considered
to be the most representative for the Group. The definition of 'Turnover' is disclosed in Note 2.7 a nd the
restatement is indicated in the table below:

| Turnover |  |
| 31 December |  |
| 2022 |  |
| (as previously |  |
| presented) |  |
|  | Restatements |
|  | to Turnover |
|  | definition |
|  |  | Turnover
|  |  | 31 December
|  |  | 2022
|  |  | (restated)
| €000 | €000 | €000
Interest income and income similar to interest |  |  |
income |  |  |
| 450,968 | (450,968) | -
Net interest income | n/a | 370,407 | 370,407
Fees and commission income | 202,583 | (202,583) | -
Net fee and commission income | n/a | 192,284 | 192,284
Net foreign exchange gains | 31,291 | - | 31,291
Net gains/(losses) on financial instruments |  |  |
| n/a | (614) | (614)
Net gains on derecognition of financial assets |  |  |
measured at amortised cost |  |  |
| n/a | 5,235 | 5,235
Gross insurance premiums |  |  |
| 210,347 | (210,347) | n/a
Net insurance result |  |  |
| n/a | 44,566 | 44,566
Net gains/(losses) from revaluation and disposal of |  |  |
investment properties |  |  |
| (999) | - | (999)
Net gains on disposal of stock of property |  |  |
| 13,970 | - | 13,970
Impairment of stock of property |  |  |
| (20,628) | 20,628 | n/a
Other income |  |  |
| 16,681 | - | 16,681
Turnover |  |  |
| 904,213 | (231,392) | 672,821

In addition, comparative information was restated following a change in the presentation of segmental
analysis as detailed in Note 6. T his change let to a respective restatement of Note 14 i n relation to the
analysis of average number of employees per business line and Notes 44.3 and 44.5.
Further, the presentation of comparative information in relation to the remuneration disclosures relating to
the members of the Board of Directors and key management personnel in Note 49 h as been restated as to
exclude employer's contribution from the tables of fees and emoluments. Such amounts are not considered
part of the remuneration of the Board of Directors and key management personnel, but rather an
incremental cost to the Group. In addition, the cost for awards granted in 2022 and 2023 to the Executive
Directors and key management personnel under the Long-Term Incentive Plan (LTIP) has also been
excluded from the tables of fees and emoluments. Αmounts of an LTIP cycle award are presented in the
remuneration table in the year the performance period of the LTIP cycle award ends. No LTIP cycles had a
performance period ending during the years ended 31 December 2023 and 2022. The cost recognised by
the Group in the Consolidated Income Statement for LTIP cycles under which awards have been granted but
not yet vested is separately disclosed in Note 49.
Other than the adoption of IFRS 17 'Insurance Contracts', the restatements did not have an impact on the
results for the year or equity of the Group.
2.2 Accounting policies and changes in accounting policies and disclosures
The Consolidated Financial Statements contain a summary of the accounting policies adopted in the
preparation of the Consolidated Financial Statements.
The accounting policies adopted are consistent with those of the previous year, except for the adoption of
new and amended standards and interpretations as explained in Note 2.2.1.
243
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations
The Group applied for the first time certain standards and amendments, which are effective for annual
periods beginning on or after 1 January 2023 and which are explained below. The Group has not early
adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
IFRS 17: Insurance Contracts
IFRS 17 'Insurance Contracts' (IFRS 17) became effective on 1 January 2023 and as required by the
standard, the Group applied the requirements retrospectively with comparative information restated from
the transition date, 1 January 2022 as further explained in the 'Transition application' section below. IFRS
17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance
contracts, reinsurance contracts and investment contracts with discretionary participation features.
IFRS 17 is a comprehensive new accounting standard for insurance contracts which replaced IFRS 4
'Insurance Contracts'. In contrast to the requirements in IFRS 4, IFRS 17 provides a comprehensive model
(the general measurement model or 'GMM') for insurance contracts, supplemented by the variable fee
approach ('VFA') for contracts with direct participation features that are substantially investment-related
service contracts, and the premium allocation approach ('PAA') mainly for short duration insurance
contracts. The main features of the new accounting standard for insurance contracts are the following:
i. The measurement of the present value of future cash flows, incorporating an explicit risk adjustment,
remeasured every reporting period (the fulfilment cash flows).
ii. A Contractual Service Margin (CSM) that is equal and opposite to any day one gain in the fulfilment
cash flows of a group of contracts. The CSM represents the unearned profitability of the insurance
contracts and is recognised in profit or loss over the service period (i.e., the coverage period).
iii. Certain changes in the expected present value of future cash flows are adjusted against the CSM and
thereby recognised in profit or loss over the remaining contractual service period.
iv. The recognition of insurance revenue and insurance service expenses in the consolidated income
statement is based on the concept of services provided during the period.
v. Insurance service result (earned revenue less incurred claims) is presented separately from the
insurance finance income or expense.
vi. Extensive disclosures to provide information on the recognised amounts from insurance contracts
and the nature and extent of the risks arising from these contracts.
2.2.1.1 Transition application
The standard is applied retrospectively using a fully retrospective approach ('FRA') as if it had always been
applied, unless it is impracticable to so, in which case either a modified retrospective approach ('MRA') or a
fair value approach ('FVA') could be selected. Impracticability assessments were performed based on the
requirements of IFRS 17 and considered the availability of data and systems and the requirement not to
apply hindsight within the measurement. Following the completion of impracticability assessments, the
Group applied the following approaches:
i. The FRA for all non-life groups of insurance contracts and non-individual life groups of insurance
contracts, irrespective of issue date.
ii. The MRA for groups of life insurance contracts issued between 2016 and 2021.
iii. The FVA for groups of life insurance contracts issued prior to 2016.
Modified retrospective approach ('MRA')
The Group is permitted to use the MRA only to the extent that is does not have reasonable and supportable
information to apply the FRA. MRA is an approach to achieve the outcome closest to the FRA, with the
prescribed modifications to address some of the challenges of retrospective application. Under MRA the
below simplifications are permitted:
i. assessments at the date of initial recognition of groups of insurance contracts;
ii. contractual service margin for insurance contracts without direct participation features;
iii. contractual service margin for insurance contracts with direct participation features; and
iv. insurance finance income or expenses.
In applying the MRA, the Group used reasonable and supportable information from its existing reporting
systems, with the objective to arrive at the outcome closest to the FRA. The Group applied each of the
following modifications:
244
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.1 Transition application (continued)
i. Groups of contracts issued between 2016 and 2021 contain contracts issued more than one year
apart. For these groups, the discount rates on initial recognition were determined at 1 January 2022
instead of at the date of initial recognition.
ii. For groups of contracts issued between 2016 and 2021, the future cash flows on initial recognition
were estimated by considering:
a) the transactions that occurred in the period 2016-2021, plus
b) the expected future cashflows estimated at 31 December 2021.
iii. For groups of contracts issued between 2016 and 2021, the illiquidity premiums applied to the risk-
free yield curves on initial recognition were estimated by determining an average spread between
the risk-free yield curves and the discount rates determined retrospectively for the period between 1
January 2016 and 1 January 2022.
iv. For groups of contracts issued between 2016 and 2021, the risk adjustment for non-financial risk at
initial recognition was determined by adjusting the relevant amount at 1 January 2022.
v. The amount of the CSM that has been released in the profit or loss before 1 January 2022 was
determined by comparing the coverage units provided before 1 January 2022 and the expected
coverage units at 1 January 2022.
Determination on transition of the fair value of insurance contract liabilities for which FVA was applied
Under the FVA approach required by IFRS 17, the valuation of insurance liabilities on transition is based on
the requirements of IFRS 13 'Fair Value Measurement'. This requires consideration of the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (an exit price). Under the FVA, the CSM of the liability for remaining
coverage at the transition date is determined as the difference between the fair value of the groups of
insurance contracts and the fulfilment cash flows measured as at that date. There is judgement involved in
determining an appropriate fair value, as there is a lack of observable data for actual transactions for closed
book insurance businesses and a range of possible modelling approaches. In determining the fair value the
Group considered the estimated profit margin that a market participant would demand in return for
assuming the insurance liabilities, and the discount rate that would be applied within the IFRS 13
calculation. The approach for setting these included the following:
i. The discount rate was derived with an allowance for an illiquidity premium that takes into account the
level of 'matching' between the life insurance assets and related liabilities.
ii. Solvency II information (i.e. Best Estimate Liabilities and Risk Margin) has been utilised.
The sections below provide a summary of the accounting policies and the significant judgements for
insurance activities applied under IFRS 17, information on the quantitative impact of transition to IFRS 17,
the restated consolidated balance sheet at 1 January 2022 and at 31 December 2022 and the restatement
impact on the consolidated income statement for the year ended 31 December 2022.
2.2.1.2 Summary of accounting policies for insurance activities
Identifying contracts in the scope of IFRS 17
IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of
insurance contracts, reinsurance contracts and investment contracts with discretionary participation
features.
An insurance contract is a contract under which the Group accepts significant insurance risk from another
party by agreeing to compensate that party if it is adversely affected by a specified uncertain future event.
When identifying contracts in the scope of IFRS 17, there is a need to assess whether contracts need to be
treated as a single contract and whether embedded derivatives, investment components and goods and
services components need to be separated and accounted for under another standard. For the Group's
insurance and reinsurance contracts held, there were no significant changes arising from the application of
these requirements.
245
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.2 Summary of accounting policies for insurance activities (continued)
Level of aggregation
Individual insurance contracts that are managed together and are subject to similar risks are identified as a
group.
Contracts that are managed together usually belong to the same product line and have similar
characteristics such as being subject to a similar pricing framework or similar product management and are
issued by the same legal entity. If a contract is exposed to more than one risk, the dominant risk of the
contract is used to assess whether the contract features similar risks.
Each group of contracts is then divided into annual cohorts (i.e. by year of issue) and each cohort into three
groups, based on expected profitability: (i) contracts that are onerous at initial recognition; (ii) contracts
that at initial recognition have no significant possibility of becoming onerous subsequently; and (iii) the
remaining contracts.
The groups of insurance contracts are established at initial recognition without subsequent reassessment
and form the unit of account at which the contracts are measured.
Recognition
Groups of insurance contracts issued are initially recognised from the earliest of the following:
i. the beginning of the coverage period;
ii. the date when the first payment from the policyholder is due or actually received, if there is no due
date; and
iii. when the Group determines that a group of contracts becomes onerous.
The Group adds new contracts to the group in the reporting period in which that contract meets one of the
criteria set out above.
Contract boundaries
The measurement of a group of insurance contracts includes all the future cash flows within the boundary of
each contract in the group. Cash flows are within the boundary of an insurance contract if they arise from
substantive rights and obligations that exist during the reporting period in which the Group can compel the
policyholder to pay the premiums, or in which the Group has a substantive obligation to provide the
policyholder with services. For multiyear (more than one year) non-life contracts, the Group has assessed
that they are expected to equal their duration as the Group cannot reprice or terminate the insurance
contract during the coverage period.
Measurement
IFRS 17 introduces a standard measurement model, the General Measurement Model (GMM) and allows also
for a simplified approach, the Premium Allocation Approach (PAA). IFRS 17 also provides for the Variable
Fee Approach (VFA), which is mandatory to apply for insurance contracts with direct participation features
upon meeting the eligibility criteria. While the GMM is the default measurement model under IFRS 17, the
Group applies the VFA primarily to insurance contracts in the unit-linked life portfolio. The PAA is an optional
simplification applicable for measuring the Liability for Remaining Coverage (LRC) for contracts with
coverage periods of one year or less, or when doing so approximates the GMM; it is primarily applied by the
Group to non-life insurance contracts and to non-individual life insurance contracts as well as to reinsurance
contracts of the Group except for the individual life reinsurance agreement, for which the GMM is applied.
For the rest of the insurance contracts (individual protection life contracts, the acquired portfolio and health
long-term portfolio) and the Liability for Incurred Claims (LIC) of non-life insurance contracts, the Group
applies the GMM approach.
Initial measurement
Groups of insurance contracts under the GMM or the VFA are initially measured as the total of:
a. Fulfilment cash flows, which comprise:
246
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.2 Summary of accounting policies for insurance activities (continued)
i. an estimate of the present value of future cash flows that are expected to arise as the
Group fulfils its service under the insurance contracts; and
ii. an explicit risk adjustment for non-financial risk (i.e., the risk adjustment held on
balance sheet)
b. Contractual Service Margin (CSM) which represents the unearned profit that the Group will recognise
as it provides insurance contract services.
The fulfilment cash flows comprise unbiased and probability-weighted estimates of future cash flows,
discounted to present value to reflect both the time value of money and financial risks, plus a risk
adjustment for non-financial risk. The discount rate applied reflects the time value of money, the
characteristics of the cash flows, the liquidity characteristics of the insurance contracts and, where
appropriate, is consistent with observable current market prices.
The risk adjustment for non-financial risk for a group of insurance contracts is the compensation required
for bearing the uncertainty in relation to the amount and timing of the cash flows that arises from non-
financial risk. The risk adjustment is explicit and determined separately from other fulfilment cash flows.
A CSM arises when, for a group of contracts, the sum of the discounted cash flows and the risk adjustment
is a net inflow. If the sum of these is a net outflow, then the group of contracts is onerous and a loss equal
to the net outflow is recognised in the consolidated income statement.
Under the PAA, the liability for remaining coverage is initially recognised as the premiums received at initial
recognition, minus any insurance acquisition cash flows.
Subsequent measurement
GMM
At the end of each reporting period, insurance contracts are measured as the sum of:
i. Liability for remaining coverage (LRC), comprising fulfilment cash flows related to future service and
the CSM at the reporting date; and
ii. Liability for incurred claims (LIC), comprising fulfilment cash flows related to past service at the
reporting date (claims and expenses not yet paid, including claims incurred but not yet reported).
The fulfilment cash flows of groups of insurance contracts are measured at the reporting date using current
estimates of future cash flows, current discount rates and current estimates of the risk adjustment for non-
financial risk. Changes in fulfilment cash flows are recognised as follows:
i. Changes related to future service are adjusted against the CSM unless the group of contracts is
onerous in which case such changes are recognised in the net insurance service result in the
consolidated income statement
ii. Changes related to past or current service are recognised in the net insurance service result in the
consolidated income statement
iii. The effects of the time value of money and financial risk are recognised as net insurance finance
income or expense in the consolidated income statement
The amount of CSM recognised in income statement for services in a period is determined by the allocation
of the CSM remaining at the end of the reporting period (before any allocation) over the current and
remaining expected coverage period of the group of insurance contracts based on coverage units. These
coverage units reflect the quantity of benefits and the coverage duration. Adjustments relating to future
service and thus adjust the CSM using locked-in discount rates (i.e. those that reflect the characteristics of
the cash flows of initial recognition) except for changes in the risk adjustment for non-financial risk that
relate to future service.
VFA
The VFA is applied for contracts with direct participation features (contracts where returns are based on the
performance of underlying assets). For insurance contracts under the VFA, changes in the Group's share of
the underlying items, and economic experience and economic assumption changes adjust the CSM, whereas
these changes do not adjust the CSM under the GMM but are recognised in profit or loss as they arise.
247
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.2 Summary of accounting policies for insurance activities (continued)
PAA
Subsequently to initial measurement, the carrying amount of the LRC is increased with premiums received
in the period, minus insurance acquisition cash flows, plus amortisation of acquisition cash flows, minus the
amount recognised as insurance revenue for coverage provided in that period. The LRC is not discounted,
since at initial recognition, it is expected that the time between providing each part of the coverage and the
due date of the related premium is not more than a year.
Reinsurance contracts
The Group applies the same accounting policies to measure a group of reinsurance contracts under PAA,
with the following modifications to reflect features that differ from those of insurance contracts. The Group
establishes a loss-recovery component on the carrying amount of the asset for remaining coverage for a
group of reinsurance contracts, depicting the recovery of losses, where the Group recognises a loss on initial
recognition of an onerous group of underlying insurance contracts or when further onerous underlying
insurance contracts are added to a group.
The Group calculates the loss-recovery component by multiplying the loss recognised on the underlying
insurance contracts and the percentage of claims on the underlying insurance contracts the Group expects
to recover from the group of reinsurance contracts. The loss-recovery component adjusts the carrying
amount of the asset for remaining coverage.
The subsequent measurement of reinsurance contracts follows the same principles as those for insurance
contracts issued and has been adapted to reflect the specific features of reinsurance. Where the Group has
established a loss-recovery component, the Group subsequently reduces the loss-recovery component to
zero in line with reductions in the onerous group of underlying insurance contracts in order to reflect that
the loss-recovery component shall not exceed the portion of the carrying amount of the loss component of
the onerous group of underlying insurance contracts that the entity expects to recover from the group of
reinsurance contracts.
The measurement of reinsurance contracts under the individual life reinsurance agreement follows the same
principles as those for insurance contracts measured under the GMM. The carrying amount of the
reinsurance contracts at each reporting date is the sum of the asset for remaining coverage and the asset
for incurred claims. The asset for remaining coverage comprises (a) the fulfilment cash flows that relate to
services that will be received under the contracts in future periods and (b) any remaining CSM at that date.
The risk adjustment for non-financial risk represents the amount of risk being transferred by the Group to
the reinsurer.
The CSM of a group of reinsurance contracts represents a net cost or net gain on purchasing reinsurance.
Contract derecognition
The Group derecognises an insurance contract issued when the obligation specified in the contract expires,
is discharged, or is cancelled, or if its terms are modified significantly. When a contract is modified
significantly, a new contract based on the modified terms is recognised.
On derecognition of an insurance contract, the Group:
i. Adjusts the fulfilment cash flows to eliminate the present value of future cash flows and risk
adjustment for non-financial risk relating to the rights and obligations that have been derecognised
from the group of contracts,
ii. Adjusts the CSM of the group of contracts for the change in the fulfilment cash flows, except where
such changes are allocated to a loss component; and
iii. Adjusts the number of coverage units for the expected remaining services, to reflect the number of
coverage units derecognised from the group of contracts.
248
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.2 Summary of accounting policies for insurance activities (continued)
Onerous groups of contracts
For portfolios measured under the PAA, the Company assumes that no contracts in the portfolio are onerous
at initial recognition unless facts and circumstances indicate otherwise. For contracts not measured under
the PAA, that are not onerous, the Group assesses, at initial recognition, that there is no significant
possibility of becoming onerous subsequently by assessing the likelihood of changes in applicable facts and
circumstances. The Group considers facts and circumstances to identify whether a group of contracts are
onerous based on:
i. Major shifts in economic and regulatory environment;
ii. Combined Loss Ratio (Claims plus expenses divided by premium);
iii. Pricing strategy leading to loss;
iv. Changes in claims handling policy (e.g. time – stamped period) etc.
The Group has based its assessment on the Combined Loss Ratio as one of the key indicators of whether
there are facts and circumstances to conclude that a group of contracts is onerous, as it takes into account
economic shifts, the Group's decision on the pricing strategy as well as the Group's claims' handling
processes.
For the portfolios measured under GMM and VFA models, the Group performs profitability assessment to
assess the portfolio of insurance contracts issued into three profitability groups, if applicable, for the
purpose of calculating the CSM. The grouping is performed per set of contracts at initial recognition based
on assumed profitability (profit testing exercise).
Insurance acquisition cash flows
The Group includes the following acquisition cash flows within the insurance contract boundary that arise
from selling and starting a group of insurance contracts and that are:
a. costs directly attributable to individual contracts and groups of contracts; and
b. costs directly attributable to the portfolio of insurance contracts to which the group belongs, which
are allocated on a reasonable and consistent basis to measure the group of insurance contracts.
Directly attributable expenses
In accordance with IFRS 17, expenses directly attributable to a group of insurance contracts, which include
both acquisition and maintenance costs are incorporated in actual and estimated future cash flows and
recognised in the net insurance result. Insurance acquisition cash flows are amortised. Expenses that are
not directly attributable are excluded from the measurement of insurance contract liabilities and are
recognised in profit and loss as incurred.
2.2.1.3 Significant judgments and estimates for insurance and reinsurance contracts assets and
liabilities
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material adjustment to the carrying amounts of insurance and
reinsurance assets and liabilities within the next financial year are discussed below. The Group based its
assumptions and estimates on parameters available by the reporting date. Existing circumstances and
assumptions about future developments, however, may change due to market changes or circumstances
arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they
occur.
Estimates of future cash flows
In estimating future cash flows, the Group incorporates, in an unbiased way, all reasonable and supportable
information that is available without undue cost or effort at the reporting date. This information includes
both internal and external historical data about claims and other experience, updated to reflect current
expectations of future events.
249
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.3 Significant judgments and estimates for insurance and reinsurance contracts assets and
liabilities (continued)
Cash flows within the boundary of a contract are those that relate directly to the fulfilment of the contract,
including those for which the Group has discretion over the amount or timing. These include payments to
(or on behalf of) policyholders and other costs that are incurred in fulfilling contracts. These comprise both
an allocation of fixed and variable overheads.
The estimates of future cash flows reflect the Group's view of current conditions at the reporting date, as
long as the estimates of any relevant market variables are consistent with observable market prices.
The following key assumptions were used when estimating future cash flows in relation to life insurance
contracts:
a) Mortality and morbidity rates
b) Expenses and inflation
c) Lapse and surrender rates
Mortality and morbidity rates
Assumptions are based on standard international tables of mortality and morbidity, according to the type of
contract. In addition, a study is performed based on the actual experience (actual deaths) of the insurance
company for comparison purposes and if sufficient evidence exists which is statistically reliable, the results
are i ncorporated i n t hese t ables. A n i ncrease i n m ortality r ates w ill l ead to a l arger e xpected
number of claims (or c laims c ould o ccur s ooner t han a nticipated), w hich w ill i ncrease t he
expenditure and reduce profits for shareholders.
The table below sets out the percentage estimated to apply to industry mortality and morbidity tables in
estimating fulfilment cash flows:

|  | Mortality rates* |
|  | 31 December 2023 | 31 December 2022
Males | Smokers | 68% A67/70 | 68% A67/70
| Non-Smokers | 48.25% A67/70 | 48.25% A67/70
| Smokers |  |
|  | 68% A67/70 rated down |
|  | by 4 years |
|  |  | 68% A67/70 rated down
|  |  | by 4 years
Females |  |  |
| Non-Smokers |  |
|  | 48.25% A67/70 rated |
|  | down by 4 years |
|  |  | 48.25% A67/70 rated
|  |  | down by 4 years

* The Group uses A67/70 UK standard mortality table in setting the mortality assumption, since the Group's
own claim experience is not sufficient to allow the development of its own mortality table. To reflect the
Group's specific claims experience more accurately, a percentage is applied on the A67/70 UK standard
mortality table.
Expense and inflation
Expense assumptions are based on the actual costs of the insurance activities of the Group incurred within
the year. To derive the per-policy expense assumption, every year the Group performs an expense analysis
which is based on the Group's insurance subsidiaries actual expenses. For the purpose of the expense
analysis, expenses are split into expenses which are attributable and non-attributable. The Group produces
various metrics/ratios to allocate the costs to the underlying p roducts. Non-attributable e xpenses a re
excluded from the analysis as these are not directly related to a group of insurance contracts.
An assumption is also made for the rate of increase in expenses in relation to the annual inflation rate. An
increase in the level of expenses would reduce profitability.

| 31 December |
| 2023 |
|  | 31 December
|  | 2022
| €000 | €000
Inflation rate | 4,00% | 4,00%

250
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.3 Significant judgments and estimates for insurance and reinsurance contracts assets and
liabilities (continued)
Lapse and surrender rates
An analysis of contract termination rates is performed every year, using actual data from the insurance
company incorporation until the immediate preceding year. Rates vary according to the type and duration of
the plan.

| Unit-Linked |  |  |  |  |  |  |
| (protection) |  |  |  |  |  |  |
|  |  | Unit-Linked |  |  |  |  |
|  |  | (savings) |  |  |  |  |
|  |  |  |  | Non-Linked |  |  |
|  |  |  |  | (term) |  |  |
|  |  |  |  |  |  | Non-Linked |
|  |  |  |  |  |  | (Cap. Builder & |
|  |  |  |  |  |  | Lifestart) |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022
Year 1 | 4% | 4% | 6% | 7% | 4% | 5% | 3% | 3%
Year 2 | 5% | 7% | 6% | 6% | 6% | 8% | 7% | 7%
Year 3 | 5% | 6% | 6% | 6% | 6% | 9% | 7% | 8%
Year 4 | 5% | 6% | 6% | 7% | 7% | 9% | 6% | 6%
Year 5 | 5% | 6% | 6% | 6% | 7% | 9% | 6% | 6%
Year 6+ | 5% | 6% | 5% | 6% | 8% | 9% | 6% | 6%

Discount rates
Discount rates are applied to adjust the estimates of future cash flows to reflect the time value of money
and the financial risks related to those cash flows, to the extent that the financial risks are not included in
the estimates of cash flows.
IFRS 17 requires that discount rates should:
i. Reflect the time value of money, characteristics of the cash flows and liquidity characteristics of the
insurance contract
ii. Be consistent with observable current market prices (if any) for financial instruments with cash flows
whose characteristics are consistent with those of the insurance contracts (e.g., timing, currency and
liquidity)
iii. Exclude the effect of factors that influence such observable market prices, but do not affect the
future cash flows of the insurance contracts
IFRS 17 does not require a particular estimation technique for determining discount rates but provides two
alternative approaches that may be used to derive discount rates. The determination of discount rates may
be derived from a yield curve that reflects the current market rates of return of an actual or reference
portfolio of assets, adjusted to eliminate any factors that are not relevant to the insurance contracts (top-
down approach), or discount rates may be derived based on a liquid risk-free yield curve adjusted for an
illiquidity premium (bottom-up approach). The Group has elected to apply a bottom-up approach whereby
discount rates are derived based on a liquid risk free yield curve adjusted for an illiquidity premium which is
derived from each insurance subsidiary own bond portfolio assets. Under the bottom-up approach, the risk
free yield curve should be based on interest rates that are risk-free without including any component of
credit risk and should be derived from each insurance subsidiary at which two parties are willing to
exchange interest obligations. It is therefore necessary for these to be available for different times
reflecting the liabilities of the insurance contracts. It should also be based on information from financial
markets. The Group has elected to use the EIOPA risk-free rate curve as the liquid risk-free curve as it
covers all the above requirements. It adds to that the illiquidity premium which is calculated by subtracting
the credit risk premium and risk-free rate from the Yield to Maturity ('YTM') of the own bond portfolio of
assets for each insurance subsidiary. The YTM represents the interest rate that would be required for the
portfolio's future cash flows to equal its market price.
251
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.3 Significant judgments and estimates for insurance and reinsurance contracts assets and
liabilities (continued)
The rates applied for discounting future cash flows are listed below:

| Year 1 |  | Year 3 |  | Year 5 |  | Year 10 |  | Year 20 |
| 31 |  |  |  |  |  |  |  |  |
| December |  |  |  |  |  |  |  |  |
| 2023 |  |  |  |  |  |  |  |  |
|  | 31 |  |  |  |  |  |  |  |
|  | December |  |  |  |  |  |  |  |
|  | 2022 |  |  |  |  |  |  |  |
|  |  | 31 |  |  |  |  |  |  |
|  |  | December |  |  |  |  |  |  |
|  |  | 2023 |  |  |  |  |  |  |
|  |  |  | 31 |  |  |  |  |  |
|  |  |  | December |  |  |  |  |  |
|  |  |  | 2022 |  |  |  |  |  |
|  |  |  |  | 31 |  |  |  |  |
|  |  |  |  | December |  |  |  |  |
|  |  |  |  | 2023 |  |  |  |  |
|  |  |  |  |  | 31 |  |  |  |
|  |  |  |  |  | December |  |  |  |
|  |  |  |  |  | 2022 |  |  |  |
|  |  |  |  |  |  | 31 |  |  |
|  |  |  |  |  |  | December |  |  |
|  |  |  |  |  |  | 2023 |  |  |
|  |  |  |  |  |  |  | 31 |  |
|  |  |  |  |  |  |  | December |  |
|  |  |  |  |  |  |  | 2022 |  |
|  |  |  |  |  |  |  |  | 31 |
|  |  |  |  |  |  |  |  | December |
|  |  |  |  |  |  |  |  | 2023 |
|  |  |  |  |  |  |  |  |  | 31
|  |  |  |  |  |  |  |  |  | December
|  |  |  |  |  |  |  |  |  | 2022
Life insurance |  |  |  |  |  |  |  |  |  |
contracts (unit- |  |  |  |  |  |  |  |  |  |
linked) | 3.5% | 2.4% | 2.5% | 2.8% | 2.4% | 2.9% | 2.5% | 3.0% | 2.5% | 2.7%
Life insurance |  |  |  |  |  |  |  |  |  |
contracts (non- |  |  |  |  |  |  |  |  |  |
linked) | 3.5% | 2.4% | 2.6% | 2.8% | 2.5% | 2.9% | 2.5% | 3.0% | 2.5% | 2.7%
Non-life insurance |  |  |  |  |  |  |  |  |  |
contracts | 4.6% | 4.0% | 3.8% | 4.0% | 3.7% | 4.0% | 3.7% | 3.9% | 3.7% | 3.6%

Investment return
Investment return is the basic risk free yield curve, adjusted to allow for the duration mismatch between
the asset portfolio and the insurance liabilities.
Risk adjustment for non-financial risk
IFRS 17 provides limited prescriptive requirements as to the methodology to be used to calculate the risk
adjustment for non-financial risk and allows an entity to apply judgement in determining an appropriate
estimation technique.
Life insurance business and health insurance business
The Group has applied judgement in estimating the risk adjustment, in the following areas:
i. Risks included within the risk adjustment calculation – the risk adjustment for non-financial risk is
the compensation that is required for bearing the uncertainty about the amount and timing of cash
flows that arises from insurance risk and other non-financial risks as the insurance contract is
fulfilled. In estimating the risk adjustment, the Group has considered the non-market risks which are
also allowed in the calculation of the Solvency II Risk Margin. These include life and health
underwriting risks whereas, as specified by the standard, counterparty and operational risks are
excluded.
ii. Method of calculation - the Group calculates a margin, above best estimate assumptions, for each
non-financial risk to which the Group is exposed through issuing insurance contracts. The margins
are set so that (in combination) they would cover potential losses from movements in non-financial
risks within a specified confidence level. The total of these margins is the risk adjustment. The Group
has applied judgement in setting the confidence level applied in the risk adjustment calculation,
based on the Group's appetite for accepting the risk inherent in writing insurance contracts and the
compensation required for doing so.
The Group has estimated the risk adjustment using a hybrid of Cost of Capital (CoC) and Value at Risk
(VaR) techniques. The Group first uses the CoC technique to calculate Risk Adjustment, which is then scaled
up/down using the VAR technique, to reflect the Group's risk appetite and overall strategy.
The CoC methodology assesses the cost of holding capital sufficient to cover the relevant risks over the
lifetime of the business. It determines a required compensation amount by discounting the projected cost of
the calculated capital and translating that compensation amount to a corresponding confidence level. The
Group uses the CoC technique to produce a normal distribution with:
i. the Best Estimate Liabilities (BEL) as the mean of the distribution, and
ii. the Best Estimate Liabilities plus the solvency capital requirement (SCR) as the 99,5% percentile of the
distribution.
252
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.3 Significant judgments and estimates for insurance and reinsurance contracts assets and
liabilities (continued)
The risk adjustment is determined by applying a cost rate to the present value of projected capital relating
to non-financial risk. The cost rate is set at 6% per annum, representing the return required to compensate
for the exposure to non-financial risk. The resulting amount of the calculated risk adjustment under the CoC
method corresponds to the confidence level of 60%.
VaR technique is calculated with reference to a particular confidence level, that is considered appropriate by
the Group. The confidence level of 60% calculated using the CoC method, is scaled up to 90%. This is the
desired confidence level of the Group. The Risk Adjustment is then calculated using the normal distribution
produced by the Group and a confidence level of 90% (2022: 90%).
Non-life insurance business other than the health insurance business
For non-life insurance business the risk adjustment forms a key component of the LIC.
The risk adjustment for LRC forms part of the loss component calculation which is used to determine the
groupings of contracts that are expected to be onerous.
Risk adjustment for non-financial risk is determined to reflect the compensation that the Group would
require for bearing non-financial risk and its degree of risk aversion. It is determined separately for each
non-life line of business and allocated to groups of contracts based on the total premiums for each group. It
reflects the effects of the diversification benefits between the different lines of business, which are
determined using a correlation matrix technique available from EIOPA.
The risk adjustment for non-financial risk is determined using a confidence level technique which stems
from a hybrid Cost of Capital and Value at Risk approach. To determine the risk adjustment for non-financial
risk for non-life reinsurance contracts, the Group applies this technique to the gross amounts and then by
using gross to net ratios it derives the amount of risk being transferred to the reinsurer as the difference
between the two results.
The Group estimates the probability distribution of the expected present value of the future cash flows from
the contracts at each reporting date and calculates the risk adjustment for non-financial risk at value at risk
of the target confidence level. The Group uses a target 75% (2022:75%) percentile for the confidence level.
CSM
The CSM of a group of contracts is recognised in the income statement to reflect services provided in each
year, by identifying the coverage units in the group, allocating the CSM remaining at the end of the year
equally to each coverage unit provided in the year and expected to be provided in future years, and
recognising in income statement the amount of the CSM allocated to coverage units provided in the year.
The number of coverage units is the quantity of services provided by the contracts in the group, determined
by considering for each contract the quantity of the benefits and its expected coverage period. The coverage
units are reviewed and updated at each reporting date.
Further details on insurance liabilities are disclosed in Note 31.
2.2.1.4 Accounting policy choices for measurement and presentation of insurance and
reinsurance contracts assets and liabilities and related income/expense
The significant accounting policy choices applicable to the Group are in relation to:
i. Disaggregation of insurance finance income or expenses: The Group has elected to recognise total
insurance finance income or expenses in the consolidated income statement in the period in which
they arise i.e. no disaggregation is applied.
ii. Deferral of acquisition expenses: The Group has elected to defer insurance acquisition cash flows for
non-life insurance business other than the health insurance business, in applying the premium
allocation approach for which IFRS 17 provides an election to be made.
253
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.4 Accounting policy choices for measurement and presentation of insurance and
reinsurance contracts assets and liabilities and related income/expense (continued)
iii. Disaggregation of change in risk adjustment for non-financial risk: The Group has elected to
disaggregate the change in risk adjustment for non-financial risk between the net insurance service
result and net insurance finance income/(expense).
2.2.1.5 Presentation
The amounts presented in the consolidated income statement in relation to insurance and reinsurance
revenue and expense include:
i. Net insurance finance income/(expense) and net reinsurance finance income/(expense), that
comprises of:
a. Net insurance finance income/(expense) which represents the finance related change in the
carrying value of a group of insurance contracts comprising interest effects of changes in
interest rates and other financial assumptions and the effect of changes in the fair value of
underlying items for direct participating contracts
b. Net finance income/(expense) from reinsurance contracts held is the finance related change
in the carrying value of a group of reinsurance contracts comprising interest accreted and
effects of changes in interest rates and other financial assumptions.
ii. Net insurance service result, that comprises of:
a. Insurance revenue that reflects the consideration to which the Group expects to be entitled in
exchange for the provision of coverage and other insurance contract services (excluding any
investment components) and includes among others CSM released during the period,
revenue for insurance contracts under the PAA and changes in risk adjustment related to
current service period and experience variance.
b. Insurance service expenses that comprise the incurred claims and other incurred insurance
service expenses (excluding any investment components), and losses on onerous groups of
contracts and reversals of such losses.
iii. Net reinsurance service result, that comprises of amounts recovered from reinsurers and reinsurance
expenses.
2.2.1.6 Transition impact
On transition on 1 January 2022, the Group's Total Equity and Equity attributable to the owners of the
Company were reduced by €37,563 thousand, reflecting the aggregate impact of the present value of in-
force life insurance business (PVIF) elimination and remeasurement of insurance assets and liabilities, both
net of associated tax impact. Similarly, adjusting for the impact of IFRS 17 on the profit for the year ended
31 December 2022, the Group's Total Equity and Equity attributable to the owners of the Company at 31
December 2022 as reported under IFRS 4 were reduced by €52,104 thousand, as analysed below.
254
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.6 Transition impact (continued)

| At 1 January |
| 2022 |
|  | At 31 December
|  | 2022
| €000 | €000
IFRS 4 Total Equity | 2,081,227 | 2,100,670
IFRS 4 Equity attributable to the owners of the Company | 1,838,793 | 1,858,370
Removal of PVIF asset | (129,890) | (115,776)
Contractual service margin | (43,731) | (41,863)
Removal of IFRS 4 assets and liabilities and recording of IFRS 17 |  |
fulfilment cash flows and risk adjustment |  |
| 129,255 | 97,028
Tax effect (incl. PVIF tax effect) | 7,079 | 9,601
Other |  |
| (276) | (1,094)
Total impact of IFRS 17 restatements |  |
| (37,563) | (52,104)
IFRS 17 Equity attributable to the owners of the Company |  |
| 1,801,230 | 1,806,266
IFRS 17 Total Equity |  |
| 2,043,664 | 2,048,566

The reduction of the Group's equity by €52 million as at 31 December 2022 comprises the elimination of the
in-force life insurance business asset (PVIF) and the associated deferred tax liability, resulting in a net
decrease of €101 million and the remeasurement of insurance assets and liabilities (including the impact of
the contractual service margin) resulting in a net increase in equity by €49 million.
On transition on 1 January 2022, the Group's Tangible Equity attributable to the owners of the Company
was increased by €92,327 thousand. A djusting for the impact of IFRS 17 on the profit for the year ended
31 December 2022, the Group's Tangible Equity attributable to the owners of the Company as at 31
December 2022 as restated under IFRS 17 was increased by €63,672 thousand as analysed below.

| At 1 January |
| 2022 |
|  | At 31 December
|  | 2022
| €000 | €000
IFRS 4 Group's Tangible Equity attributable to the owners of |  |
the Company |  |
| 1,654,759 | 1,690,048
Contractual service margin | (43,731) | (41,863)
Removal of IFRS 4 assets and liabilities and recording of IFRS 17 |  |
fulfilment cash flows and risk adjustment |  |
| 129,255 | 97,028
Tax effect (incl. PVIF tax effect) | 7,079 | 9,601
Other |  |
| (276) | (1,094)
Total impact of IFRS 17 restatements |  |
| 92,327 |
|  | 63,672
IFRS 17 Group's Tangible Equity attributable to the owners of |  |
the Company |  |
| 1,747,086 | 1,753,720

255
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.6 Transition impact (continued)
Consolidated Income Statement for the year ended 31 December 2022, as restated for IFRS 17 and as
previously reported under IFRS 4 is presented below.

| IFRS 17 |
| (restated) |
|  | IFRS 4
|  | (as previously
|  | presented)
| €000 | €000
Interest income | 428,849 | 428,849
Income similar to interest income | 22,119 | 22,119
Interest expense | (65,721) | (65,821)
Expense similar to interest expense | (14,840) | (14,840)
Net interest income | 370,407 | 370,307
Fee and commission income | 202,583 | 202,583
Fee and commission expense | (10,299) | (10,299)
Net foreign exchange gains | 31,291 | 31,291
Net gains/(losses) on financial instruments | (614) | 10,052
Net gains/(losses) on derecognition of financial assets measured at amortised cost | 5,235 | 5,235
Net insurance finance income/(expense) and net reinsurance finance income/(expense) | 784 | -
Net insurance service result | 60,530 | -
Net reinsurance service result | (16,748) | -
Income from assets under insurance and reinsurance contracts | - | 114,681
Expenses from liabilities under insurance and reinsurance contracts | - | (43,542)
Net losses from revaluation and disposal of investment properties | (999) | (999)
Net gains on disposal of stock of property | 13,970 | 13,970
Other income | 16,681 | 16,681
Total operating income | 672,821 | 709,960
Staff costs | (285,154) | (294,361)
Special levy on deposits and other levies/contributions | (38,492) | (38,492)
Provisions for pending litigations, regulatory and other provisions (net of reversals) | (11,880) | (11,880)
Other operating expenses | (157,916) | (166,365)
Operating profit before credit losses and impairment | 179,379 | 198,862
Credit losses on financial assets | (59,087) | (59,529)
Impairment net of reversals on non-financial assets |  |
| (29,549) | (29,549)
Profit before tax |  |
| 90,743 | 109,784
Income tax | (31,312) | (35,812)
Profit after tax for the year |  |
| 59,431 | 73,972
Attributable to: |  |
Owners of the Company |  |
| 56,565 | 71,106
Non-controlling interests |  |
| 2,866 | 2,866
Profit for the year |  |
| 59,431 | 73,972
Basic and diluted profit per share attributable to the owners of the Company |  |
(€ cent) |  |
| 12.7 | 15.9

256
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.6 Transition impact (continued)
Consolidated Balance Sheet at transition date and at 31 December 2022 as restated under IFRS 17 and as
previously reported under IFRS 4 is presented below.

| IFRS 17 |  |  |
| (restated) |  |  |
|  |  | IFRS 4 |
|  |  | (as previously presented) |
| 31 December |  |  |
| 2022 |  |  |
|  | 1 January |  |
|  | 2022 |  |
|  |  | 31 December |
|  |  | 2022 |
|  |  |  | 1 January
|  |  |  | 2022
Assets |  |  |  |
| €000 | €000 | €000 |
|  |  |  | €000
Cash and balances with central banks | 9,567,258 | 9,230,883 | 9,567,258 | 9,230,883
Loans and advances to banks | 204,811 | 291,632 | 204,811 | 291,632
Derivative financial assets | 48,153 | 6,653 | 48,153 | 6,653
Investments at FVPL | 190,209 | 199,194 | 190,209 | 199,194
Investments at FVOCI | 467,375 | 748,695 | 467,375 | 748,695
Investments at amortised cost | 2,046,119 | 1,191,274 | 2,046,119 | 1,191,274
Loans and advances to customers | 9,953,252 | 9,836,405 | 9,953,252 | 9,836,405
Life insurance business assets attributable to policyholders | 542,321 | 551,797 | 542,321 | 551,797
Prepayments, accrued income and other assets | 609,054 | 583,777 | 639,765 | 616,219
Stock of property | 1,041,032 | 1,111,604 | 1,041,032 | 1,111,604
Investment properties | 85,099 | 117,745 | 85,099 | 117,745
Deferred tax assets | 227,934 | 265,942 | 227,521 | 265,481
Property and equipment | 253,378 | 252,130 | 253,378 | 252,130
Intangible assets | 52,546 | 54,144 | 168,322 | 184,034
Non-current assets and disposal groups held for sale | - | 358,951 | - | 358,951
Total assets |  |  |  |
| 25,288,541 | 24,800,826 | 25,434,615 | 24,962,697
Liabilities |  |  |  |
Deposits by banks | 507,658 | 457,039 | 507,658 | 457,039
Funding from central banks | 1,976,674 | 2,969,600 | 1,976,674 | 2,969,600
Derivative financial liabilities | 16,169 | 32,452 | 16,169 | 32,452
Customer deposits | 18,998,319 | 17,530,883 | 18,998,319 | 17,530,883
Insurance contract liabilities | 597,981 | 622,398 | 679,952 | 736,201
Accruals, deferred income, other liabilities and other |  |  |  |
provisions |  |  |  |
| 381,193 | 358,090 | 384,004 | 361,977
Provisions for pending litigations, claims, regulatory and |  |  |  |
other matters |  |  |  |
| 127,607 | 104,108 | 127,607 | 104,108
Debt securities in issue | 297,636 | 302,555 | 297,636 | 302,555
Subordinated liabilities | 302,104 | 340,220 | 302,104 | 340,220
Deferred tax liabilities | 34,634 | 39,817 | 43,822 | 46,435
Total liabilities |  |  |  |
| 23,239,975 | 22,757,162 | 23,333,945 | 22,881,470
Equity |  |  |  |
Share capital | 44,620 | 44,620 | 44,620 | 44,620
Share premium | 594,358 | 594,358 | 594,358 | 594,358
Revaluation and other reserves | 76,939 | 99,541 | 178,240 | 213,192
Retained earnings | 1,090,349 | 1,062,711 | 1,041,152 | 986,623
Equity attributable to the owners of the Company |  |  |  |
| 1,806,266 |  |  |
|  | 1,801,230 | 1,858,370 | 1,838,793
Other equity instruments | 220,000 | 220,000 | 220,000 | 220,000
Non-controlling interests |  |  |  |
| 22,300 | 22,434 | 22,300 | 22,434
Total equity |  |  |  |
| 2,048,566 | 2,043,664 | 2,100,670 | 2,081,227
Total liabilities and equity |  |  |  |
| 25,288,541 | 24,800,826 | 25,434,615 | 24,962,697

257
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.6 Transition impact (continued)
Transition impact on the Consolidated Balance Sheet at 1 January 2022
The adjustments to the Group's balance sheet at 1 January 2022 arising on the adoption of IFRS 17 are
presented below.

| Balance |  |  |  |  |  |  |
| IFRS 4 |  |  |  |  |  |  |
|  | Removal of |  |  |  |  |  |
|  | PVIF and |  |  |  |  |  |
|  | IFRS 4 |  |  |  |  |  |
|  | assets and |  |  |  |  |  |
|  | liabilities |  |  |  |  |  |
|  |  | IFRS 17 |  |  |  |  |
|  |  | fulfilment |  |  |  |  |
|  |  | cash flows |  |  |  |  |
|  |  | incl. Risk |  |  |  |  |
|  |  | adjustment* |  |  |  |  |
|  |  |  | IFRS 17 |  |  |  |
|  |  |  | CSM |  |  |  |
|  |  |  |  | Tax |  |  |
|  |  |  |  | effect |  |  |
|  |  |  |  |  | Other |  |
|  |  |  |  |  |  | Balance |
|  |  |  |  |  |  | IFRS 17 |
|  |  |  |  |  |  |  | Total
|  |  |  |  |  |  |  | movements
Assets |  |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Prepayments, accrued income and other assets |  |  |  |  |  |  |  |
| 616,219 | (70,121) | 37,676 | - | - | 3 | 583,777 | (32,442)
Deferred tax assets | 265,481 | - | - | - | 461 | - | 265,942 | 461
Intangible assets | 184,034 | (129,890) | - | - | - | - | 54,144 | (129,890)
All other assets |  |  |  |  |  |  |  |
| 23,896,963 | - | - | - | - | - | 23,896,963 | -
Total assets |  |  |  |  |  |  |  |
| 24,962,697 | (200,011) | 37,676 | - | 461 | 3 | 24,800,826 | (161,871)
Liabilities |  |  |  |  |  |  |  |
Insurance contract liabilities | 736,201 | (736,201) | 578,667 | 43,731 | - | - | 622,398 | (113,803)
Accruals, deferred income, other liabilities and |  |  |  |  |  |  |  |
other provisions |  |  |  |  |  |  |  |
| 361,977 | (4,166) | - | - | - | 279 | 358,090 | (3,887)
Deferred tax liabilities | 46,435 | - | - | - | (6,618) | - | 39,817 | (6,618)
All other liabilities |  |  |  |  |  |  |  |
| 21,736,857 | - | - | - | - | - | 21,736,857 | -
Total liabilities |  |  |  |  |  |  |  |
| 22,881,470 | (740,367) | 578,667 | 43,731 | (6,618) | 279 | 22,757,162 | (124,308)

* includes reinsurance assets and liabilities adjustments
Transition drivers
Removal of PVIF and IFRS 4 assets and liabilities
The present value of in-force business ('PVIF') which was previously reported under IFRS 4 within
'Intangible assets' and that arose from the upfront recognition of future profits associated with in-force
insurance contracts, is no longer recognized under IFRS 17. The estimated future profits are included in the
measurement of the insurance contract liability as the contractual service margin ('CSM'), representing the
unearned profit, which will be gradually recognized over the duration of a contract. Other IFRS 4 insurance
assets and insurance contract liabilities were removed on transition, and replaced with IFRS 17 insurance
assets and liabilities.
Recognition of the IFRS 17 fulfilment cash flows and risk adjustment
The measurement of insurance contract liabilities under IFRS 17 is based on groups of insurance contracts
and includes a liability for fulfilling the contractual obligations associated with the insurance contract, such
as premiums, expenses, insurance benefits and claims. These are recorded within the fulfilment cash flow
component of the insurance contract liability, together with the risk adjustment.
Recognition of the IFRS 17 CSM
In contrast to IFRS 4 accounting, where profits were recognised upfront, under IFRS 17 they are deferred
within the CSM which is systematically recognized in revenue, as services are provided over the coverage
period of groups of insurance contracts.
Tax effect
The removal of deferred tax liability primarily results from the removal of the associated PVIF intangible,
and new deferred tax assets and liabilities are reported, where appropriate, on temporary differences
between the new IFRS 17 accounting balances and their associated tax bases.
258
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.6 Transition impact (continued)
Transition impact on the Consolidated Income Statement
A summary of the impact of implementing IFRS 17 on the Group's consolidated income statement for the
year ended 31 December 2022 is presented below.

| For the year ended 31 December 2022 |  |  |  |  |  |  |  |  |
| IFRS 4 |  |  |  |  |  |  |  |  |
|  | Removal of |  |  |  |  |  |  |  |
|  | IFRS 4 and |  |  |  |  |  |  |  |
|  | reclassifi- |  |  |  |  |  |  |  |
|  | cations |  |  |  |  |  |  |  |
|  |  | Net |  |  |  |  |  |  |
|  |  | insurance |  |  |  |  |  |  |
|  |  | finance |  |  |  |  |  |  |
|  |  | income/ |  |  |  |  |  |  |
|  |  | expense |  |  |  |  |  |  |
|  |  |  | IFRS 17 |  |  |  |  |  |
|  |  |  | CSM |  |  |  |  |  |
|  |  |  |  | IFRS 17 |  |  |  |  |
|  |  |  |  | insurance |  |  |  |  |
|  |  |  |  | revenue- |  |  |  |  |
|  |  |  |  | other than |  |  |  |  |
|  |  |  |  | CSM |  |  |  |  |
|  |  |  |  |  | IFRS 17 |  |  |  |
|  |  |  |  |  | insurance |  |  |  |
|  |  |  |  |  | expense |  |  |  |
|  |  |  |  |  |  | Net |  |  |
|  |  |  |  |  |  | expense |  |  |
|  |  |  |  |  |  | from |  |  |
|  |  |  |  |  |  | reinsurance |  |  |
|  |  |  |  |  |  |  | Attributable |  |
|  |  |  |  |  |  |  | expenses |  |
|  |  |  |  |  |  |  | (reclassifi- |  |
|  |  |  |  |  |  |  | cation |  |
|  |  |  |  |  |  |  | to net |  |
|  |  |  |  |  |  |  | insurance |  |
|  |  |  |  |  |  |  | service result) |  |
|  |  |  |  |  |  |  |  | Tax |
|  |  |  |  |  |  |  |  | effect |
|  |  |  |  |  |  |  |  |  | IFRS 17
|  |  |  |  |  |  |  |  |  | (restated)
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Interest income | 428,849 | - | - | - | - | - | - | - | - | 428,849
Income similar to interest |  |  |  |  |  |  |  |  |  |
income |  |  |  |  |  |  |  |  |  |
| 22,119 | - | - | - | - | - | - | - | - | 22,119
Interest expense | (65,821) | - | - | - | 100 | - | - | - | - | (65,721)
Expense similar to interest |  |  |  |  |  |  |  |  |  |
expense |  |  |  |  |  |  |  |  |  |
| (14,840) | - | - | - | - | - | - | - | - | (14,840)
Net interest income | 370,307 | - | - | - | 100 | - | - | - | - | 370,407
Fee and commission |  |  |  |  |  |  |  |  |  |
income |  |  |  |  |  |  |  |  |  |
| 202,583 | - | - | - | - | - | - | - | - | 202,583
Fee and commission |  |  |  |  |  |  |  |  |  |
expenses |  |  |  |  |  |  |  |  |  |
| (10,299) | - | - | - | - | - | - | - | - | (10,299)
Net foreign exchange |  |  |  |  |  |  |  |  |  |
gains |  |  |  |  |  |  |  |  |  |
| 31,291 | - | - | - | - | - | - | - | - | 31,291
Net gains/(losses) on |  |  |  |  |  |  |  |  |  |
financial instruments |  |  |  |  |  |  |  |  |  |
| 10,052 | (10,666) | - | - | - | - | - | - | - | (614)
Net gains/(losses) on |  |  |  |  |  |  |  |  |  |
derecognition of financial |  |  |  |  |  |  |  |  |  |
assets measured at |  |  |  |  |  |  |  |  |  |
amortised cost |  |  |  |  |  |  |  |  |  |
| 5,235 | - | - | - | - | - | - | - | - | 5,235
Net insurance finance |  |  |  |  |  |  |  |  |  |
income/(expense) and net |  |  |  |  |  |  |  |  |  |
reinsurance finance |  |  |  |  |  |  |  |  |  |
income/(expense) |  |  |  |  |  |  |  |  |  |
| - | - | 784 | - | - | - | - | - | - | 784
Net insurance service |  |  |  |  |  |  |  |  |  |
result |  |  |  |  |  |  |  |  |  |
| - | - | - | 5,031 | 130,061 | (74,562) | - | - | - | 60,530
Net reinsurance service |  |  |  |  |  |  |  |  |  |
result |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | - | (16,748) | - | - | (16,748)
Income from assets under |  |  |  |  |  |  |  |  |  |
insurance and reinsurance |  |  |  |  |  |  |  |  |  |
contracts |  |  |  |  |  |  |  |  |  |
| 114,681 | (114,681) | - | - | - | - | - | - | - | -
Expenses from liabilities |  |  |  |  |  |  |  |  |  |
under insurance and |  |  |  |  |  |  |  |  |  |
reinsurance contracts |  |  |  |  |  |  |  |  |  |
| (43,542) | 43,542 | - | - | - | - | - | - | - | -
Net losses from |  |  |  |  |  |  |  |  |  |
revaluation and disposal of |  |  |  |  |  |  |  |  |  |
investment properties |  |  |  |  |  |  |  |  |  |
| (999) | - | - | - | - | - | - | - | - | (999)
Net gains on disposal of |  |  |  |  |  |  |  |  |  |
stock of property |  |  |  |  |  |  |  |  |  |
| 13,970 | - | - | - | - | - | - | - | - | 13,970
Other income |  |  |  |  |  |  |  |  |  |
| 16,681 | - | - | - | - | - | - | - | - | 16,681
Total operating income | 709,960 | (81,805) | 784 | 5,031 | 130,161 | (74,562) | (16,748) | - | - | 672,821
Staff costs | (294,361) | - | - | - | - | - | - | 9,207 | - | (285,154)
Special levy on deposits |  |  |  |  |  |  |  |  |  |
and other |  |  |  |  |  |  |  |  |  |
levies/contributions |  |  |  |  |  |  |  |  |  |
| (38,492) | - | - | - | - | - | - | - | - | (38,492)
Provisions for pending |  |  |  |  |  |  |  |  |  |
litigations, regulatory and |  |  |  |  |  |  |  |  |  |
other provisions (net of |  |  |  |  |  |  |  |  |  |
reversals) |  |  |  |  |  |  |  |  |  |
| (11,880) | - | - | - | - | - | - | - | - | (11,880)
Other operating expenses |  |  |  |  |  |  |  |  |  |
| (166,365) | - | - | - | - | - | - | 8,449 | - | (157,916)
Operating profit before |  |  |  |  |  |  |  |  |  |
credit losses and |  |  |  |  |  |  |  |  |  |
impairment |  |  |  |  |  |  |  |  |  |
| 198,862 | (81,805) | 784 | 5,031 | 130,161 | (74,562) | (16,748) | 17,656 | - | 179,379
Credit losses on financial |  |  |  |  |  |  |  |  |  |
assets |  |  |  |  |  |  |  |  |  |
| (59,529) | - | - | - | 442 | - | - | - | - | (59,087)
Impairment net of |  |  |  |  |  |  |  |  |  |
reversals on non-financial |  |  |  |  |  |  |  |  |  |
assets |  |  |  |  |  |  |  |  |  |
| (29,549) | - | - | - | - | - | - | - | - | (29,549)
Profit before tax |  |  |  |  |  |  |  |  |  |
| 109,784 | (81,805) | 784 | 5,031 | 130,603 | (74,562) | (16,748) | 17,656 | - | 90,743
Income tax |  |  |  |  |  |  |  |  |  |
| (35,812) | - | - | - | - | - | - | 77 | 4,423 | (31,312)
Profit after tax for the |  |  |  |  |  |  |  |  |  |
year |  |  |  |  |  |  |  |  |  |
| 73,972 | (81,805) | 784 | 5,031 | 130,603 | (74,562) | (16,748) | 17,733 | 4,423 | 59,431

259
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.2 Accounting policies and changes in accounting policies and disclosures (continued)
2.2.1 New and amended standards and interpretations (continued)
2.2.1.6 Transition impact (continued)
IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies
(amendments)
The amendments to IAS 1 require companies to disclose their material accounting policy information rather
than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance
on how to apply the concept of materiality to accounting policy disclosures. The amendments did not have
an impact on the financial position and results of the Group during the year ended 31 December 2023.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates
(amendments)
The amendments introduce the definition of accounting estimates and include other amendments to IAS 8
to help entities distinguish changes in accounting estimates from changes in accounting policies. The
amendments did not have an impact on the financial position and results of the Group during the year
ended 31 December 2023.
IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
(amendments)
The amendments require companies to recognise deferred tax on transactions that, on initial recognition,
give rise to equal amounts of taxable and deductible temporary differences. The amendments typically
apply to transactions such as leases for the lessee and decommissioning obligations. The amendments did
not have a significant impact on the financial position and results of the Group during the year ended 31
December 2023.
IAS 12 Income Taxes: International Tax Reform – Pillar Two Model Rules (amendments)
IAS 12 is amended to add the exception to recognising and disclosing information about deferred tax assets
and liabilities that are related to tax law enacted or substantively enacted to implement the Pillar Two
model rules. An entity is required to separately disclose its current tax expense (income) related to Pillar
Two income taxes, in the periods when the legislation is effective. The amendments require, for periods in
which Pillar Two legislation is (substantively) enacted but not yet effective, disclosure of known or
reasonably estimable information that helps users of financial statements understand the entity's exposure
arising from Pillar Two income taxes. To comply with these requirements, an entity is required to disclose
qualitative and quantitative information about its exposure to Pillar Two income taxes at the end of the
reporting period. Although the Group is operating in jurisdictions where the Pillar Two legislation has not
been enacted or substantively enacted at the balance sheet date, the Group discloses known or reasonably
estimable information that helps users of financial statements to understand the estimated Group's
exposure to Pillar Two income taxes in the Group's annual consolidated financial statements in Note 17. The
Group will disclose separately current tax expense/income related to Pillar Two income taxes when it is in
effect.
2.3 Standards and Interpretations that are issued but not yet effective
2.3.1 Standards and Interpretations issued by the IASB and adopted by the EU
IFRS 16 Leases: Lease Liability in a Sale and Leaseback (amendments)
The amendment to IFRS 16 Leases specifies the requirements that a seller-lessee uses in measuring the
lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognise any
amount of the gain or loss that relates to the right of use it retains. A sale and leaseback transaction
involves the transfer of an asset by an entity (the seller-lessee) to another entity (the buyer-lessor) and the
leaseback of the same asset by the seller-lessee. The amendment is intended to improve the requirements
for sale and leaseback transactions in IFRS 16. It does not change the accounting for leases unrelated to
sale and leaseback transactions. The amendment applies retrospectively to annual reporting periods
beginning on or after 1 January 2024. Earlier application is permitted. The Group does not expect these
amendments to have a material impact on its results and financial position.
260
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.3 Standards and Interpretations that are issued but not yet effective (continued)
2.3.1 Standards and Interpretations issued by the IASB and adopted by the EU (continued)
IAS 1 Presentation of Financial Statements: classification of Liabilities as Current or Non-current
(amendments)
The IASB issued amendments to IAS 1 Presentation of Financial Statements to specify the requirements for
classifying liabilities as current or non-current. The amendments clarify: (a) what is meant by a right to
defer settlement, (b) that a right to defer must exist at the end of the reporting period and (c) that
classification is unaffected by the likelihood that an entity will exercise its deferral right. Terms of a liability
that could, at the option of the counterparty, result in its settlement by the transfer of the entity's own
equity instruments do not affect its classification as current or non-current if, the entity classifies the option
as an equity instrument, recognising it separately from the liability as an equity component of a compound
financial instrument. The amendments are effective for annual periods beginning on or after 1 January
2024, with earlier application permitted. The Group does not expect these amendments to have a material
impact on its results and financial position.
2.3.2 Standards and Interpretations issued by the IASB but not yet adopted by the EU
IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance
Arrangements (amendments)
In response to concerns of the users of financial statements about inadequate or misleading disclosure of
financing arrangements, in May 2023, the IASB issued amendments to IAS 7 and IFRS 7 to require
disclosure about entity's supplier finance arrangements (SFAs). These amendments require the disclosures
of the entity's supplier finance arrangements that would enable the users of financial statements to assess
the effects of those arrangements on the entity's liabilities and cash flows and on the entity's exposure to
liquidity risk. The purpose of the additional disclosure requirements is to enhance the transparency of the
supplier finance arrangements. The amendments do not affect recognition or measurement principles but
only disclosure requirements. The new disclosure requirements will be effective for the annual reporting
periods beginning on or after 1 January 2024. Earlier application is permitted. The Group does not expect
these amendments to have a material impact on its results and financial position.
IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (amendments)
In August 2023, the IASB issued amendments to IAS 21 to help entities assess exchangeability between
two currencies and determine the spot exchange rate, when exchangeability is lacking. An entity is
impacted by the amendments when it has a transaction or an operation in a foreign currency that is not
exchangeable into another currency at a measurement date for a specified purpose. The amendments to
IAS 21 do not provide detailed requirements on how to estimate the spot exchange rate. Instead, they set
out a framework under which an entity can determine the spot exchange rate at the measurement date.
When applying the new requirements, it is not permitted to restate comparative information. Rather, it is
required to translate the affected amounts at estimated spot exchange rates at the date of initial
application, with an adjustment to retained earnings or to the reserve for cumulative translation differences.
The amendments will be effective for annual reporting periods beginning on or after 1 January 2025. Earlier
application is permitted. The Group does not expect these amendments to have a material impact on its
results and financial position.
2.4 Basis of consolidation
The Consolidated Financial Statements comprise the Consolidated Financial Statements of the Group as at
and for the year ended 31 December 2023. The financial statements of the subsidiaries are prepared as of
the same reporting date as that of the Company, using consistent accounting policies.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Specifically,
the Group controls an investee only if the Group has:
i. power over an investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee)
ii. exposure, or rights, to variable returns from its involvement with the investee
iii. the ability to use its power over the investee to affect its returns.
261
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.4 Basis of consolidation (continued)
Generally, there is a presumption that a majority of voting rights results in control. To support this
presumption and in cases the Group has less than a majority of the voting rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has power over an investee including
any contractual arrangements with the other vote holders, rights arising from other contractual
arrangements, and the Group's voting and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts indicate that there are changes to any
of the three elements of control.
Assets, liabilities, income and expenses of subsidiaries acquired or disposed of during the year are included
in the Consolidated Financial Statements from the date of acquisition or up to the date of disposal,
respectively. Profit or loss and each component of other comprehensive income (OCI) are attributed to the
equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-
controlling interests having a deficit balance. Non-controlling interests represent the portion of profit or loss
and net assets not held by the Group, directly or indirectly. The non-controlling interests are presented
separately in the consolidated income statement and within equity from the Company owners' equity.
All intra-group balances and transactions are eliminated on consolidation.
A change in the ownership interest of a subsidiary, without loss of control, is accounted for as a transaction
between the owners, which affects equity. As a result, no goodwill arises no gain/loss is recognised in the
consolidated income statement from such transactions. The foreign exchange differences which relate to the
share of non-controlling interests being sold/acquired are reclassified between the foreign currency reserve
and non-controlling interests.
2.5 Foreign currency translation
The Consolidated Financial Statements are presented in Euro (€), which is the functional and presentation
currency of the Company and its operating subsidiaries in Cyprus. Each subsidiary, overseas branch or
subsidiary of the Group determines its own functional currency and items included in the financial
statements of each entity are measured using that functional currency. The Group uses the direct method of
consolidation and on disposal of a foreign operation, the gain or loss that is reclassified to profit or loss
reflects the amount that arises from using this method.
2.5.1 Transactions and balances
Transactions in foreign currencies are recorded using the functional currency rate of exchange ruling at the
date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
rate of exchange ruling at the reporting date. All differences are taken to 'Net foreign exchange gains' in the
consolidated income statement, with the exception of differences on foreign currency assets/liabilities that
provide a hedge against the net investments in subsidiaries and overseas branches. These differences are
recognised in other comprehensive income in the 'Foreign currency translation reserve' until the disposal or
liquidation of the net investment, at which time the cumulative amount is reclassified to the consolidated
income statement.
Non-monetary items that are measured at historic cost in a foreign currency are translated using the
exchange rates ruling as at the dates of the initial transactions. Non-monetary items measured at fair value
in a foreign currency are translated using the exchange rates ruling at the date when the fair value is
determined. The retranslation of non-monetary assets carried at fair value is reported as part of the fair
value change.
2.5.2 Subsidiary companies and branches
At the reporting date, the assets and liabilities of subsidiaries (including special purpose entities that the
Group consolidates) and branches whose functional currency is other than the Group's presentation
currency are translated into the Group's presentation currency at the rate of exchange ruling at the
reporting date, and their income statements are translated using the average exchange rates for the year.
262
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.5 Foreign currency translation (continued)
2.5.2 Subsidiary companies and branches (continued)
Foreign exchange differences arising on translation are recognised in other comprehensive income in the
'Foreign currency translation reserve'. On disposal or liquidation of a subsidiary or branch, the cumulative
amount of the foreign exchange differences relating to that particular overseas operation, is reclassified to
the consolidated income statement as part of the profit/loss on disposal/dissolution of subsidiaries.
2.6 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker is the person or group of persons that
allocate resources to and assess the performance of the operating segments.
The chief operating decision-maker of the Group is the Group Executive Committee.
2.7 Turnover
Group turnover is represented by the Total operating income which comprises of net interest income, net
fee and commission income, net foreign exchange gains, net gains/(losses) on financial instruments, net
gains/(losses) on derecognition of financial assets measured at amortised cost, net insurance result, net
gains/(losses) from revaluation and disposal of investment properties, net gains/(losses) on disposal of
stock of property and other income as these are presented in the Consolidated Income Statement and is
presented in Note 6.
2.8 Revenue from contracts with customers
The Group recognises revenue when control of the promised goods or services is transferred to customers
in return of an amount that reflects the consideration to which the Group expects to be entitled in exchange
for those goods or services. The revenue recognition model applies the following five steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the Group satisfies a performance obligation.
The performance obligation notion in effect represents a promise in a contract with a customer to transfer
to the customer either: (a) a good or service (or a bundle of goods or services) that is distinct; or (b) a
series of distinct goods or services that are substantially the same and that have the same pattern of
transfer to the customer.
Contract balances
A contract asset is the right to consideration in exchange for services transferred to the customer. If the
Group performs by transferring services to a customer before the customer pays consideration or before
payment is due, a contract asset is recognised for the earned consideration that is conditional.
Receivables are recorded where the Group provides services to clients, consideration is due immediately
upon satisfaction of a point in time service or at the end of a prespecified period for an over the time
service. It is the Group's right to an amount of consideration that is unconditional (i.e. only the passage of
time is required before payment of the consideration is due). The initial recognition and subsequent
measurement of such receivables is disclosed in Notes 2.13 to 2.17.
Contract liabilities relate to payments received from customers where the Group is yet to satisfy its
performance obligation. Contract liabilities are recognised as revenue when the Group performs under the
contract.
Contract assets and receivables are recorded within 'Prepayments, accrued income and other assets' and
contract liabilities within 'Accruals, deferred income, other liabilities and other provisions' in the
consolidated balance sheet.
263
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.8 Revenue from contracts with customers (continued)
2.8.1 Fee and commission income
The Group earns fee income from a diverse range of services it provides to its clients. Fee income can be
divided into two broad categories:
i. fees earned from services that are provided over a certain period of time, such as asset or portfolio
management, custody services and certain advisory services; and
ii. fees earned from point in time services such as executing transactions and brokerage fees (e.g.
securities and derivative execution and clearing).
Over time services
For fees earned from services that are provided over a certain period of time revenue is recognised pro-rata
over the service period, provided the fees are not contingent on successfully meeting specified performance
criteria that are beyond the control of the Group. Costs to fulfil over time services are recorded in the
consolidated income statement immediately, because such services are considered to be a series of services
that are substantially the same from day to day and have the same pattern of transfer.
Point in time services
For fees earned from providing transaction-type services, revenue is recognised when the service has been
completed, provided such fees are not subject to refund or another contingency beyond the control of the
Group. Incremental costs to fulfil services provided at a point in time are typically incurred and recorded at
the same time as the performance obligation is satisfied and revenue is earned, and are therefore not
recognised as an asset, e.g. brokerage commissions.
Fee and commission income is measured based on consideration specified in a legally enforceable contract
with a customer, excluding amounts such as taxes collected on behalf of third parties. Consideration can
include both fixed and variable amounts. Variable consideration includes refunds, discounts and other
amounts that are contingent on the occurrence or non-occurrence of a future event. Variable consideration
that is contingent on an uncertain event can only be recognised to the extent that it is highly probable that
a significant reversal in the amount of cumulative revenue for a contract will not occur.
2.8.2 Dividend income
Dividend income is recognised in the consolidated income statement when the Group's right to receive
payment is established, i.e. upon approval by the general meeting of the shareholders.
2.8.3 Rental income
Rental income from investment properties and stock of property is accounted for on a straight-line basis
over the period of the lease and is recognised in the consolidated income statement in 'Other income'.
2.8.4 Gains on disposal of investment property
Gains on disposal of investment property are recognised in the consolidated income statement in 'Net
gains/(losses) from revaluation and disposal of investment properties' when the buyer accepts delivery and
the control of the property is transferred to the buyer.
2.8.5 Gains on disposal of stock of property
Gains on disposal of stock of property are recognised in the consolidated income statement in 'Net gains on
disposal of stock of property' when the buyer accepts delivery and the control of the property is transferred
to the buyer.
2.9 Recognition of interest income/expense and income/expense similar to interest
The Group calculates interest income/expense by applying the effective interest rate (EIR) to the gross
carrying amount of financial assets, unless the asset is credit-impaired. For financial assets and financial
liabilities measured at FVPL which accrue interest, the Group follows the principles of the effective interest
method with the only difference being the treatment of fees that are integral to the financial asset/financial
liabilities. That is, for financial assets and financial liabilities classified at FVPL the fees are recognised as
revenue or expense when the instrument is initially recognised and not as part of the EIR calculation.
264
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.9 Recognition of interest income/expense and income/expense similar to interest
(continued)
When a financial asset becomes credit-impaired and is therefore classified as Stage 3, interest income is
calculated by applying the EIR to the amortised cost of the financial asset, being the gross carrying amount
of the financial asset less any loss allowance. If the financial asset cures and is no longer credit-impaired,
the Group reverts to calculating interest income on the gross carrying amount. In such cases, the Group
unwinds the discount on the expected credit losses (ECL) through the 'Credit losses on financial assets' line
in the consolidated income statement.
Interest income on purchased or originated credit-impaired (POCI) financial assets is recognised using the
credit adjusted effective interest rate (CAEIR) calculated at initial recognition. The CAEIR is applied on the
amortised cost of the financial asset, being the gross carrying amount of the financial asset less any loss
allowance.
Interest income from financial assets at amortised cost and financial assets at FVOCI is presented within the
caption 'Interest income', while interest income on financial instruments at FVPL is presented within the
caption 'Income similar to interest income' in the consolidated income statement. Interest expense on
financial liabilities at amortised cost is presented within the caption 'Interest expense', while interest
expense on financial instruments at FVPL is presented within the caption 'Expense similar to interest
expense' in the consolidated income statement. All form part of the 'Net interest income'.
The effective interest rate method
Interest income and expense are recognised in the consolidated income statement by applying the effective
interest rate (EIR) for all financial instruments measured at amortised cost and debt instruments at FVOCI.
The EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected
life of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of
the financial liability.
The EIR, and therefore the amortised cost of the asset, is calculated by taking into account any discount or
premium on acquisition, fees and costs that are an integral part of the EIR. Fees and incremental costs that
are directly attributable to loans and advances to customers are also deferred and amortised as part of
interest income using the effective interest rate method.
For floating-rate financial instruments, periodic re-estimation of cash flows to reflect the movements in the
market rates of interest also alters the EIR, but when instruments were initially recognised at an amount
equal to the principal, re-estimating the future interest payments does not significantly affect the carrying
amount of the asset or the liability.
The carrying amount of a financial asset or liability is adjusted if the Group revises its estimates of
payments or receipts for reasons other than credit risk. The adjusted carrying amount is calculated based
on the original effective interest rate and the change in carrying amount is recorded in 'Net gains/(losses)
on financial instruments' for debt securities, or in 'Changes in expected cash flows' component of the 'Credit
losses to cover credit risk on loans and advances to customers' for loans and advances to customers
included within 'Credit losses on financial assets'.
265
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.10 Employee benefits
2.10.1 Retirement benefits
The Group operates both defined contribution and defined benefit retirement plans.
Defined contribution plans
The Group recognises obligations in respect of the accounting period in the consolidated income statement.
Any unpaid contributions at the reporting date are included as a liability.
Defined benefit plans
The cost of providing benefits for defined benefit plans is estimated separately for each plan using the
Projected Unit Credit Method of actuarial valuation.
The defined benefit asset or liability comprises the present value of the defined benefit obligations (using a
discount rate based on high quality corporate bonds), reduced by the fair value of plan assets out of which
the obligations are to be settled. Plan assets are assets that are held by a funded plan or qualifying
insurance policies. Any net defined benefit surplus is limited to the present value of available refunds and
reductions in future contributions to the plan. Fair value is based on market price information and in the
case of quoted securities it is the published bid price.
The net charge to the consolidated income statement mainly comprises the service costs and the net
interest on the net defined benefit asset or liability, and is presented in staff costs. Service costs comprise
current service costs, past service costs, gains and losses or curtailments and non routine settlements. R e
measurements, comprising actuarial gains and losses, the effect of the asset ceiling (excluding net interest),
and the return on plan assets (excluding net interest), are recognised immediately on the consolidated
balance sheet with a corresponding debit or credit in other comprehensive income. R e-measurements are
not reclassified to profit or loss in subsequent periods.
Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous
actuarial assumptions and what has actually occurred), as well as the effects of changes in actuarial
assumptions.
2.10.2 Short term employee benefits
Short term employee benefits, such as salaries and other benefits, are accounted for on an accrual basis
over the period during which employees have provided services. Bonuses are recognised to the extent that
the Group has a legal or constructive obligation to its employees that can be measured reliably.
2.10.3 Exit cost benefits
Exit cost benefits refer to termination benefits and are recognised as an expense at the earlier of when the
Group can no longer withdraw the offer of those benefits and when the Group recognises costs for a
restructuring under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, which includes the
payment of termination benefits.
For termination benefits payable as a result of an employee's decision to accept an offer of voluntary
redundancy, which is not within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets,
the Group recognises the expense at the earlier of when the employee accepts the offer and when a
restriction on the Group's ability to withdraw the offer takes effect.
2.11 Tax
Current income tax and deferred tax
Tax on income is provided in accordance with the fiscal regulations and rates which apply in the countries
where the Group operates and is recognised as an expense in the period in which the income arises.
Deferred tax is provided using the liability method. Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid to the tax authorities. Current income tax and
deferred tax relating to items recognised directly in equity is recognised directly in equity.
266
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.11 Tax (continued)
Deferred tax liabilities are recognised for taxable temporary differences between the tax basis of assets and
liabilities and their carrying amounts at the reporting date, which will give rise to taxable amounts in future
periods. Deferred tax liabilities are recognised for taxable temporary differences associated with
investments in subsidiary and associate companies and branches, except where the timing of the reversal of
the temporary differences can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and carry-forward of unutilised tax
losses to the extent that it is probable that taxable profit will be available, against which the deductible
temporary differences and carry-forward of unutilised tax losses can be utilised. The carrying amount of
deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to utilise all or part of the deductible temporary
differences or tax losses. Unrecognised deferred tax assets are reassessed at each reporting date and are
recognised to the extent that it has become probable that future taxable profit will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the amount that is expected to be paid to or recovered
from the tax authorities, after taking into account the tax rates and legislation that have been enacted or
substantially enacted by the reporting date.
The deferred tax assets arising from specific tax losses and which are subject to the Income Tax Law
Amendment 28 (I) of 2019, are accounted for on the same basis as other deferred tax assets and can be
converted into tax credits. These tax losses are converted into 11 equal annual instalments and each
instalment could be claimed as a deductible expense in the determination of the taxable income for the
relevant year. Any amount of the annual instalment not utilised is converted into a tax credit and can be
utilised in the tax year following the tax year to which this tax credit relates to. Any unutilised tax credit in
the relevant year is converted into a receivable from the Cyprus Government. Further details are disclosed
in Note 17.
Current and deferred tax assets and liabilities are offset when they arise from the same tax reporting entity
and relate to the same tax authority and when the legal right to offset exists.
Indirect Tax Value Added Tax (VAT)
Expenses and assets are recognised net of the amount of VAT, except:
i. when the VAT incurred on a purchase of assets or services is not recoverable from the tax
authorities, in which case, the VAT suffered is recognised as part of the cost of acquisition of the
asset or as part of the expense item, as applicable.
ii. when receivables and payables are stated with the amount of VAT charged. The amount of VAT
recoverable from, or payable to the tax authorities, is included as part of receivables or payables in
the consolidated balance sheet.
2.12 Financial instruments - initial recognition
2.12.1 Date of recognition
'Balances with central banks', 'Loans and advances to banks', 'Loans and advances to customers', 'Deposits
by banks', 'Funding from central banks' and 'Customer deposits' are recognised when cash is received by
the Group or advanced to the borrowers. All other financial assets and financial liabilities are initially
recognised on the trade date. Purchases or sales of financial assets, where delivery is required within a time
frame established by regulations or by market convention, are also recognised on the trade date, i.e. the
date that the Group commits to purchase or sell the asset. Derivatives are also recognised on a trade date
basis.
2.12.2 Initial recognition and measurement of financial instruments
The classification of financial assets on initial recognition depends on their contractual terms and the
business model for managing the instruments, as described in Note 2.13.
All financial instruments are measured initially at their fair value plus, in the case of financial assets and
liabilities not measured at FVPL, any directly attributable incremental costs of acquisition or issue.
267
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.12 Financial instruments - initial recognition (continued)
2.12.2 Initial recognition and measurement of financial instruments (continued)
When the fair value of financial instruments at initial recognition differs from the transaction price, the
Group accounts for the Day 1 profit or loss, as described in Note 2.12.3 below.
2.12.3 Day 1 profit or loss
When the transaction price of the instrument differs from the fair value at origination and the fair value is
based on a valuation technique using only inputs observable in market transactions, the Group recognises
the difference between the transaction price and fair value in 'Net gains/(losses) on financial instruments'
caption. In the cases, where the fair value is based on models for which some of the inputs are not
observable, the difference between the transaction price and the fair value is deferred and is only
recognised in profit or loss when the inputs become observable, or when the instrument is derecognised.
2.12.4 Measurement categories of financial assets and financial liabilities
Financial assets are measured either at amortised cost, FVOCI or FVPL.
The Group classifies and measures its derivatives and trading portfolios at FVPL. The Group may designate
financial instruments at FVPL, if doing so eliminates or significantly reduces measurement or recognition
inconsistencies.
Financial liabilities, other than loan commitments and financial guarantees are measured at amortised cost
or at FVPL when they are held for trading or relate to derivative instruments.
2.13 Classification and measurement of financial assets and financial liabilities
The classification and measurement of financial assets depends on how these are managed as part of the
business models the Group operates and their contractual cash flow characteristics (whether the cash flows
represent solely payments of principal and interest (SPPI).
Business model assessment
The Group assesses the business model at a portfolio level. The portfolio level is determined at the
aggregation level that reflects how the Group manages its financial assets and the business model is based
on observable factors which include:
i. How the performance of the business model and the financial assets held within that business model
are evaluated and reported to the Group's key management personnel;
ii. The risks that affect the performance of the business model (and the financial assets held within that
business model) and, in particular, the way in which those risks are managed;
iii. How managers of the business are compensated (for example, whether the compensation is based
on the fair value of the assets managed or on the contractual cash flows collected);
iv. The expected frequency, value and timing of sales are also important aspects of the Group's
assessment.
If cash flows after initial recognition are realised in a way that is different from the Group's original
expectations, the Group does not change the classification of the remaining financial assets held in that
business model, but incorporates such information when assessing newly originated or newly purchased
financial assets going forward.
Contractual cash flows characteristics test (SPPI assessment)
The Group assesses whether the individual financial assets' cash flows represent solely payments of
principal and interest on the principal amount outstanding at origination (SPPI test).
For the purposes of this assessment, principal is defined as the fair value of the financial asset on initial
recognition and may change over the life of the financial asset (for example, if there are repayments of
principal or amortisation of the premium/discount).
Interest is defined as consideration for the time value of money, for the credit risk associated with the
principal amount outstanding during a particular period of time and for other basic lending risks and costs
(e.g. liquidity risk and administrative costs), as well as a profit margin.
268
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.13 Classification and measurement of financial assets and financial liabilities (continued)
In assessing whether contractual cash flows are SPPI, the Group applies judgement and considers the terms
that could change the contractual cash flows so that they would not meet the condition for SPPI, and be
inconsistent to a basic lending arrangement, including: (i) contingent and leverage features, (ii) interest
rates which are beyond the control of the Group or variable interest rate consideration, (iii) features that
could modify the time value of money, (iv) prepayment and extension options, (v) non-recourse
arrangements, and (vi) convertibility features.
Where the contractual terms of a financial asset introduce a more than de-minimis exposure to risks or
volatility that are inconsistent with a basic lending arrangement, the related financial asset will be measured
at FVPL.
2.13.1 Derivative financial instruments
Derivatives are recorded at fair value and classified as assets when their fair value is positive and as
liabilities when their fair value is negative. Subsequently, derivatives are measured at fair value.
Revaluations of trading derivatives are included in the consolidated income statement in 'Net foreign
exchange gains' in the case of currency derivatives and in 'Net gains/(losses) on financial instruments' in
the case of all other derivatives. Interest income and expense are included in the 'Income similar to interest
income' and 'Expense similar to interest expense' captions respectively in the consolidated income
statement.
An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host
contract with the effect that some of the cash flows of the combined instrument vary in a way similar to a
stand-alone derivative.
For hybrid contracts where the host contract is a financial asset within the scope of IFRS 9, the classification
and measurement criteria are based on the business model and SPPI assessment as described in the
classification of financial assets section of Note 2.13 and applied to the entire hybrid instrument.
Derivatives embedded in financial liabilities and non-financial host contracts, are treated as separate
derivatives and recorded at fair value if their economic characteristics and risks are not closely related to
those of the host contract, and the host contract is not itself measured at fair value with revaluation
recognised in the consolidated income statement. The embedded derivatives separated from the host are
carried at fair value, with revaluations recognised in 'Net gains/(losses) on financial instruments' in the
consolidated income statement. The host contract is accounted for in accordance with the relevant
standards.
2.13.2 Financial assets measured at amortised cost
Financial assets are measured at amortised cost if they meet both of the following conditions:
i. The financial asset is held within a business model with the objective to hold financial assets in order
to collect contractual cash flows;
ii. The contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI
on the principal amount outstanding.
This classification relates to cash and balances with central banks, loans and advances to banks, loans and
advances to customers that pass the SPPI test, debt securities held under the 'Hold to collect' business
model and other financial assets that pass the SPPI test.
After their initial recognition, financial instruments measured at amortised cost are measured at amortised
cost using the effective interest rate method, less allowances for expected credit losses (ECL). Amortised
cost is calculated by taking into account any discount or premium on acquisition and fees that are an
integral part of the effective interest rate. The amortisation is included in 'Interest income' in the
consolidated income statement. The losses arising from impairment are recognised in the consolidated
income statement in 'Credit losses on financial assets'.
269
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.13 Classification and measurement of financial assets and financial liabilities (continued)
2.13.3 Debt instruments measured at FVOCI
Debt instruments are measured at FVOCI if they meet both of the following conditions:
i. The financial asset is held within a business model the objective of which is achieved by both
collecting contractual cash flows and selling financial assets;
ii. The contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI
on the principal amount outstanding.
This classification relates to debt securities held under the 'Hold to collect and sell' business model that pass
the SPPI test.
FVOCI debt instruments are subsequently measured at fair value with gains and losses due to changes in
fair value recognised directly in other comprehensive income in the 'Net gains/(losses) on investments in
debt instruments measured at FVOCI' caption. Upon derecognition of these instruments, any accumulated
balances in other comprehensive income are reclassified to the consolidated income statement and reported
within 'Net gains/(losses) on financial instruments' caption. The interest income, foreign exchange
differences and ECL are recognised in the consolidated income statement in the respective lines in the same
manner as for financial assets at amortised cost.
2.13.4 Financial assets or financial liabilities held for trading
Financial assets or financial liabilities held for trading represent assets and liabilities acquired or incurred
principally for the purpose of selling or repurchasing them in the near term and are recognised in the
consolidated balance sheet at fair value. Changes in the fair value are recognised in 'Net gains on financial
instruments' in the consolidated income statement. Interest income and expense are included in the
captions 'Income similar to interest income' and 'Expense similar to interest expense' respectively in the
consolidated income statement according to the terms of the relevant contract, while dividend income is
recognised in 'Other income' when the right to receive payment has been established.
This classification relates to debt and equity instruments that have been acquired principally for the
purposes of sale or repurchase in the near term.
2.13.5 Financial assets or financial liabilities at FVPL
Financial assets and financial liabilities, other than those held for trading, classified in this category are
those that are designated by management on initial recognition or are mandatorily required to be measured
at fair value under IFRS 9.
Management only designates an instrument at FVPL at initial recognition when one of the following criteria
are met:
(a) the designation eliminates or significantly reduces the inconsistency that would otherwise arise
from the measurement of the assets or liabilities or the recognition of gains or losses on them on a
different basis, or
(b) the liabilities are part of a group of financial liabilities or financial assets and financial liabilities
which are managed and their performance is evaluated on a fair value basis, in accordance with a
documented risk management or investment strategy, or
(c) the liabilities contain an embedded derivative, unless the embedded derivative does not
significantly modify the cash flows of the instrument or it is clear, with little or no analysis, that the
embedded derivative could not be separated.
Such designation is determined on an instrument-by-instrument basis.
Assets held under unit-linked insurance contracts, certain non-linked insurance contracts and investment
contracts issued by insurance subsidiaries are designated at FVPL.
Financial assets mandatorily classified at FVPL include certain loans and advances to customers, certain
investment fund holdings and other securities for which the contractual cash flows do not meet the SPPI
test, or the financial assets are part of a portfolio held within a business model under which they are
managed and their performance is evaluated on a fair value basis.
270
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.13 Classification and measurement of financial assets and financial liabilities (continued)
2.13.5 Financial assets or financial liabilities at FVPL (continued)
Financial assets and financial liabilities at FVPL are recorded in the consolidated balance sheet at fair value.
Changes in the fair value are recognised in 'Net gains/(losses) on financial instruments' in the consolidated
income statement. Interest income and expense are included in the captions 'Income similar to interest
income' and 'Expense similar to interest expense' respectively in the consolidated income statement.
Dividend income is recognised in 'Other income' in the consolidated income statement when the right to
receive payment has been established.
2.13.6 Equity instruments measured at FVOCI
At initial recognition, the Group can make an irrevocable election to classify an investment in an equity
instrument at FVOCI, when that meets the definition of Equity under IAS 32 Financial Instruments:
'Presentation', and is not held for trading. Such classification is determined on an instrument-by-instrument
basis.
Fair value gains and losses on these equity instruments are recognised in OCI and are not recycled to profit
or loss upon derecognition, but are transferred directly to retained earnings. Dividends on equity
investments are recognised in the consolidated income statement and reported within 'Other Income' when
the right to receive payment has been established, except when the Group benefits from such proceeds as a
recovery of part of the cost of the instrument, in which case it is recorded in OCI. Equity instruments
measured at FVOCI are not subject to an impairment assessment.
2.13.7 Debt securities in issue and Subordinated liabilities
Debt securities in issue and Subordinated liabilities are initially measured at the fair value of the
consideration received, net of any issue costs. They are subsequently measured at amortised cost using the
effective interest rate method, in order to amortise the difference between the cost at inception and the
redemption value, over the period to the earliest date that the Group has the right to redeem the loan
stock.
Interest on debt securities in issue and subordinated liabilities is included in 'Interest expense' in the
consolidated income statement.
2.13.8 Other financial liabilities
Other financial liabilities include 'Customer deposits', 'Deposits by banks', 'Funding from central banks' and
other financial liabilities.
Financial liabilities are recognised when the Group enters into the contractual provisions of the
arrangements with counterparties, which is generally on trade date, and initially measured at fair value,
which is normally the consideration received, net of directly attributable transaction costs incurred.
Subsequent measurement of other financial liabilities is at amortised cost, using the effective interest
method.
2.13.9 Determination of fair value - Valuation techniques
The following is a description of the determination of fair value for financial instruments which are recorded
at fair value and for financial instruments which are not measured at fair value but for which fair value is
disclosed, using valuation techniques. These incorporate the Group's estimate of assumptions that a market
participant would make when valuing the instruments.
Derivative financial instruments
Derivative financial instruments valued using a valuation technique with market observable inputs are
mainly interest rate swaps, currency swaps, currency rate options, forward foreign exchange rate contracts
and interest rate collars. The most frequently applied valuation techniques include forward pricing and swap
models, using present value calculations. The models incorporate various inputs including, foreign exchange
spot and forward rates and interest rate curves.
271
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.13 Classification and measurement of financial assets and financial liabilities (continued)
2.13.9 Determination of fair value - Valuation techniques (continued)
Credit Valuation Adjustments (CVA) and Debit Valuation Adjustments (DVA)
The CVA and DVA are incorporated into derivative valuations to reflect the impact on fair value of
counterparty risk and BOC PCL's own credit quality respectively.
The Group calculates the CVA by applying the PD of the counterparty, conditional on the non-default of the
Group, to the Group's expected positive exposure to the counterparty and multiplying the result by the loss
expected in the event of default. Conversely, the Group calculates the DVA by applying BOC PCL's PD,
conditional on the non-default of the counterparty, to the expected positive exposure of the counterparty to
the Group and multiplying the result by the loss expected in the event of default.
The expected exposure of derivatives is calculated as per the CRR and takes into account the netting
agreements where they exist. A standard Loss Given Default (LGD) assumption in line with industry norm is
adopted. Alternative LGD assumptions may be adopted when both the nature of the exposure and the
available data support this.
The Group does not hold any significant derivative instruments which are valued using a valuation technique
with significant non-market observable inputs.
Investments at FVPL, investments at FVOCI and investments at amortised cost
Investments which are valued using a valuation technique or pricing models, primarily consist of unquoted
equity securities and debt securities. These assets are valued using valuation models which sometimes only
incorporate market observable data and at other times use both observable and non-observable data. The
rest of the investments are valued using quoted prices in active markets.
Loans and advances to customers
The fair value of loans and advances to customers is based on the present value of expected future cash
flows. Future cash flows have been based on the future expected loss rate per loan portfolio, taking into
account expectations for the credit quality of the borrowers. The discount rate includes components that
capture the risk-free rate per currency, funding cost, servicing cost and the cost of capital, considering the
risk weight of each loan.
Customer deposits
The fair value of customer deposits is determined by calculating the present value of future cash flows. The
discount rate takes into account current market rates and the credit profile of BOC PCL. The fair value of
deposits repayable on demand and deposits protected by the Deposit Protection Guarantee Scheme are
approximated by their carrying values.
Loans and advances to banks
Loans and advances to banks with maturity over one year are discounted using an appropriate risk-free rate
plus the appropriate credit spread. For short-term lending, the fair value is approximated by the carrying
value.
Reverse repurchase agreements
Fair values of reverse repurchase agreements that are held on a non-trading basis are determined by
calculating the present value of future cash flows. The cashflows are discounted using an appropriate risk
free rate plus the appropriate credit spread.
Deposits by banks and funding from central banks
Deposits by banks and funding from central banks with maturity over one year are discounted using an
appropriate risk-free rate plus the appropriate credit spread. For short-term funding, the fair value is
approximated by the carrying value.
Debt securities in issue and Subordinated liabilities
Debt securities and subordinated liabilities issuances are traded in an active market with quoted prices.
Further details on the fair value of assets and liabilities are disclosed in Note 22.
272
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.14 Reclassification of financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from
exceptional circumstances in which the Group changes its business model for managing financial assets and
acquires, disposes of, or terminates a business line. Reclassification is applied prospectively from the
reclassification date, which is the first day of the first reporting period following the change in business
model that results in the reclassification. Any previously recognised gains, losses or interest are not
restated.
Financial liabilities are never reclassified.
2.15 Derecognition of financial assets and financial liabilities
2.15.1 Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is derecognised when the contractual rights to the cash flows from the financial asset have expired.
The Group also derecognises a financial asset if it has both transferred the financial asset and the transfer
qualifies for derecognition.
The Group transfers a financial asset if, and only if, either:
i. The Group transfers its contractual rights to receive cash flows from the financial asset; or
ii. The Group retains the rights to the cash flows, but assumes an obligation to pay the received cash
flows in full without material delay to a third party under a 'pass-through' arrangement.
A transfer only qualifies for derecognition if either:
i. The Group transfers substantially all the risks and rewards of the asset; or
ii. The Group neither transfers nor retains substantially all the risks and rewards of the asset, but it
transfers control of the asset.
2.15.2 Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or
expired. Modifications to, and exchanges of, financial liabilities are treated as extinguishments and
derecognised, when the revised terms are substantially different to the original term. The difference
between the carrying amount of the original financial liability and the consideration paid is recognised in
profit or loss.
2.16 Modification of financial assets
The contractual terms of a financial asset may be modified due to various reasons, either due to commercial
renegotiations or as a response to a borrower's financial difficulties (forborne modified loans) with a view to
maximise recovery.
In the event that the terms and conditions of a financial asset are renegotiated or otherwise modified, the
Group considers whether the modification results in derecognition of the existing financial asset and the
recognition of a new financial asset. A derecognition of a financial asset (or part of a financial asset) and a
recognition of a new financial asset would occur where there has been a substantial modification on the
revised terms to the original cash flows.
Judgement is required to assess whether a change in the contractual terms is substantial enough to lead to
derecognition. The Group considers a series of factors of both qualitative and quantitative nature when
making such judgements on a modification in the contractual cash flows, including change in the currency,
change in counterparty, introduction of substantially different terms such as addition of equity conversion
features, changes in the legal framework and other.
273
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.16 Modification of financial assets (continued)
Where the modification does not result in derecognition, the Group recognises a modification gain or loss,
based on the difference between the modified cash flows discounted at the original EIR and the existing
gross carrying value of the financial asset. The financial asset continues to be subject to the same
assessments for significant increase in credit risk relative to initial recognition and credit-impairment. A
modified financial asset will transfer out of Stage 3 if the conditions that led to it being identified as credit-
impaired, as defined in Note 2.17.2, a re no longer present. A modified financial asset will transfer out of
Stage 2 when it no longer meets the criteria for significant increase in credit risk such as it satisfies relative
thresholds, which are based on changes in its lifetime probability of default (PD), days past due are not
considered to be forborne, and other considerations. The financial asset continues to be monitored for
significant increases in credit risk and credit impairment.
Where the modification results in derecognition, the new financial asset is classified at amortised cost or
FVOCI and an assessment is performed on whether it should be classified as Stage 1 or POCI for ECL
measurement. For the purposes of assessing significant increases in credit risk, the date of initial
recognition for the new financial asset is the date of the modification.
2.17 Impairment of financial assets
2.17.1 Overview of ECL principle
The Group uses a forward looking ECL model, requiring judgement, estimates and assumptions in
determining the level of ECL. ECL is recorded for all financial assets measured at amortised cost and FVOCI,
lease receivables, loan commitments and financial guarantee contracts. Equity instruments are not subject
to impairment.
At initial recognition, impairment allowance (or provision in the case of commitments and guarantees) is
required for ECL resulting from default events that are possible within the next 12 months (12-month ECL),
unless assets are deemed as POCI whereby the ECL is measured on a lifetime basis. In the event of a
significant increase in credit risk since initial recognition, impairment allowance is required resulting from all
possible default events over the expected life of the financial instrument (lifetime ECL). The Group's policies
for determining if there has been a significant increase in credit risk are set out in Note 2.17.3.
The Group categorises its financial assets into Stage 1, Stage 2, Stage 3 and POCI for ECL measurement as
described below:
Stage 1: Financial assets which did not have a significant increase in credit risk since initial recognition are
considered to be Stage 1 and 12-month ECL is recognised.
Stage 2: Financial assets that are considered to have experienced a significant increase in credit risk since
initial recognition are considered to be Stage 2 and lifetime ECL is recognised.
Stage 3: Financial assets which are considered to be credit-impaired (refer to following section of the note
on how the Group defines credit-impaired and default) and lifetime ECL is recognised.
POCI: These are purchased or originated financial assets that are credit-impaired on initial recognition. POCI
assets include loans purchased or originated at a deep discount that reflects incurred credit losses. Changes
in lifetime ECL since initial recognition are recognised until a POCI loan is derecognised.
ECL is recognised in profit or loss with a corresponding ECL allowance reported as a decrease in the carrying
value of financial assets measured at amortised cost on the balance sheet. For financial assets measured at
FVOCI the carrying value is not reduced, but the accumulated amount of impairment allowance is
recognised in OCI. For off-balance sheet instruments, accumulated provisions for ECL are reported in
'Accruals, deferred income, other liabilities and other provisions', except in the case of loan commitments
where ECL on the loan commitment is recognised together with the loss allowance of the relevant on
balance-sheet exposure, as the Group cannot separately identify the ECL on the loan commitment from
those on the on-balance sheet exposure component. ECL for the period is recognised within the
consolidated income statement in 'Credit losses on financial assets' and further analysed in Note 16 i n
'Credit losses to cover credit risk on loans and advances to customers' for loans and advances to customers
and loan commitments and financial guarantees and in 'Credit losses of other financial instruments' for all
other financial instruments.
274
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.17 Impairment of financial assets (continued)
2.17.2 Credit impaired and definition of default
Loans and advances to customers, loan commitments and financial guarantees
The Group considers loans and advances to customers that meet the non-performing exposure (NPE)
definition as per the European Banking Authority (EBA) standards to be in default and hence Stage 3
(credit-impaired). Therefore such loans have ECL calculated on a lifetime basis and are considered to be in
default for credit risk management purposes.
As per the EBA standards and European Central Bank's (ECB) Guidance to Banks on Non-Performing Loans
(which was published in March 2017), NPEs are defined as those exposures that satisfy one of the following
conditions:
(i) The borrower is assessed as unlikely to pay its credit obligations in full without the realisation of the
collateral, regardless of the existence of any past due amount or of the number of days past due.
(ii) Defaulted or impaired exposures as per the approach provided in the Capital Requirement
Regulation (CRR), which would also trigger a default under specific credit adjustment, diminished
financial obligation and obligor bankruptcy.
(iii) Material exposures as set by the Central Bank of Cyprus (CBC), which are more than 90 days past
due.
(iv) Performing forborne exposures under probation for which additional forbearance measures are
extended.
(v) Performing forborne exposures previously classified as NPEs that present more than 30 days past
due within the probation period.
From 1 January 2021 two regulatory guidelines came into force that affect NPE classification and Days-Past-
Due calculation. More specifically, these are the RTS on the Materiality Threshold of Credit Obligations Past-
Due (EBA/RTS/2016/06), and the Guideline on the Application of the Definition of Default under article 178
(EBA/RTS/2016/07).
The Days-Past-Due (DPD) counter begins counting DPD as soon as the arrears or excesses of an exposure
reach the materiality threshold (rather than as of the first day of presenting any amount of arrears or
excesses). Similarly, the counter will be set to zero when the arrears or excesses drop below the materiality
threshold. Payments towards the exposure that do not reduce the arrears/excesses below the materiality
threshold, will not impact the counter.
For retail debtors, when a specific part of the exposures of a customer that fulfils the NPE criteria set out
above is greater than 20% of the gross carrying amount of all on balance sheet exposures of that customer,
then the total customer exposure is classified as non-performing; otherwise only the specific part of the
exposure is classified as non-performing.
For non-retail debtors, when an exposure fulfils the NPE criteria set out above, then the total customer
exposure is classified as non-performing.
Material arrears/excesses are defined as follows:
i. Retail exposures: Total arrears/excess amount greater than €100
ii. Exposures other than retail: Total arrears/excess amount greater than €500
and the amount in arrears/excess is at least 1% of the customer's total exposure.
The definitions of credit-impaired and default are aligned so that stage 3 represents loans which are
considered defaulted or otherwise credit-impaired.
Exposures are classified as forborne when concessions are made to debtors who are facing or about to face
financial difficulties and cannot meet their contractual obligations.
275
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.17 Impairment of financial assets (continued)
2.17.2 Credit impaired and definition of default (continued)
Non-performing forborne exposures cease to be considered as NPEs and in such case are transferred out of
Stage 3, only when all of the following conditions are met:
i. The extension of forbearance measures does not lead to the recognition of impairment or default.
ii. A period of one year has passed since the latest of the following events:
a. The restructuring date
b. The date the exposure was classified as non-performing
c. The end of the grace period included in the restructuring arrangements.
iii. Following the forbearance measures and according to the post-forbearance conditions, there is no
past due amount or concerns regarding the full repayment of the exposure.
iv. No Unlikely-to-Pay criteria exist for the debtor.
v. The debtor has made post-forbearance payments of a non-insignificant amount of capital (different
capital thresholds exist according to the facility type).
Non-performing non-forborne exposures cease to be considered as NPEs only when all of the following
conditions are met:
i. At least three months have passed since the date that the conditions for which the exposure was
classified as non-performing cease to be met, and within these three months there are no default
triggers, and
ii. During the three month period, the behaviour of the obligor should be taken into account, i.e. there
are no arrears/excesses and instalments are being repaid normally, and
iii. During the three month period, the financial situation of the obligor should be taken into account, i.e.
the financial situation of the obligor has improved, and
iv. During the three month period an Unlikely-to-Pay criteria assessment is carried out and it is
assessed that the obligor can fulfil their obligations without resorting to the liquidation of collateral
and there are no other Unlikely-to-Pay criteria, and
v. The obligor does not have any amount past due by more than 90 days.
When an account exits Stage 3, it is transferred to Stage 2 for a probationary period of 6 months. At the
end of this period, the significant increase in credit risk (SICR) trigger is activated as described in Note
2.17.3 a nd the loan is either transferred to Stage 1 or remains in Stage 2. The reversal of previous
unrecognised interest on loans and advances to customers that no longer meet Stage 3 criteria is presented
in 'Credit losses to cover credit risk on loans and advances to customers' within 'Credit losses on financial
assets'.
Debt securities, loans and advances to banks and balances with central banks
Debt securities, loans and advances to banks and balances with central banks are considered defaulted and
transferred to Stage 3 if the issuers have failed to pay either interest or principal. Moody's ratings indicate
these exposures with a grade C which is the lowest Moody's rating category. In addition, a number of other
criteria are considered such as adverse changes in business, financial and economic conditions as well as
external market indicators (credit spreads, credit default swap (CDS) prices) in determining whether there
has been a significant deterioration in the financial position that could lead to unlikeliness to pay.
2.17.3 Significant increase in credit risk (SICR)
IFRS 9 requires that in the event of a significant increase in credit risk since initial recognition, the
calculation basis of the loss allowance would change from 12 month ECL to lifetime ECL.
The assessment of whether credit risk has increased significantly since initial recognition is performed at
each reporting date, by considering the change in the risk of default occurring over the remaining life of the
financial instrument since initial recognition.
276
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.17 Impairment of financial assets (continued)
2.17.3 Significant increase in credit risk (SICR) (continued)
Significant increase in credit risk for loans and advances to customers
Primarily, the Group uses the lifetime probability of default (PD) as the quantitative metric in order to
assess transition from Stage 1 to Stage 2 for all portfolios. The Group considers an exposure to have
experienced significant increase in credit risk (SICR) by comparing the PD at the reporting date with the PD
at initial recognition to compute the relative increase in regards to the corresponding threshold. The
threshold has been determined by using statistical analysis on historical information of credit migration
exposures on the basis of days past due, for the different segments. The Group applies the thresholds
presented in the table below to each portfolio/segment, based on the following characteristics: customer
type, product type and rating at origination. The threshold is then assigned to each facility according to the
facility's portfolio/segment.
The SICR trigger is activated based on the comparison of the ratio of current lifetime PD to the remaining
Lifetime PD at origination (PD@O) to the pre-established threshold. If the resulting ratio is higher than the
pre-established threshold then deterioration is assumed to have occurred and the exposure is transferred to
Stage 2.
The table below summarises the quantitative measure of the SICR trigger which varies depending on the
credit quality at origination as follows, applied on 31 December 2023 and 2022:

Segment |  |  |
| Rating at |  |
| origination |  |
|  | PD Deterioration |
|  | thresholds applied at |
|  | 31 December 2023 |
|  | (median across |
|  | IFRS 9 segments) |
|  |  | PD Deterioration
|  |  | thresholds applied at
|  |  | 31 December 2022
|  |  | (median across
|  |  | IFRS 9 segments)
Retail | 1-7 | 3 X PD@O | 2 X PD@O
SME | 1-7 | 6 X PD@O | 2 X PD@O
Corporate | 1-7 | 2 X PD@O | 2 X PD@O

During the year ended 31 December 2023 PDs were calibrated and consequently the PD deterioration
thresholds were also updated.
For exposures which are subject to individual impairment assessment, the following qualitative factors in
addition to the ones incorporated in the PD calculation, are considered:
i. significant change in collateral value or guarantee or financial support provided by
shareholders/directors,
ii. significant adverse changes in business, financial and/or economic conditions in which the borrower
operates.
SICR is automatically triggered upon the granting of forbearance measures to performing borrowers. Stage
1 exposures that are classified as 'performing forborne' are automatically transferred to Stage 2.
The Group also considers, as a backstop criterion, that a significant increase in the credit risk occurs when
contractual payments are more than 30 days past due (past due materiality is applied). Loans that meet
this condition are classified in Stage 2. The transfer to Stage 2 does not take place in cases where certain
exposures are past due for more than 30 days but certain materiality limits are not met (such as arrears up
to €100 and the amount in arrears is lower than 1% of the customer's total exposure, in the case of retail
exposures and arrears up to €500 and the amount in arrears is lower than 1% of the customer's total
exposure, on all exposures other than retail). The materiality levels are set in accordance with the ECB
Regulation (EU) 2018/1845.
The thresholds for movement between Stage 1 and Stage 2 are symmetrical. After a financial asset has
been transferred to Stage 2, if its credit risk is no longer considered to have significantly increased relative
to its initial recognition, the financial asset will move back to Stage 1.
277
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.17 Impairment of financial assets (continued)
2.17.3 Significant increase in credit risk (SICR) (continued)
Significant increase in credit risk for financial instruments other than loans and advances to customers
Low credit risk simplification is adopted for debt securities, loans and advances to banks and balances with
central banks with external credit ratings that are rated as investment grade. The assessment of low credit
risk is based on both the external credit rating and the internal scoring (which considers latest available
information on the instrument and issuer). The combination of the two provides an adjusted credit rating.
An adjusted credit rating which remains investment grade is considered as having low credit risk.
For debt securities, loans and advances to banks and balances with central banks which are below
investment grade, the low credit risk exemption does not apply and therefore an assessment of significant
credit deterioration takes place, by comparing their credit rating at origination with the credit rating on the
reporting date. Significant deterioration in credit risk is considered to have occurred when the adjusted
rating of the exposures drops to such an extent that the new rating relates to a riskier category (i.e. from a
non-investment grade to speculative and then to highly speculative) or when the PD of the exposure at the
origination date compared to the PD at the reporting date has increased by a level greater than the pre-set
threshold.
2.17.4 Measurement of ECLs
IFRS 9 ECL reflects an unbiased, probability-weighted estimate based on either loss expectations resulting
from default events either over a maximum 12-month period from the reporting date or over the remaining
life of a financial instrument. The Group calculates lifetime ECL and 12-month ECL either on an individual
basis or a collective basis, depending on the nature of the underlying portfolio of financial instruments.
The Group calculates ECL based on three-weighted scenarios to measure the expected cash flow shortfalls,
discounted at an approximation to the EIR as calculated at initial recognition. A cash flow shortfall is the
difference between the cash flows that are due in accordance with the contract and the cash flows expected
to be received.
The Group calculates ECL using the following three components:
i. exposure at default (EAD),
ii. probability of default (PD), and
iii. loss given default (LGD).
Exposure at default (EAD)
EAD represents the expected exposure in the event of a default during the life of a financial instrument,
considering expected repayments, interest payments and accruals. EAD definition is differentiated for the
following categories: revolving and non-revolving exposures.
For non-revolving exposures the term is based on the contractual term of the exposure and both on-balance
sheet and off-balance sheet exposures are amortised in accordance with the principal contractual payment
schedule of each exposure. For revolving exposures, the projected EAD is the carrying value plus the credit
conversion factor applied on the undrawn amount. The credit conversion factor model is derived based on
empirical data from 2014 onwards.
In regards to the credit-impaired exposures, the EAD is equal to the on balance sheet amount as at the
reporting date.
Probability of default (PD)
PD represents the probability an exposure defaults and is calculated based on statistical rating models,
calculated per segment and taking into consideration each individual's exposure rating as well as forward
looking information based on macroeconomic inputs.
278
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.17 Impairment of financial assets (continued)
2.17.4 Measurement of ECLs (continued)
For each exposure, lifetime PD represents the probability of default within the lifetime horizon and is based
on the underlying models of marginal probability of default through the cycle (MPD TTC), MPD individual,
MPD individual (embedding also the NPE overlay), MPD point in time and Marginal Probability of Paid-off
(MPP). I n particular, the first element, MPD TTC is constructed per segment, illustrating the probability of
default status depending on number of months since the origination date. The PD for each month since the
origination date is calculated under the condition that exposures survived until the prior month. The MPD
individual is allocated to linked individual exposures through a scaling factor constructed based on the
current individual risk assessment, which is represented by the Group's PD per rating grade. It also embeds
the NPE overlay, which is an add-on factor that calibrates the underlying models, such that they are aligned
with the NPE definition. MPD is adjusted to reflect the current and forward looking information based on the
macroeconomic inputs. The MPP Component is the curve that shows the probability of full payment of a
particular exposure based on specific period in months since the open date of the exposure. MPP is
estimated for each particular segment and depends on the contractual terms of the exposure. For revolving
facilities where there is no contractual survival maturity, curves based on product type are developed. The
combination of these models gives rise to a PD value for each month for the lifetime of the exposure.
BOC PCL's internal rating process is summarised in Note 44.
Loss given default (LGD)
LGD represents an estimate of the loss if default occurs at a given time. It is usually expressed as a
percentage of the EAD. Two distinct paths are taken into consideration for the LGD parameter. The first one
is that of a cured facility where there is a full recovery thus no losses occur. In the second scenario, the
facility remains non-performing resulting in BOC PCL proceeding with collateral liquidation actions. To this
end, the LGD model considers parameters such as historical loss and/or recovery rates as well as the
collateral value which is discounted to the present value determining the amount of the expected shortfall.
LGD rates are estimated for the Stage 1, Stage 2, Stage 3 and POCI segments of each asset class.
The structure of the LGD model considers the following:
i. Curing where the probability of cure model was derived based on historical observations.
ii. Non-curing including cash recovery or realisation of collaterals either voluntarily i.e. debt for asset
swap or through forced sale, auctions and foreclosure and receivership.
A model monitoring process is followed for PD, EAD and LGD models, where model outputs are back-tested
against recent data points.
Individually assessed loans
The individual assessment is performed not only for individually significant performing and non-performing
exposures, but also for other exposures meeting specific criteria and thresholds determined by Credit Risk
Management. A risk-based approach is used on the selection criteria of the individually assessed population
which include, among others, forborne exposures, exposures with significant decrease in the yearly credit
turnover and/or in assigned collaterals. Also, significant Stage 1 exposures within sectors assessed by
Credit Risk Management to be highly impacted by one or more factors or events (such as a global or local
economic/market/regulatory/geopolitical development) are assessed for potential increase in credit risk and
significant exposures that have transitioned to Stage 2 from Stage 1 are assessed for potential indications
of unlikeness to pay.
The ECL for individually assessed Stage 3 assets is calculated on an individual basis and all relevant
considerations of the expected future cash flows are taken into account (for example, the business
prospects for the customer, the realisable value of collateral, the Group's position relative to other
claimants, the reliability of customer information and the likely cost and duration of the work out process).
Collectively assessed loans
All customer exposures that are not individually assessed are assessed on a collective basis. For the
purposes of calculating ECL, exposures are grouped into granular portfolios/segments with shared risk
characteristics. The granularity is based on different levels of segmentation which, among other factors
include customer type, exposure class and portfolio type. The granularity of the IFRS 9 segments is aligned
with the Internal Rating Based (IRB) segmentation of the CRR.
279
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.17 Impairment of financial assets (continued)
2.17.4 Measurement of ECLs (continued)
When a financial asset has been identified as credit-impaired, ECL are measured as the difference between
the asset's gross carrying amount and the present value of estimated future cash flows discounted at the
instrument's original effective interest rate.
2.17.5 Scenarios and scenario weights
The Group uses reasonable and supportable information, including forward-looking information, in the
calculation of ECL. ECL are the unbiased probability-weighted credit losses determined by evaluating a
range of possible outcomes and considering future economic conditions. ECL are calculated for three
macroeconomic scenarios, baseline, adverse and favourable and the output is the weighted average ECL
based on the assigned probability of each scenario (Note 44).
Macroeconomic scenarios impact both the probability of default (PD) and the loss given default (LGD).
Specifically, forward looking information is embedded in the PD based on regression equations derived on
the basis of historical data. Using statistical analysis, the most significant and relevant macro-variables have
been selected in order to predict more accurately the expected default rates. In regards to the LGD, the
forward looking information is incorporated via the property indices for the relevant categories of properties
(residential, commercial, industrial). In particular, for each collateral a forward-looking projection of the
realisable value is calculated before discounting back to reporting date to quantify the expected cash
shortfall.
Each macroeconomic scenario used in the ECL calculation includes a projection of all relevant
macroeconomic variables used in the models for a five-year period, subsequently reverting to projections of
long-run growth averages based on estimates of potential growth, and behavioural relationships between
the targeted variables.
Regarding the scenario weights, these are determined using probability theory and severity analysis.
Historical data for GDP growth (1995-2022) is analysed and a frequency distribution is produced. From that
distribution probabilities are derived for all possible outcomes. Deviations of actual outcomes from the mean
are calculated in terms of standard deviation ratios, and severity is higher at higher deviation ratios. The
baseline scenario is defined over the range of values that correspond to 50% probability of equidistant
deviations around the mean of the historical distribution. The favourable scenario is defined over the range
of values to the right of the distribution that correspond to 25% probability. The adverse scenario is defined
over the range of values to the left of the distribution that correspond to 25% probability. These benchmark
probability points (50%, 25% and 25%), are decided using severity analysis which incorporates the average
and standard deviation of the distribution.
The macroeconomic forecasts for the baseline, favourable and adverse scenarios are determined by the
Economic Research Department of Bank of Cyprus. This process utilises a variety of external actual and
forecast information (International Monetary Fund (IMF), European Commission and other). The
corresponding weights are also determined by the Economic Research Department as described above also
applying discretion and expert judgement where necessary. The resulting scenarios and weights are
reviewed and proposed by the CRO and are submitted to the Provisions Committee for their endorsement.
Qualitative adjustments or overlays are occasionally made when inputs calculated do not capture all the
characteristics of the market at the reporting date. Overlays performed are set out in Note 5.2 and are
assessed/reconfirmed at each reporting date.
2.17.6 ECL measurement period
The period for which expected credit losses are determined (either for 12-month or lifetime horizon) is
based on the stage classification of the facility and its contractual life. For non-revolving exposures the
expected lifetime is the period from the reporting date to the termination date of the facility. For irrevocable
loan commitments and financial guarantee contracts, the measurement period is determined similar to the
period of the revolving facilities.
280
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.17 Impairment of financial assets (continued)
2.17.6 ECL measurement period (continued)
For revolving facilities, credit cards and corporate and retail overdrafts, BOC PCL has the right to cancel
and/or reduce the facilities with two months' notice. BOC PCL does not limit its exposure to credit losses to
the contractual notice period, but instead a behavioural maturity model is utilised where each revolving
facility is assigned an expected time period to termination.
2.17.7 Purchased or originated credit impaired financial assets (POCI)
POCI financial assets are recorded at fair value on initial recognition. ECL are only recognised or released to
the extent that there is a subsequent change in the lifetime expected credit losses. For POCI financial
assets, the Group only recognises the cumulative changes in lifetime ECL since initial recognition in the loss
allowance. POCI remain a separate category until derecognition.
2.18 Write-offs
The Group reduces the gross carrying amount of a financial asset when there is no reasonable expectation
of recovering it. In such case, financial assets are written off either partially or in full. Write off refers to
both contractual and non-contractual write offs. A non-contractual write-off is defined as the accounting
reduction of a debt, without waiving the legal claim against the debtor. BOC PCL continues to seek recovery
of the debt (e.g. restructuring arrangements, debt for assets swaps, full settlement, etc.) and the amount
written off for financial assets that are still subject to enforcement activity.
Indicative conditions for writing off part or the full amount of the exposure include, but are not limited to,
the following list of criteria. The criteria are applicable to both contractual and non-contractual write offs
and are not by default applicable to all cases, as individual assessment and judgement is required in order
to evaluate each case on its own merits.
i. Cases which are close to realisation of a security or collateral may be deemed necessary to be
considered for write-off. With regards to such financial assets for which the security or collateral has
not yet been realised (but may be close to agreement or other arrangement for realising), BOC PCL
forms a reasonable expectation of future cash flows which would also take into account the
collateral's realisable value.
ii. When BOC PCL ceases all collection and debt enforcement actions, such remaining debt can be
assessed for write-off. However, debt can be written-off even while collection and enforcement
activities are proceeding.
iii. Debtor status is another indicator for assessment for write-off, for example, the debtor's insolvency
status, or whether the debtor is deceased or cannot be traced. While such loans may already be
impaired, BOC PCL might be unable to form a reasonable expectation of future cash flows.
Nevertheless, BOC PCL takes all the legally available steps to recover the debt, where appropriate.
iv. Customers with exposures with significant number of days past due, provided that all other efforts
for restructuring are exhausted and the exposure or part of the exposure is deemed as
unrecoverable / uncollectable, are also assessed for write-off.
Write-offs are subject to the Groups internal governance process for review and approval.
Write-offs and partial write-offs represent derecognition/partial derecognition events. If the amount of
write-off is greater than the amount of accumulated loss allowance, the difference is first treated as an
addition to the allowance that is then applied against the gross carrying amount. Recoveries in part or in
full, of amounts previously written-off are credited to the consolidated income statement in 'Credit losses on
financial assets' and separately identified in Note 16 w ithin 'Credit losses to cover credit risk on loans and
advances to customers'.
281
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.19 Financial guarantees, letters of credit and undrawn loan commitments
The Group issues financial guarantees to its customers, consisting of letters of guarantee and acceptances.
Financial guarantees are initially recognised at fair value being the premium received, and presented on the
consolidated balance sheet within 'Accruals, deferred income, other liabilities and other provisions'.
Subsequently, the Group's liability under each guarantee is measured at the higher of: (a) the amount
initially recognised reduced by the cumulative amortised premium which is periodically recognised in the
consolidated income statement in 'Fee and commission income' in accordance with the terms of the
guarantee, and (b) the amount of ECL provision.
ECL relating to financial guarantees is recorded in 'Credit losses on financial assets' and further identified in
Note 16 in 'Credit losses on financial assets' in 'Credit losses to cover credit risk on loans and advances to
customers'. The balance of the liability for financial guarantees that remains is recognised in 'Fee and
commission income' in the consolidated income statement when the guarantee is fulfilled, cancelled or
expired.
Undrawn loan commitments and letters of credit are commitments under which, over the duration of the
commitment the Group is required to provide a loan with pre-specified terms to the customer.
Corresponding ECL are presented within 'Accruals, deferred income, other liabilities and other provisions' on
the Group's balance sheet except in the case of loan commitments where ECL on the loan commitment is
recognised together with the loss allowance of the relevant on balance-sheet exposure as the Group cannot
separately identify the ECL on the loan commitment from those on the on-balance sheet exposure
component. ECL relating to loan commitments and letters of credit is recorded in 'Credit losses on financial
assets' and further identified in Note 16 in 'Credit losses on financial assets' in 'Credit losses to cover credit
risk on loans and advances to customers'.
When a customer draws on a commitment, the resulting loan is presented within (i) financial assets at fair
value held for trading, consistent with the associated derivative loan commitment, (ii) financial assets at fair
value not held for trading, following loan commitments designated at FVPL or (iii) loans and advances to
customers, when the associated loan commitment is not fair valued through profit or loss.
2.20 Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance
sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be enforceable in the normal course of
business and in the event of default, insolvency or bankruptcy of either party.
2.21 Hedge accounting
The Group elected, as a policy choice permitted by IFRS 9, to continue to apply hedge accounting in
accordance with IAS 39.
The Group uses derivative financial instruments to hedge exposures to interest rate and foreign exchange
risks and in the case of the hedge of net investments, the Group uses also non-derivative financial liabilities.
The Group applies hedge accounting for transactions which meet the specified criteria.
Transactions that are entered into in accordance with the Group's hedging objectives, but do not qualify for
hedge accounting, are referred to as economic hedge relationships.
At inception of the hedging relationship, the Group formally documents the relationship between the hedged
item and the hedging instrument, including the nature of the risk and the objective and strategy for
undertaking the hedge. The method that will be used to assess the effectiveness, both at the inception and
at ongoing basis, of the hedging relationship also forms part of the Group's documentation.
282
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.21 Hedge accounting (continued)
At inception of the hedging relationship and at each hedge effectiveness assessment date, a formal
assessment is undertaken to ensure that the hedging relationship is highly effective regarding the offsetting
of the changes in fair value or the cash flows attributable to the hedged risk. A hedge is regarded as highly
effective if the changes in fair value or cash flows attributable to the hedged risk of the hedging instrument
and the hedged item during the period for which the hedge is designated, are expected to offset in a range
of 80% to 125%. In the case of cash flow hedges where the hedged item is a forecast transaction, the
Group assesses whether the transaction is highly probable and presents an exposure to variations in cash
flows that could ultimately affect the consolidated income statement.
2.21.1 Fair value hedges
In the case of fair value hedges that meet the criteria for hedge accounting, the change in the fair value of a
hedging instrument is recognised in the consolidated income statement in 'Net gains/(losses) on financial
instruments'. The change in the fair value of the hedged item attributable to the risk hedged is recorded as
part of the carrying value of the hedged item and is also recognised in the consolidated income statement in
'Net gains/(losses) on financial instruments'.
If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets
the criteria for hedge accounting, the hedging relationship is discontinued prospectively. For hedged items
recorded at amortised cost, the difference between the carrying value of the hedged item on termination
and the face value is amortised to the consolidated income statement, over the remaining term of the
original hedge. If the hedged item is derecognised, the unamortised fair value adjustment is recognised
immediately in the consolidated income statement.
2.21.2 Cash flow hedges
In the case of cash flow hedges that meet the criteria for hedge accounting, the effective portion of the gain
or loss on the hedging instrument is recognised directly in other comprehensive income in the 'Cash flow
hedge reserve'. The ineffective portion of the gain or loss on the hedging instrument is recognised in 'Net
gains/(losses) on financial instruments' in the consolidated income statement.
When the hedged cash flows affect the consolidated income statement, the gain or loss previously
recognised in the 'Cash flow hedge reserve' is transferred to the consolidated income statement.
2.21.3 Hedges of net investments in foreign operations
Hedges of net investments in overseas branches or subsidiaries are accounted for in a way similar to cash
flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are
recognised in other comprehensive income in the 'Foreign currency translation reserve', while gains or
losses relating to the ineffective portion are recognised in 'Net foreign exchange gains' in the consolidated
income statement.
On disposal or liquidation of an overseas branch or subsidiary, the cumulative gains or losses recognised in
other comprehensive income are transferred in the consolidated income statement.
2.22 Cash and cash equivalents
Cash and cash equivalents for the purposes of the consolidated statement of cash flows consist of cash,
non-obligatory balances with central banks, loans and advances to banks and other securities that are
readily convertible into known amounts of cash and are repayable within three months of the date of their
acquisition.
2.23 Insurance business
The Group undertakes both life insurance and non-life insurance business and issues insurance and
investment contracts. An insurance contract is a contract under which one party (the insurer) accepts
significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder
if a specified uncertain future event (the insured event) adversely affects the policyholder.
283
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.23 Insurance business (continued)
Once a contract has been classified as an insurance contract, it remains an insurance contract until expiry or
until all the rights and obligations under the contract have been fulfilled, even if the insurance risk has been
significantly reduced during its term.
Investment contracts are those contracts that transfer financial risk. Investment contracts can, however, be
reclassified as insurance contracts after inception, if insurance risk becomes significant.
A summary of accounting policies, that apply following adoption of IFRS 17 on 1 January 2023, for
insurance and reinsurance contracts is presented in Note 2.2.1.
2.24 Repurchase and reverse repurchase agreements
Securities sold under agreements to repurchase (repos) at a specific future date are not derecognised from
the consolidated balance sheet as the Group retains substantially all risks and rewards of ownership. The
corresponding cash received, including accrued interest, is recognised on the consolidated balance sheet as
'Repurchase agreements', reflecting its economic substance as a loan to the Group. The difference between
the sale price and repurchase price is treated as interest expense and is accrued over the life of the
agreement using the effective interest rate method. The investments pledged as security for the repurchase
agreements can be sold or repledged by the counterparty. When the counterparty has the right to sell or
repledge the securities, the Group discloses those securities as 'Investments pledged as collateral'.
Securities purchased under agreements to resell (reverse repos) at a specific future date, are not
recognised on the consolidated balance sheet, rather are recorded as 'Reverse Repurchase agreements' on
the consolidated balance sheet. The difference between the purchase and the resale price is treated as
interest income and is accrued over the life of the agreement using the effective interest rate method.
Reverse repos outstanding at the reporting date relate to agreements with financial institutions. The
investments received as security under reverse repurchase agreements can either be sold or repledged by
the Group.
2.25 Leases
Group as a lessee
The Group recognises right of use assets (RoU assets) and lease liabilities for contracts that convey the
right to control the use of an identified asset for a period of time in exchange for consideration.
The Group has the right to direct the use of an identified asset throughout the period of use when it has the
right to direct how and for what purpose the asset is used and has the right to change the purpose,
throughout the period of use (i.e. the decision-making rights that most significantly affect the economic
benefits that can be derived from the use of the underlying asset). Essentially, this right permits the Group
to change its decisions throughout the contract term without approval from the lessor.
The lease liabilities are initially measured at the present value of the future lease payments, discounted at
the lessee's incremental borrowing rate (IBR) given that the interest rate implicit in the lease cannot be
readily determined. Subsequently, the lease liability is adjusted for interest and lease payments, as well as
the impact of lease modifications. Interest is computed by unwinding the present value of the lease liability
and charged to the consolidated income statement within 'Interest expense'.
RoU assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost of the RoU asset comprises the amount of the initial
measurement of the lease liability, initial direct costs and the provision for restoration costs, adjusted for
any related prepaid or accrued lease payments previously recognised. Depreciation is computed on a
straight line basis up to the end of the lease term, and recognised in the consolidated income statement
within 'Other operating expenses'. RoU assets are subject to impairment under IAS 36.
The Group elected to use the recognition exemption for lease contracts that, at the commencement date,
have a lease term of 12 months or less and do not contain a purchase option ('short-term leases'), and
lease contracts for which the underlying asset is of low value ('low value assets'). Payments associated with
short-term leases and leases of low value assets are recognised on a straight line basis as an expense in the
consolidated income statement.
284
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.25 Leases (continued)
Leases are monitored for significant changes that could trigger a change in the lease term and at the end of
each reporting period the impact on the lease liability and the RoU asset is reassessed. Lease liability is
remeasured if there is a change in future lease payments, a change in the lease term, or as appropriate, a
change in the assessment of whether an extension option is reasonably certain to be exercised or a
termination option is reasonably certain not to be exercised. When the lease liability is remeasured, a
corresponding adjustment is made to the RoU asset and/or profit or loss, as appropriate.
The lease term is calculated as the non-cancellable term of the lease, together with any periods covered by
an option to extend the lease (if reasonably certain to be exercised), or any periods covered by an option to
terminate the lease (if reasonably certain not to be exercised). The assessment of whether the Group is
reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of
lease liabilities and RoU assets recognised. Judgement is used in calculating the lease term, as further
disclosed in Note 5.13.
Lease payments generally include fixed payments and variable payments that depend on an index (such as
an inflation index).
Variable lease payments that are determined by reference to an index or a rate are taken into account in
the lease liability only when there is a change in the cash flows resulting from a change in the reference
index or rate. In cases where the lease contract includes a term relating to increase in the lease payment
based on variable lease payments, this increase is applied on the lease when it becomes effective (when the
actual cash outflow occurs). The assessment is performed at each reporting date. In cases where the lease
contract includes a term with fixed increments in the lease payments, the increase is accounted for in the
initial recognition of lease liability.
When a lease contains an extension or termination option that the Group considers reasonably certain to be
exercised, the expected lease payments or costs of termination are included within the lease payments in
determining the lease liability.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership
of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis
over the lease terms and is included in 'Other income' in the consolidated income statement due to its
operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to
the carrying amount of the leased asset and recognised over the lease term on the same basis as rental
income.
2.26 Property and equipment
Owner-occupied property is property held by the Group for use in the supply of services or for
administrative purposes. Investment property is property held by the Group to earn rentals and/or for
capital appreciation, as further disclosed in Note 2.27. I f a property of the Group includes a portion that is
owner-occupied and another portion that is held to earn rentals or for capital appreciation, the classification
is based on whether or not these portions can be sold separately. Otherwise, the whole property is classified
as owner-occupied property unless the owner-occupied portion is insignificant. The classification of property
is reviewed on a regular basis to account for major changes in its use.
Owner-occupied property is initially measured at cost and subsequently measured at fair value less
accumulated depreciation and impairment. Valuations are carried out periodically between 3 to 5 years,
(but more frequent revaluations may be performed where there are significant and volatile movement in
values), by independent, qualified valuers or by the internal qualified valuers of the Group applying a
valuation model recommended by internationally accepted valuation standards. Depreciation is calculated
on the revalued amount less the estimated residual value of each building on a straight line basis over its
estimated useful life. Gain from revaluations are recognised in other comprehensive income in 'Property
revaluation reserve', however to the extent it reverses an impairment previously recognised in the
consolidated income statement, the increase is recognised in the consolidated income statement. A
revaluation loss is recognised in the consolidated income statement, except to the extent it offsets an
existing revaluation reserve surplus.
Useful life is in the range of 30 to 67 years. Freehold land is not depreciated. On disposal of freehold land
and buildings, the relevant revaluation reserve balance is transferred to 'Retained earnings'.
285
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.26 Property and equipment (continued)
The cost of adapting/improving leasehold property is amortised over 5 years.
Equipment is measured at cost less accumulated depreciation. Depreciation of equipment is calculated on a
straight line basis over its estimated useful life of 5 to 10 years.
RoU assets recognised as property are measured at cost less accumulated depreciation and adjusted for
certain re-measurements of lease liabilities. Depreciation of the recognised RoU assets is calculated on a
straight line basis over the lease term, as further disclosed in Note 2.25.
At the reporting date, when events or changes in circumstances indicate that the carrying value may not be
recovered, property and equipment is assessed for impairment. Where the recoverable amount is less than
the carrying amount, property and equipment is written down to its recoverable amount.
2.27 Investment properties
Investment properties comprise land and buildings that are not occupied for use by, or in the operations of
the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income
and/or for capital appreciation. Additionally, leased properties which are acquired in exchange for debt and
are leased out under operating leases are also usually classified as 'Investment properties'.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial
recognition, investment properties are measured at fair value as at the reporting date. Gains or losses
arising from changes in the fair values of investment properties are included in 'Net gains/(losses) from
revaluation and disposal of investment properties' in the consolidated income statement. Valuations are
carried out by independent, qualified valuers or by the Group's internal qualified valuers.
Transfers are made to (or from) investment property only when there is a change in use. For a transfer
from owner-occupied property to investment property, the Group accounts for such property in accordance
with the policy described in Note 2.26 'Property and equipment' up to the date of change in use. For a
transfer from investment property to stock of property, the property's deemed cost for subsequent
accounting is its fair value at the date of change in use.
2.28 Stock of property
The Group in its normal course of business acquires properties in exchange of debt, which are held either
directly by BOC PCL or by entities set up and controlled by the Group for the sole purpose of managing
these properties with an intention to be disposed of. These properties are recognised in the Consolidated
Financial Statements as 'Stock of property', reflecting the substance of these transactions.
Stock of property is initially measured at cost and subsequently measured at the lower of cost and net
realisable value. Net realisable value is the estimated selling price, less the estimated costs necessary to
make the sale.
If net realisable value is below the cost of the stock of property, impairment is recognised in 'Impairment
net of reversals on non-financial assets' in the consolidated income statement.
286
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.29 Intangible assets
Intangible assets comprise computer software (including internally developed software). Intangible assets
acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value as at the date of acquisition. The Group recognises an intangible
asset that arises from development or the development phase of an internal project if, and only if, it can
demonstrate all of the following:
i. The technical feasibility of completing the intangible asset so that it will be available for use or sale;
ii. Its intention to complete the intangible asset and use or sell it;
iii. Its ability to use or sell the intangible asset;
iv. How the intangible asset will generate probable future economic benefits;
v. The availability of adequate technical, financial and other resources to complete the development and
to use or sell the intangible asset; and
vi. Its ability to reliably measure the expenditure attributable to the intangible asset during its
development.
The expenditure arising on research or the research phase of an internal project are expensed as incurred.
Research expenditure cannot be subsequently capitalised.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any
accumulated impairment losses.
Amortisation is calculated on a straight line basis over the estimated useful life of the assets which is 3 to 8
years for computer software, including computer software development costs.
Intangible assets are reviewed for impairment when events relating to changes in circumstances indicate
that the carrying value may not be recoverable. If the carrying amount exceeds the recoverable amount
then the intangible assets are written down to their recoverable amount.
2.30 Share capital
Ordinary shares are classified as equity.
Any difference between the issue price of share capital and the nominal value is recognised as share
premium. The costs incurred attributable to the issue of share capital are deducted from equity.
287
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.31 Share-based compensation plans
The Group recognises expenses for deferred compensation awards over the period that the employee is
required to provide service to become entitled to the award. Whereby employees render services in
exchange for equity instruments these arrangements are classified as equity-settled transactions.
Share-based compensation benefits are provided to employees (senior management of the Group) via the
Long Term Incentive Plan, an employee share arrangement which satisfies an incentive based award
through the issue of shares (equity settled).
Share-based compensation expense is measured by reference to the fair value of the equity instruments on
the date of grant, with a corresponding increase in equity (other capital reserves), taking into account the
terms and conditions inherent in the award, including, where relevant, dividend rights, transfer restrictions
in effect beyond the vesting date, market conditions, and non-vesting conditions. For equity-settled awards,
fair value is not remeasured unless the terms of the award are modified such that there is an incremental
increase in value.
The total expense is recognised on a per-tranche basis, over the service period based on an estimate of the
number of shares expected to vest and are adjusted to reflect the actual outcomes of service or
performance conditions. At the end of each reporting period, the Group revises its estimates of the number
of shares that are expected to vest and recognises the impact of the revision to original estimates, if any, in
the consolidated income statement, with a corresponding adjustment to equity (other capital reserves). The
cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and the Group's best estimate of the number of
shares that will ultimately vest. The expense or credit in the consolidated income statement for a period
represents the movement in cumulative expense recognised as at the beginning and end of that period. No
expense is recognised for awards that do not ultimately vest because non-market performance and/or
service conditions have not been met.
The vesting period for these schemes may commence before the legal grant date if the employees have
started to render services in respect of the award before the legal grant date, where there is a shared
understanding of the terms and conditions of the arrangement. Expenses are recognised when the
employee starts to render service to which the award relates.
2.32 Other equity instruments
An instrument is an equity instrument if the instrument includes no contractual obligation to deliver cash or
another financial asset to another entity, or to exchange financial assets or financial liabilities with another
entity under conditions that are potentially unfavourable to the issuer.
Other equity instruments are recorded at their residual amount and are not subject to any re-measurement
after initial recognition. The cost incurred attributable to the issue of other equity instruments is deducted
from retained earnings. Any subsequent write-down or write-up results to a credit or debit in retained
earnings respectively. Coupon payments are recorded directly in retained earnings.
2.33 Treasury shares
Own equity instruments which are acquired by the Company or by any of its subsidiaries are presented as
treasury shares at their acquisition cost. Treasury shares are deducted from equity until they are cancelled
or reissued. No gain or loss is recognised in the consolidated income statement on the purchase, sale, issue
or cancellation of the Company's own equity shares.
2.34 Dividends on ordinary shares
Dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved
by the Company's shareholders. Interim dividends are deducted from equity when they are declared and
are no longer at the discretion of the Company. Dividends for the year that are approved after the reporting
date, are disclosed as an event after the reporting date.
288
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.35 Provisions for pending litigations, claims, regulatory and other matters
Provisions for pending litigations, claims, regulatory and other matters against the Group are made when:
(a) there is a present obligation (legal or constructive) arising from past events, (b) the settlement of the
obligation is expected to result in an outflow of resources embodying economic benefits, and (c) a reliable
estimate of the amount of the obligation can be made.
2.36 Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is
measured as the aggregate of the consideration transferred, measured at the acquisition date fair value and
the amount of any non-controlling interests in the acquiree. For each business combination the Group elects
whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share
of the acquiree's identifiable net assets. Any excess of the cost of acquisition over the Group's share of the
fair values of the identifiable net assets acquired is recognised as goodwill on the consolidated balance
sheet. Where the Group's share of the fair values of the identifiable net assets is greater than the cost of
acquisition (i.e. negative goodwill), the difference is recognised directly in the consolidated income
statement in the year of acquisition. Acquisition related costs are expensed as incurred and included in
other operating expenses.
If the business combination is achieved in stages, the previously held equity interest is remeasured at fair
value and any resulting gain or loss is recognised in the consolidated income statement.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with contractual terms, economic circumstances and pertinent
conditions as at the acquisition date.
2.37 Investments in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control or joint control
over those policy decisions.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary
to determine control over subsidiaries.
In the Consolidated Financial Statements, the Group's investments in associates and joint ventures are
accounted for using the equity method of accounting.
Under the equity method, the investment in an associate or a joint venture is carried in the consolidated
balance sheet at cost plus post-acquisition changes in the Group's share of the net assets of the associate
or joint venture. The Group's share of the results of the associate or joint venture is included in the
consolidated income statement. Losses of the associate or joint venture in excess of the Group's cost of the
investment are recognised as a liability only when the Group has incurred obligations on behalf of the
associate or joint venture. Investments in associates and joint ventures are assessed at each reporting date
for impairment when there is an indication that the investment may be impaired. Goodwill relating to an
associate or joint venture is included in the carrying amount of the investment and is not tested for
impairment separately.
Any excess of the Group's share of the net fair value of the associate's or joint venture's identifiable assets
over the cost of the investment (i.e. negative goodwill) is included as income in the determination of the
Group's share of the associate's or joint venture's profit or loss in the period in which the investment is
acquired. The aggregate of the Group's share of profit or loss of an associate or a joint venture is included
in 'Other income' in the Consolidated Income Statement and represents profit or loss before tax. The
associated tax charge is disclosed in income tax.
289
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
2. Summary of accounting policies (continued)
2.37 Investments in associates and joint ventures (continued)
The Group recognises its share of any changes in the equity of the associate or the joint venture through
the consolidated statement of changes in equity. Gains and losses resulting from transactions between the
Group and the associate or the joint venture are eliminated to the extent of the Group's interest in the
associate or the joint venture.
The financial statements of the associates or joint ventures are prepared as of the same reporting date as
that of the Company, using consistent accounting policies.
3. Going concern
The Directors have made an assessment of the ability of the Group, the Company and BOC PCL to continue
as a going concern for a period of 12 months from the date of approval of these Consolidated Financial
Statements.
The Directors have concluded that there are no material uncertainties which would cast a significant doubt
over the ability of the Group, the Company and BOC PCL to continue to operate as a going concern for a
period of 12 months from the date of approval of the Consolidated Financial Statements and the Financial
Statements of the Company.
In making this assessment, the Directors have considered a wide range of information relating to present
and future conditions, including projections of profitability, cash flows, capital requirements and capital
resources, liquidity and funding position, taking also into consideration, the Group's Financial Plan approved
by the Board in February 2024 (the 'Plan') and the operating environment. The Group has sensitised its
projection to cater for a downside scenario and has used reasonable economic inputs to develop its
medium-term strategy. The Group is working towards materialising its Strategy.
Capital
The Directors and Management have considered the Group's forecasted capital position, including the
potential impact of a deterioration in economic conditions. The Group has developed capital projections
under a base and an adverse scenario and the Directors believe that the Group has sufficient capital to meet
its regulatory capital requirements throughout the period of assessment.
Funding and liquidity
The Directors and Management have considered the Group's funding and liquidity position and are satisfied
that the Group has sufficient funding and liquidity throughout the period of assessment. The Group
continues to hold a significant liquidity buffer at 31 December 2023 that can be easily and readily monetised
in a period of stress.
4. Economic and geopolitical environment
Cyprus is a small, open, services-based economy, with a large external sector and high reliance on tourism
and international business services. As a result, external factors which are beyond the control of the Group,
including developments in the European Union and in the global economy, or in specific countries with which
Cyprus maintains close economic and investment links, can have a significant impact on domestic economic
activity. A number of macro and market related risks, including weaker economic activity, a higher interest
rate environment for longer, and higher competition in the financial services industry, could negatively
affect the Group's business environment, results, and operations.
The Group is closely monitoring the geopolitical situation developing. War and geopolitics can be very
disruptive to the economy and society and the extent to which the international system is intertwined, is
often underestimated. Meantime wars continue to rage in Ukraine and in the Middle East, adding to
uncertainty and instability. The attacks on merchant shipping in the Red Sea from the Houthis in Yemen, is
a reflection of the uncertainty. The attacks are forcing many carriers to change route adding days and costs
to shipping which eventually will add to inflationary pressures, with implications for monetary policy.
In Cyprus, the financial sector exposure to foreign markets has been reduced since the 2013 banking crisis.
Although, there have been distinct improvements in Cyprus' risk profile after the banking crisis, substantial
risks remain. Cyprus' overall country risk is a combination of sovereign, currency, banking, political and
economic structure risk, influenced by external developments with substantial potential impact on the
domestic economy. Given the above, the Group recognises that unforeseen political events can have
negative effects on the Group's activities, operating results, and market position.
290
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
4. Economic and geopolitical environment (continued)
Interest rates in the US and the eurozone peaked in the third quarter as headline inflation continues to
decline while core inflation proves stickier. Amidst a high interest rate environment, financial stability risks
will remain elevated.
Cyprus demonstrates relative strength and resilience in this environment with a growth outlook that
outweighs average growth in EU and with inflation dropping at a faster pace in comparison. Economic
momentum is expected to continue in 2024 driven by an easing in monetary policy in the second half of the
year, and positive momentum in growth sectors mainly in information and communications, financial
services, and international business services.
Cyprus' risk profile has improved significantly, but substantial risks remain in the domestic environment and
in the external environment on which it depends. The most important factor weighing on Cyprus' sovereign
risk is the high level of public debt. Banks have weathered the pandemic crisis well, with their liquidity and
capital buffers intact. Non-performing loans continued their downward trend, mainly due to the sale
packages of the two largest banks. However, in an uncertain environment, asset quality remains a focus for
bank management and supervisors.
The Group believes it is reasonably well positioned to withstand volatility that may arise from a
deterioration in the geopolitical and global economic environment.
Group's Direct exposure to Russia
Overall, the Group's direct exposure to Russia and Belarus remains limited. In summary, the Group has
direct lending exposure to Russia and Belarus of a gross book value of approximately €96 million (2022:
approximately €86 million) across its business divisions as at 31 December 2023, of which €89 million
(2022: €76 million) are classified as performing and secured mainly with residential collateral located in
Cyprus. The basis of the exposure is expanded compared to the country risk exposure as included in Note
44.2 o f the Consolidated Financial Statements which is disclosed by reference to the country of
residency/country of registration, to also include exposures for loans and advances to customers with
passport of origin in these countries and/or business activities within these countries and/or where the UBO
has passport of origin or residency in these countries.
Customer deposit balances of customers with country of residence of the UBO in these countries amounts to
approximately 1% of total deposits as at 31 December 2023 as disclosed in Note 30 o f the Consolidated
Financial Statements.
With respect to the Group's Russian subsidiary, the net exposure is being run down and as a result the net
assets included on the Group's balance sheet as at 31 December 2023 are less than €1 million (2022: less
than €1 million).
5. Significant and other judgements, estimates and assumptions
The preparation of the Consolidated Financial Statements requires the Company's Board of Directors and
management to make judgements, estimates and assumptions that can have a material impact on the
amounts recognised in the Consolidated Financial Statements and the accompanying disclosures, as well as
the disclosures of contingent liabilities. Uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of assets or liabilities affecting future
periods.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities are described below. The Group based its assumptions and estimates on parameters available
when the Consolidated Financial Statements were prepared. Existing circumstances and assumptions about
future developments may, however, change due to market changes or circumstances beyond the control of
the Group. Such changes are reflected in the assumptions when they occur.
The most significant judgements, estimates and assumptions relate to the classification of financial
instruments and the calculation of expected credit losses (ECL), the estimation of the net realisable value of
stock of property and the provisions for pending litigations, claims, regulatory and other matters, which are
presented in Notes 5.1 to 5.4 below. O ther judgements, estimates and assumptions are disclosed further
below in Notes 5.5 to 5.13.
291
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.1 Classification of financial assets
The Group exercises judgement upon determining the classification of its financial assets, in relation to
business models and future cash flows.
Judgement is also required to determine the appropriate level at which the assessment of business models
needs to be performed. In general, the assessment for the classification of financial assets into the business
models is performed at the level of each business line. Further, the Group exercises judgement in
determining the effect of sales of financial instruments on its business model assessment.
The Group also applies judgement upon considering whether contractual features including interest rate
could significantly affect future cash flows. Furthermore, judgement is required when assessing whether
compensation paid or received on early termination of lending arrangements results in cash flows that are
not SPPI.
5.2 Calculation of expected credit losses
The calculation of ECL requires management to apply significant judgement and make estimates and
assumptions, involving significant uncertainty at the time these are made. Changes to these estimates and
assumptions can result in significant changes to the timing and amount of ECL to be recognised. The
Group's calculations are outputs of models, of underlying assumptions on the choice of variable inputs and
their interdependencies.
It has been the Group's policy to regularly review its models in the context of actual loss experience and
adjust when necessary.
Elements of ECL models that are considered accounting judgements and estimates include:
Assessment of significant increase in credit risk (SICR)
IFRS 9 does not include a definition of significant increase in credit risk. The Group assesses whether
significant increase in credit risk has occurred since initial recognition using predominantly quantitative and
in certain cases qualitative information. The determination of the relevant thresholds to determine whether
a significant increase in credit risk has occurred, is based on statistical metrics and could be subject to
management judgement. The relevant thresholds are set, monitored and updated on a yearly basis by the
Risk Management Division and endorsed by the Group Provisions Committee.
Determining the probability of default (PD) at initial recognition requires management estimates in
particular cases. Specifically, in the case of exposures existing prior to the adoption of IFRS 9, a
retrospective calculation of the PD is made in order to quantify the risk of each exposure at the time of the
initial recognition. In certain cases, estimates about the date of initial recognition might be required.
For the retail portfolio, the Group uses a PD at origination incorporating behavioural information (score
cards) whereas, for the corporate portfolio, the Group uses the internal credit rating information. For
revolving facilities, management estimates are required with respect to the lifetime and hence a behavioural
maturity model is utilised, assigning an expected maturity based on product and customer behaviour.
Scenarios and macroeconomic factors
The Group determines the ECL, which is a probability weighted amount, by evaluating a range of possible
outcomes. Management uses forward looking scenarios and assesses the suitability of weights used. These
are based on management's assumptions taking into account macroeconomic, market and other factors.
Changes in these assumptions and in other external factors could significantly impact ECL. Macroeconomic
inputs and weights per scenario are monitored by the Economic Research Department and are based on
internal model analysis and expert judgement after, considering external market data and forecasts.
292
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.2 Calculation of expected credit losses (continued)
Following two years of robust growth in 2021 and 2022 with GDP growing respectively by 9.9% and 5.1%,
economic activity averaged 2.5% in 2023, amid continued global economic uncertainty and rising interest
rates. The economy is expected to pick up again in 2024-2025 growing by an annual average of 2.8%
according to the European Commission's Winter European Forecasts. Inflation measured by the Harmonised
Index of Consumer Prices decreased to an average of 3.9% and is expected to continue to decelerate to
around 3.0% in 2024 after a peak of 8.1% in 2022. A sustained drop in energy prices and tighter monetary
conditions underpin the disinflation that is being observed. In the labour market the unemployment rate
decreased to 6.1% in December 2023, seasonally adjusted and expected to remain at 6.1% in 2024. The
government balance is expected to turn to a surplus of 2.3% of GDP in 2023 and 2.1% in 2024. Gross
Public debt will thus drop to 71.5% of GDP in 2024 and to 66% in 2025.
The credit profile of Cyprus has improved significantly in the more recent period, reflecting solid medium-
term growth outlook, good institutional strength and effective policy making. There have been significant
improvements in the banking sector and in public finances. Cyprus is a small open economy and therefore
more vulnerable to exogenous shocks, but features relatively high levels of wealth, an agile private sector,
and an outward orientation. The sovereign risk ratings of the Cypriot government have improved
significantly in recent years, now above investment grade by one notch by the three major rating agencies.
Cyprus received €157 million from the recovery and resilience facility in pre-financing in September 2021
following the approval of the national recovery plan the previous July. This was pre-financing for 13% of
total disbursements over the period 2021-2026. Cyprus received its first disbursement of €85 million in
December 2022 following the passage of conditional legislation in parliament, and after approval from the
European Commission. The release of the funds is conditional on the strict implementation of reforms
agreed in the national recovery plan. Funds will be used to increase investment in the digital and green
transition, to increase the efficiency of public and local administrations, and to improve the efficiency of the
judicial system among others.
Banks managed to weather the pandemic crisis well, with their liquidity and capital buffers intact. Non-
performing exposures continued their declining trend, mostly due to sales packages by the two largest
banks. Total NPEs at the end of November 2023 were €2.0 billion or 8.3% of gross loans. About 44.8% of
total non-performing exposures are restructured facilities and the coverage ratio was 56.7%. Private debt,
as measured by loans to residents on bank balance sheets, excluding the government, dropped to €20.3
billion at the end of December 2023, or about 68% of GDP.
However, substantial risks remain in terms of the domestic operating environment, as well as the external
environment on which it depends. The large stock of public debt weighs heavily on Cyprus' sovereign credit
risk. In the banking sector non-performing exposures need to drop further. While the current account deficit
will be narrowing as exports services recover in the medium term, it will remain sizable. The monetary
policy of the European Central Bank can remain tight for longer if inflation pressures persist. The extent of
crises in Ukraine and the Middle East can lead to elevated tensions for a considerable period of time.
For the ECL, the Group updated its forward-looking scenarios, factoring in updated macroeconomic
assumptions and other monetary and fiscal developments at the national and the EU level based on
developments and events as at the reporting date.
293
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.2 Calculation of expected credit losses (continued)
For the ECL calculations, the Group uses an unbiased and probability-weighted amount that is determined
by evaluating a range of possible outcomes, as described in Note 2.17.5. T he approach employed, involves
scenario generation, where the scenarios applied by the Group are anchored to the baseline scenario. All
scenarios are updated on a quarterly basis for the purposes of the ECL calculation in tandem with the
baseline. The updated macroeconomic inputs (incorporating any uncertainties and downside risks) are
therefore reflected in the scenario parameters, starting from the baseline and updated in turn for the
adverse and the favourable scenarios accordingly. If the baseline becomes more pessimistic, then both the
favourable and downside scenarios would move accordingly, reflecting the fact that the economic variables
used in the scenarios are not constant but are conditional on the economy's position in the business cycle. A
dynamic scenario approach is followed as explained above where the scenario parameters derived reflect
the Group's view of the economic conditions. The approach employed involves scenario generation for a
defined probability weighting. The probability weights attached to the scenarios are a function of their
relative position on the distribution, with a lower probability weight attached to the scenarios that were
assessed to be more distant from the center of the distribution. The baseline scenario is defined over the
range of values corresponding to 50% probability of equidistant deviations around the mean of the
historical distribution. The favourable and adverse scenarios are defined over the range of values to the
right and left of the distribution respectively, each corresponding to 25% probability.
The uncertainties and the macro-conditions are indicated in the tables below, where the most significant
macroeconomic variables for each of the scenarios used by the Group as at 3 1 December 2023 and 2022
are presented. The Group uses three different economic scenarios in the calculation of default probabilities
and provisions. The scenarios factor-in updated macroeconomic assumptions and other monetary and fiscal
developments based on events as at the reporting date. The Group has used the 30-50-20 probability
structure for the adverse, baseline and favourable scenarios respectively compared to the 25-50-25
structure derived using the method described in Note 2.17.5 and above. This reflects management's view of
specific characteristics of the Cyprus economy that render it more vulnerable to external and internal
shocks.
31 December 2023

Year | Scenario | Weight % |  |  |  |
|  |  | Real GDP (% |  |  |
|  |  | change) |  |  |
|  |  |  | Unemployment |  |
|  |  |  | rate (% of |  |
|  |  |  | labour force) |  |
|  |  |  |  | Consumer |
|  |  |  |  | Price Index |
|  |  |  |  | (average % |
|  |  |  |  | change) |
|  |  |  |  |  | RICS House
|  |  |  |  |  | Price Index
|  |  |  |  |  | (average %
|  |  |  |  |  | change)
2024 | Adverse | 30.0 | -1.6 | 6.3 | 0.9 | -3.1
| Baseline | 50.0 | 2.7 | 5.8 | 2.5 | 3.0
| Favourable | 20.0 | 3.5 | 5.6 | 3.1 | 3.7
2025 | Adverse | 30.0 | -0.7 | 6.9 | 1.2 | 0.6
| Baseline | 50.0 | 2.6 | 5.4 | 2.5 | 2.3
| Favourable | 20.0 | 3.1 | 5.2 | 2.6 | 2.5
2026 | Adverse | 30.0 | 2.2 | 7.0 | 1.2 | 1.9
| Baseline | 50.0 | 2.6 | 5.1 | 2.1 | 2.2
| Favourable | 20.0 | 2.7 | 4.9 | 2.0 | 2.3
2027 | Adverse | 30.0 | 3.6 | 6.7 | 2.3 | 2.4
| Baseline | 50.0 | 2.4 | 4.9 | 2.3 | 2.2
| Favourable | 20.0 | 2.6 | 4.6 | 2.2 | 2.3
2028 | Adverse | 30.0 | 3.5 | 6.4 | 2.2 | 2.4
| Baseline | 50.0 | 2.3 | 4.6 | 2.2 | 2.3
| Favourable | 20.0 | 2.5 | 4.2 | 2.3 | 2.4

294
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.2 Calculation of expected credit losses (continued)
31 December 2022

Year | Scenario | Weight % |  |  |  |
|  |  | Real GDP (% |  |  |
|  |  | change) |  |  |
|  |  |  | Unemployment |  |
|  |  |  | rate (% of |  |
|  |  |  | labour force) |  |
|  |  |  |  | Consumer |
|  |  |  |  | Price Index |
|  |  |  |  | (average % |
|  |  |  |  | change) |
|  |  |  |  |  | RICS House
|  |  |  |  |  | Price Index
|  |  |  |  |  | (average %
|  |  |  |  |  | change)
2023 | Adverse | 30.0 | -2.0 | 7.0 | 3.7 | -2.2
| Baseline | 50.0 | 2.8 | 6.3 | 4.7 | 2.8
| Favourable | 20.0 | 3.6 | 5.9 | 5.1 | 3.3
2024 | Adverse | 30.0 | -0.7 | 6.8 | 3.0 | -0.8
| Baseline | 50.0 | 2.4 | 6.0 | 3.2 | 2.5
| Favourable | 20.0 | 2.8 | 5.8 | 3.3 | 2.8
2025 | Adverse | 30.0 | 1.4 | 6.7 | 2.4 | 1.1
| Baseline | 50.0 | 2.5 | 5.7 | 2.3 | 2.5
| Favourable | 20.0 | 2.6 | 5.6 | 2.4 | 2.6
2026 | Adverse | 30.0 | 2.8 | 6.7 | 2.4 | 2.7
| Baseline | 50.0 | 2.8 | 5.5 | 2.4 | 2.5
| Favourable | 20.0 | 3.1 | 5.3 | 2.4 | 2.6
2027 | Adverse | 30.0 | 3.5 | 6.5 | 2.5 | 3.5
| Baseline | 50.0 | 2.6 | 5.2 | 2.5 | 2.5
| Favourable | 20.0 | 2.6 | 4.9 | 2.4 | 2.6

The adverse scenarios may outpace the base and favourable scenarios after the initial shock has been
adjusted to and the economy starts to expand from a lower base. Thus, in the adverse scenario GDP will
follow a growth trajectory that will ultimately equal and surpass the baseline before converging. Property
prices are determined by multiple factors with GDP growth featuring prominently. However, the relationship
between GDP growth and property prices entails a lag.
The baseline scenario was updated for the 31 December 2023 reporting, considering available information
and relevant developments until then, and is described next. Economic activity started to slow in 2023,
following strong recoveries in 2021-2022. Tourism continued to recover in 2023 with arrivals reaching levels
near their pre-covid levels in 2019, while revenues exceeded those pre-covid. Private consumption
remained strong despite aggressive monetary tightening by the ECB. R eal GDP increased by 2.5% on
average in 2023. Under the baseline scenario the economy is expected to advance by 2.7% in 2024.
Consumer price inflation averaged 8.1% in 2022 and decelerated to 3.8% in 2023. The unemployment rate
will continue to drop steadily in the medium term. Property prices continued to rise modestly in 2023 as
domestic demand remained relatively strong.
The adverse scenario is consistent with assumptions for a global economic slowdown driven by the wars in
Ukraine and Middle East, elevated inflation and continued tight monetary conditions. The Cypriot economy
relies on services, particularly on tourism, international business, and information and communication
services with an outward orientation. This makes the Cypriot economy more exposed than other economies
to the international environment and terms of trade shocks. Weaker external demand and more restricted
domestic demand as a result of higher interest rates will lead to a slowdown of economic activity. The
adverse scenario assumes a deeper impact of these conditions on the real economy than under the baseline
scenario. Under the adverse scenario, real GDP is expected to contract by 1.6% in 2024 as a whole and by
0.7% in 2025. In the labour market the unemployment rate will rise only modestly, and inflation will be
lower than under the baseline scenario. House prices will also slow in line with the contraction in real GDP.
The Group uses actual values for the input variables. These values are sourced from the Cyprus Statistical
Service, the Eurostat, the Central Bank of Cyprus for the residential property price index, and the European
Central Bank for interest rates. Interest rates are also sourced from the Eurostat. In the case of property
prices, the Group additionally uses data from the Royal Institute of Chartered Surveyors. For the forward
reference period, the Group uses the forecast values for the same variables, as prepared by the BOC PCL's
Economic Research Department. The results of the internal forecast exercises are consistent with publicly
available forecasts from official sources including the European Commission, the International Monetary
Fund, the European Central Bank and the Ministry of Finance of the Republic of Cyprus.
295
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.2 Calculation of expected credit losses (continued)
Qualitative adjustments or overlays are occasionally made when inputs calculated do not capture all the
characteristics of the market. These are reviewed and adjusted, if considered necessary, by the Risk
Management Division, endorsed by the Group Provisions Committee and approved by the joint Risk and
Audit Committee. Qualitative adjustments or overlays are described in the below sections as applicable.
For Stage 3 customers, the calculation of individually assessed provisions is the weighted average of three
scenarios: base, adverse and favourable. The base scenario focuses on the following variables, which are
based on the specific facts and circumstances of each customer: the operational cash flows, the timing of
recovery of collaterals and the haircuts from the realisation of collateral. The base scenario is used to derive
additional either more favourable or more adverse scenarios. Under the adverse scenario, operational cash
flows are decreased by 50%, applied haircuts on real estate collateral are increased by 50% and the timing
of recovery of collaterals is increased by 1 year with reference to the baseline scenario, whereas under the
favourable scenario applied haircuts are decreased by 5%, with no change in the recovery period with
reference to the baseline scenario. Assumptions used in estimating expected future cash flows (including
cash flows that may result from the realisation of collateral) reflect current and expected future economic
conditions and are generally consistent with those used in the Stage 3 collectively assessed exposures.
For collectively assessed customers the calculation is also the weighted average of three scenarios: base,
adverse and favourable.
Assessment of loss given default (LGD)
A factor for the estimation of loss given default (LGD) is the timing and net recoverable amount from
repossession or realisation of collaterals which mainly comprise real estate assets.
Assumptions have been made about the future changes in property values, as well as the timing for the
realisation of collateral, taxes and expenses on the repossession and subsequent sale of the collateral as
well as any other applicable haircuts. Indexation has been used as the basis to estimate updated market
values of properties, supplemented by management judgement where necessary, given the difficulty in
differentiating between short-term impacts and long-term structural changes and the shortage of market
evidence for comparison purposes. Assumptions were made on the basis of a macroeconomic scenario for
future changes in property prices and qualitative adjustments or overlays were applied to the projected
future property value increases to restrict the level of future property price growth to 0% for all scenarios
for loans and advances to customers which are secured by property collaterals.
At 31 December 2023, the weighted average haircut (including liquidity haircut and selling expenses) used
in the collectively assessed provisions calculation for loans and advances to customers is approximately
32.5% under the baseline scenario (2022: approximately 32%).
The timing of recovery from real estate collaterals used in the collectively assessed provisions calculation for
loans and advances to customers has been estimated to be on average seven years under the baseline
scenario (2022: average of seven years).
For the calculation of individually assessed provisions, the timing of recovery of collaterals as well as the
haircuts used are based on the specific facts and circumstances of each case. For specific cases judgement
may also be exercised over staging during the individual assessment.
The above assumptions are also influenced by the ongoing regulatory dialogue the Group maintains with its
lead regulator, the ECB, and other regulatory guidance and interpretations issued by various regulatory and
industry bodies such as the ECB and the EBA, which provide guidance and expectations as to relevant
definitions and the treatment/classification of certain parameters/assumptions used in the estimation of
provisions.
Any changes in these assumptions or variances between assumptions made and actual results could result
in significant changes in the estimated amount of expected credit losses of loans and advances to
customers.
Expected lifetime of revolving facilities
The expected lifetime of revolving facilities is based on a behavioural maturity model for revolving facilities
based on BOC PCL's available historical data, where an expected maturity for each revolving facility based
on the customer's profile is assigned. The behavioural model was updated in the third quarter of 2023 to
reflect updates in customers' profile whilst maintaining the same model components.
296
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.2 Calculation of expected credit losses (continued)
Modelling adjustments
Forward looking models have been developed for ECL parameters (PD, EAD, LGD) for all portfolios and
segments sharing similar characteristics. Model validation (initial and periodic) is performed by the
independent validation unit within the Risk Management Division and involves assessment of a model under
both quantitative (i.e. stability and performance) and qualitative terms. The frequency and level of rigour of
model validation is commensurate to the overall use, complexity and materiality of the models, (i.e. risk
tiering). In certain cases, judgement is exercised in the form of management overlay by applying
adjustments on the modelled parameters. Governance of these models lies with the Risk Management
Division, where a strong governance process is in place around the determination of the impairment
measurement methodology including inputs, assumptions and overlays. Any management overlays are
prepared by the Risk Management Division, endorsed by the Group Provisions Committee and approved by
the joint Risk and Audit Committee.
ECL allowances also include allowances on off-balance sheet credit exposures represented by guarantees
given and by irrevocable commitments to disburse funds. Off-balance sheet credit exposures of the
individually assessed assets require assumptions on the probability, timing and amount of cash outflows.
For the collectively assessed off-balance sheet credit exposures, the allowance for provisions is calculated
using the Credit Conversion Factor (CCF) model.
Overlays in the context of current economic conditions
The two overlays introduced in 2022 in response to uncertainties from the consequences of the Ukrainian
crisis, in the collectively assessed population for exposures that were considered to be the most vulnerable
to the implications of the crisis, continued to be in effect during the year ended 31 December 2023. These
were introduced to address the increased uncertainties from the geopolitical instability, trade restrictions,
disruptions in the global supply chains, increases in the energy prices and their potential negative impact on
the domestic cost of living. The impact on the ECL from the application of these overlays was approximately
€3.4 million ECL release for the year ended 31 December 2023 (following an update of the assessment of
the sectors classified as High Risk and/or Early Warning) and a net transfer of €19 million loans from Stage
1 to Stage 2 as at 31 December 2023.
Specifically, the first overlay relates to private individuals that are expected to be affected by the increased
cost of living in order to reflect the future vulnerabilities to inflation, where a scenario with higher
percentage increase is applied for the cost of living. A one-notch downgrade is applied to the identified
portfolio, reflecting the expected impact of inflation to their credit quality. The second overlay relates to
sectors that have been classified as High Risk or Early Warning to reflect the expected Gross Value Added
(GVA) outlook of these sectors, where this has deteriorated. Specifically, the sector risk classification is
carried out by comparing the projected GVA outlook of each sector with its past performance (intrinsic) and
its performance vis-a-vis other sectors (systemic). In cases where both systemic and intrinsic indicators are
found to have deteriorated, the relevant sector is classified as High Risk, whereas if only one of the two has
deteriorated, then the sector is classified as Early Warning. A one-notch downgrade is applied to Early
Warning sectors whereas for High Risk sectors a more severe downgrade is applied accordingly.
In addition, the overlay on the probability of default (PD), introduced in the fourth quarter of 2022 to
address specifically the high inflation environment affecting the economy, continued to be in effect during
the year ended 31 December 2023. With this overlay the PDs were floored to the maximum of 2018/2019
level, on the basis that these years are considered as closer to a business-as-usual environment in terms of
default rates. The impact on the ECL from the application of this overlay was €7.2 million charge for the
year ended 31 December 2023, as a result of multiple components including updated ratings, PD and
thresholds calibrations and stage migrations.
In addition, during the year ended 31 December 2023, an overlay for the LGD parameter has been
integrated through reduced curability period for Stage 2 and Stage 3 exposures (i.e., the maximum period
that a customer is considered to cure has been reduced). The impact on the ECL was €7 million charge for
the year ended 31 December 2023.
The Group has exercised critical judgement on a best effort basis, to consider all reasonable and
supportable information available at the time of the assessment of the ECL allowance as at 31 December
2023. The Group will continue to evaluate the ECL allowance and the related economic outlook each
quarter, so that any changes arising from the uncertainty on the macroeconomic outlook and geopolitical
developments are timely captured.
297
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.2 Calculation of expected credit losses (continued)
Portfolio segmentation
The individual assessment is performed not only for individually significant assets but also for other
exposures meeting specific criteria determined by management. The selection criteria for the individually
assessed exposures are based on management judgement and are reviewed on a quarterly basis by the
Risk Management Division and are adjusted or enhanced, if deemed necessary. Following the wars in
Ukraine and Middle East, the selection criteria were further enhanced to include significant exposures to
customers with passport of origin or residency in Russia, Ukraine or Belarus and/or business activity within
these countries and significant exposures with repayment deriving from Israel.
Further details on impairment allowances and related credit information are set out in Note 44.
5.3 Stock of property - estimation of net realisable value
Stock of property is measured at the lower of cost and net realisable value. The net realisable value is
determined through valuation techniques, requiring significant judgement, taking into account all available
reference points, such as expert valuation reports, current market conditions, the holding period of the
asset, applying an appropriate illiquidity discount where considered necessary, and any other relevant
parameters. Selling expenses are deducted from the realisable value. Depending on the value of the
underlying asset and available market information, the determination of costs to sell may require
professional judgement which involves a high degree of uncertainty due to the relatively low level of market
activity.
More details on the stock of property are presented in Note 27.
5.4 Provisions for pending litigations, claims, regulatory and other matters
The accounting policy for provisions for pending litigations, claims, regulatory and other matters is
described in Note 2.35. J udgement is required in determining whether a present obligation exists and in
estimating the probability, timing and amount of any outflows. Provisions for pending litigations, claims,
regulatory and other matters usually require a higher degree of judgement than other types of provisions. It
is expected that the Group will continue to have a material exposure to litigation and regulatory
proceedings and investigations relating to legacy issues in the medium term. The matters for which the
Group determines that the probability of a future loss is more than remote will change from time to time, as
will the matters as to which a reliable estimate can be made and the possible loss for such matters can be
estimated. Actual results may prove to be significantly higher or lower than the estimated possible loss in
those matters, where an estimate was made. In addition, loss may be incurred in matters with respect to
which the Group believed the probability of loss was remote.
For a detailed description of the nature of uncertainties and assumptions and the effect on the amount and
timing of pending litigations, claims, regulatory and other matters refer to Note 38.
5.5 Tax
The Group, is subject to tax in Cyprus and in the countries that it has run-down operations mainly in
Greece, Russia and Romania. Estimates are required in determining the provision for taxes at the reporting
date. The Group recognises income tax liabilities for transactions and assessments whose tax treatment is
uncertain. Where the final tax is different from the amounts initially recognised in the consolidated income
statement, such differences will impact the income tax expense, the tax liabilities and deferred tax assets or
liabilities of the period in which the final tax is agreed with the relevant tax authorities.
Deferred tax assets
In the absence of a specific accounting standard dedicated to the accounting of the asset that arose
pursuant to amendments in the Income Tax Law effected in March 2019 which provides for the
recoverability of tax assets arising from transfer of tax losses following resolution of a credit institution,
within the framework of 'The Resolution of Credit and Other Institutions', to be guaranteed (Note 17), BOC
PCL had exercised judgement in applying the guidance of IAS 12 in accounting for this asset item as the
most relevant available standard. On the basis of this guidance, BOC PCL had determined that this asset
should be accounted for on the basis of IAS 12 principles relating to deferred tax assets.
For further details on such deferred tax assets refer to Note 17.
298
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.6 Fair value of investments and derivatives
The best evidence of fair value is a quoted price in an actively traded market. If the market for a financial
instrument is not active, a valuation technique is used. The majority of valuation techniques employed by
the Group use primarily observable market data and so the reliability of the fair value measurement is
relatively high.
However, certain financial instruments are valued on the basis of valuation techniques that feature one or
more significant inputs that are not observable. Valuation techniques that rely on non-observable inputs
require a higher level of management judgement to calculate a fair value than those based wholly on
observable inputs.
Valuation techniques used to calculate fair values include comparisons with similar financial instruments for
which market observable prices exist, discounted cash flow analysis and other valuation techniques
commonly used by market participants. Valuation techniques incorporate assumptions that other market
participants would use in their valuations, including assumptions about interest rate yield curves, exchange
rates, volatilities and default rates. When valuing instruments by reference to comparable instruments,
management takes into account the maturity, structure and rating of the instrument with which the position
held is being compared.
The Group uses models with only unobservable inputs for the valuation of certain unquoted equity
investments. In these cases, estimates are made to reflect uncertainties in fair values resulting from a lack
of market data inputs, for example, as a result of illiquidity in the market. Inputs into valuations based on
unobservable data are inherently uncertain because there is little or no current market data available from
which to determine the level at which an arm's length transaction would occur under normal business
conditions. Unobservable inputs are determined based on the best information available.
Further details on the fair value of assets and liabilities are disclosed in Notes 2.13.9 and 22.
5.7 Retirement benefits
The cost of defined benefit pension plans is determined using actuarial valuations. The actuarial valuations
involve making assumptions about discount rates, the expected rate of return on plan assets, future salary
increases, mortality rates as well as future pension increases where necessary. The Group's management
sets these assumptions based on market expectations at the reporting date using its best estimates for
each parameter covering the period over which the obligations are to be settled. In determining the
appropriate discount rate, management considers the yield curve of high quality corporate bonds. In
determining other assumptions, a certain degree of judgement is required. Future salary increases are
based on expected future inflation rates for the specific country plus a margin to reflect the best possible
estimate relating to parameters such as productivity, workforce maturity and promotions. The expected
return on plan assets is based on the composition of each fund's plan assets, estimating a different rate of
return for each asset class. Estimates of future inflation rates on salaries and expected rates of return of
plan assets represent management's best estimates for these variables. These estimates are derived after
consultation with the Group's advisors, and involve a degree of judgement. Due to the long-term nature of
these plans, such estimates are inherently uncertain.
Further details on retirement benefits are disclosed in Note 14.
5.8 Non-life insurance business
The Group is engaged in the provision of non-life insurance services. Risks under these policies usually
cover a period of 12 months.
A summary of the significant judgements and estimates made in the measurement of insurance and
reinsurance contract assets and liabilities is included in Note 2.2.1.3.
Further information on non-life insurance business is disclosed in Note 12.
299
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.9 Life insurance business
The Group is engaged in the provision of life insurance services. Whole life insurance plans (life plans) are
unit-linked contracts associated with assets where the amount payable in the case of death is the greater of
the sum insured and the value of investment units. Simple insurance or temporary term plans (term plans)
relate to fixed term duration plans for protection against death. In case of death within the coverage period,
the insured sum will be paid. Endowment insurance (such as investment plans/horizon plans/Capital builder
and Lifestart) refer to specific duration plans linked to investments, to create capital through systematic
investment in association with death insurance coverage whereby the higher of the sum insured and the
value of investment units is payable on death within the contract term.
A summary of the significant judgements and estimates made in the measurement of insurance and
reinsurance contract assets and liabilities is included in Note 2.2.1.3.
Further information on life insurance business is disclosed in Note 12.
5.10 Exercise of significant influence
The Group determines whether it exercises significant influence on companies in which it has shareholdings
of less than 20% if other factors exist that demonstrate significant influence. In performing this assessment
it considers its representation in the Board of Directors which gives rise to voting rights of more than 20%
and participation in policy-making processes, including participation in decisions about dividends and other
distributions.
5.11 Classification of properties
The Group determines whether a property is classified as investment property or stock of property as
follows:
i. Investment properties comprise land and buildings that are not occupied for use by, or in the
operations of the Group, nor for sale in the ordinary course of business, but are held primarily to earn
rental income and/or capital appreciation. These buildings are substantially rented to tenants and not
intended to be sold in the ordinary course of business. Additionally they comprise leased properties
which are acquired in exchange of debt and are leased out under operating leases.
ii. Stock of property comprises real estate assets held with an intention to be disposed of. This principally
relates to properties acquired through debt-for-property swaps and properties acquired through the
acquisition of certain operations of Laiki Bank in 2013 (except from those that are leased out and are
classified as investment properties).
5.12 Fair value of properties held for own use and investment properties
In accordance with the Group's accounting policy, property held for own use, as well as investment
property, is measured at fair value. In the case of property held for own use, valuations are carried out
periodically so that the carrying value is not materially different from the fair value, whereas in the case of
investment property, the fair value is established at each reporting date. Valuations are carried out by
qualified valuers by applying valuation models recommended by internationally accepted valuation
standards.
In arriving at their estimates of the fair values of properties, the valuers use their market knowledge and
professional judgement and do not rely solely on historical transactional comparable information, taking into
consideration the greater degree of uncertainty that exists compared to a more active market. Depending
on the nature of the underlying asset and available market information, the determination of the fair value
of property may require the use of estimates such as future cash flows from assets and discount rates
applicable to those assets. All these estimates are based on local market conditions existing at the reporting
date.
Further information on inputs used is disclosed in Note 22.
300
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
5. Significant and other judgements, estimates and assumptions (continued)
5.13 Leases
Incremental Borrowing Rate (IBR)
The determination of an IBR term structure which is used in the measurement of the present value of the
future lease payments as described in Note 2.25, i nherently involves significant judgement. The IBR used
was based on the Cyprus Government yield curve, with no further adjustment, as a fair proxy for the
Group's secured borrowing cost, for a time horizon in accordance to the lease term. The sensitivity analysis
on the yield curve performed by BOC PCL showed that the value of the lease liability and corresponding RoU
assets is relatively insensitive to changes in the IBR.
Lease term
In determining the lease term, management considers all facts and circumstances that could make a
contract enforceable, such as the economics of the contract. The following assumptions were made for the
duration of lease term depending on the contract terms:
i. For cancellable leases, an assessment was made at the initial application of the standard and
subsequently updated where considered appropriate, based on the horizon used in the Group's
financial plan. The current medium term financial plan assessment is for a duration of 4 years. The
lease term was therefore based on an assessment of either 4 years (being the medium time horizon)
or 8 years (being an assessment of a longer time horizon).
ii. For non-cancellable leases, the lease term has been assessed to be the non-cancellable period.
iii. For leases with an option for renewal, the Group's past practice regarding the period over which it
has typically used properties (whether leased or owned), and its economic reasons for doing so,
provide information that is helpful in assessing whether the lessee is reasonably certain to exercise,
or not to exercise, an option.
Low value assets
The Group has exercised judgement in determining the threshold of low value assets which was set at
€5,000.
Further details on the leases are disclosed in Note 42.
6. Segmental analysis
The Group's activities are mainly concentrated in Cyprus. Cyprus operations are organised into operating
segments based on the line of business. The results of the overseas activities of the Group, namely Greece,
Romania and Russia, are presented within segment 'Other', given the size of these operations which are in a
run-down mode and relate to legacy operations of the Group. Further, the results of certain small
subsidiaries of the Group are allocated to the segments based on their key activities.
The results of the subsidiary company JCC Payment Systems Ltd (JCC), previously reported under the
segment 'Other', are now presented separately under segment 'Payment services'. The business segments
'International Corporate' and 'IBU' have been combined and the results of these business segments,
previously reported separately, are now presented combined under segment 'IBU & International Corporate'
business segment. Comparative information in 'Analysis by business line', 'Analysis of total revenue' and
'Analysis of assets and liabilities' was restated to account for these changes. Comparative information in
'Analysis by business line', 'Analysis of total revenue' and 'Analysis of assets and liabilities' was also restated
to account for the retrospective application of IFRS 17 as described in Note 2.2.1.
The operating segments are analysed below:
i. The Corporate and Large Corporate, Small and Medium-sized Enterprises (SME) and Retail business
lines are managing loans and advances to customers. Categorisation of loans per customer group is
detailed below.
ii. IBU & International Corporate comprises of:
1. IBU, which specialises in the offering of banking services to the international corporate
customers based in Cyprus, particularly international business companies whose ownership
and business activities lie outside Cyprus, and non resident individual customers of BOC PCL.
2. International Corporate, which comprises of International Corporate Banking, Project Finance
& Loan Syndication and Shipping Center. International Corporate Banking provides financing
from Cyprus in respect of projects based overseas with main focus being Greece and the
United Kingdom. Project Finance & Loan Syndication acts as arranger or participant in large
international loan syndication transactions. Shipping Center provides shipping financing
primarily for ocean going cargo vessels.
301
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
6. Segmental analysis (continued)
iii. Restructuring and Recoveries is the specialised unit which was set up to tackle the Group's loan
portfolio quality and manages exposures to borrowers in distress situation through innovative
solutions.
iv. Wealth Management comprises the provision of private banking and wealth management, market
execution and custody services along with asset management and investment banking. This segment
also includes subsidiary companies of the Group, whose activities relate to investment banking,
brokerage, discretionary asset management and investment advice services.
v. The Real Estate Management Unit (REMU) manages properties acquired through debt-for-property
swaps and properties acquired through the acquisition of certain operations of Laiki Bank in 2013
and executes exit strategies in order to monetise these assets. REMU also includes other subsidiary
property companies of the Group.
vi. Treasury is responsible for managing assets and liabilities within the Risk Appetite Framework set by
the Board of Directors. Treasury manages the Group's liquid assets, investing in fixed income
securities and interbank market. This business line manages the interest rate and foreign exchange
risks to which the Group is exposed to and is also responsible for liquidity management and for
ensuring compliance with internal and regulatory liquidity guidelines. It is also responsible for raising
funding through the issuance of debt in the wholesale markets.
vii. The Insurance business line is involved in both life and non-life insurance business.
viii. Payment Services comprise the subsidiary company JCC, which is involved in the development of
inter-banking systems, acquiring and processing of debit and credit card transactions and other
payment services.
ix. The segment 'Other' includes central functions of BOC PCL such as finance, risk management,
compliance, legal, information technology, corporate affairs and human resources. These functions
provide services to the operating segments. Segments 'Other' also includes other small subsidiary
companies in Cyprus (excluding the insurance subsidiaries, property companies under REMU,
payment services subsidiary of the Group (JCC) and subsidiary companies under Wealth), as well as
the overseas legacy activities of the Group.
BOC PCL broadly categorises its loans per customer group, in the following customer sectors:
i. Retail – all individuals, regardless of the facility amount, and legal entities with facilities from BOC
PCL of up to €500 thousand, excluding business property loans, and/or annual credit turnover up to
€1 million.
ii. Small and medium-sized enterprises (SME) – any company or group of companies (including
personal and housing loans to the directors or shareholders of a company) with facilities from BOC
PCL in the range of €500 thousand to €4 million and/or annual credit turnover in the range of €1
million to €10 million.
iii. Corporate – any company or group of companies (including personal and housing loans to the
directors or shareholders of a company) with available credit lines with BOC PCL of over €4 million
and/or having a minimum annual credit turnover of over €10 million. These companies are either
local larger corporations or international companies or companies in the shipping sector. Lending
includes direct lending or through syndications.
Management monitors the operating results of each business segment separately for the purposes of
performance assessment and resource allocation. Segment performance is evaluated based on profit after
tax and non-controlling interests. Inter-segment transactions and balances are eliminated on consolidation.
Operating segment disclosures are provided as presented to the Group Executive Committee.
Income and expenses associated with each business line are included within the business line results for
determining its performance. Fund transfer pricing methodologies are applied between the business lines as
to reflect the performance of each business line. Income and expenses incurred directly by the business
lines are allocated to the business lines as incurred. Indirect income and expenses are re-allocated from the
central functions to the business lines. For the purposes of the Cyprus analysis by business line, notional tax
at the 12.5% Cyprus tax rate is charged/credited to the profit or loss before tax of each business line.
The loans and advances to customers, the customer deposits and the related income and expense are
generally included in the segment where the business is managed, instead of the segment where the
transaction is recorded.
302
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
6. Segmental analysis (continued)
Analysis by business line

| Corporate |  |  |  |  |  |  |  |  |  |  |
| and Large |  |  |  |  |  |  |  |  |  |  |
| corporate |  |  |  |  |  |  |  |  |  |  |
|  | IBU & |  |  |  |  |  |  |  |  |  |
|  | International |  |  |  |  |  |  |  |  |  |
|  | corporate |  |  |  |  |  |  |  |  |  |
|  |  | SME | Retail |  |  |  |  |  |  |  |
|  |  |  |  | Restructuring |  |  |  |  |  |  |
|  |  |  |  | and recoveries |  |  |  |  |  |  |
|  |  |  |  |  | Wealth |  |  |  |  |  |
|  |  |  |  |  | management |  |  |  |  |  |
|  |  |  |  |  |  | REMU | Insurance | Treasury |  |  |
|  |  |  |  |  |  |  |  |  | Payment |  |
|  |  |  |  |  |  |  |  |  | services |  |
|  |  |  |  |  |  |  |  |  |  | Other | Total
2023 |  |  |  |  |  |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Net interest income/(expense) | 165,640 | 155,678 | 56,351 | 381,172 | 17,702 | 17,449 | (34,263) | (2) | 35,022 | - | (2,532) | 792,217
Net fee and commission income/(expense) | 19,798 | 51,679 | 10,452 | 63,144 | 2,844 | 5,369 | (212) | (8,350) | 2,369 | 29,537 | 4,393 | 181,023
Net foreign exchange gains/(losses) | 2,010 | 5,212 | 700 | 2,315 | (171) | 116 | (14) | - | 18,846 | (287) | (139) | 28,588
Net gains/(losses) on financial instruments | 2,401 | - | - | - | - | 139 | 7 | 5,648 | 3,583 | 1,007 | (5) | 12,780
Net gains/(losses) on derecognition of financial assets measured at amortised |  |  |  |  |  |  |  |  |  |  |  |
cost |  |  |  |  |  |  |  |  |  |  |  |
| 4,400 | (246) | (2,299) | (428) | 6,770 | (33) | - | - | (1,783) | - | (20) | 6,361
Net insurance result | - | - | - | - | - | - | - | 53,350 | - | - | 138 | 53,488
Net gains/(losses) from revaluation and disposal of investment properties | - | - | - | - | - | - | 1,548 | (331) | - | - | (174) | 1,043
Net gains on disposal of stock of property | - | - | - | - | - | - | 8,476 | - | - | - | 496 | 8,972
Other income |  |  |  |  |  |  |  |  |  |  |  |
| 24 | 5 | 16 | 209 | 67 | 283 | 7,551 | 5,594 | 12 | 3,775 | 801 | 18,337
Total operating income | 194,273 | 212,328 | 65,220 | 446,412 | 27,212 | 23,323 | (16,907) | 55,909 | 58,049 | 34,032 | 2,958 | 1,102,809
Staff costs | (7,559) | (13,156) | (5,908) | (51,147) | (8,929) | (5,010) | (3,917) | (3,791) | (2,349) | (7,307) | (83,193) | (192,266)
Special levy on deposits and other levies/contributions | (4,340) | (8,765) | (2,176) | (25,734) | (109) | (1,256) | - | - | - | - | - | (42,380)
Provisions for pending litigations, claims, regulatory and other matters (net |  |  |  |  |  |  |  |  |  |  |  |
of reversals) |  |  |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | - | - | - | - | (380) | (28,084) | (28,464)
Other operating expenses |  |  |  |  |  |  |  |  |  |  |  |
| (36,392) | (18,959) | (14,597) | (85,794) | (11,506) | (1,880) | (15,341) | (4,591) | (7,987) | (12,342) | 58,296 | (151,093)
Operating profit/(loss) before credit losses and impairment | 145,982 | 171,448 | 42,539 | 283,737 | 6,668 | 15,177 | (36,165) | 47,527 | 47,713 | 14,003 | (50,023) | 688,606
Credit losses on financial assets | (36,553) | (2,130) | 625 | (4,370) | (30,419) | 65 | (5,737) | (229) | 548 | - | (1,630) | (79,830)
Impairment net of reversals on non-financial assets |  |  |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | - | (46,307) | - | - | - | (545) | (46,852)
Profit/(loss) before tax |  |  |  |  |  |  |  |  |  |  |  |
| 109,429 | 169,318 | 43,164 | 279,367 | (23,751) | 15,242 | (88,209) | 47,298 | 48,261 | 14,003 | (52,198) | 561,924
Income tax |  |  |  |  |  |  |  |  |  |  |  |
| (13,679) | (21,165) | (5,395) | (34,921) | 2,969 | (1,938) | 16,296 | (4,201) | (6,033) | (2,070) | (2,843) | (72,980)
Profit/(loss) after tax |  |  |  |  |  |  |  |  |  |  |  |
| 95,750 | 148,153 | 37,769 | 244,446 | (20,782) | 13,304 | (71,913) | 43,097 | 42,228 | 11,933 | (55,041) | 488,944
Non-controlling interests-(profit)/loss |  |  |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | (5) | 1,252 | - | - | (2,984) | - | (1,737)
Profit/(loss) after tax attributable to the owners of the Company |  |  |  |  |  |  |  |  |  |  |  |
| 95,750 | 148,153 | 37,769 | 244,446 | (20,782) | 13,299 | (70,661) | 43,097 | 42,228 | 8,949 | (55,041) | 487,207

303
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
6. Segmental analysis (continued)
Analysis by business line (continued)

| Corporate |  |  |  |  |  |  |  |  |  |  |
| and Large |  |  |  |  |  |  |  |  |  |  |
| corporate |  |  |  |  |  |  |  |  |  |  |
|  | IBU & |  |  |  |  |  |  |  |  |  |
|  | International |  |  |  |  |  |  |  |  |  |
|  | corporate |  |  |  |  |  |  |  |  |  |
|  |  | SME | Retail |  |  |  |  |  |  |  |
|  |  |  |  | Restructuring |  |  |  |  |  |  |
|  |  |  |  | and recoveries |  |  |  |  |  |  |
|  |  |  |  |  | Wealth |  |  |  |  |  |
|  |  |  |  |  | management |  |  |  |  |  |
|  |  |  |  |  |  | REMU | Insurance | Treasury |  |  |
|  |  |  |  |  |  |  |  |  | Payment |  |
|  |  |  |  |  |  |  |  |  | services |  |
|  |  |  |  |  |  |  |  |  |  | Other | Total
2022 (restated) |  |  |  |  |  |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Net interest income/(expense) | 114,135 | 68,394 | 34,860 | 137,178 | 31,083 | 4,680 | (34,649) | - | 14,860 | (157) | 23 | 370,407
Net fee and commission income/(expense) | 22,369 | 57,289 | 11,753 | 61,764 | 7,819 | 5,099 | (175) | (7,749) | 1,602 | 26,672 | 5,841 | 192,284
Net foreign exchange gains/(losses) | 992 | 6,070 | 591 | 2,424 | 80 | 126 | - | - | 21,008 | (589) | 589 | 31,291
Net (losses)/gains on financial instruments | (508) | - | - | - | 4,557 | (114) | (7) | (12,691) | 4,911 | 3,249 | (11) | (614)
Net gains/(losses) on derecognition of financial assets measured at amortised |  |  |  |  |  |  |  |  |  |  |  |
cost |  |  |  |  |  |  |  |  |  |  |  |
| 614 | 128 | (456) | 454 | 6,220 | (302) | - | - | (1,193) | - | (230) | 5,235
Net insurance result | - | - | - | - | - | - | - | 44,496 | - | - | 70 | 44,566
Net gains/(losses) from revaluation and disposal of investment properties | - | - | - | - | - | - | 181 | (406) | - | - | (774) | (999)
Net gains on disposal of stock of property | - | - | - | - | - | - | 13,325 | - | - | - | 645 | 13,970
Other income |  |  |  |  |  |  |  |  |  |  |  |
| (71) | (2) | 16 | 131 | 201 | 215 | 9,349 | 65 | 1 | 4,688 | 2,088 | 16,681
Total operating income | 137,531 | 131,879 | 46,764 | 201,951 | 49,960 | 9,704 | (11,976) | 23,715 | 41,189 | 33,863 | 8,241 | 672,821
Staff costs | (6,629) | (13,450) | (5,294) | (53,372) | (10,759) | (4,044) | (4,062) | (2,648) | (2,140) | (6,366) | (72,065) | (180,829)
Staff costs–voluntary exit plans and other termination benefits | (1,167) | (5,465) | (2,060) | (46,536) | (9,125) | (1,311) | (571) | (2,475) | (426) | (3,130) | (32,059) | (104,325)
Special levy on deposits and other levies/contributions | (3,752) | (8,158) | (1,938) | (23,509) | (91) | (1,044) | - | - | - | - | - | (38,492)
Provisions for pending litigations, claims, regulatory and other matters (net of |  |  |  |  |  |  |  |  |  |  |  |
reversals) |  |  |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | - | - | - | - | - | (11,880) | (11,880)
Other operating expenses |  |  |  |  |  |  |  |  |  |  |  |
| (34,579) | (16,556) | (15,684) | (77,242) | (24,415) | (2,280) | (18,836) | (3,275) | (10,132) | (10,840) | 55,923 | (157,916)
Operating profit before credit losses and impairment | 91,404 | 88,250 | 21,788 | 1,292 | 5,570 | 1,025 | (35,445) | 15,317 | 28,491 | 13,527 | (51,840) | 179,379
Credit losses on financial assets | (7,572) | 355 | (1,024) | 230 | (48,393) | (1,535) | (3,422) | 15 | (823) | - | 3,082 | (59,087)
Impairment net of reversals on non-financial assets |  |  |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | - | (23,921) | - | - | - | (5,628) | (29,549)
Profit/(loss) before tax |  |  |  |  |  |  |  |  |  |  |  |
| 83,832 | 88,605 | 20,764 | 1,522 | (42,823) | (510) | (62,788) | 15,332 | 27,668 | 13,527 | (54,386) | 90,743
Income tax |  |  |  |  |  |  |  |  |  |  |  |
| (10,479) | (11,076) | (2,596) | (190) | 5,353 | (107) | 7,151 | (2,306) | (3,458) | (1,641) | (11,963) | (31,312)
Profit/(loss) after tax |  |  |  |  |  |  |  |  |  |  |  |
| 73,353 | 77,529 | 18,168 | 1,332 | (37,470) | (617) | (55,637) | 13,026 | 24,210 | 11,886 | (66,349) | 59,431
Non-controlling interests-(profit)/loss |  |  |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | - | - | - | - | (2,971) | 105 | (2,866)
Profit/(loss) after tax attributable to the owners of the Company |  |  |  |  |  |  |  |  |  |  |  |
| 73,353 | 77,529 | 18,168 | 1,332 | (37,470) | (617) | (55,637) | 13,026 | 24,210 | 8,915 | (66,244) | 56,565

304
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
6. Segmental analysis (continued)
Analysis of total revenue
Total revenue includes net interest income, net fee and commission income, net foreign exchange gains, net gains/(losses) on financial instruments, net
gains/(losses) on derecognition of financial assets measured at amortised cost, net insurance result, net gains/(losses) from revaluation and disposal of
investment properties, net gains/(losses) on disposal of stock of property and other income. There was no revenue deriving from transactions with a single
external customer that amounted to 10% or more of Group revenue.

| Corporate |  |  |  |  |  |  |  |  |  |  |
| and Large |  |  |  |  |  |  |  |  |  |  |
| corporate |  |  |  |  |  |  |  |  |  |  |
|  | IBU & |  |  |  |  |  |  |  |  |  |
|  | International |  |  |  |  |  |  |  |  |  |
|  | corporate |  |  |  |  |  |  |  |  |  |
|  |  | SME | Retail |  |  |  |  |  |  |  |
|  |  |  |  | Restructuring |  |  |  |  |  |  |
|  |  |  |  | and recoveries |  |  |  |  |  |  |
|  |  |  |  |  | Wealth |  |  |  |  |  |
|  |  |  |  |  | management |  |  |  |  |  |
|  |  |  |  |  |  | REMU | Insurance | Treasury |  |  |
|  |  |  |  |  |  |  |  |  | Payment |  |
|  |  |  |  |  |  |  |  |  | Services |  |
|  |  |  |  |  |  |  |  |  |  | Other | Total
2023 |  |  |  |  |  |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Revenue from third parties | 219,193 | 124,579 | 56,574 | 247,043 | 27,719 | 7,484 | 17,778 | 64,101 | 305,558 | 28,889 | 3,891 | 1,102,809
Inter-segment (expense)/revenue |  |  |  |  |  |  |  |  |  |  |  |
| (24,920) | 87,749 | 8,646 | 199,369 | (507) | 15,839 | (34,685) | (8,192) | (247,509) | 5,143 | (933) | -
Total revenue |  |  |  |  |  |  |  |  |  |  |  |
| 194,273 | 212,328 | 65,220 | 446,412 | 27,212 | 23,323 | (16,907) | 55,909 | 58,049 | 34,032 | 2,958 | 1,102,809

2022 (restated) |  |  |  |  |  |  |  |  |  |  |  |
Revenue from third parties | 154,621 | 131,752 | 50,413 | 213,309 | 54,216 | 10,517 | (8,848) | 31,226 | (5,710) | 29,193 | 12,132 | 672,821
Inter-segment (expense)/revenue |  |  |  |  |  |  |  |  |  |  |  |
| (17,090) | 127 | (3,649) | (11,358) | (4,256) | (813) | (3,128) | (7,511) | 46,899 | 4,670 | (3,891) | -
Total revenue |  |  |  |  |  |  |  |  |  |  |  |
| 137,531 | 131,879 | 46,764 | 201,951 | 49,960 | 9,704 | (11,976) | 23,715 | 41,189 | 33,863 | 8,241 | 672,821

Analysis of assets and liabilities

| Corporate |  |  |  |  |  |  |  |  |  |  |
| and Large |  |  |  |  |  |  |  |  |  |  |
| corporate |  |  |  |  |  |  |  |  |  |  |
|  | IBU & |  |  |  |  |  |  |  |  |  |
|  | International |  |  |  |  |  |  |  |  |  |
|  | corporate |  |  |  |  |  |  |  |  |  |
|  |  | SME | Retail |  |  |  |  |  |  |  |
|  |  |  |  | Restructuring |  |  |  |  |  |  |
|  |  |  |  | and recoveries |  |  |  |  |  |  |
|  |  |  |  |  | Wealth |  |  |  |  |  |
|  |  |  |  |  | management |  |  |  |  |  |
|  |  |  |  |  |  | REMU | Insurance | Treasury |  |  |
|  |  |  |  |  |  |  |  |  | Payment |  |
|  |  |  |  |  |  |  |  |  | Services |  |
|  |  |  |  |  |  |  |  |  |  | Other | Total
2023 |  |  |  |  |  |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Assets |  |  |  |  |  |  |  |  |  |  |  |
Assets | 3,469,090 | 880,219 | 942,490 | 4,309,492 | 213,477 | 71,776 | 895,374 | 919,427 | 13,971,313 | 93,536 | 1,026,038 | 26,792,232
Inter-segment assets |  |  |  |  |  |  |  |  |  |  |  |
| (35,367) | - | - | - | - | (9,707) | (39,843) | (19,443) | - | (33,058) | (26,237) | (163,655)
Total assets |  |  |  |  |  |  |  |  |  |  |  |
| 3,433,723 | 880,219 | 942,490 | 4,309,492 | 213,477 | 62,069 | 855,531 | 899,984 | 13,971,313 | 60,478 | 999,801 | 26,628,577

2022 (restated) |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Assets | 3,556,475 | 822,095 | 1,020,727 | 4,193,741 | 313,657 | 72,438 | 1,115,788 | 852,892 | 12,291,132 | 80,730 | 1,058,138 | 25,377,813
Inter-segment assets |  |  |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | (9,313) | (35,214) | (18,807) | - | (21,347) | (4,591) | (89,272)
Total assets |  |  |  |  |  |  |  |  |  |  |  |
| 3,556,475 | 822,095 | 1,020,727 | 4,193,741 | 313,657 | 63,125 | 1,080,574 | 834,085 | 12,291,132 | 59,383 | 1,053,547 | 25,288,541

305
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
6. Segmental analysis (continued)
Analysis of assets and liabilities (continued)

| Corporate |  |  |  |  |  |  |  |  |  |  |
| and Large |  |  |  |  |  |  |  |  |  |  |
| corporate |  |  |  |  |  |  |  |  |  |  |
|  | IBU & |  |  |  |  |  |  |  |  |  |
|  | International |  |  |  |  |  |  |  |  |  |
|  | corporate |  |  |  |  |  |  |  |  |  |
|  |  | SME | Retail |  |  |  |  |  |  |  |
|  |  |  |  | Restructuring |  |  |  |  |  |  |
|  |  |  |  | and recoveries |  |  |  |  |  |  |
|  |  |  |  |  | Wealth |  |  |  |  |  |
|  |  |  |  |  | management |  |  |  |  |  |
|  |  |  |  |  |  | REMU | Insurance | Treasury |  |  |
|  |  |  |  |  |  |  |  |  | Payment |  |
|  |  |  |  |  |  |  |  |  | Services |  |
|  |  |  |  |  |  |  |  |  |  | Other | Total
2023 |  |  |  |  |  |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Liabilities | 2,197,945 | 3,901,025 | 1,019,245 | 11,781,972 | 29,045 | 543,123 | 24,695 | 803,319 | 3,503,842 | 40,635 | 459,045 | 24,303,891
Inter-segment liabilities |  |  |  |  |  |  |  |  |  |  |  |
| (111,192) | - | - | - | - | (3,485) | (11,667) | (16,404) | - | - | (20,907) | (163,655)
Total liabilities |  |  |  |  |  |  |  |  |  |  |  |
| 2,086,753 | 3,901,025 | 1,019,245 | 11,781,972 | 29,045 | 539,638 | 13,028 | 786,915 | 3,503,842 | 40,635 | 438,138 | 24,140,236

-

2022 (restated) |  |  |  |  |  |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Liabilities | 1,915,300 | 4,096,948 | 1,007,555 | 11,333,783 | 33,806 | 628,578 | 10,049 | 690,757 | 3,183,550 | 28,658 | 400,263 | 23,329,247
Inter-segment liabilities |  |  |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | - | - | - | (89,272) | - | - | (89,272)
Total liabilities |  |  |  |  |  |  |  |  |  |  |  |
| 1,915,300 | 4,096,948 | 1,007,555 | 11,333,783 | 33,806 | 628,578 | 10,049 | 690,757 | 3,094,278 | 28,658 | 400,263 | 23,239,975

Segmental analysis of customer deposits and loans and advances to customers is presented in Note 30 and Notes 44.2 and 44.5 respectively.
306
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
6. Segmental analysis (continued)
Analysis of turnover

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Net interest income | 792,217 | 370,407
Net fee and commission income | 181,023 | 192,284
Net foreign exchange gains | 28,588 | 31,291
Net gains/(losses) on financial instruments | 12,780 | (614)
Net gains on derecognition of financial assets measured at amortised cost | 6,361 | 5,235
Net insurance result (Note 12) | 53,488 | 44,566
Net gains/(losses) from revaluation and disposal of investment properties | 1,043 | (999)
Net gains on disposal of stock of property | 8,972 | 13,970
Other income |  |
| 18,337 | 16,681
| 1,102,809 | 672,821

7. Interest income and income similar to interest income
Interest income

| 2023 | 2022
| €000 | €000
Financial assets at amortised cost: |  |
- Loans and advances to customers | 511,072 | 335,653
- Loans and advances to banks and central banks | 321,828 | 42,545
- Reverse repurchase agreements | 3,219 | -
- Debt securities | 55,752 | 12,113
- Other financial assets (Note 28) | 19,774 | 10,889
Debt securities at FVOCI | 8,433 | 9,231
Negative interest on funding from central banks |  |
| - | 18,418
| 920,078 | 428,849

Income similar to interest income

| 2023 | 2022
| €000 | €000
Loans and advances to customers measured at FVPL | 11,489 | 10,963
Derivative financial instruments |  |
| 53,961 | 11,156
| 65,450 | 22,119

307
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
8. Interest expense and expense similar to interest expense
Interest expense

| 2023 |
|  | 2022
|  | (restated)
Financial liabilities at amortised cost: | €000 | €000
- Customer deposits | 32,358 | 6,857
- Funding from central banks and deposits by banks | 74,393 | 7,151
- Debt securities in issue |  |
| 19,534 | 7,857
- Subordinated liabilities | 20,320 | 20,658
Negative interest on loans and advances to banks and balances with central |  |
banks |  |
| - | 23,184
Interest expense on lease liabilities |  |
| 294 | 14
| 146,899 | 65,721

Expense similar to interest expense

| 2023 | 2022
| €000 | €000
Derivative financial instruments |  |
| 46,412 | 14,840

9. Fee and commission income and expense
Fee and commission income

| 2023 | 2022
| €000 | €000
Credit-related fees and commissions | 54,020 | 47,050
Other banking commissions | 92,086 | 112,562
Fees on servicing loans disposed of under Project Helix 3 | 646 | 5,564
Mutual funds and asset management fees | 4,079 | 3,652
Brokerage commissions | 1,146 | 858
Other commissions |  |
| 36,366 | 32,897
| 188,343 | 202,583

Mutual funds and asset management fees relate to fiduciary and other similar activities.
Credit-related fees and commissions include commissions from credit card arrangements amounting to
€32,522 thousand (2022: €26,257 thousand). Other banking commissions include commissions from
payment orders amounting to €26,676 thousand (2022: €27,439 thousand) and account maintenance fees
of €29,420 thousand (2022: €29,266 thousand). During the year ended 31 December 2022 liquidity fee
(abolished in December 2022) of €15,663 thousand was also included within other banking commissions.
Fee and commission income is further divided into:
Fees earned from services that are provided over time:

| 2023 | 2022
| €000 | €000
Credit-related fees and commissions | 26,879 | 20,119
Other banking commissions | 44,150 | 54,618
Fees on servicing loans disposed of under Project Helix 3 | 646 | 5,564
Mutual funds and asset management fees | 2,878 | 1,772
Other commissions |  |
| - | 241
| 74,553 | 82,314

308
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
9. Fee and commission income and expense (continued)
Fees earned from point in time services:

| 2023 | 2022
| €000 | €000
Credit-related fees and commissions | 27,141 | 26,931
Other banking commissions | 47,936 | 57,944
Mutual funds and asset management fees | 1,201 | 1,880
Brokerage commissions | 1,146 | 858
Other commissions |  |
| 36,366 | 32,656
| 113,790 | 120,269

Fee and commission expense

| 2023 | 2022
| €000 | €000
Banking commissions | 6,784 | 9,984
Mutual funds and asset management fees | 343 | 284
Brokerage commissions |  |
| 193 | 31
| 7,320 | 10,299

10. Net foreign exchange gains
Net foreign exchange gains comprise of the conversion of monetary assets and liabilities in foreign currency
at the reporting date, realised exchange gains/(losses) from transactions in foreign currency settled during
the year and the revaluation of foreign exchange derivatives.
11. Net gains/(losses) on financial instruments

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Trading portfolio: |  |
- derivative financial instruments | 26 | 280
Other investments at FVPL: |  |
- non-equity securities | 1,268 | 7,326
- mutual funds | 5,787 | (12,805)
- equity securities | 1,618 | 55
Net losses on disposal of FVOCI debt securities | (438) | (2,384)
Net gains on loans and advances to customers at FVPL (Note 22) | 2,401 | 4,050
Revaluation of financial instruments designated as fair value hedges: |  |
- hedging instruments (Note 21) | (2,211) | 65,427
- hedged items (Note 21) |  |
| 4,329 | (62,563)
| 12,780 | (614)

309
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
12. Net insurance result

| 2023 |  |  | 2022 |  |
| Life |  |  |  |  |
| insurance |  |  |  |  |
|  | Non-life |  |  |  |
|  | insurance |  |  |  |
|  |  | Total |  |  |
|  |  |  | Life |  |
|  |  |  | insurance |  |
|  |  |  |  | Non-life |
|  |  |  |  | insurance |
|  |  |  |  |  | Total
| €000 | €000 | €000 | €000 | €000 | €000
Insurance finance |  |  |  |  |  |
income/(expense) |  |  |  |  |  |
| (43,820) | (1,269) | (45,089) | 40,978 | 604 | 41,582
Reinsurance finance |  |  |  |  |  |
income/(expense) |  |  |  |  |  |
| 2,114 | 449 | 2,563 | (3,291) | (153) | (3,444)
Return on assets backing |  |  |  |  |  |
insurance liabilities |  |  |  |  |  |
| 43,486 | - | 43,486 | (37,354) | - | (37,354)
Net insurance finance |  |  |  |  |  |
income/(expense) and net |  |  |  |  |  |
reinsurance finance |  |  |  |  |  |
income/(expense) |  |  |  |  |  |
| 1,780 | (820) | 960 | 333 | 451 | 784
Insurance revenue | 57,081 | 88,694 | 145,775 | 52,537 | 82,958 | 135,495
Insurance service expenses | (25,259) | (46,273) | (71,532) | (30,594) | (43,968) | (74,562)
Other insurance related |  |  |  |  |  |
income/(expense) |  |  |  |  |  |
| (715) | - | (715) | (403) | - | (403)
Net insurance service result |  |  |  |  |  |
| 31,107 | 42,421 | 73,528 | 21,540 | 38,990 | 60,530
Allocation of reinsurance |  |  |  |  |  |
premiums |  |  |  |  |  |
| (14,824) | (34,498) | (49,322) | (11,191) | (30,008) | (41,199)
Amounts recoverable from |  |  |  |  |  |
reinsurers for incurred claims |  |  |  |  |  |
| 11,853 | 16,469 | 28,322 | 11,216 | 13,235 | 24,451
Net reinsurance service result |  |  |  |  |  |
| (2,971) | (18,029) | (21,000) | 25 | (16,773) | (16,748)
Net insurance result |  |  |  |  |  |
| 29,916 | 23,572 | 53,488 | 21,898 | 22,668 | 44,566

The analysis of the insurance revenue recognised during the year is presented below:

| 2023 | 2022
| €000 | €000
Life insurance contracts |  |
Amounts relating to the changes in the liability for remaining coverage |  |
Expected incurred claims and insurance service expenses incurred in the |  |
year |  |
| 37,129 | 36,375
Change in the risk adjustment for non-financial risk | 1,306 | 1,523
Amount of CSM recognised in profit or loss | 7,792 | 5,032
Other amounts, including experience adjustments for premium receipts | 1,160 | 1,289
Amounts relating to recovery of insurance acquisition cash flows |  |
Allocation of the portion of premiums that relate to the recovery of |  |
insurance acquisition cash flows |  |
| 228 | 81
Insurance revenue from contracts measured under GMM and VFA | 47,615 | 44,300
Insurance revenue from contracts measured under PAA |  |
| 9,466 | 8,237
Insurance revenue - life |  |
| 57,081 | 52,537
Non-life insurance contracts |  |
Insurance revenue from contracts measured under PAA |  |
| 88,694 | 82,958
Insurance revenue - non-life |  |
| 88,694 | 82,958
Insurance revenue |  |
| 145,775 | 135,495

310
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
12. Net insurance result (continued)
The analysis of the insurance service expenses recognised during the year is presented below:

| 2023 |  |  | 2022 |  |
| Life |  |  |  |  |
| insurance |  |  |  |  |
|  | Non-life |  |  |  |
|  | insurance |  |  |  |
|  |  | Total |  |  |
|  |  |  | Life |  |
|  |  |  | insurance |  |
|  |  |  |  | Non-life |
|  |  |  |  | insurance |
|  |  |  |  |  | Total
| €000 | €000 | €000 | €000 | €000 | €000
Incurred claims and directly |  |  |  |  |  |
attributable expenses |  |  |  |  |  |
| (24,446) | (32,964) | (57,410) | (25,814) | (27,091) | (52,905)
Amortisation of insurance |  |  |  |  |  |
acquisition cash flows |  |  |  |  |  |
| (227) | (5,541) | (5,768) | (80) | (5,013) | (5,093)
Insurance acquisition cash flows |  |  |  |  |  |
expensed as incurred |  |  |  |  |  |
| (2,581) | (5,907) | (8,488) | (2,429) | (5,419) | (7,848)
Reversals of losses/(losses) on |  |  |  |  |  |
onerous contracts |  |  |  |  |  |
| 1,145 | (108) | 1,037 | (4,743) | - | (4,743)
Changes to liabilities for incurred |  |  |  |  |  |
claims (LIC) |  |  |  |  |  |
| 850 | (1,753) | (903) | 2,472 | (6,445) | (3,973)
Insurance service expenses |  |  |  |  |  |
| (25,259) | (46,273) | (71,532) | (30,594) | (43,968) | (74,562)

The analysis of the net reinsurance service result from reinsurance contracts held recognised during the
year is presented below:

| 2023 | 2022
Reinsurance contracts - life contracts | €000 | €000
Amounts relating to the changes in the assets for remaining coverage |  |
Expected recovery for insurance service expenses incurred in the year | (10,087) | (8,314)
Change in the risk adjustment for non-financial risk | 41 | (58)
Net cost/gain recognised in profit or loss |  |
| (1,559) | (277)
Allocation of reinsurance premiums from contracts measured under GMM | (11,605) | (8,649)
Allocation of reinsurance premiums from contracts measured under PAA |  |
| (3,219) | (2,542)
Allocation of reinsurance premiums |  |
| (14,824) | (11,191)
Amounts recoverable for claims and other expenses incurred in the year | 12,247 | 12,187
Changes in amounts recoverable arising from changes in liability for |  |
incurred claims |  |
| (394) | (971)
Amounts recoverable from reinsurers for incurred claims |  |
| 11,853 | 11,216
Net reinsurance service result - life |  |
| (2,971) | 25
Reinsurance contracts - non-life contracts |  |
Allocation of reinsurance premiums from contracts measured under PAA |  |
| (34,498) | (30,008)
Allocation of reinsurance premiums |  |
| (34,498) | (30,008)
Amounts recoverable for claims and other expenses incurred in the year | 13,346 | 9,256
Changes in amounts recoverable arising from changes in liability for |  |
incurred claims |  |
| 3,072 | 3,979
Changes in fulfilment cash flows which relate to onerous underlying |  |
contracts |  |
| 51 | -
Amounts recoverable from reinsurers for incurred claims |  |
| 16,469 | 13,235
Net reinsurance service result - non-life |  |
| (18,029) | (16,773)
Net reinsurance service result |  |
| (21,000) | (16,748)

311
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
12. Net insurance result (continued)
The analysis of insurance finance income/(expense) and reinsurance finance income/(expense) recognised
during the year is presented below:

| 2023 |  |  | 2022 |  |
| Life |  |  |  |  |
| insurance |  |  |  |  |
|  | Non-life |  |  |  |
|  | insurance |  |  |  |
|  |  | Total |  |  |
|  |  |  | Life |  |
|  |  |  | insurance |  |
|  |  |  |  | Non-life |
|  |  |  |  | insurance |
|  |  |  |  |  | Total
| €000 | €000 | €000 | €000 | €000 | €000
Changes in value of underlying |  |  |  |  |  |
assets of direct participating |  |  |  |  |  |
contracts |  |  |  |  |  |
| (42,949) | - | (42,949) | 36,759 | - | 36,759
Interest accreted to insurance |  |  |  |  |  |
contracts using current financial |  |  |  |  |  |
assumptions |  |  |  |  |  |
| (307) | (1,297) | (1,604) | 78 | - | 78
Interest accreted to insurance |  |  |  |  |  |
contracts using locked-in rates |  |  |  |  |  |
| 13 | - | 13 | 81 | (395) | (314)
Changes in interest rates and |  |  |  |  |  |
other financial assumptions |  |  |  |  |  |
| (577) | 28 | (549) | 4,060 | 999 | 5,059
Insurance finance |  |  |  |  |  |
income/(expense) |  |  |  |  |  |
| (43,820) | (1,269) | (45,089) | 40,978 | 604 | 41,582
Interest accreted to reinsurance |  |  |  |  |  |
contracts using current financial |  |  |  |  |  |
assumptions |  |  |  |  |  |
| - | 465 | 465 | - | - | -
Interest accreted to reinsurance |  |  |  |  |  |
contracts using locked-in rates |  |  |  |  |  |
| (85) | - | (85) | (4) | 138 | 134
Changes in interest rates and |  |  |  |  |  |
other financial assumptions |  |  |  |  |  |
| 2,199 | (19) | 2,180 | (3,287) | (291) | (3,578)
Changes in non-performance |  |  |  |  |  |
risk of reinsurer |  |  |  |  |  |
| - | 3 | 3 | - | - | -
Reinsurance finance |  |  |  |  |  |
income/(expense) |  |  |  |  |  |
| 2,114 | 449 | 2,563 | (3,291) | (153) | (3,444)

13. Other income

| 2023 | 2022
| €000 | €000
Dividend income | 856 | 940
Profit/(loss) on sale and write-off of property and equipment and intangible |  |
assets |  |
| 53 | (13)
Rental income from investment properties | 3,239 | 4,263
Rental income from stock of property | 346 | 257
Income from hotel, golf and other leisure activities | 3,463 | 3,559
Income from insurance compensation | 5,093 | -
Other income |  |
| 5,287 | 7,675
| 18,337 | 16,681

The income from hotel, golf and other leisure activities primarily relates to activities of subsidiaries acquired
in debt satisfaction as part of loan restructuring activity.
312
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
14. Staff costs
Staff costs

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Salaries | 137,390 | 142,779
Employer's contributions to state social insurance | 24,834 | 25,962
Variable compensation: |  |
Accrual for short-term incentive award (Note 14.3) | 9,955 | -
Share-based benefits expense (Note 14.2) | 595 | 322
Retirement benefit plan costs | 12,072 | 11,766
Exit cost and other termination benefits (2022:Voluntary Exit Plan) |  |
| 7,420 | 104,325
| 192,266 | 285,154

The number of persons employed by the Group as at 31 December 2023 was 2,830 (2022: 2,889).
In 2023 and 2022, staff costs are presented in the Consolidated Income Statement net of software
capitalisation costs and costs included in the insurance contract fulfilment cash flow liabilities under IFRS
17. An analysis of expenses by nature incurred by the Group is included in Note 15.1.
The following table shows the analysis per geographical location of the Group's average number of
employees (full time) and analysis of the average number of employees in Cyprus per business line for 2023
and 2022.

| 2023 |
|  | 2022
|  | (restated)
Corporate and Large corporate | 53 | 60
IBU & International corporate |  |
- IBU | 211 | 218
- International corporate | 14 | 30
Small and medium-sized enterprises | 82 | 95
Retail | 881 | 1,019
Restructuring and recoveries | 132 | 180
Wealth management | 31 | 36
REMU | 41 | 45
Insurance | 200 | 201
Treasury | 30 | 26
Payment services | 113 | 108
Other (primarily head office functions) |  |
| 1,088 | 1,191
Total Cyprus | 2,876 | 3,209
Other countries |  |
| 7 | 11
| 2,883 | 3,220

313
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
14. Staff costs (continued)
During 2023, the Group provided termination benefits to 50 of the Group's full time employees at a total
cost of €7,420 thousand. During 2022, the Group completed VEPs through which 574 of the Group's full
time employees were approved to leave at a total cost of €104,325 thousand.
14.1 Retirement benefits
Retirement benefits
In addition to the employer's contributions to state social insurance, the Group operates plans for the
provision of additional retirement benefits as described below:

| 2023 | 2022
| €000 | €000
Defined benefit plans | 512 | 652
Defined contribution plans |  |
| 12,226 | 11,364
| 12,738 | 12,016

During the year ended 31 December 2023 retirement benefit costs of €666 thousand are included within net
insurance service result as directly attributable expenses for the fulfilment of insurance contracts within the
scope of IFRS 17 (2022: €250 thousand) (Note 15.1).
Cyprus
The main retirement plan for the Group's permanent employees in Cyprus (85% of total Group employees)
is a defined contribution plan. This plan provided for employer contributions of 9% for 2023 and 8% for
2022 and employee contributions of 3%-10% of the employees' gross salaries for both 2023 and 2022. This
plan is managed by an Administrative Committee appointed by the members.
In previous years a small number of employees who did not participate in the main retirement plan, were
members of a pension scheme that was closed to new entrants and could have received part or all of their
retirement benefit entitlement by way of a pension for life. This plan was managed by an Administrative
Committee composed of representatives of the employer. As the last member exited the plan during the
year ended 31 December 2022, there was no retirement benefit obligation as at 31 December 2023 and
2022 in relation to this plan.
A small number of employees of Group subsidiaries in Cyprus are also members of defined benefit plans.
These plans are funded with assets backing the obligations held in separate legal vehicles.
Greece
Following IFRIC's decision in May 2021 about the periods of service to which an entity attributes benefit for
a particular defined benefit plan, the Group as at 31 December 2023 and 2022 does not have any
retirement benefits obligation for its employees in Greece, and as a result the accumulated actuarial
gains/losses attributable to these plans were derecognised since 31 December 2021.
United Kingdom
The Group has assumed in prior years the obligation of the defined benefit plan of employees of the former
subsidiary of the Group in the United Kingdom which was closed in December 2008 to future accrual of
benefits for active members. As at 31 December 2023 and 2022 the Group's remaining retirement benefit
obligation related to the UK pension plan.
Analysis of the results of the actuarial valuations for the defined benefit plans

| 2023 | 2022
Amounts recognised in the consolidated balance sheet | €000 | €000
Liabilities (Note 33) | 565 | 3,694
Assets (Note 28) |  |
| (669) | (816)
| (104) | 2,878

One of the plans has a total funded status at a surplus of €7,141 thousand (2022: two plans with total
funded status at a surplus of €10,739 thousand) that is not recognised as an asset on the basis that the
Group has no unconditional right to future economic benefits either via a refund or a reduction in future
contributions.
314
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
14. Staff costs (continued)
14.1 Retirement benefits (continued)
The amounts recognised in the consolidated balance sheet and the movement in the net defined benefit obligation for the years ended 31 December 2023 and
2022 are presented below:

| Present value of |  |  |  |
| obligation |  |  |  |
|  | Fair value of |  |  |
|  | plan assets |  |  |
|  |  | Net amount |  |
|  |  | before impact of |  |
|  |  | asset ceiling |  |
|  |  |  | Impact of |
|  |  |  | minimum |
|  |  |  | funding |
|  |  |  | requirement/ |
|  |  |  | asset ceiling |
|  |  |  |  | Net defined
|  |  |  |  | benefit liability
| €000 | €000 | €000 | €000 | €000
1 January 2023 |  |  |  |  |
| 54,743 | (62,605) | (7,862) | 10,740 | 2,878
Current service cost | 395 | - | 395 | - | 395
Net interest expense/(income) |  |  |  |  |
| 2,624 | (2,507) | 117 | - | 117
Total amount recognised in the consolidated income |  |  |  |  |
statement |  |  |  |  |
| 3,019 | (2,507) | 512 | - | 512
Remeasurements: |  |  |  |  |
Return on plan assets, excluding amounts included in |  |  |  |  |
net interest expense |  |  |  |  |
| - | 394 | 394 | - | 394
Actuarial loss from changes in financial assumptions | 1,623 | - | 1,623 | - | 1,623
Demographic assumptions | (605) | - | (605) | - | (605)
Experience adjustments | 621 | - | 621 | - | 621
Asset adjustment | - | 1,600 | 1,600 | - | 1,600
Change in asset ceiling |  |  |  |  |
| - | - | - | (4,253) | (4,253)
Total amount recognised in the consolidated OCI |  |  |  |  |
| 1,639 | 1,994 | 3,633 | (4,253) | (620)
Exchange differences | 889 | (1,465) | (576) | 654 | 78
Contributions: |  |  |  |  |
Employer | - | (2,952) | (2,952) | - | (2,952)
Plan participants | 177 | (177) | - | - | -
Benefits paid from the plans |  |  |  |  |
| (2,449) | 2,449 | - | - | -
31 December 2023 |  |  |  |  |
| 58,018 | (65,263) | (7,245) | 7,141 | (104)

315
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
14. Staff costs (continued)
14.1 Retirement benefits (continued)

| Present value of |  |  |  |
| obligation |  |  |  |
|  | Fair value of |  |  |
|  | plan assets |  |  |
|  |  | Net amount |  |
|  |  | before impact of |  |
|  |  | asset ceiling |  |
|  |  |  | Impact of |
|  |  |  | minimum |
|  |  |  | funding |
|  |  |  | requirement/ |
|  |  |  | asset ceiling |
|  |  |  |  | Net defined
|  |  |  |  | benefit liability
| €000 | €000 | €000 | €000 | €000
1 January 2022 |  |  |  |  |
| 95,038 | (98,827) | (3,789) | 5,462 | 1,673
Current service cost | 479 | - | 479 | - | 479
Gain on curtailment and settlement | 219 | - | 219 | - | 219
Net interest expense/(income) |  |  |  |  |
| 1,523 | (1,569) | (46) | - | (46)
Total amount recognised in the consolidated income |  |  |  |  |
statement |  |  |  |  |
| 2,221 | (1,569) | 652 | - | 652
Remeasurements: |  |  |  |  |
Return on plan assets, excluding amounts included in |  |  |  |  |
net interest expense |  |  |  |  |
| - | 30,400 | 30,400 | - | 30,400
Actuarial loss from changes in financial assumptions | (34,016) | - | (34,016) | - | (34,016)
Demographic assumptions | (721) | - | (721) | - | (721)
Experience adjustments | 3,008 | - | 3,008 | - | 3,008
Change in asset ceiling |  |  |  |  |
| - | - | - | 5,617 | 5,617
Total amount recognised in the consolidated OCI |  |  |  |  |
| (31,729) | 30,400 | (1,329) | 5,617 | 4,288
Exchange differences | (4,077) | 4,296 | 219 | (339) | (120)
Contributions: |  |  |  |  |
Employer | - | (3,615) | (3,615) | - | (3,615)
Plan participants | 183 | (183) | - | - | -
Benefits paid from the plans |  |  |  |  |
| (6,893) | 6,893 | - | - | -
31 December 2022 |  |  |  |  |
| 54,743 | (62,605) | (7,862) | 10,740 | 2,878

316
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
14. Staff costs (continued)
14.1 Retirement benefits (continued)
The actual return on plan assets for year 2023 was a gain of €2,113 thousand (2022: loss of €28,831
thousand) mainly due to the increases in bond and equity prices during the year.
The assets of funded plans are generally held in separately administered entities, either as specific assets or
as a proportion of a general fund, or as insurance contracts and are governed by local regulations and
practice in each country.
Pension plan assets are invested in different asset classes in order to maintain a balance between risk and
return. Investments are well diversified to limit the financial effect of the failure of any individual
investment. Through its defined benefit plans, the Group is exposed to a number of risks as outlined below:
Interest rate risk
The Group is exposed to interest rate risk due to the mismatch of the duration
of assets and liabilities.
Changes in bond yields
A decrease in corporate bond yields will increase the liabilities, although this
will be partially offset by an increase in the value of bond holdings.
Inflation risk
The Group faces inflation risk, since the liabilities are either directly (through
increases in pensions) or indirectly (through wage increases) exposed to
inflation risks. Investments to ensure inflation-linked returns (i.e. real returns
through investments such as equities, index-linked bonds and assets whose
return increases with increasing inflation) could be used to better match the
expected increases in liabilities.
Asset volatility
The liabilities are calculated using a discount rate set with reference to
corporate bond yields; if assets underperform this yield, a deficit will be
created.
The major categories of plan assets as a percentage of total plan assets are as follows:
2023 2022
Equity securities %10 %13
Debt securities %66 %57
Loans and advances to banks %21 %13
Funds
%3 %17
%100 %100
The assets held by the funded plans include equity securities issued by the Company, the fair value of which
as at 31 December 2023 is €186 thousand (2022: €95 thousand).
The Group expects to make additional contributions to defined benefit plans of €1,164 thousand during
2024.
At the end of the reporting period, the average duration of the defined benefit obligations was 14 years
(2022: 14 years).
317
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
14. Staff costs (continued)
14.1 Retirement benefits (continued)
Principal actuarial assumptions used in the actuarial valuations
The present value of the defined benefit obligations of the retirement plans is estimated annually using the
Projected Unit Credit Method of actuarial valuation, carried out by independent actuaries. The principal
actuarial assumptions used for the valuations of the retirement plans of the Group during 2023 and 2022 are
set out below:

2023 | Cyprus | UK
Discount rate | 3.27% | 4.75%
Inflation rate | 2.25% | 3.00%
Future salary increases | 2.25% | n/a
Rate of pension increase | n/a | 2.80%
Life expectancy for pensioners at age 60 |  |
| 23.5 years M |
| 29.6 years F | n/a
Life expectancy for pensioners at age 65 |  |
| n/a |
|  | 23.0 years M
|  | 24.7 years F

2022 |  |
Discount rate | 3.85% | 5.00%
Inflation rate | 2.50% | 3.10%
Future salary increases | 2.50% | n/a
Rate of pension increase | n/a | 2.90%
Life expectancy for pensioners at age 60 |  |
| 23.5 years M |
| 29.6 years F | n/a
Life expectancy for pensioners at age 65 |  |
| n/a |
|  | 23.0 years M
|  | 24.7 years F

The discount rate used in the actuarial valuations reflects the rate at which liabilities could effectively be
settled and is set by reference to market yields at the reporting date of high quality corporate bonds of
suitable maturity and currency. For the Group's plans in the Eurozone which comprise 19% of the defined
benefit obligations, the Group adopted a full yield curve approach using AA- rated corporate bond data from
the iBoxx Euro Corporates AA10+ index. For the Group's plan in the UK which comprises 81% of the defined
benefit obligations, the Group adopted a full yield curve approach using the discount rate that has been set
based on the yields on AA- rated corporate bonds with duration consistent with the scheme's liabilities.
Under this approach, each future liability payment is discounted by a different discount rate that reflects its
exact timing.
To develop the assumptions relating to the expected rates of return on plan assets, the Group, in
consultation with its actuaries, uses forward-looking assumptions for each asset class reflecting market
conditions and future expectations at the reporting date. Adjustments are made annually to the expected
rate of return assumption based on revised expectations of future investment performance of asset classes,
changes to local legislation that may affect investment strategy, as well as changes to the target strategic
asset allocation.
The impact of significant assumptions' fluctuations on the defined benefit obligation as at 31 December
2023 and 2022 is presented below:
2023 2022
Variable
Change
+0.5%
Change
-0.5%
Change
+0.5%
Change
-0.5%
Discount rate %-6.4 %6.8 %-6.5 %6.9
Inflation growth rate %4.2 %-4.1 %3.8 %-4.2
Salary growth rate %1.1 %-1.0 %1.1 %-1.1
Pension growth rate %0.1 %-0.1 %0.1 %-0.1
Plus 1 year Minus 1 year Plus 1 year Minus 1 year
Life expectancy %3.8 %-3.8 %3.6 %-3.6
318
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
14. Staff costs (continued)
14.1 Retirement benefits (continued)
The above sensitivity analysis (with the exception of the inflation sensitivity) is based on a change in one
assumption while holding all other assumptions constant. In practice this is unlikely to occur and some
changes of the assumptions may be correlated. The inflation sensitivity includes changes to any inflation-
linked benefit increases. When calculating the sensitivity of the defined benefit obligation to significant
assumptions, the same method has been applied as when calculating the pension liability recognised on the
consolidated balance sheet. The methods and types of assumptions used in preparing the sensitivity
analysis did not change compared to previous years.
14.2 Share-based compensation plan
Long-Term Incentive Plan
During the Annual General Meeting of the shareholders of the Company which took place on 20 May 2022, a
special resolution was approved for the establishment and implementation of the share based Long-Term
Incentive Plan of Bank of Cyprus Holdings Public Limited Company (the 'LTIP').
The LTIP is an equity-settled share-based compensation plan for executive directors and senior
management of the Group. The LTIP provides for an award in the form of ordinary shares of the Company
based on certain non-market performance and service vesting conditions. Performance will be measured
over a three-year period. The performance conditions are set by the Human Resources & Remuneration
Committee (HRRC) each year and may be differentiated at HRRC's discretion to reflect the Group's strategic
targets and employee's personal performance. Performance will be assessed against an evaluation
scorecard consistent with the Group's Medium Term Strategic Targets containing both financial and non-
financial objectives, and including targets in the areas of: (i) Profitability; (ii) Asset quality; (iii) Capital
adequacy; (iv) Risk control & compliance; and (v) Environmental, Social and Governance ('ESG'). The
awards ordinarily vest in six tranches, with 40% vesting in the year following the year the performance
period ends and the remaining 60% vesting in tranches (12%), on each of the first, second, third, fourth
and fifth anniversary date of the first vesting date. For any award to vest the employee must be in the
employment of the Group up until the date of the vesting of such an award. Under certain circumstances the
HRRC has the discretion to determine whether the award will lapse and/or the extent to which the award
will be vested.
The maximum number of shares that may be issued pursuant to the LTIP until the tenth anniversary of the
relevant resolution shall not exceed 5% of the issued ordinary share capital of the Company, as at the date
of the resolution (being 22,309,996 ordinary shares of €0.10 each), as adjusted for any issuance or
cancellation of shares subsequently to the date of the resolution (excluding any issuances of shares
pursuant to the LTIP).
Under the LTIP the following share awards were granted as of 31 December 2023:
On 3 October 2023 (grant date) 479,160 share awards were granted by the Company to 21 eligible
employees, comprising the Extended Executive Committee of the Group. The awards granted in October
2023 are subject to a three year performance period 2023-2025 (with all performance conditions being
non-market performance conditions).
On 22 December 2022 (grant date) 819,860 share awards were granted by the Company to 22 eligible
employees comprising the Extended Executive Committee of the Group. The awards granted in December
2022 are subject to a three year performance period 2022-2024 (with all performance conditions being
non-market performance conditions).
Each of the share awards granted thereon vest in six tranches, with the first tranche vesting in the year
following the year the performance period ends and the last tranche vesting on the fifth anniversary of the
first vesting date. Vesting is also subject to service conditions. Awards are subject to potential forfeiture
under certain leaver scenarios.
The following table presents movements in outstanding share-based awards during 2023 and 2022.
319
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
14. Staff costs (continued)
14.2 Share-based compensation plan (continued)

| 2023 |  | 2022 |
| Number of |  |  |
| shares |  |  |
|  | Weighted |  |
|  | average grant |  |
|  | date fair value |  |
|  |  | Number of |
|  |  | shares |
|  |  |  | Weighted
|  |  |  | average grant
|  |  |  | date fair value
|  | € |  | €
As at 1 January | 819,860 | 1.69 | - |
Granted during the year | 479,160 | 2.95 | 819,860 | 1.69
Vested during the year | - | - | - | -
Forfeited during the year |  |  |  |
| (89,984) |  |  |
|  | n/a |  |
|  |  | - |
|  |  |  | n/a
31 December |  |  |  |
| 1,209,036 |  | 819,860 |

As at 31 December 2023 the weighted average share price for forfeitures is €1.85.
Assumptions
The fair value calculations as of the granting date for each of the share awards are calculated using Black-
Scholes model. As the award is a share award (and does not contain any market based performance
conditions) the fair value is based on the share price at the date of the grant.
14.3 Short-term incentive plan
Short-term Incentive Plan
Short-term incentive award refers to a Short-term Incentive Plan established by the Company in 2023. This
involves variable remuneration in the form of cash to selected employees, and is driven by both delivery of
the Company's Strategy, as well as individual performance, in the relevant year. Executive Management are
also eligible to be considered for the short-term incentive award. The short-term incentive award is
generally paid in cash and is non-deferred, however, in cases where the amount exceeds a specified
threshold as per regulatory guidelines, 50% of the award is awarded in shares and 50% in cash. In cases
the award for an individual comprises both a cash and a share component then the award vests, similarly to
LTIP vesting, i.e., 40% vests in the year following the performance year to which the incentive award
relates to, and the remaining 60% vests in tranches (12%) over five years.
Shares vesting as part of the short-term incentive award are subject to one-year retention period and 100%
of the award is subject to clawback provisions.
For the short-term incentive award for the performance year 2023 only an amount of €250 thousand is to
be granted in the form of shares and the rest amount is awarded in cash. Further information on the
amounts awarded under the short-term incentive award for the performance year 2023 to Executive
Directors and other key management personnel is disclosed in Note 49.
320
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
15. Other operating expenses

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Repairs and maintenance expenses | 33,837 | 33,622
Property-related costs | 11,714 | 13,429
Consultancy, legal and other professional services fees | 19,467 | 19,244
Insurance | 7,096 | 8,430
Advertising and marketing | 9,000 | 9,328
Incentives to performing customers | 2,500 | -
Depreciation of property and equipment (Note 25) | 13,760 | 13,858
Amortisation of intangible assets (Note 26) | 15,740 | 15,953
Communication expenses | 6,119 | 6,393
Printing and stationery | 1,641 | 1,618
Cash transfer expenses | 3,193 | 2,953
Other operating expenses |  |
| 24,773 | 18,952
| 148,840 | 143,780
Advisory and other transformation costs |  |
| 2,253 | 14,136
| 151,093 | 157,916

Advisory and other transformation costs comprise mainly fees to external advisors in relation to the
transformation program and other strategic projects of the Group.
During the year ended 31 December 2023, the Group recognised €57 thousand relating to rent expense for
short-term leases, included within 'Property-related costs' (2022: €164 thousand as restated) and €5,490
thousand relating to the depreciation of right-of-use assets, included within 'Depreciation of property and
equipment' (2022: €5,558 thousand as restated).
Incentives to performing customers of €2,500 thousand during the year ended 31 December 2023 (2022:
nil) relate to the Reward Programme launched in June 2023 to reward performing borrowers through the
Antamivi reward scheme.
Within total other operating expenses, an amount of €777 thousand (2022: €820 thousand) relates to
investment property that generated rental income.
Special levy on deposits and other levies/contributions as presented in the consolidated income statement
are set out below:

| 2023 | 2022
| €000 | €000
Special levy on deposits of credit institutions in Cyprus | 23,300 | 21,499
Single Resolution Fund contribution | 5,477 | 5,779
Guarantee fee on annual deferred tax credit (Note 17) | 5,364 | 4,795
Contribution to Deposit Guarantee Fund |  |
| 8,239 | 6,419
| 42,380 | 38,492

The special levy on credit institutions in Cyprus (the Special Levy) is imposed on the level of deposits as at
the end of the previous quarter, at the rate of 0.0375% per quarter. Following an amendment of the
Imposition of Special Credit Institution Tax Law in 2017, the Single Resolution Fund contribution, which is
charged annually by the Single Resolution Board, reduces the charge of the Special Levy up to the level of
the total annual Special Levy charge.
As from 1 January 2020 and until 3 July 2024 BOC PCL is subject to a contribution to the Deposit Guarantee
Fund (DGF) on a semi-annual basis. The contributions are calculated based on the Risk Based Methodology
(RBM) as approved by the management committee of the Deposit Guarantee and Resolution of Credit and
Other Institutions Schemes (DGS) and is publicly available on the CBC's website. In line with the RBM, the
contributions are broadly calculated on the covered deposits of all authorised institutions and the target
level is to reach at 0.8% of covered deposits by 3 July 2024.
321
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
15. Other operating expenses (continued)
Fees to the independent auditors of the Group for audit and other professional services provided both in
Cyprus and overseas are presented in the table below:

| PwC Ireland |  | PwC Network firms |
| 2023 | 2022 | 2023 | 2022
| €000 | €000 | €000 | €000
Audit of the individual and the Group |  |  |  |
financial statements |  |  |  |
| 433 | 416 | 1,684 | 1,613
Other assurance services | 117 | 78 | 545 | 345
Tax advisory services | - | - | 169 | 236
Other non-assurance services |  |  |  |
| - | - | 326 | 167
| 117 | 78 | 1,040 | 748
| 550 | 494 | 2,724 | 2,361

15.1. Expenses by nature
An analysis by nature of staff costs and other operating expenses incurred by the Group is presented in the
table below:

|  |  | 2023 |  |
| Directly |  |  |  |
| attributable |  |  |  |
| expenses |  |  |  |
| (Note 12) |  |  |  |
|  | Capitalised |  |  |
|  | as |  |  |
|  | internally |  |  |
|  | developed |  |  |
|  | computer |  |  |
|  | software |  |  |
|  | (Note 26) |  |  |
|  |  | Staff |  |
|  |  | costs |  |
|  |  | (Note 14) |  |
|  |  |  | Other |
|  |  |  | operating |
|  |  |  | expenses |
|  |  |  | (Note 15) |
|  |  |  |  | Total
| €000 | €000 | €000 | €000 | €000
Salaries and employer's contributions | 9,898 | 2,202 | 162,224 | - | 174,324
Variable compensation: |  |  |  |  |
Accrual for short-term incentive award | - | - | 9,955 | - | 9,955
Share-based benefits expense | - | - | 595 | - | 595
Retirement benefit costs (Note 14.1) | 666 | - | 12,072 | - | 12,738
Exit cost and other termination benefits | - | - | 7,420 | - | 7,420
Depreciation | 387 | - | - | 8,270 | 8,657
Depreciation of RoU assets | 1,246 | - | - | 5,490 | 6,736
Amortisation of intangible assets | 3,120 | - | - | 15,740 | 18,860
Other operating expenses |  |  |  |  |
| 4,088 | - | - | 121,593 | 125,681
Total |  |  |  |  |
| 19,405 | 2,202 | 192,266 | 151,093 | 364,966

322
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
15. Other operating expenses (continued)
15.1. Expenses by nature (continued)

|  |  | 2022 |  |
| Directly |  |  |  |
| attributable |  |  |  |
| expenses |  |  |  |
| (Note 12) |  |  |  |
|  | Capitalised |  |  |
|  | as internally |  |  |
|  | developed |  |  |
|  | computer |  |  |
|  | software |  |  |
|  | (Note 26) |  |  |
|  |  | Staff |  |
|  |  | costs |  |
|  |  | (Note 14) |  |
|  |  |  | Other |
|  |  |  | operating |
|  |  |  | expenses |
|  |  |  | (Note 15) |
|  |  |  |  | Total
| €000 | €000 | €000 | €000 | €000
Salaries and employer's contributions | 8,957 | 1,719 | 168,741 | - | 179,417
Variable compensation: |  |  |  |  |
Share-based benefits expense | - | - | 322 | - | 322
Retirement benefit costs (Note 14.1) | 250 | - | 11,766 | - | 12,016
Exit cost and other termination benefits | - | - | 104,325 | - | 104,325
Depreciation | 583 | - | - | 8,300 | 8,883
Depreciation of RoU assets | 1,209 | - | - | 5,558 | 6,767
Amortisation of intangible assets | 2,600 | - | - | 15,953 | 18,553
Other operating expenses |  |  |  |  |
| 4,057 | - | - | 128,105 | 132,162
Total |  |  |  |  |
| 17,656 | 1,719 | 285,154 | 157,916 | 462,445

Directly attributable expenses are expenses incurred by the insurance subsidiaries of the Group that relate
directly to the fulfilment of insurance and re-insurance contracts within the scope of IFRS 17.
16. Credit losses on financial assets and impairment net of reversals of non-financial assets

| 2023 |
|  | 2022
|  | (restated)
Credit losses on financial assets | €000 | €000
Credit losses to cover credit risk on loans and advances to customers |  |
Impairment net of reversals on loans and advances to customers (Note |  |
44.5) |  |
| 81,764 | 64,997
Recoveries of loans and advances to customers previously written off | (15,057) | (11,919)
Changes in expected cash flows | 4,824 | 7,948
Financial guarantees and commitments (Notes 44.6.1 and 44.6.2) |  |
| 1,763 | (4,516)
| 73,294 | 56,510
Credit losses of other financial instruments |  |
Amortised cost debt securities (Note 20) | (531) | 701
FVOCI debt securities (Note 20) | (380) | (23)
Loans and advances to banks (Note 19) | 1 | (52)
Balances with central banks (Note 19) | 330 | 193
Reverse repurchase agreements | 20 | -
Other financial assets (Note 28) |  |
| 7,096 | 1,758
| 6,536 | 2,577
| 79,830 | 59,087

| 2023 | 2022
Impairment net of reversals on non-financial assets | €000 | €000
Stock of property (Note 27) | 46,026 | 20,628
Other non-financial assets |  |
| 826 | 8,921
| 46,852 | 29,549

323
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
17. Income tax

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Current tax: |  |
- Cyprus | 46,319 | 29,826
Cyprus special defence contribution | 47 | 67
Deferred tax charge/(credit) | 26,001 | (513)
Prior years' tax adjustments | (52) | 1,736
Other tax charges |  |
| 665 | 196
| 72,980 | 31,312

The reconciliation between the income tax expense and the profit before tax as estimated using the current
income tax rates is set out below:

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Profit before tax |  |
| 561,924 | 90,743
Income tax at the normal tax rates in Cyprus | 70,241 | 11,343
Income tax effect of: |  |
- expenses not deductible for income tax purposes | 12,862 | 30,999
- income not subject to income tax | (7,366) | (13,029)
- other allowable deductions |  |
| (3,417) | -
| 72,320 | 29,313
Cyprus special defence contribution | 47 | 67
Prior years' tax adjustments | (52) | 1,736
Other tax charges |  |
| 665 | 196
| 72,980 | 31,312

Income tax in Cyprus is calculated at the rate of 12.5% on taxable income (2022: 12.5%).
For life insurance business there is a minimum income tax charge of 1.5% on gross premiums (this is
included within 'Net insurance service result'). Special defence contribution is payable on rental income at a
rate of 3% (2022: 3%) and on interest income from activities outside the ordinary course of business at a
rate of 30% (2022: 30%).
The Group's profits from overseas operations are taxed at the rates prevailing in the respective countries,
which for 2023 were: Greece 22% (2022: 22%), Romania 16% (2022: 16%) and Russia 20% (2022 20%).
The Group is subject to income taxes in the various jurisdictions in which it operates and the calculation of
the Group's income tax charge and provisions for income tax necessarily involves a degree of estimation
and judgement. There are transactions and calculations for which the ultimate income tax treatment is
uncertain and cannot be determined until resolution has been reached with the relevant tax authority. The
Group has a number of open income tax returns with various income tax authorities and liabilities relating
to these judgemental matters are based on estimates of whether additional income taxes will be due. In
case the final income tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the current and deferred income tax assets and liabilities in the
period in which such determination is made.
324
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
17. Income tax (continued)
On 22 December 2022, the European Commission approved Directive 2022/2523 which provides for a
minimum effective tax rate of 15% for the global activities of large multinational groups (Pillar Two tax).
The Directive that follows closely the OECD Inclusive Framework on Base Erosion and Profit Shifting should
be transposed by the Member States throughout 2023, entering into force on 1 January 2024. In Cyprus,
the legislation has not been substantively enacted at the balance sheet date, however it is expected to be
enacted within 2024. The Group expects to be in scope of the draft legislation and has performed an initial
assessment of the potential impact of Pillar Two income taxes and is currently estimated to be in the range
of up to 2% of profit before tax. However, the actual impact will depend on the Group's consolidated income
statement variables at the time of implementation. Because of the calculation complexity resulting from
these rules and as the final legislation has yet to be implemented, the impact of this reform is still being
examined and the Group will further refine the quantification in view of the first accounting recognition of
the additional tax charge in the Group's consolidated accounts in 2024.
Deferred tax
The net deferred tax assets arise from:

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Difference between capital allowances and depreciation | (10,329) | (10,528)
Own property revaluation | (16,546) | (13,338)
Stock of property and investment properties | 7,542 | (2,847)
Unutilised income tax losses carried forward (guaranteed deferred tax |  |
asset) |  |
| 189,546 | 227,455
Other temporary differences (net) |  |
| (1,251) | (7,442)
Net deferred tax assets |  |
| 168,962 | 193,300

The net deferred tax assets comprise:

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Deferred tax assets | 201,268 | 227,934
Deferred tax liabilities |  |
| (32,306) | (34,634)
Net deferred tax assets |  |
| 168,962 | 193,300

The deferred tax assets (DTA) relate to Cyprus operations.
325
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
17. Income tax (continued)
The movement of the net deferred tax assets is set out below:

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
1 January (restated) | 193,300 | 226,125
Deferred tax recognised in the consolidated income statement - tax |  |
(charge)/credit |  |
| (26,001) | 4,840
Deferred tax recognised in the consolidated statement of comprehensive |  |
income - tax (charge)/credit |  |
| (3,234) | 244
Transfer to current tax payables following the adoption of IFRS 17 | 4,871 | -
Transfer to current tax receivables following conversion into tax credit | - | (37,909)
Other transfers |  |
| 26 | -
31 December |  |
| 168,962 | 193,300

The Group offsets income tax assets and liabilities only if it has a legally enforceable right to set-off current
income tax assets and current income tax liabilities.
The analysis of the net deferred tax charge/(credit) recognised in the consolidated income statement is set
out below:

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Difference between capital allowances and depreciation | (199) | (462)
Temporary differences on valuation of investment properties and stock of |  |
property |  |
| (10,389) | -
Utilisation of annual instalment of acquired tax losses | 37,909 | -
Other temporary differences |  |
| (1,320) | (51)
| 26,001 | (513)

The analysis of the net deferred tax (charge)/credit recognised in other comprehensive income in the
consolidated statement of comprehensive income is set out below:

| 2023 | 2022
| €000 | €000
Temporary differences on own property revaluation - (charge)/credit |  |
| (3,234) | 244

Income Tax Law Amendment 28 (I) of 2019
On 1 March 2019 the Cyprus Parliament adopted legislative amendments to the Income Tax Law (the 'Law')
which were published in the Official Gazette of the Republic on 15 March 2019 ('the amendments').
The main provisions of the legislation are set out below:
i. The amendments allow for the conversion of specific tax losses into tax credits.
ii. The Law applies only to tax losses transferred following resolution of a credit institution within the
framework of 'The Resolution of Credit and Other Institutions Law'.
iii. The losses are capped to the amount of Deferred Tax Assets (DTA) recognised on the balance sheet of
the audited financial statements of the acquiring credit institution in the year of acquisition.
iv. Acquired tax losses are converted into 15 equal annual instalments or into 11 equal annual instalments
for acquired losses from credit institutions which were in resolution pre 31 December 2017.
v. Each annual instalment can be claimed as a deductible expense in the determination of the taxable
income for the relevant year. Annual instalments are capped and cannot create additional losses for the
credit institution.
vi. Any amount of the annual instalment not utilised is converted into a tax credit (with reference to the
applicable tax rate enacted at the time of the conversion) and it can be utilised in the tax year following
the tax year to which this tax credit relates to. The tax credit can be used against a tax liability
(Corporate Income Tax Law, VAT Law or Bank levy Law) of the credit institution or any other eligible
subsidiary for group relief. Any unutilised tax credit in the relevant year is converted into a receivable
from the Cyprus Government.
326
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
17. Income tax (continued)
vii. In financial years where a credit institution has accounting losses the amount of the annual instalment is
recalculated. Upon recalculation, the mechanics outlined above remain unchanged.
viii. In case a credit institution in scope goes into liquidation the total amount of unused annual instalments
are converted to tax credits and immediately become a receivable from the Government.
ix. A guarantee fee on annual tax credit is payable annually by the credit institution to the Government.
In response to concerns raised by the European Commission with regard to the provision of state aid arising
out of the treatment of such tax losses, the Cyprus Government has proceeded with the adoption of
modifications to the Law, including requirements for an additional annual fee over and above the 1.5%
annual guarantee fee already provided for in the Law, to maintain the conversion of such DTAs into tax
credits. The relevant amendments were voted by the Cyprus Parliament in May 2022 and have become
effective since. As prescribed by the amendments in the Law, the annual fee is to be determined by the
Cyprus Government on an annual basis, providing however, for such fee charge to be set at a minimum fee
of 1.5% of the annual instalment and can range up to a maximum amount of €10,000 thousand per year,
and also allowing for a higher amount to be charged in the year the amendments are effective (i.e. in
2022).
BOC PCL has DTA that meets the requirements of the Income Tax Law Amendment 28(I) of 2019 relating to
income tax losses transferred to BOC PCL as a result of the acquisition of certain operations of Laiki Bank,
on 29 March 2013, under 'The Resolution of Credit and Other Institutions Law'. The DTA recognised upon
the acquisition of certain operations of Laiki in 2013 amounted to €417 million (corresponding to €3.3 billion
tax losses) for which BOC PCL paid a consideration as part of the respective acquisition. The period of
utilisation of the tax losses which may be converted into tax credits is eleven years following the
amendment of the Law in 2019, starting from 2018 i.e., by end of 2028.
As a result of the above Law, the Group has DTA amounting to €189,546 thousand as at 31 December 2023
(2022: €227,455 thousand) that meet the requirements under this Law, the recovery of which is
guaranteed. On an annual basis an amount is either converted to annual tax credit and is reclassified from
the DTA to current tax receivables or it is used in the determination of the taxable income of the relevant
year, as the annual instalment can be claimed as a deductible expense in which case the annual instalment
is reflected as a charge in the Consolidated Income Statement.
The DTA subject to the Law is accounted for on the same basis as described in Note 2.11.
The Group in prior years, in anticipation of modifications in the Law, acknowledged that such increased
annual fee may be required to be recorded on an annual basis until expiration of such losses in 2028. The
Group estimates that such fees could range up to €5,300 thousand per year (for each tax year in scope i.e.,
since 2018) although the Group understands that such fee may fluctuate annually as to be determined by
the Ministry of Finance. An amount of €5,364 thousand that relates to the tax credit of year 2023 (2022:
€4,795 thousand) was recorded during the year ended 31 December 2023. In the third quarter of 2022,
BOC PCL has been levied an amount for years 2018-2021 within the provisions level maintained.
Accumulated income tax losses
The accumulated income tax losses are presented in the table below:

| Total income |  |
| tax losses |  |
|  | Income tax |
|  | losses for |
|  | which a |
|  | deferred tax |
|  | asset was |
|  | recognised |
|  |  | Income tax
|  |  | losses for
|  |  | which no
|  |  | deferred tax
|  |  | asset was
|  |  | recognised
2023 | €000 | €000 | €000
Expiring within 5 years | 45,851 | - | 45,851
Utilisation in annual instalments up to 2028 |  |  |
| 1,516,364 | 1,516,364 | -
| 1,562,215 | 1,516,364 | 45,851
2022 |  |  |
Expiring within 5 years | 44,960 | - | 44,960
Utilisation in annual instalments up to 2028 |  |  |
| 1,819,636 | 1,819,636 | -
| 1,864,596 | 1,819,636 | 44,960

327
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
18. Earnings per share
Basic earnings per share

Basic profit per share attributable to the owners of the Company | 2023 |
|  | 2022
|  | (restated)
Profit for the year attributable to the owners of the Company |  |
(€ thousand) (basic) |  |
| 487,207 | 56,565
Weighted average number of shares in issue during the year, excluding |  |
treasury shares (thousand) |  |
| 446,058 | 446,058
Basic profit per share (€ cent) |  |
| 109.2 | 12.7

Diluted earnings per share

Diluted profit per share attributable to the owners of the Company | 2023 |
|  | 2022
|  | (restated)
Profit for the year attributable to the owners of the Company |  |
(€ thousand) |  |
| 487,207 | 56,565
Weighted average number of shares in issue during the year, excluding |  |
treasury shares adjusted for the dilutive effect of all rights on shares |  |
(thousand) |  |
| 447,158 | 446,058
Diluted profit per share (€ cent) |  |
| 109.0 | 12.7

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted for the
dilutive effect of ordinary shares that may arise in respect of share awards granted to executive directors
and senior management of the Group under the Long-Term Incentive Plan (LTIP).
19. Cash, balances with central banks and loans and advances to banks

| 2023 | 2022
| €000 | €000
Cash | 92,541 | 91,717
Balances with central banks | 9,522,484 | 9,475,734
Allowance for expected credit losses (Note 16) |  |
| (523) | (193)
| 9,614,502 | 9,567,258

| 2023 | 2022
| €000 | €000
Loans and advances to banks | 384,824 | 204,832
Allowance for expected credit losses (Note 16) |  |
| (22) | (21)
| 384,802 | 204,811

An analysis of the movement of the gross carrying amount of balances with central banks is presented in
the table below:

| 2023 | 2022
Gross carrying amount | €000 | €000
1 January | 9,475,734 | 9,087,968
Net increase |  |
| 46,750 | 387,766
31 December |  |
| 9,522,484 | 9,475,734

Balances with central banks are classified as Stage 1.
The ECL charge (Note 16) o n balances with central banks for the year ended 31 December 2023 amounted
to €330 thousand (2022: €193 thousand).
An analysis of the movement of the gross carrying amount before ECL and ECL of loans and advances to
banks is presented in the table below:
328
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
19. Cash, balances with central banks and loans and advances to banks (continued)

| 2023 |  | 2022 |
| Gross carrying |  |  |
| amount |  |  |
|  | ECL |  |
|  |  | Gross carrying |
|  |  | amount |
|  |  |  | ECL
| €000 | €000 | €000 | €000
1 January | 204,832 | (21) | 291,705 | (73)
Net increase/(decrease) | 180,043 | - | (85,970) | -
Changes to models and inputs used for |  |  |  |
ECL calculation (Note 16) |  |  |  |
| - | (1) | - | 52
Foreign exchange adjustments |  |  |  |
| (51) | - | (903) | -
31 December |  |  |  |
| 384,824 | (22) | 204,832 | (21)

All loans and advances to banks are classified as Stage 1.
Balances with central banks include obligatory deposits for liquidity purposes which amount to €59,179
thousand as at 31 December 2023 (2022: €114,537 thousand) (Note 41). T he average balance of
obligatory deposits that should be maintained with central banks was set at €186,794 thousand for the
period of December 2023 to January 2024 (2022: €187,280 thousand for the period December 2022 to
February 2023).
The credit rating analysis of balances with central banks and loans and advances to banks by independent
credit rating agencies is set out in Note 44.11.
Loans and advances to banks earn interest based on the interbank rate of the relevant term and currency.
20. Investments
The analysis of the Group's investments is presented in the table below:

| 2023 | 2022
| €000 | €000
Investments at FVPL | 135,275 | 190,209
Investments at FVOCI | 443,420 | 467,375
Investments at amortised cost |  |
| 3,116,714 | 2,046,119
| 3,695,409 | 2,703,703

Out of these, the amounts pledged as collateral are shown below:

| 2023 | 2022
Investments pledged as collateral | €000 | €000
Investments at FVOCI | 25,458 | 60,974
Investments at amortised cost |  |
| 234,553 | 223,369
| 260,011 | 284,343

Investments pledged as collateral as at 31 December 2023 and 2022 related to debt securities collaterised
mainly for the additional amounts borrowed from the ECB Targeted Longer-Term Refinancing Operations
(TLTRO III) (Note 29). Encumbered assets are disclosed in Note 46.
The maximum exposure to credit risk for debt securities is disclosed in Note 44.1 a nd the debt securities
price risk sensitivity analysis is disclosed in Note 45.
The increase in the investment portfolio as at 31 December 2023 is consistent with the strategy of the
Group to prudently grow the fixed income portfolio.
The credit rating analysis of investments is disclosed in Note 44.11.
329
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
20. Investments (continued)
Investments at fair value through profit or loss

| Investments mandatorily |
| measured at FVPL |
| 2023 | 2022
| €000 | €000
Other non-equity securities | 3,611 | 8,968
Equity securities | 903 | 6,961
Mutual funds |  |
| 130,761 | 174,280
| 135,275 | 190,209

Investments at FVOCI

| 2023 | 2022
| €000 | €000
Debt securities | 431,068 | 453,775
Equity securities |  |
| 12,352 | 13,600
| 443,420 | 467,375

Investments at amortised cost

| 2023 | 2022
| €000 | €000
Debt securities |  |
| 3,116,714 | 2,046,119

Further analysis of the Group's investments is provided in the tables below.
Equity securities

| FVPL | FVOCI | Total
2023 | €000 | €000 | €000
Listed on the Cyprus Stock Exchange | - | 728 | 728
Listed on other stock exchanges | 903 | 58 | 961
Unlisted |  |  |
| - | 11,566 | 11,566
| 903 | 12,352 | 13,255

| FVPL | FVOCI | Total
2022 | €000 | €000 | €000
Listed on the Cyprus Stock Exchange | - | 1,335 | 1,335
Listed on other stock exchanges | 6,961 | 68 | 7,029
Unlisted |  |  |
| - | 12,197 | 12,197
| 6,961 | 13,600 | 20,561

The Group irrevocably made the election to classify its equity investments as equity investments at FVOCI
on the basis that these are not held for trading. Their carrying value amounts to €12,352 thousand at 31
December 2023 and is equal to their fair value (2022: €13,600 thousand).
Equity investments at FVOCI comprise mainly investments in private Cyprus registered companies, acquired
through loan restructuring activity and specifically through debt for equity swaps.
Dividend income amounting to €856 thousand has been received and recognised for 2023 in other income
(2022: €940 thousand) (Note 13).
During the year ended 31 December 2023 holdings of an equity investment measured at FVOCI with a
carrying value of €702 thousand have been disposed of (2022: no material equity investments measured at
FVOCI have been disposed of). During the year ended 31 December 2022, there were transfers from OCI to
retained earnings of €2,931 thousand relating to investments disposed of in prior years.
330
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
20. Investments (continued)
Mutual funds

| FVPL
2023 | €000
Listed on other stock exchanges | 35,192
Unlisted |
| 95,569
| 130,761

| FVPL
2022 | €000
Listed on other stock exchanges | 77,782
Unlisted |
| 96,498
| 174,280

The majority of the unlisted mutual funds relate to investments whose underlying assets are listed on stock
exchanges and are therefore presented in Level 2 hierarchy in Note 22.
Debt securities and other non-equity securities

Analysis by issuer type | FVPL | FVOCI |  |
|  |  | Amortised |
|  |  | cost |
|  |  |  | Total
2023 | €000 | €000 | €000 | €000
Cyprus government | - | 315,640 | 610,781 | 926,421
Other governments | - | 10,316 | 751,247 | 761,563
Financial institutions | - | 81,727 | 1,046,184 | 1,127,911
Other financial corporations | 3,611 | - | 47,477 | 51,088
Supranational organisations | - | 18,438 | 550,394 | 568,832
Other non-financial corporations |  |  |  |
| - | 4,947 | 110,631 | 115,578
| 3,611 | 431,068 | 3,116,714 | 3,551,393

| FVPL | FVOCI |  |
|  |  | Amortised |
|  |  | cost |
|  |  |  | Total
2022 | €000 | €000 | €000 | €000
Cyprus government | - | 310,791 | 521,322 | 832,113
Other governments | - | 22,616 | 402,844 | 425,460
Financial institutions | - | 115,497 | 722,522 | 838,019
Other financial corporations | 8,968 | - | 36,547 | 45,515
Supranational organisations | - | - | 293,834 | 293,834
Other non-financial corporations |  |  |  |
| - | 4,871 | 69,050 | 73,921
| 8,968 | 453,775 | 2,046,119 | 2,508,862

331
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
20. Investments (continued)

Geographic dispersion by country of issuer | FVPL | FVOCI |  |
|  |  | Amortised |
|  |  | cost |
|  |  |  | Total
2023 | €000 | €000 | €000 | €000
Cyprus | - | 315,640 | 621,162 | 936,802
Greece | - | 18,726 | 60,297 | 79,023
Germany | - | - | 210,507 | 210,507
France | - | 31,659 | 283,235 | 314,894
Other European Union countries | - | 20,342 | 741,157 | 761,499
United Kingdom | - | - | 18,089 | 18,089
USA and Canada | 3,611 | 4,077 | 273,447 | 281,135
Other countries | - | 22,186 | 358,426 | 380,612
Supranational organisations |  |  |  |
| - | 18,438 | 550,394 | 568,832
| 3,611 | 431,068 | 3,116,714 | 3,551,393

| FVPL | FVOCI | Amortised cost | Total
2022 | €000 | €000 | €000 | €000
Cyprus | - | 310,791 | 531,611 | 842,402
Greece | - | 14,987 | 43,276 | 58,263
Germany | - | - | 121,132 | 121,132
France | - | 58,134 | 162,405 | 220,539
Other European Union countries | - | 33,298 | 370,728 | 404,026
United Kingdom | - | - | 23,128 | 23,128
USA and Canada | 8,968 | 8,974 | 238,802 | 256,744
Other countries | - | 27,591 | 261,203 | 288,794
Supranational organisations |  |  |  |
| - | - | 293,834 | 293,834
| 8,968 | 453,775 | 2,046,119 | 2,508,862

'Other countries' include exposures in Israel amounting to €46,715 thousand as at 31 December 2023
(2022: €58,642 thousand).

Listing analysis | FVPL | FVOCI |  |
|  |  | Amortised |
|  |  | cost |
|  |  |  | Total
2023 | €000 | €000 | €000 | €000
Listed on the Cyprus Stock Exchange | - | - | 4,566 | 4,566
Listed on other stock exchanges | - | 431,068 | 3,112,148 | 3,543,216
Unlisted |  |  |  |
| 3,611 | - | - | 3,611
| 3,611 | 431,068 | 3,116,714 | 3,551,393

| FVPL | FVOCI |  |
|  |  | Amortised |
|  |  | cost |
|  |  |  | Total
2022 | €000 | €000 | €000 | €000
Listed on the Cyprus Stock Exchange | - | - | 29,849 | 29,849
Listed on other stock exchanges | - | 453,775 | 2,016,270 | 2,470,045
Unlisted |  |  |  |
| 8,968 | - | - | 8,968
| 8,968 | 453,775 | 2,046,119 | 2,508,862

The Group uses fair value hedging to manage the interest rate risk in relation to its FVOCI bonds (Note 21).
An analysis of the movement of the gross debt securities at FVOCI before ECL and ECL of debt securities is
presented in the table below:
332
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
20. Investments (continued)

| 2023 |  | 2022 |
| Gross debt |  |  |
| securities |  |  |
|  | ECL |  |
|  |  | Gross debt |
|  |  | securities |
|  |  |  | ECL
| €000 | €000 | €000 | €000
1 January | 454,438 | (663) | 733,766 | (686)
New assets acquired in the year | 84,700 | - | 27,972 | -
Assets derecognised and redeemed in the |  |  |  |
year (Note 16) |  |  |  |
| (128,929) | 39 | (244,486) | 35
Interest accrued and amortisation | (1,728) | - | (6,119) | -
Foreign exchange adjustments | (640) | - | 11,190 | -
Changes to models and inputs used for |  |  |  |
ECL calculations (Note 16) |  |  |  |
| - | 341 | - | (12)
Changes in fair value |  |  |  |
| 23,510 | - | (67,885) | -
31 December |  |  |  |
| 431,351 | (283) | 454,438 | (663)

All debt securities measured at FVOCI are classified as Stage 1.
An analysis of the movement in the gross carrying amount before ECL of the debt securities at amortised
cost by staging is presented in the table below:

|  | 2023 |  |  | 2022 |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
| €000 | €000 | €000 | €000 | €000 | €000
1 January | 2,047,638 | - | 2,047,638 | 1,143,533 | 48,559 | 1,192,092
New assets acquired in the year | 1,472,417 | - | 1,472,417 | 1,073,058 | - | 1,073,058
Assets derecognised and/or |  |  |  |  |  |
redeemed in the year |  |  |  |  |  |
| (428,958) | - | (428,958) | (164,874) | (47,100) | (211,974)
Fair value due to hedging |  |  |  |  |  |
relationship |  |  |  |  |  |
| 2,674 | - | 2,674 | (10,527) | (197) | (10,724)
Interest accrued and |  |  |  |  |  |
amortisation |  |  |  |  |  |
| 31,326 | - | 31,326 | (179) | (1,262) | (1,441)
Foreign exchange adjustments |  |  |  |  |  |
| (7,395) | - | (7,395) | 6,627 | - | 6,627
31 December |  |  |  |  |  |
| 3,117,702 | - | 3,117,702 | 2,047,638 | - | 2,047,638

An analysis of changes on the respective ECL is presented in the table below:

|  | 2023 |  |  | 2022 |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
| €000 | €000 | €000 | €000 | €000 | €000
1 January | (1,519) | - | (1,519) | (722) | (96) | (818)
Assets derecognised and/or |  |  |  |  |  |
redeemed (Note 16) |  |  |  |  |  |
| 102 | - | 102 | 11 | 96 | 107
Changes to models and inputs |  |  |  |  |  |
used for ECL calculation (Note |  |  |  |  |  |
16) |  |  |  |  |  |
| 429 | - | 429 | (808) | - | (808)
31 December |  |  |  |  |  |
| (988) | - | (988) | (1,519) | - | (1,519)

There were no reclassifications of investments during the year ended 31 December 2023 and 2022.
The fair value of the financial assets that have been reclassified out of FVPL to FVOCI on transition to IFRS
9, amounts to €7,149 thousand at 31 December 2023 (2022: €8,694 thousand). The fair value loss that
would have been recognised in the consolidated income statement during the year ended 31 December
2023 if these financial assets had not been reclassified as part of the transition to IFRS 9, amounts to €140
thousand (2022: loss of €1,432 thousand). The effective interest rate of these instruments is 1.6%-5.0%
(2022: 1.6%-5.0%) per annum and the respective interest income during the year ended 31 December
2023 amounts to €227 thousand (2022: €252 thousand).
333
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
21. Derivative financial instruments
The contract amount and fair value of the derivative financial instruments is set out below:

|  | 2023 |  |  | 2022 |
|  | Fair value |  |  | Fair value |
| Contract |  |  |  |  |
| amount |  |  |  |  |
|  | Assets | Liabilities |  |  |
|  |  |  | Contract |  |
|  |  |  | amount |  |
|  |  |  |  | Assets | Liabilities
| €000 | €000 | €000 | €000 | €000 | €000
Trading derivatives |  |  |  |  |  |
Forward exchange rate contracts | 23,960 | 205 | 184 | 13,239 | 103 | 123
Currency swaps | 986,259 | 136 | 13,278 | 1,248,522 | 283 | 10,316
Interest rate swaps | 13,460 | 189 | 181 | 14,806 | 437 | 420
Currency options | 44 | 2 | 42 | 352 | 287 | 65
Interest rate caps/floors |  |  |  |  |  |
| 166,075 | 1,843 | 1,844 | 171,864 | 3,094 | 3,094
| 1,189,798 | 2,375 | 15,529 | 1,448,783 | 4,204 | 14,018
Derivatives qualifying for hedge |  |  |  |  |  |
accounting |  |  |  |  |  |
Fair value hedges - interest rate |  |  |  |  |  |
swaps |  |  |  |  |  |
| 1,401,531 | 48,679 | 2,451 | 803,513 | 43,939 | 2,151
Net investments - forward exchange |  |  |  |  |  |
rate contracts |  |  |  |  |  |
| 1,200 | 1 | - | 3,059 | 10 | -
| 1,402,731 | 48,680 | 2,451 | 806,572 | 43,949 | 2,151
Total |  |  |  |  |  |
| 2,592,529 | 51,055 | 17,980 | 2,255,355 | 48,153 | 16,169

The use of derivatives is an integral part of the Group's activities. Derivatives are used to manage the
Group's own exposure to fluctuations in interest rates and foreign currency exchange rates. Derivatives are
also sold to customers as risk management products.
Credit risk for derivatives arises from the possibility of the counterparty's failure to meet the terms of any
contract. In the case of derivatives, credit losses are a significantly smaller amount compared to the
derivatives' notional amount. In order to manage credit risk, the Group sets derivative limits based on the
creditworthiness of the involved counterparties and uses credit mitigation techniques such as netting and
collateralisation.
Interest rate risk is explained in Note 45. The interest rate risk is managed through the use of own balance
sheet solutions such as plain vanilla interest rate swaps and interest rate options. In fair value hedges of
interest rate risk, the Group converts fixed rate assets/liabilities to floating. In cash flow hedging of interest
rate risk, the Group converts floating rate assets/liabilities to fixed.
Currency risk is explained in Note 45. I n order to manage the risk, the Group hedges its open position by
entering into foreign exchange deals such as: foreign exchange spot, foreign exchange forwards, foreign
exchange swaps or foreign exchange options. The foreign currency risk mainly arises from customer-driven
transactions on deposits and loans and advances.
Forward exchange rate contracts are irrevocable agreements to buy or sell a specified quantity of foreign
currency on a specified future date at an agreed rate.
Currency swaps include simple currency swaps and cross-currency swaps. Simple currency swaps involve
the exchange of two currencies at the current market rate and the commitment to re-exchange them at a
specified rate upon maturity of the swap. Cross-currency swaps are interest rate swaps in which the cash
flows are in different currencies.
Interest rate swaps are contractual agreements between two parties to exchange fixed rate and floating
rate interest, by means of periodic payments, based upon a notional principal amount and the interest rates
defined in the contract.
Currency options are contracts that grant the holder the right, but not the obligation, to buy or sell currency
at a specified exchange rate during a specified period of time.
Interest rate caps/floors protect the buyer from fluctuations of interest rates above or below a specified
interest rate for a specified period of time.
334
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
21. Derivative financial instruments (continued)
The credit exposure of derivative financial instruments represents the cost to replace these contracts at the
reporting date. The exposure arising from these transactions is managed as part of the Group's credit risk
management process for credit facilities granted to customers and financial institutions.
The contract amount of certain types of derivative financial instruments provides a basis for comparison
with other instruments recognised on the consolidated balance sheet, but does not necessarily indicate the
amount of future cash flows involved or the current fair value of the instruments and, consequently, does
not indicate the Group's exposure to credit or market risk.
The fair value of the derivatives can be either positive (asset) or negative (liability) as a result of
fluctuations in market interest rates and foreign currency exchange rates in accordance with the terms of
the relevant contract. The aggregate net fair value of derivatives may fluctuate significantly over time.
Hedge accounting
The Group elected, as a policy choice permitted by IFRS 9, to continue to apply hedge accounting in
accordance with IAS 39.
The Group applies hedge accounting using derivatives when the required criteria for hedge accounting are
met. The Group also uses derivatives for economic hedging (hedging the changes in interest rates, foreign
currency exchange rates or other risks) which do not meet the criteria for hedge accounting. As a result,
these derivatives are accounted for as trading derivatives and the gains or losses arising from revaluation
are recognised in the consolidated income statement.
Fair value hedges
The Group uses interest rate swaps to hedge the interest rate risk arising as a result of the possible adverse
movement in the fair value of fixed rate debt securities measured at FVOCI as well as on debt securities in
issue and subordinated liabilities.
Changes in the fair value of derivatives designated as fair value hedges and the fair value of the hedged
item in relation to the risk being hedged are recognised in the consolidated income statement.
Hedges of net investments
The Group's consolidated balance sheet is impacted by foreign currency exchange differences between the
Euro and all non-Euro functional currencies of overseas subsidiaries and other foreign operations. The Group
hedges its structural currency risk when it considers that the cost of such hedging is within an acceptable
range (in relation to the underlying risk). This hedging is effected by financing with borrowings in the same
currency as the functional currency of the overseas subsidiaries and other foreign operations and by forward
exchange rate contracts.
As at 31 December 2023, forward exchange rate contracts amounting to €1,200 thousand (2022: forward
exchange rate contracts amounting to €3,059 thousand) have been designated as hedging instruments and
have given rise to a loss of €13 thousand (2022: loss of €4,079 thousand) which was recognised in the
'Foreign currency translation reserve' in the consolidated statement of comprehensive income, against the
profit or loss from the retranslation of the net assets of the overseas subsidiaries and other foreign
operations.

| Gains/(losses) attributable to |  |
| hedged risk |  |
|  |  | Hedge in-
|  |  | effectiveness
2023 |  |  |
| Hedged items |  |
|  | Hedging |
|  | instruments |
Derivatives qualifying for hedge accounting | €000 | €000 | €000
Fair value hedges |  |  |
-interest rate swaps | 4,329 | (2,211) | 2,118
Net investments |  |  |
-forward exchange rate contracts |  |  |
| 13 | (13) | -
Total |  |  |
| 4,342 | (2,224) | 2,118

335
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
21. Derivative financial instruments (continued)

| Gains/(losses) attributable |  |
| to hedged risk |  |
|  |  | Hedge in-
|  |  | effectiveness
2022 |  |  |
| Hedged |  |
| items |  |
|  | Hedging |
|  | instruments |
Derivatives qualifying for hedge accounting | €000 | €000 | €000
Fair value hedges |  |  |
-interest rate swaps | (62,563) | 65,427 | (2,864)
Net investments |  |  |
-forward exchange rate contracts |  |  |
| 4,079 | (4,079) | -
Total |  |  |
| (58,484) | 61,348 | (2,864)

The accumulated fair value adjustment arising from the hedging relationships is presented in the table
below:

| Carrying amount of hedged |  |  |
| items |  |  |
|  |  | Accumulated amount of fair |
|  |  | value hedging adjustments |
|  |  | gains/(losses) on the |
|  |  | hedged item |
2023 | Assets | Liabilities | Assets | Liabilities
Derivatives qualifying for hedge |  |  |  |
accounting | €000 | €000 | €000 | €000
Fair value hedges - interest rate swaps |  |  |  |
-debt securities - investments | 439,043 | - | (43,441) | -
-debt securities in issue | - | 671,632 | - | (9,421)
-subordinated liabilities | - | 306,787 | - | (4,237)
Net investments - forward exchange rate |  |  |  |
contracts |  |  |  |
Net assets |  |  |  |
| 1,200 | - | 1 | -
Total |  |  |  |
| 440,243 | 978,419 | (43,440) | (13,658)

| Carrying amount of hedged |  |  |
| items |  |  |
|  |  | Accumulated amount of fair |
|  |  | value hedging adjustments |
|  |  | gains/(losses) on the hedged |
|  |  | item |
2022 | Assets | Liabilities | Assets | Liabilities
Derivatives qualifying for hedge |  |  |  |
accounting | €000 | €000 | €000 | €000
Fair value hedges - interest rate swaps |  |  |  |
-debt securities - investments | 468,396 | - | (66,555) | -
-debt securities in issue | - | 297,636 | - | 4,853
Net investments - forward exchange rate |  |  |  |
contracts |  |  |  |
Net assets |  |  |  |
| 3,059 | - | 10 | -
Total |  |  |  |
| 471,455 | 297,636 | (66,545) | 4,853

For assets hedged using fair value hedges the fixed rate is 2.05% and the floating rate is 3.98% as at 31
December 2023 (2022: 1.84% and 1.20% respectively). For liabilities hedged using fair value hedges, the
average fixed rate is 5.44% and the average floating rate is 5.96% as at 31 December 2023 (2022: 0.62%
and 0.25% respectively).
336
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
21. Derivative financial instruments (continued)
The maturity of the Group's contract amount of the derivatives is presented in the table below:

| On demand |  |  |  |  |
| and up to one |  |  |  |  |
| month |  |  |  |  |
|  | Between one |  |  |  |
|  | and three |  |  |  |
|  | months |  |  |  |
|  |  | Between |  |  |
|  |  | three months |  |  |
|  |  | and one year |  |  |
|  |  |  | Between one |  |
|  |  |  | and five |  |
|  |  |  | years |  |
|  |  |  |  | Over five |
|  |  |  |  | years |
|  |  |  |  |  | Total
|  |  |  |  |  | contract
|  |  |  |  |  | amount
2023 | €000 | €000 | €000 | €000 | €000 | €000
Trading |  |  |  |  |  |
derivatives |  |  |  |  |  |
Forward |  |  |  |  |  |
exchange rate |  |  |  |  |  |
contracts |  |  |  |  |  |
| 9,734 | 9,657 | 4,569 | - | - | 23,960
Currency swaps | 852,963 | 132,603 | 693 | - | - | 986,259
Interest rate |  |  |  |  |  |
swaps |  |  |  |  |  |
| - | 4,372 | 9,088 | - | - | 13,460
Currency options | 44 | - | - | - | - | 44
Interest rate |  |  |  |  |  |
caps/floors |  |  |  |  |  |
| - | - | - | 166,075 | - | 166,075
| 862,741 | 146,632 | 14,350 | 166,075 | - | 1,189,798
Derivatives |  |  |  |  |  |
qualifying for |  |  |  |  |  |
hedge |  |  |  |  |  |
accounting |  |  |  |  |  |
Fair value |  |  |  |  |  |
hedges - interest |  |  |  |  |  |
rate swaps |  |  |  |  |  |
| - | 15,000 | 56,031 | 1,166,000 | 164,500 | 1,401,531
Net investments |  |  |  |  |  |
- forward |  |  |  |  |  |
exchange rate |  |  |  |  |  |
contracts |  |  |  |  |  |
| 1,200 | - | - | - | - | 1,200
| 1,200 | 15,000 | 56,031 | 1,166,000 | 164,500 | 1,402,731
Total |  |  |  |  |  |
| 863,941 | 161,632 | 70,381 | 1,332,075 | 164,500 | 2,592,529

337
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
21. Derivative financial instruments (continued)

| On demand |  |  |  |  |
| and up to one |  |  |  |  |
| month |  |  |  |  |
|  | Between one |  |  |  |
|  | and three |  |  |  |
|  | months |  |  |  |
|  |  | Between three |  |  |
|  |  | months and |  |  |
|  |  | one year |  |  |
|  |  |  | Between one |  |
|  |  |  | and five years |  |
|  |  |  |  | Over five |
|  |  |  |  | years |
|  |  |  |  |  | Total contract
|  |  |  |  |  | amount
2022 | €000 | €000 | €000 | €000 | €000 | €000
Trading |  |  |  |  |  |
derivatives |  |  |  |  |  |
Forward |  |  |  |  |  |
exchange rate |  |  |  |  |  |
contracts |  |  |  |  |  |
| 1,649 | 9,138 | 2,452 | - | - | 13,239
Currency swaps | 1,109,302 | 139,220 | - | - | - | 1,248,522
Interest rate |  |  |  |  |  |
swaps |  |  |  |  |  |
| - | - | - | 14,806 | - | 14,806
Currency options | 352 | - | - | - | - | 352
Interest rate |  |  |  |  |  |
caps/floors |  |  |  |  |  |
| - | - | - | 154,173 | 17,691 | 171,864
| 1,111,303 | 148,358 | 2,452 | 168,979 | 17,691 | 1,448,783
Derivatives |  |  |  |  |  |
qualifying for |  |  |  |  |  |
hedge |  |  |  |  |  |
accounting |  |  |  |  |  |
Fair value |  |  |  |  |  |
hedges - interest |  |  |  |  |  |
rate swaps |  |  |  |  |  |
| 23,416 | 17,000 | 42,200 | 486,397 | 234,500 | 803,513
Net investments |  |  |  |  |  |
- forward |  |  |  |  |  |
exchange rate |  |  |  |  |  |
contracts |  |  |  |  |  |
| 3,059 | - | - | - | - | 3,059
| 26,475 | 17,000 | 42,200 | 486,397 | 234,500 | 806,572
Total |  |  |  |  |  |
| 1,137,778 | 165,358 | 44,652 | 655,376 | 252,191 | 2,255,355

338
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement
The following table presents the carrying value and fair value of the Group's financial assets and liabilities.

| 2023 |  |  |
|  |  | 2022 |
|  |  | (restated) |
| Carrying |  |  |
| value |  |  |
|  | Fair value |  |
|  |  | Carrying |
|  |  | value |
|  |  |  | Fair value
Financial assets | €000 | €000 | €000 | €000
Cash and balances with central banks | 9,614,502 | 9,614,502 | 9,567,258 | 9,567,258
Loans and advances to banks | 384,802 | 370,853 | 204,811 | 193,349
Investments at FVPL | 135,275 | 135,275 | 190,209 | 190,209
Investments at FVOCI | 443,420 | 443,420 | 467,375 | 467,375
Investments at amortised cost | 3,116,714 | 3,119,618 | 2,046,119 | 1,953,336
Reverse repurchase agreements | 403,199 | 411,654 | - | -
Derivative financial assets | 51,055 | 51,055 | 48,153 | 48,153
Loans and advances to customers | 9,821,788 | 9,972,249 | 9,953,252 | 10,011,741
Life insurance business assets attributable |  |  |  |
to policyholders |  |  |  |
| 637,562 | 637,562 | 531,061 | 531,061
Other financial assets |  |  |  |
| 388,244 | 406,602 | 402,462 | 456,402
| 24,996,561 | 25,162,790 | 23,410,700 | 23,418,884
Financial liabilities |  |  |  |
Funding from central banks and deposits by |  |  |  |
banks |  |  |  |
| 2,515,424 | 2,472,718 | 2,484,332 | 2,399,266
Derivative financial liabilities | 17,980 | 17,980 | 16,169 | 16,169
Customer deposits | 19,336,915 | 19,300,867 | 18,998,319 | 18,963,934
Debt securities in issue | 671,632 | 655,428 | 297,636 | 254,179
Subordinated liabilities | 306,787 | 300,098 | 302,104 | 265,472
Other financial liabilities and lease liabilities |  |  |  |
| 362,152 | 362,152 | 300,210 | 300,210
| 23,210,890 | 23,109,243 | 22,398,770 | 22,199,230

The fair value of financial assets and liabilities in the above table is as at the reporting date and does not
represent any expectations about their future value.
The Group uses the following hierarchy for determining and disclosing fair value:
Level 1: investments valued using quoted prices in active markets.
Level 2: investments valued using models for which all inputs that have a significant impact on fair value
are market observable.
Level 3: investments valued using models for which inputs that have a significant impact on fair value are
not based on market observable data.
Observable inputs to the models for the valuation of unquoted equity and debt securities include, where
applicable, current and expected market interest rates, market expected default rates, market implied
country and counterparty credit risk and market liquidity discounts.
For assets and liabilities that are recognised in the Consolidated Financial Statements at fair value, the
Group determines whether transfers have occurred between levels in the hierarchy by re-assessing
categorisation at the end of each reporting period.
339
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement (continued)
The following table presents the fair value measurement hierarchy of the Group's financial assets and
financial liabilities recorded at fair value and financial assets and financial liabilities for which fair value is
disclosed, by level of the fair value hierarchy:

| Level 1 | Level 2 | Level 3 | Total
2023 | €000 | €000 | €000 | €000
Assets measured at fair value |  |  |  |
Investment properties |  |  |  |
Residential | - | - | 5,933 | 5,933
Offices and other commercial properties | - | - | 34,369 | 34,369
Manufacturing and industrial properties | - | - | 19,513 | 19,513
Land (fields and plots) |  |  |  |
| - | - | 2,290 | 2,290
| - | - | 62,105 | 62,105
Freehold property |  |  |  |
Offices and other commercial properties |  |  |  |
| - | - | 232,235 | 232,235
Loans and advances to customers measured |  |  |  |
at FVPL |  |  |  |
| - | - | 138,727 | 138,727
Trading derivatives |  |  |  |
Forward exchange rate contracts | - | 205 | - | 205
Currency swaps | - | 136 | - | 136
Interest rate swaps | - | 189 | - | 189
Currency options | - | 2 | - | 2
Interest rate caps/floors |  |  |  |
| - | 1,843 | - | 1,843
| - | 2,375 | - | 2,375
Derivatives qualifying for hedge accounting |  |  |  |
Fair value hedges-interest rate swaps | - | 48,679 | - | 48,679
Net investments-forward exchange rate |  |  |  |
contracts and currency swaps |  |  |  |
| - | 1 | - | 1
| - | 48,680 | - | 48,680
Investments at FVPL |  |  |  |
| 36,095 | 95,569 | 3,611 | 135,275
Investments at FVOCI |  |  |  |
| 431,854 | - | 11,566 | 443,420
| 467,949 | 146,624 | 448,244 | 1,062,817
Other financial assets not measured at |  |  |  |
fair value |  |  |  |
Loans and advances to banks | - | 370,853 | - | 370,853
Investments at amortised cost | 2,958,793 | 160,825 | - | 3,119,618
Reverse repurchase agreements | - | 411,654 | - | 411,654
Loans and advances to customers |  |  |  |
| - | - | 9,833,522 | 9,833,522
| 2,958,793 | 943,332 | 9,833,522 | 13,735,647

The discount rate used in the determination of the fair value of the loans and advances to customers
measured at FVPL during the year ended 31 December 2023 is 7.56% (2022: 2.66%-4.86%). The increase
in the discount rate reflects the rising interest rate environment. The discount rate at the low-end range
used in the determination of the fair value of the loans and advances to customers measured at FVPL during
the year ended 31 December 2022 relates to loans and advances to customers with a carrying value of
€67,937 thousand as at 31 December 2022, which have been derecognized in the year ended 31 December
2023.
For loans and advances to customers measured at FVPL categorised as Level 3, an increase in the discount
factor by 10% would result in a decrease of €2,714 thousand in their fair value and a decrease in the
discount factor by 10% would result in an increase of €622 thousand in their fair value.
340
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement (continued)
For one investment included in other non-equity securities mandatorily measured at FVPL as a result of the
SPPI assessment and categorised as Level 3 w ith a carrying amount of €3,611 thousand as at 31 December
2023, a change in the conversion factor by 10% would result in a change in the value of the other non-
equity securities by €361 thousand.
For additional disclosures on sensitivity analysis of equity securities refer to Note 45.
The fair value measurement hierarchy for life insurance business assets attributable to policy holders is
disclosed in Note 24.

| Level 1 | Level 2 | Level 3 | Total
2023 | €000 | €000 | €000 | €000
Liabilities measured at fair value |  |  |  |
Trading derivatives |  |  |  |
Forward exchange rate contracts | - | 184 | - | 184
Currency swaps | - | 13,278 | - | 13,278
Interest rate swaps | - | 181 | - | 181
Currency options | - | 42 | - | 42
Interest rate caps/floors |  |  |  |
| - | 1,844 | - | 1,844
| - | 15,529 | - | 15,529
Derivatives qualifying for hedge accounting |  |  |  |
Fair value hedges-interest rate swaps |  |  |  |
| - | 2,451 | - | 2,451
| - | 17,980 | - | 17,980
Other financial liabilities not measured |  |  |  |
at fair value |  |  |  |
Funding from central banks | - | 2,043,868 | - | 2,043,868
Deposits by banks | - | 428,850 | - | 428,850
Customer deposits | - | - | 19,300,867 | 19,300,867
Debt securities in issue | 655,428 | - | - | 655,428
Subordinated liabilities |  |  |  |
| 300,098 | - | - | 300,098
| 955,526 | 2,472,718 | 19,300,867 | 22,729,111

341
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement (continued)

| Level 1 | Level 2 | Level 3 | Total
2022 | €000 | €000 | €000 | €000
Assets measured at fair value |  |  |  |
Investment properties |  |  |  |
Residential | - | - | 9,045 | 9,045
Offices and other commercial properties | - | - | 47,837 | 47,837
Manufacturing and industrial properties | - | - | 25,607 | 25,607
Land (fields and plots) |  |  |  |
| - | - | 2,610 | 2,610
| - | - | 85,099 | 85,099
Freehold property |  |  |  |
Offices and other commercial properties |  |  |  |
| - | - | 203,658 | 203,658
Loans and advances to customers measured |  |  |  |
at FVPL |  |  |  |
| - | - | 214,359 | 214,359
Trading derivatives |  |  |  |
Forward exchange rate contracts | - | 103 | - | 103
Currency swaps | - | 283 | - | 283
Interest rate swaps | - | 437 | - | 437
Currency options | - | 287 | - | 287
Interest rate caps/floors |  |  |  |
| - | 3,094 | - | 3,094
| - | 4,204 | - | 4,204
Derivatives qualifying for hedge accounting |  |  |  |
Fair value hedges-interest rate swaps | - | 43,939 | - | 43,939
Net investments-forward exchange rate |  |  |  |
contracts and currency swaps |  |  |  |
| - | 10 | - | 10
| - | 43,949 | - | 43,949
Investments at FVPL |  |  |  |
| 84,743 | 96,498 | 8,968 | 190,209
Investments at FVOCI |  |  |  |
| 455,110 | - | 12,265 | 467,375
| 539,853 | 144,651 | 524,349 | 1,208,853
Other financial assets not measured at |  |  |  |
fair value |  |  |  |
Loans and advances to banks | - | 193,349 | - | 193,349
Investments at amortised cost | 1,871,757 | 69,300 | 12,279 | 1,953,336
Loans and advances to customers |  |  |  |
| - | - | 9,797,382 | 9,797,382
| 1,871,757 | 262,649 | 9,809,661 | 11,944,067

For loans and advances to customers measured at FVPL categorised as Level 3, an increase in the discount
factor by 10% would result in a decrease of €4,538 thousand in their fair value and a decrease in the
discount factor by 10% would result in an increase of €1,145 thousand in their fair value.
For one investment included in other non-equity securities mandatorily measured at FVPL as a result of the
SPPI assessment and categorised as Level 3 with a carrying amount of €8,968 thousand as at 31 December
2022, a change in the conversion factor by 10% would result in a change in the value of the other non-
equity securities by €897 thousand.
342
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement (continued)

| Level 1 | Level 2 | Level 3 | Total
2022 | €000 | €000 | €000 | €000
Liabilities measured at fair value |  |  |  |
Trading derivatives |  |  |  |
Forward exchange rate contracts | - | 123 | - | 123
Currency swaps | - | 10,316 | - | 10,316
Interest rate swaps | - | 420 | - | 420
Currency options | - | 65 | - | 65
Interest rate caps/floors |  |  |  |
| - | 3,094 | - | 3,094
| - | 14,018 | - | 14,018
Derivatives qualifying for hedge accounting |  |  |  |
Fair value hedges-interest rate swaps |  |  |  |
| - | 2,151 | - | 2,151
| - | 16,169 | - | 16,169
Other financial liabilities not measured |  |  |  |
at fair value |  |  |  |
Funding from central banks | - | 1,944,145 | - | 1,944,145
Deposits by banks | - | 455,121 | - | 455,121
Customer deposits | - | - | 18,963,934 | 18,963,934
Debt securities in issue | 254,179 | - | - | 254,179
Subordinated liabilities |  |  |  |
| 265,472 | - | - | 265,472
| 519,651 | 2,399,266 | 18,963,934 | 21,882,851

The cash and balances with central banks are financial instruments whose carrying value is a reasonable
approximation of fair value because they are mostly short-term in nature or are repriced to current market
rates frequently. The carrying value of other financial assets, other than the deferred purchase payment
consideration (Note 28), a nd other financial liabilities is a close approximation of their fair value and they
are categorised as Level 3.
During the years ended 31 December 2023 and 2022 there were no significant transfers between Level 1
and Level 2.
343
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement (continued)
Movements in Level 3 assets measured at fair value
Transfers from Level 3 to Level 2 occur when the market for some securities becomes more liquid, which eliminates the need for the previously required
significant unobservable valuation inputs. Following a transfer to Level 2 the instruments are valued using valuation models incorporating observable market
inputs. Transfers into Level 3 reflect changes in market conditions as a result of which instruments become less liquid and consequently, the Group requires
significant unobservable inputs to calculate their fair value.
The movement in Level 3 financial assets which are measured at fair value is presented below:

| 2023 |  |  |  |  | 2022 |  |  |  |
| Investment |  |  |  |  |  |  |  |  |
| properties |  |  |  |  |  |  |  |  |
|  | Own use |  |  |  |  |  |  |  |
|  | properties |  |  |  |  |  |  |  |
|  |  | Loans and |  |  |  |  |  |  |
|  |  | advances to |  |  |  |  |  |  |
|  |  | customers |  |  |  |  |  |  |
|  |  |  | Financial |  |  |  |  |  |
|  |  |  | instruments |  |  |  |  |  |
|  |  |  |  | Investment |  |  |  |  |
|  |  |  |  | properties |  |  |  |  |
|  |  |  |  |  | Investment |  |  |  |
|  |  |  |  |  | properties |  |  |  |
|  |  |  |  |  | held for sale |  |  |  |
|  |  |  |  |  |  | Own use |  |  |
|  |  |  |  |  |  | properties |  |  |
|  |  |  |  |  |  |  | Own use |  |
|  |  |  |  |  |  |  | properties |  |
|  |  |  |  |  |  |  | held for sale |  |
|  |  |  |  |  |  |  |  | Loans and |
|  |  |  |  |  |  |  |  | advances to |
|  |  |  |  |  |  |  |  | customers |
|  |  |  |  |  |  |  |  |  | Financial
|  |  |  |  |  |  |  |  |  | instruments
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
1 January |  |  |  |  |  |  |  |  |  |
| 85,099 | 203,658 | 214,359 | 21,233 | 117,745 | 5,321 | 195,666 | 10,408 | 281,868 | 19,897
Additions | 1,390 | 836 | - | - | 9,166 | - | 3,173 | - | - | 10,054
Disposals | (23,797) | - | - | - | (39,484) | (5,321) | - | - | - | (500)
Transfers from own use properties to investment properties (Note |  |  |  |  |  |  |  |  |  |
25) |  |  |  |  |  |  |  |  |  |
| 798 | (798) | - | - | - | - | - | - | - | -
Net transfers from stock of property | - | 17,827 | - | - | - | - | - | - | - | -
Transfers from own use properties held for sale to own use |  |  |  |  |  |  |  |  |  |
properties |  |  |  |  |  |  |  |  |  |
| - | - | - | - | - | - | 10,408 | (10,408) | - | -
Conversion of instruments into common shares | - | - | - | (6,521) | - | - | - | - | - | (4,102)
Depreciation charge for the year | - | (2,047) | - | - | - | - | (2,046) | - | - | -
Impairment (Note 25) | - | (765) | - | - | - | - | (3,543) | - | - | -
Fair value (losses)/gains | (1,385) | 13,524 | - | 569 | (2,915) | - | - | - | - | (4,133)
Net gains on loans and advances to customers measured at FVPL |  |  |  |  |  |  |  |  |  |
(Note 11) |  |  |  |  |  |  |  |  |  |
| - | - | 2,401 | - | - | - | - | - | 4,050 | -
Repayments/derecognition of loans | - | - | (89,522) | - | - | - | - | - | (82,522) | -
Interest on loans (Note 7) | - | - | 11,489 | - | - | - | - | - | 10,963 | -
Foreign exchange adjustments |  |  |  |  |  |  |  |  |  |
| - | - | - | (104) | 587 | - | - | - | - | 17
31 December |  |  |  |  |  |  |  |  |  |
| 62,105 | 232,235 | 138,727 | 15,177 | 85,099 | - | 203,658 | - | 214,359 | 21,233

344
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement (continued)
Valuation policy and sensitivity analysis
Investment properties, investment properties held for sale and own use properties
The valuation technique mainly applied by the Group is the market comparable approach, adjusted for
market and property specific conditions. In certain cases, the Group also utilises the income capitalisation
approach. The key inputs used for the valuations of the investment properties and own use properties are
presented in the tables below:
345
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement (continued)
Valuation policy and sensitivity analysis (continued)
Analysis of investment properties

Type and country |  |  |  |  |  |  |  |  |
| 2023 |  |  |  |  |  |  |  |
|  | Estimated |  |  |  |  |  |  |
|  | rental value |  |  |  |  |  |  |
|  | per m |  |  |  |  |  |  |
|  | 2 |  |  |  |  |  |  |
|  | per |  |  |  |  |  |  |
|  | annum |  |  |  |  |  |  |
|  |  | Estimated |  |  |  |  |  |
|  |  | building cost |  |  |  |  |  |
|  |  | per m |  |  |  |  |  |
|  |  | 2 |  |  |  |  |  |
|  |  |  | Yield |  |  |  |  |
|  |  |  |  | Estimated fair |  |  |  |
|  |  |  |  | value per m |  |  |  |
|  |  |  |  | 2 |  |  |  |
|  |  |  |  |  | Estimated |  |  |
|  |  |  |  |  | land value per |  |  |
|  |  |  |  |  | m |  |  |
|  |  |  |  |  | 2 |  |  |
|  |  |  |  |  |  | Land | Building area |
|  |  |  |  |  |  |  |  | Age of
|  |  |  |  |  |  |  |  | building
Residential |  |  |  |  |  |  |  |  |
| €000 |  |  |  |  |  |  |  |
|  |  |  |  |  |  | m |  |
|  |  |  |  |  |  | 2 |  |
|  |  |  |  |  |  |  | m |
|  |  |  |  |  |  |  | 2 |
|  |  |  |  |  |  |  |  | Years
Cyprus | 2,024 | €41-€98 | €1,090-€1,673 | 4.5%-5.5% | €380-€2,338 | €130-€380 | 607-725 | 89-594 | 10-58
Greece |  |  |  |  |  |  |  |  |
| 3,909 |  |  |  |  |  |  |  |
|  | €6-€113 | €164-€2,961 | 2%-9.4% | €46-€1,878 | €16-€1,910 | 24-5,147 | 51-825 | 16-51
| 5,933 |  |  |  |  |  |  |  |
Offices and other commercial properties |  |  |  |  |  |  |  |  |
Cyprus | 31,297 | €36-€289 | €470 | 3.9%-6.7% | €578-€5,781 | €150-€3,900 | 348-11,301 | 0-4,605 | 11-68
Greece |  |  |  |  |  |  |  |  |
| 3,072 |  |  |  |  |  |  |  |
|  | €9-€219 | €193-€1,404 | 4.9%-8.8% | €72-€3,648 | €261-€289 | 100-8,582 | 6-4,692 | 19-65
| 34,369 |  |  |  |  |  |  |  |
Manufacturing and industrial |  |  |  |  |  |  |  |  |
Cyprus | 12,583 | €23-€67 | €205-€709 | 4.5%-7.0% | €266-€1,225 | €165-€500 | 2,202-14,590 | 743-8,007 | 20-37
Greece |  |  |  |  |  |  |  |  |
| 6,930 |  |  |  |  |  |  |  |
|  | €1-€99 | €172-€684 | 4.4%-10.4% | €12-€439 | €10-€191 | 57-34,495 | 349-5,858 | 14-85
| 19,513 |  |  |  |  |  |  |  |
Land (fields and plots) |  |  |  |  |  |  |  |  |
Cyprus |  |  |  |  |  |  |  |  |
| 2,290 |  |  |  |  |  |  |  |
|  | n/a | n/a | n/a | n/a | €989 | 2,316 | n/a | n/a
| 2,290 |  |  |  |  |  |  |  |
Total |  |  |  |  |  |  |  |  |
| 62,105 |  |  |  |  |  |  |  |

Analysis of own use properties

Type and country |  |  |  |  |  |  |  |  |
| 2023 |  |  |  |  |  |  |  |
|  | Estimated |  |  |  |  |  |  |
|  | rental value |  |  |  |  |  |  |
|  | per m |  |  |  |  |  |  |
|  | 2 |  |  |  |  |  |  |
|  | per |  |  |  |  |  |  |
|  | annum |  |  |  |  |  |  |
|  |  | Estimated |  |  |  |  |  |
|  |  | building cost |  |  |  |  |  |
|  |  | per m |  |  |  |  |  |
|  |  | 2 |  |  |  |  |  |
|  |  |  | Yield |  |  |  |  |
|  |  |  |  | Estimated fair |  |  |  |
|  |  |  |  | value per m |  |  |  |
|  |  |  |  | 2 |  |  |  |
|  |  |  |  |  | Estimated |  |  |
|  |  |  |  |  | land value per |  |  |
|  |  |  |  |  | m |  |  |
|  |  |  |  |  | 2 |  |  |
|  |  |  |  |  |  | Land | Building area |
|  |  |  |  |  |  |  |  | Age of
|  |  |  |  |  |  |  |  | building
Offices and other commercial properties |  |  |  |  |  |  |  |  |
| €000 |  |  |  |  |  |  |  |
|  |  |  |  |  |  | m |  |
|  |  |  |  |  |  | 2 |  |
|  |  |  |  |  |  |  | m |
|  |  |  |  |  |  |  | 2 |
|  |  |  |  |  |  |  |  | Years
Cyprus |  |  |  |  |  |  |  |  |
| 232,235 |  |  |  |  |  |  |  |
|  | €30-€315 | €1,063-€3,162 | 6%-6.5% | €65-€5,254 | €65-€2,756 | 390-51,947 | 210-24,035 | 16-100
Total |  |  |  |  |  |  |  |  |
| 232,235 |  |  |  |  |  |  |  |

346
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement (continued)
Valuation policy and sensitivity analysis (continued)
Analysis of investment properties

Type and country |  |  |  |  |  |  |  |  |
| 2022 |  |  |  |  |  |  |  |
|  | Estimated |  |  |  |  |  |  |
|  | rental value |  |  |  |  |  |  |
|  | per m |  |  |  |  |  |  |
|  | 2 |  |  |  |  |  |  |
|  | per |  |  |  |  |  |  |
|  | annum |  |  |  |  |  |  |
|  |  | Estimated |  |  |  |  |  |
|  |  | building cost |  |  |  |  |  |
|  |  | per m |  |  |  |  |  |
|  |  | 2 |  |  |  |  |  |
|  |  |  | Yield |  |  |  |  |
|  |  |  |  | Estimated fair |  |  |  |
|  |  |  |  | value per m |  |  |  |
|  |  |  |  | 2 |  |  |  |
|  |  |  |  |  | Estimated |  |  |
|  |  |  |  |  | land value per |  |  |
|  |  |  |  |  | m |  |  |
|  |  |  |  |  | 2 |  |  |
|  |  |  |  |  |  | Land | Building area |
|  |  |  |  |  |  |  |  | Age of
|  |  |  |  |  |  |  |  | building
Residential |  |  |  |  |  |  |  |  |
| €000 |  |  |  |  |  |  |  |
|  |  |  |  |  |  | m |  |
|  |  |  |  |  |  | 2 |  |
|  |  |  |  |  |  |  | m |
|  |  |  |  |  |  |  | 2 |
|  |  |  |  |  |  |  |  | Years
Cyprus | 4,911 | €37-€93 | €185-€1,673 | 5%-7% | €427-€2,338 | €130-€650 | 134-1,203 | 89-1,420 | 10-104
Greece |  |  |  |  |  |  |  |  |
| 4,134 |  |  |  |  |  |  |  |
|  | €6-€115 | €164-€2,115 | 2%-7.1% | €45-€1,892 | €7-€4,017 | 24-5,147 | 51-825 | 11-50
| 9,045 |  |  |  |  |  |  |  |
Offices and other commercial properties |  |  |  |  |  |  |  |  |
Cyprus | 44,837 | €36-€250 | €470 | 3.4%-10% | €520-€5,781 | €150-€5,000 | 348-35,413 | 16-5,850 | 9-67
Greece |  |  |  |  |  |  |  |  |
| 3,000 |  |  |  |  |  |  |  |
|  | €19-€381 | €193-€3,548 | 5.4%-10.5% | €72-€3,638 | €142-€265 | 100-8,582 | 6-4,692 | 18-64
| 47,837 |  |  |  |  |  |  |  |
Manufacturing and industrial |  |  |  |  |  |  |  |  |
Cyprus | 18,439 | €14-€62 | €360 | 4.5%-9% | €283-€1,272 | €550 | 2,202-15,965 | 743-8,007 | 10-38
Greece |  |  |  |  |  |  |  |  |
| 7,168 |  |  |  |  |  |  |  |
|  | €7-€58 | €133-€461 | 3.5%-11% | €8-€439 | €5-€395 | 57-34,495 | 349-5,858 | 13-84
| 25,607 |  |  |  |  |  |  |  |
Land (fields and plots) |  |  |  |  |  |  |  |  |
Cyprus |  |  |  |  |  |  |  |  |
| 2,610 |  |  |  |  |  |  |  |
|  | n/a | n/a | n/a | n/a | €1,127 | 2,316 | n/a | n/a
Total |  |  |  |  |  |  |  |  |
| 85,099 |  |  |  |  |  |  |  |

Analysis of own use properties

Type and country |  |  |  |  |  |  |  |  |
| 2022 |  |  |  |  |  |  |  |
|  | Estimated |  |  |  |  |  |  |
|  | rental value |  |  |  |  |  |  |
|  | per m |  |  |  |  |  |  |
|  | 2 |  |  |  |  |  |  |
|  | per |  |  |  |  |  |  |
|  | annum |  |  |  |  |  |  |
|  |  | Estimated |  |  |  |  |  |
|  |  | building cost |  |  |  |  |  |
|  |  | per m |  |  |  |  |  |
|  |  | 2 |  |  |  |  |  |
|  |  |  | Yield |  |  |  |  |
|  |  |  |  | Estimated fair |  |  |  |
|  |  |  |  | value per m |  |  |  |
|  |  |  |  | 2 |  |  |  |
|  |  |  |  |  | Estimated |  |  |
|  |  |  |  |  | land value per |  |  |
|  |  |  |  |  | m |  |  |
|  |  |  |  |  | 2 |  |  |
|  |  |  |  |  |  | Land | Building area |
|  |  |  |  |  |  |  |  | Age of
|  |  |  |  |  |  |  |  | building
Offices and other commercial properties |  |  |  |  |  |  |  |  |
| €000 |  |  |  |  |  |  |  |
|  |  |  |  |  |  | m |  |
|  |  |  |  |  |  | 2 |  |
|  |  |  |  |  |  |  | m |
|  |  |  |  |  |  |  | 2 |
|  |  |  |  |  |  |  |  | Years
Cyprus |  |  |  |  |  |  |  |  |
| 203,658 |  |  |  |  |  |  |  |
|  | €76-€277 | €750-€1,855 | 5.6%-5.8% | €70-€6,164 | €70-€2,274 | 390-51,947 | 122-11,109 | 15-79
Total |  |  |  |  |  |  |  |  |
| 203,658 |  |  |  |  |  |  |  |

347
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
22. Fair value measurement (continued)
Valuation policy and sensitivity analysis (continued)
Sensitivity analysis
The Group's property valuations have been classified as Level 3. Significant increases/decreases in
estimated values per square meter for properties valued with the comparable approach or significant
increases/decreases in estimated rental values or yields for properties valued with the income capitalisation
approach could result in a significantly higher/lower fair value of the properties.
23. Loans and advances to customers

| 2023 | 2022
| €000 | €000
Gross loans and advances to customers at amortised cost | 9,862,514 | 9,917,335
Allowance for ECL for impairment of loans and advances to customers (Note 44.5) |  |
| (179,453) | (178,442)
| 9,683,061 | 9,738,893
Loans and advances to customers measured at FVPL |  |
| 138,727 | 214,359
| 9,821,788 | 9,953,252

The following tables present the Group's gross loans and advances to customers at amortised cost by
staging and by geographical analysis (based on the country in which the loans are managed).

| Stage 1 | Stage 2 | Stage 3 | POCI | Total
2023 | €000 | €000 | €000 | €000 | €000
Gross loans at amortised cost |  |  |  |  |
before residual fair value |  |  |  |  |
adjustment on initial recognition |  |  |  |  |
| 8,334,929 | 1,168,745 | 328,177 | 100,197 | 9,932,048
Residual fair value adjustment on |  |  |  |  |
initial recognition |  |  |  |  |
| (59,340) | (7,474) | (1,294) | (1,426) | (69,534)
Gross loans at amortised cost |  |  |  |  |
| 8,275,589 | 1,161,271 | 326,883 | 98,771 | 9,862,514
Cyprus | 8,275,416 | 1,161,271 | 326,363 | 98,771 | 9,861,821
Other Countries |  |  |  |  |
| 173 | - | 520 | - | 693
| 8,275,589 | 1,161,271 | 326,883 | 98,771 | 9,862,514

2022 |  |  |  |  |
Gross loans at amortised cost |  |  |  |  |
before residual fair value |  |  |  |  |
adjustment on initial recognition |  |  |  |  |
| 7,931,511 | 1,586,488 | 372,821 | 115,544 | 10,006,364
Residual fair value adjustment on |  |  |  |  |
initial recognition |  |  |  |  |
| (64,255) | (20,885) | (1,803) | (2,086) | (89,029)
Gross loans at amortised cost |  |  |  |  |
| 7,867,256 | 1,565,603 | 371,018 | 113,458 | 9,917,335
Cyprus | 7,867,037 | 1,565,603 | 368,922 | 113,458 | 9,915,020
Other countries |  |  |  |  |
| 219 | - | 2,096 | - | 2,315
| 7,867,256 | 1,565,603 | 371,018 | 113,458 | 9,917,335

Residual fair value adjustment
The residual fair value adjustment on initial recognition mainly relates to the loans and advances to
customers acquired as part of the acquisition of certain operations of Laiki Bank in 2013. In accordance with
the provisions of IFRS 3, this adjustment decreased the gross balance of loans and advances to customers.
The residual fair value adjustment is included within the gross balances of loans and advances to customers
as at each balance sheet date. However, for credit risk monitoring, the residual fair value adjustment as at
each balance sheet date is presented separately from the gross balances of loans and advances, as shown
in the tables above.
Loans and advances to customers measured at FVPL are managed in Cyprus.
348
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
23. Loans and advances to customers (continued)
The following tables present the Group's gross loans and advances to customers at amortised cost by
staging and by business line concentration.

2023 | Stage 1 | Stage 2 | Stage 3 | POCI | Total
By business line | €000 | €000 | €000 | €000 | €000
Corporate and Large Corporate | 2,709,523 | 519,134 | 96,289 | 32,799 | 3,357,745
IBU & International corporate |  |  |  |  |
- IBU | 99,009 | 21,409 | 320 | 140 | 120,878
- International corporate | 744,955 | 17,220 | 38 | 15 | 762,228
SMEs | 824,503 | 109,865 | 5,583 | 9,042 | 948,993
Retail |  |  |  |  |
- housing | 3,015,838 | 343,277 | 23,508 | 9,897 | 3,392,520
- consumer, credit cards and |  |  |  |  |
other |  |  |  |  |
| 821,665 | 101,168 | 9,813 | 13,527 | 946,173
Restructuring |  |  |  |  |
- corporate | 3,770 | 21,747 | 13,461 | 10,073 | 49,051
- SMEs | 9,831 | 8,089 | 13,715 | 2,431 | 34,066
- retail housing | 6,450 | 12,429 | 39,696 | 1,912 | 60,487
- retail other | 2,471 | 2,533 | 13,474 | 733 | 19,211
Recoveries |  |  |  |  |
- corporate | - | - | 6,378 | 967 | 7,345
- SMEs | - | - | 15,812 | 1,587 | 17,399
- retail housing | - | - | 65,070 | 10,255 | 75,325
- retail other | 59 | - | 23,725 | 5,081 | 28,865
Wealth management |  |  |  |  |
| 37,515 | 4,400 | 1 | 312 | 42,228
| 8,275,589 | 1,161,271 | 326,883 | 98,771 | 9,862,514

2022 | Stage 1 | Stage 2 | Stage 3 | POCI | Total
By business line | €000 | €000 | €000 | €000 | €000
Corporate and Large Corporate | 2,502,630 | 807,282 | 54,259 | 34,616 | 3,398,787
IBU & International corporate |  |  |  |  |
- IBU | 104,539 | 31,934 | 1,254 | 147 | 137,874
- International corporate | 685,099 | 150 | 35 | 24 | 685,308
SMEs | 825,123 | 189,825 | 3,299 | 10,364 | 1,028,611
Retail |  |  |  |  |
- housing | 2,982,436 | 305,714 | 30,071 | 12,413 | 3,330,634
- consumer, credit cards and |  |  |  |  |
other |  |  |  |  |
| 704,959 | 152,815 | 14,376 | 15,746 | 887,896
Restructuring |  |  |  |  |
- corporate | 2,842 | 34,246 | 20,689 | 10,175 | 67,952
- SMEs | 12,643 | 10,603 | 23,374 | 2,381 | 49,001
- retail housing | 5,168 | 22,018 | 42,155 | 3,292 | 72,633
- retail other | 1,713 | 5,364 | 16,237 | 1,029 | 24,343
Recoveries |  |  |  |  |
- corporate | - | - | 18,403 | 1,316 | 19,719
- SMEs | - | - | 29,339 | 2,366 | 31,705
- retail housing | - | - | 88,956 | 14,039 | 102,995
- retail other | 108 | - | 28,569 | 4,953 | 33,630
Wealth management |  |  |  |  |
| 39,996 | 5,652 | 2 | 597 | 46,247
| 7,867,256 | 1,565,603 | 371,018 | 113,458 | 9,917,335

Loans and advances to customers pledged as collateral are disclosed in Note 46.
Additional analysis and information regarding credit risk and analysis of the allowance for ECL of loans and
advances to customers are set out in Note 44.
349
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
24. Life insurance business assets attributable to policyholders

| 2023 | 2022
| €000 | €000
Equity securities | 1,982 | 1,359
Debt securities | 58,688 | 36,837
Mutual funds | 549,592 | 443,299
Bank deposits and other receivables |  |
| 27,300 | 49,566
| 637,562 | 531,061
Property |  |
| 11,650 | 11,260
| 649,212 | 542,321

Financial assets of life insurance business attributable to policyholders are classified as investments at FVPL.
Bank deposits and other receivables include other financial receivables of €2,957 thousand (2022: €2,965
thousand).
In addition to the above assets, the life insurance subsidiary of the Group holds shares of the Company, as
part of the assets attributable to policyholders with a carrying value as at 31 December 2023 of €476
thousand (2022: €236 thousand). Such shares are presented in the Consolidated Financial Statements as
treasury shares (Note 34).
The analysis of the financial assets of life insurance business attributable to policyholders measured at fair
value by level of the fair value hierarchy is presented below:

| Level 1 | Level 2 | Level 3 | Total
2023 | €000 | €000 | €000 | €000
Equity securities | 1,982 | - | - | 1,982
Debt securities | 38,378 | - | 20,310 | 58,688
Mutual funds |  |  |  |
| 546,475 | - | 3,117 | 549,592
| 586,835 | - | 23,427 | 610,262
2022 |  |  |  |
Equity securities | 1,359 | - | - | 1,359
Debt securities | 17,525 | - | 19,312 | 36,837
Mutual funds |  |  |  |
| 440,108 | - | 3,191 | 443,299
| 458,992 | - | 22,503 | 481,495

Bank deposits are financial instruments whose carrying amount is a reasonable approximation of fair value,
because they are short-term in nature or are repriced to current market rates frequently.
The movement of financial assets classified as Level 3 is presented below:

| 2023 | 2022
| €000 | €000
1 January | 22,503 | 22,265
Unrealised gains recognised in the consolidated income statement |  |
| 924 | 238
31 December |  |
| 23,427 | 22,503

During the years ended 31 December 2023 and 2022 there were no significant transfers between Level 1
and Level 2.
350
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
25. Property and equipment

| Property | Equipment | Total
2023 | €000 | €000 | €000
Net book value at 1 January | 235,538 | 17,840 | 253,378
Additions | 396 | 7,058 | 7,454
Revaluation | 13,524 | - | 13,524
Impairment | (765) | - | (765)
Transfers to investment properties (Note 22) | (798) | - | (798)
Net transfers from stock of properties (Note 27) | 17,827 | - | 17,827
Disposals and write-offs | - | (24) | (24)
Depreciation charge for the year (Note 15.1) | (8,997) | (6,396) | (15,393)
New leases (Note 42) | 168 | 11,185 | 11,353
Re-assessment of RoU assets (Note 42) |  |  |
| (988) | - | (988)
Net book value at 31 December |  |  |
| 255,905 | 29,663 | 285,568

1 January 2023 |  |  |
Cost or valuation | 303,891 | 142,787 | 446,678
Accumulated depreciation |  |  |
| (68,353) | (124,947) | (193,300)
Net book value |  |  |
| 235,538 | 17,840 | 253,378

31 December 2023 |  |  |
Cost or valuation | 327,251 | 123,677 | 450,928
Accumulated depreciation |  |  |
| (71,346) | (94,014) | (165,360)
Net book value |  |  |
| 255,905 | 29,663 | 285,568

| Property | Equipment | Total
2022 | €000 | €000 | €000
Net book value at 1 January | 231,896 | 20,234 | 252,130
Additions | 3,898 | 2,854 | 6,752
Transfers from non-current assets and disposal groups held |  |  |
for sale |  |  |
| 10,408 | - | 10,408
Impairment | (3,543) | - | (3,543)
Disposals and write-offs | (46) | (92) | (138)
Depreciation charge for the year (Note 15.1) | (9,669) | (5,981) | (15,650)
New leases (Note 42) | 132 | 825 | 957
Re-assessment of RoU assets (Note 42) | 3,922 | - | 3,922
Derecognition of RoU assets (Note 42) |  |  |
| (1,460) | - | (1,460)
Net book value at 31 December |  |  |
| 235,538 | 17,840 | 253,378

1 January 2022 |  |  |
Cost or valuation | 296,406 | 141,220 | 437,626
Accumulated depreciation |  |  |
| (64,510) | (120,986) | (185,496)
Net book value |  |  |
| 231,896 | 20,234 | 252,130

31 December 2022 |  |  |
Cost or valuation | 303,891 | 142,787 | 446,678
Accumulated depreciation |  |  |
| (68,353) | (124,947) | (193,300)
Net book value |  |  |
| 235,538 | 17,840 | 253,378

351
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
25. Property and equipment (continued)
As at December 2023 the net book value of the Group's equipment includes an amount of €11,462
thousand that relates to RoU asset - Computer hardware (2022: €825 thousand).
The net book value of the Group's property comprises:

| 2023 | 2022
| €000 | €000
Freehold property | 232,235 | 203,658
Improvements on leasehold property | 1,270 | 2,472
RoU assets (Note 42) |  |
| 22,400 | 29,408
Total |  |
| 255,905 | 235,538

Freehold property includes land amounting to €92,751 thousand (2022: €79,623 thousand) for which no
depreciation is charged. Further, freehold property includes an amount of €20,876 thousand (2022: nil)
which relates to a property under construction.
The Group's policy is to revalue its properties periodically (between 3 to 5 years) but more frequent
revaluations may be performed where there are significant and volatile movements in values. The Group
performed revaluations during the year ended 31 December 2023. The valuations were carried out by
independent qualified valuers, on the basis of market value using observable prices and/or recent market
transactions depending on the location of the property. Details on valuation techniques and inputs are
presented in Note 22.
There were no charges against the freehold property of the Group as at 31 December 2023 and 2022.
The net book value of freehold property, on a cost less accumulated depreciation basis, as at 31 December
2023 amounts to €158,900 thousand (2022: €142,555 thousand).
26. Intangible assets

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Net book value at 1 January | 52,546 | 54,144
Additions | 14,949 | 17,347
Disposals and write-offs | - | (392)
Amortisation charge for the year (Note 15.1) |  |
| (18,860) | (18,553)
Net book value at 31 December |  |
| 48,635 | 52,546

1 January |  |
Cost | 253,353 | 236,526
Accumulated amortisation and impairment |  |
| (200,807) | (182,382)
Net book value |  |
| 52,546 | 54,144

31 December |  |
Cost | 268,268 | 253,353
Accumulated amortisation and impairment |  |
| (219,633) | (200,807)
Net book value |  |
| 48,635 | 52,546

Computer software includes internally developed computer software with a net carrying amount of €4,679
thousand as at 31 December 2023 (2022: €2,954 thousand).
352
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
27. Stock of property
The carrying amount of stock of property is determined as the lower of cost and net realisable value.
Impairment is recognised if the net realisable value is below the cost of the stock of property. During the
year ended 31 December 2023 an impairment loss of €46,026 thousand (2022: €20,628 thousand) was
recognised in 'Impairment net of reversals of non-financial assets' in the consolidated income statement. At
31 December 2023, stock of property of €445,009 thousand (2022: €529,316 thousand) is carried at net
realisable value. Additionally, at 31 December 2023 stock of property with a carrying amount of €65,908
thousand (2022: €108,010 thousand) is carried at approximately its fair value less costs to sell.
The stock of property includes residential properties, offices and other commercial properties,
manufacturing and industrial properties, hotels and land (fields and plots). There is no stock of property
pledged as collateral for central bank funding facilities under Eurosystem monetary policy operations.
The carrying amount of the stock of property is analysed in the tables below:

| 2023 | 2022
| €000 | €000
Net book value at 1 January | 1,041,032 | 1,111,604
Additions | 19,531 | 76,851
Disposals | (170,595) | (126,797)
Net transfers (to)/from property and equipment | (17,827) | -
Impairment (Note 16) | (46,026) | (20,628)
Foreign exchange adjustments |  |
| - | 2
Net book value at 31 December |  |
| 826,115 | 1,041,032

As at 31 December 2023 there were no charges against stock of property of the Group (2022: charges
against stock of property with a carrying value of €20,989 thousand).
The result on the disposal of stock of property in the year is presented in the table below:

| 2023 | 2022
| €000 | €000
Net proceeds | 179,567 | 140,767
Carrying value of stock of property disposed of |  |
| (170,595) | (126,797)
Net gains on disposal of stock of property |  |
| 8,972 | 13,970

Analysis by type and country | Cyprus | Greece | Romania | Total
2023 | €000 | €000 | €000 | €000
Residential properties | 47,841 | 8,091 | - | 55,932
Offices and other commercial properties | 91,114 | 9,978 | - | 101,092
Manufacturing and industrial properties | 23,373 | 9,263 | - | 32,636
Hotels | 17,345 | 437 | - | 17,782
Land (fields and plots) |  |  |  |
| 614,990 | 3,683 | - | 618,673
Total |  |  |  |
| 794,663 | 31,452 | - | 826,115

2022 | €000 | €000 | €000 | €000
Residential properties | 63,724 | 16,947 | 32 | 80,703
Offices and other commercial properties | 142,475 | 11,263 | - | 153,738
Manufacturing and industrial properties | 29,172 | 11,710 | 48 | 40,930
Hotels | 24,027 | 437 | - | 24,464
Land (fields and plots) |  |  |  |
| 736,913 | 4,284 | - | 741,197
Total |  |  |  |
| 996,311 | 44,641 | 80 | 1,041,032

353
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
28. Prepayments, accrued income and other assets

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Financial assets |  |
Debtors | 34,662 | 29,220
Insurance contract assets (Note 31) | 1,255 | 1,204
Receivable relating to tax | 3,263 | 4,536
Deferred purchase payment consideration | 243,013 | 311,523
Other assets |  |
| 106,051 | 55,979
| 388,244 | 402,462
Non-financial assets |  |
Insurance and reinsurance contract assets (Note 31) | 56,239 | 45,176
Current tax receivable | 73,943 | 124,328
Prepaid expenses | 867 | 682
Retirement benefit plan assets (Note 14.1) | 669 | 816
Other assets |  |
| 64,957 | 35,590
| 196,675 | 206,592
| 584,919 | 609,054

An analysis of the movement of the gross carrying amount of the financial assets included in prepayments,
accrued income and other assets is presented in the table below:

| Stage 1 | Stage 3 |  |
|  |  | Simplified |
|  |  | method |
|  |  |  | Total
2023 | €000 | €000 | €000 | €000
1 January | 394,814 | 37,512 | 4,919 | 437,245
Net (decrease)/increase |  |  |  |
| (13,663) | (1,578) | 953 | (14,288)
31 December |  |  |  |
| 381,151 | 35,934 | 5,872 | 422,957

2022 (restated) |  |  |  |
1 January | 377,412 | 37,157 | 4,843 | 419,412
Net increase |  |  |  |
| 17,402 | 355 | 76 | 17,833
31 December |  |  |  |
| 394,814 | 37,512 | 4,919 | 437,245

An analysis of the movement of the ECL of the above financial assets is presented in the table below:

| Stage 1 | Stage 3 |  |
|  |  | Simplified |
|  |  | method |
|  |  |  | Total
2023 | €000 | €000 | €000 | €000
1 January | 2,107 | 32,181 | 495 | 34,783
Write-offs | - | (82) | - | (82)
Changes to models and inputs used for ECL |  |  |  |
calculations |  |  |  |
| (6) | (223) | 241 | 12
31 December |  |  |  |
| 2,101 | 31,876 | 736 | 34,713

2022 (restated) |  |  |  |
1 January | 2,557 | 31,761 | 746 | 35,064
Write-offs | - | (206) | (236) | (442)
Changes to models and inputs used for ECL |  |  |  |
calculations |  |  |  |
| (450) | 626 | (15) | 161
31 December |  |  |  |
| 2,107 | 32,181 | 495 | 34,783

354
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
28. Prepayments, accrued income and other assets (continued)
There were no financial assets classified as Stage 2 as at 31 December 2023 and 2022. In addition, no
financial assets were measured at FVPL as at 31 December 2023 and 2022.
Within other non-financial assets an amount of €18,550 thousand as at 31 December 2023 (2022: nil)
relates to contract assets from contracts with customers.
On the completion date of the sale of Project Helix 2 (the 'Transaction') in June 2021, the Group recognised
an amount of €381,567 thousand in other financial assets, which represented the fair value of the deferred
consideration receivable from the Transaction (the 'DPP'). This amount outstanding is payable in four
instalments up to December 2025 and each instalment carries interest up to each payment date. An amount
of €19,774 thousand, which represents the interest income on the DPP has been recognised in the
Consolidated Income Statement for the year ended 31 December 2023 (2022: €10,889 thousand) within
'Interest income - Financial assets at amortised cost - Other financial assets' (Note 7). T here are no other
conditions attached. The DPP is classified as Stage 1 as at 31 December 2023 and 2022.
During the year ended 31 December 2023, credit losses of €7,096 thousand were recognised in relation to
other financial assets. This includes ECL losses of €12 thousand (of which €511 thousand relate to a partial
reversal for 12-months ECL of the DPP) and €7,084 thousand impairment losses. During the year ended 31
December 2022, credit losses of €1,758 thousand were recognised in relation to other financial assets. This
includes ECL losses of €161 thousand (of which €867 thousand relate to a partial reversal for 12-months
ECL of the DPP) €1,310 thousand write-offs and €287 thousand impairment losses.
29. Funding from central banks
Funding from central banks comprises funding from the ECB under Eurosystem monetary policy operations
as set out in the table below:

| 2023 | 2022
| €000 | €000
Targeted Longer-Term Refinancing Operations (TLTRO IΙI) |  |
| 2,043,868 | 1,976,674

As at 31 December 2023, ECB funding amounted to €2 billion (2022: €2 billion) borrowed from various
TLTRO III operations.
The maturity of TLTRO III is three years from the settlement of each operation, but there is an option to
early repay or reduce the amounts borrowed before their respective final maturity.
BOC PCL early repaid €1 billion of TLTRO III funding in December 2022.
Details on encumbered assets related to the above funding facilities are disclosed in Note 46.
355
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
30. Customer deposits

| 2023 | 2022
| €000 | €000
By type of deposit |  |
Demand | 10,167,622 | 10,561,724
Savings | 2,979,275 | 2,840,346
Time or notice |  |
| 6,190,018 | 5,596,249
| 19,336,915 | 18,998,319
By geographical area |  |
Cyprus | 15,355,445 | 14,703,276
Greece | 1,473,491 | 1,635,406
United Kingdom | 386,057 | 395,235
United States | 166,673 | 169,176
Germany | 77,288 | 94,168
Romania | 29,729 | 22,118
Russia | 128,489 | 308,096
Ukraine | 183,316 | 237,697
Belarus | 3,762 | 9,966
Israel | 195,580 | 124,436
Other countries |  |
| 1,337,085 | 1,298,745
| 19,336,915 | 18,998,319

Deposits by geographical area are based on the country of residence of the Ultimate Beneficial Owner.

| 2023 | 2022
| €000 | €000
By currency |  |
Euro | 17,514,400 | 17,067,299
US Dollar | 1,448,753 | 1,529,548
British Pound | 300,867 | 333,458
Russian Rouble | 1,322 | 3,466
Swiss Franc | 8,947 | 11,796
Other currencies |  |
| 62,626 | 52,752
| 19,336,915 | 18,998,319

| 2023 | 2022
| €000 | €000
By business line |  |
Corporate and Large corporate | 2,086,753 | 1,915,300
IBU & International corporate |  |
- IBU | 3,779,571 | 3,957,050
- International corporate | 121,454 | 139,898
SMEs | 1,019,245 | 1,007,555
Retail | 11,781,972 | 11,333,783
Restructuring |  |
– corporate | 12,565 | 16,017
– SMEs | 5,954 | 6,375
– retail other | 9,428 | 10,152
Recoveries |  |
– corporate | 1,098 | 1,262
Wealth management |  |
| 518,875 | 610,927
| 19,336,915 | 18,998,319

356
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
31. Insurance and reinsurance contracts
The breakdown of groups of insurance and reinsurance contracts, that are in an asset position and those in a liability position is set out in the table below:

| 2023 |  |  | 2022 |  |
| Assets | Liabilities | Net | Assets | Liabilities | Net
Insurance contracts | €000 | €000 | €000 | €000 | €000 | €000
Life insurance | 6,472 | (604,233) | (597,761) | 2,270 | (546,101) | (543,831)
Non-life insurance |  |  |  |  |  |
| - | (54,191) | (54,191) | - | (51,880) | (51,880)
Total insurance contracts |  |  |  |  |  |
| 6,472 | (658,424) | (651,952) | 2,270 | (597,981) | (595,711)
Reinsurance contracts |  |  |  |  |  |
Life insurance | 26,350 | - | 26,350 | 23,679 | - | 23,679
Non-life insurance |  |  |  |  |  |
| 24,672 | - | 24,672 | 20,431 | - | 20,431
Total reinsurance contracts |  |  |  |  |  |
| 51,022 | - | 51,022 | 44,110 | - | 44,110
Total insurance and reinsurance contracts |  |  |  |  |  |
| 57,494 | (658,424) | (600,930) | 46,380 | (597,981) | (551,601)

The table below presents a reconciliation of the measurement components of insurance and reinsurance contract balances showing estimates of the present
value of future cash flows, risk adjustment and CSM for portfolios in the life insurance business measured under GMM and VFA.

| 2023 |  |  |  | 2022 |  |  |
| Estimates of |  |  |  |  |  |  |
| the present |  |  |  |  |  |  |
| value of |  |  |  |  |  |  |
| future cash |  |  |  |  |  |  |
| flows |  |  |  |  |  |  |
|  | Risk |  |  |  |  |  |
|  | adjustment |  |  |  |  |  |
|  | for |  |  |  |  |  |
|  | non- |  |  |  |  |  |
|  | financial |  |  |  |  |  |
|  | risk |  |  |  |  |  |
|  |  | Contractual |  |  |  |  |
|  |  | Service |  |  |  |  |
|  |  | Margin |  |  |  |  |
|  |  |  | Total |  |  |  |
|  |  |  |  | Estimates of |  |  |
|  |  |  |  | the present |  |  |
|  |  |  |  | value of |  |  |
|  |  |  |  | future cash |  |  |
|  |  |  |  | flows |  |  |
|  |  |  |  |  | Risk |  |
|  |  |  |  |  | adjustment |  |
|  |  |  |  |  | for |  |
|  |  |  |  |  | non-financial |  |
|  |  |  |  |  | risk |  |
|  |  |  |  |  |  | Contractual |
|  |  |  |  |  |  | Service |
|  |  |  |  |  |  | Margin |
|  |  |  |  |  |  |  | Total
Insurance contracts |  |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Insurance contracts liabilities | (528,955) | (13,940) | (58,331) | (601,226) | (484,060) | (16,588) | (41,863) | (542,511)
Insurance contracts assets | 10,411 | (2,004) | (1,935) | 6,472 | 3,705 | (1,255) | (180) | 2,270
Reinsurance contracts |  |  |  |  |  |  |  |
Reinsurance contracts assets | 7,896 | 220 | 16,979 | 25,095 | 23,270 | 718 | (1,772) | 22,216

The roll-forward of the net asset or liability for insurance contracts issued, showing the liabilities for remaining coverage and the liabilities for incurred claims
for portfolio included in life and non-life insurance, is disclosed in the table below:
357
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
31. Insurance and reinsurance contracts (continued)

| 2023 |  |  |  | 2022 |  |  |
| Liabilities for remaining coverage |  |  |  |  |  |  |
| LRC |  |  |  |  |  |  |
|  |  | Liabilities for |  |  |  |  |
|  |  | incurred claims |  |  |  |  |
|  |  | LIC |  |  |  |  |
|  |  |  | Total |  |  |  |
|  |  |  |  | Liabilities for remaining coverage |  |  |
|  |  |  |  | LRC |  |  |
|  |  |  |  |  |  | Liabilities for |
|  |  |  |  |  |  | incurred claims |
|  |  |  |  |  |  | LIC |
|  |  |  |  |  |  |  | Total
| Excluding loss |  |  |  |  |  |  |
| component |  |  |  |  |  |  |
|  | Loss component |  |  |  |  |  |
|  |  |  |  | Excluding loss |  |  |
|  |  |  |  | component |  |  |
|  |  |  |  |  | Loss component |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Insurance contract liabilities as at 1 January | (522,191) | (6,278) | (69,512) | (597,981) | (558,174) | (3,628) | (60,596) | (622,398)
Insurance contract assets as at 1 January |  |  |  |  |  |  |  |
| 4,110 | (1,540) | (300) | 2,270 | 6 | - | - | 6
Net insurance contract assets/(liabilities) as at 01 January |  |  |  |  |  |  |  |
| (518,081) | (7,818) | (69,812) | (595,711) | (558,168) | (3,628) | (60,596) | (622,392)
Insurance revenue | 145,775 | - | - | 145,775 | 135,495 | - | - | 135,495
Insurance service expenses |  |  |  |  |  |  |  |
Incurred claims and directly attributable expenses | - | 815 | (58,225) | (57,410) | - | 544 | (53,449) | (52,905)
Amortisation of insurance acquisition cash flows | (5,768) | - | - | (5,768) | (5,093) | - | - | (5,093)
Insurance acquisition cash flows expensed as incurred | (8,488) | - | - | (8,488) | (7,848) | - | - | (7,848)
Reversals of losses/(losses) on onerous contracts | - | 1,037 | - | 1,037 | - | (4,743) | - | (4,743)
Changes to liabilities for incurred claims (LIC) | - | - | (903) | (903) | - | - | (3,973) | (3,973)
Investment component | 55,325 | - | (55,325) | - | 53,966 | - | (53,966) | -
Insurance finance income/(expense) |  |  |  |  |  |  |  |
| (43,778) | (42) | (1,269) | (45,089) | 40,969 | 9 | 604 | 41,582
Total changes in the statement of profit or loss |  |  |  |  |  |  |  |
| 143,066 | 1,810 | (115,722) | 29,154 | 217,489 | (4,190) | (110,784) | 102,515
Premiums received | (234,913) | - | - | (234,913) | (207,769) | - | - | (207,769)
Claims and other directly attributable expenses paid | - | - | 112,670 | 112,670 | - | - | 101,568 | 101,568
Insurance acquisition cash flows |  |  |  |  |  |  |  |
| 36,693 | (10) | 165 | 36,848 | 30,367 | - | - | 30,367
Total cash flows |  |  |  |  |  |  |  |
| (198,220) | (10) | 112,835 | (85,395) | (177,402) | - | 101,568 | (75,834)
Net insurance contract assets/(liabilities) as at 31 December |  |  |  |  |  |  |  |
| (573,235) | (6,018) | (72,699) | (651,952) | (518,081) | (7,818) | (69,812) | (595,711)
Insurance contract liabilities as at 31 December | (580,410) | (5,713) | (72,301) | (658,424) | (522,191) | (6,278) | (69,512) | (597,981)
Insurance contract assets as at 31 December |  |  |  |  |  |  |  |
| 7,175 | (305) | (398) | 6,472 | 4,110 | (1,540) | (300) | 2,270
Net insurance contract assets/(liabilities) as at 31 December |  |  |  |  |  |  |  |
| (573,235) | (6,018) | (72,699) | (651,952) | (518,081) | (7,818) | (69,812) | (595,711)

358
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
31. Insurance and reinsurance contracts (continued)
The table below presents a roll-forward of the net asset or liability for insurance contacts issued, showing
CSM for portfolios included in the life insurance business.

| 2023 | 2022
| €000 | €000
Insurance contract liabilities as at 1 January | (41,863) | (43,747)
Insurance contract assets as at 1 January |  |
| (180) | -
Contractual Service Margin as at 1 January |  |
| (42,043) | (43,747)
Changes that relate to current services |  |
Contractual service margin recognised for services provided | 7,792 | 5,032
Changes that relate to future services |  |
Contracts initially recognised in the period | (282) | (394)
Changes in estimates that adjust the contractual service margin |  |
| (25,150) | (3,518)
Insurance service result |  |
| (17,640) | 1,120
Insurance finance expenses |  |
| (583) | 584
Total changes in the consolidated income statement |  |
| (18,223) | 1,704
Contractual Service Margin as at 31 December |  |
| (60,266) | (42,043)
Insurance contract liabilities as at 31 December | (58,331) | (41,863)
Insurance contract assets as at 31 December |  |
| (1,935) | (180)
Contractual Service Margin as at 31 December |  |
| (60,266) | (42,043)

32. Debt securities in issue and Subordinated liabilities

|  |  | 2023 |  | 2022 |
|  |  | Nominal |  |  |
|  |  | value |  |  |
|  |  |  | Carrying |  |
|  |  |  | value |  |
|  |  |  |  | Nominal |
|  |  |  |  | value |
|  |  |  |  |  | Carrying
|  |  |  |  |  | value
Subordinated |  |  |  |  |  |
liabilities |  |  |  |  |  |
| Contractual interest |  |  |  |  |
| rate |  |  |  |  |
|  | Issuer |  |  |  |
|  |  | €000 | €000 | €000 | €000
Subordinated Tier 2 |  |  |  |  |  |
Capital Note - April |  |  |  |  |  |
2021 |  |  |  |  |  |
| 6.625% up to |  |  |  |  |
| 23 October 2026 |  |  |  |  |
|  | BOCH |  |  |  |
|  |  | 300,000 | 306,787 | 300,000 | 302,104
Debt securities in |  |  |  |  |  |
issue |  |  |  |  |  |
Senior Preferred |  |  |  |  |  |
Notes - June 2021 |  |  |  |  |  |
| 2.50% up to |  |  |  |  |
| 24 June 2026 |  |  |  |  |
|  | BOC PCL |  |  |  |
|  |  | 300,000 | 303,466 | 300,000 | 297,636
Senior Preferred |  |  |  |  |  |
Notes - July 2023 |  |  |  |  |  |
| 7.375% up to |  |  |  |  |
| 25 July 2027 |  |  |  |  |
|  | BOC PCL |  |  |  |
|  |  | 350,000 | 368,166 | - | -
|  |  | 650,000 | 671,632 | 300,000 | 297,636

BOCH and BOC PCL maintain a Euro Medium Term Note (ΕΜΤΝ) Programme with an aggregate nominal
amount up to €4,000 million.
Subordinated Liabilities
Subordinated Tier 2 Capital Note - April 2021
In April 2021, BOCH issued a €300 million unsecured and subordinated Tier 2 Capital Note under the EMTN
Programme. The note was priced at par with a coupon of 6.625% per annum payable annually in arrear and
resettable on 23 October 2026 at the then prevailing 5-year swap rate plus a margin of 6.902% per annum
up to 23 October 2031, payable annually. The note matures on 23 October 2031. BOCH has the option to
redeem the note early on any day during the six-month period from 23 April 2026 to 23 October 2026,
subject to applicable regulatory consents. The note is listed on the Luxembourg Stock Exchange's Euro MTF
market.
The fair value of the subordinated liabilities as at 31 December 2023 and 2022 is disclosed in Note 22.
359
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
32. Debt securities in issue and Subordinated liabilities (continued)
Debt securities in issue
Senior Preferred Notes - June 2021
In June 2021, BOC PCL issued a €300 million senior preferred note under the EMTN Programme. The note
was priced at par with a fixed coupon of 2.50% per annum, payable annually in arrear and resettable on 24
June 2026. The note matures on 24 June 2027. BOC PCL has the option to redeem the note early on 24
June 2026, subject to applicable regulatory consents. The note is listed on the Luxembourg Stock
Exchange's Euro MTF market. The note complies with the criteria for the minimum requirement for own
funds and eligible liabilities (MREL) and contributes towards BOC PCL's MREL requirements.
Senior Preferred Notes - July 2023
In July 2023, BOC PLC issued a €350 million senior preferred note under the EMTN Programme. The note
was priced at par with a fixed coupon of 7.375% per annum, payable annually in arrear and resettable on
25 July 2027. The note matures on 25 July 2028. BOC PCL has the option to redeem the note early on 25
July 2027, subject to applicable regulatory consents. The note is listed on the Luxembourg Stock Exchange's
Euro MTF market. The note complies with the criteria for the minimum requirement for own funds and
eligible liabilities (MREL) and contributes towards BOC PCL's MREL requirements.
The fair value of the debt securities in issue as at 31 December 2023 and 2022 is disclosed in Note 22.
33. Accruals, deferred income, other liabilities and other provisions

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Income tax payable and related provisions | 66,479 | 41,420
Special defence contribution payable | 1,308 | 379
Retirement benefit plan liabilities (Note 14.1) | 565 | 3,694
Provisions for financial guarantees and commitments (Notes 44.6.1 and |  |
44.6.2) |  |
| 19,192 | 17,429
Liabilities arising from non-participating investment contracts | 87,756 | 47,847
Accrued expenses and other provisions | 83,738 | 65,734
Deferred income | 19,569 | 18,061
Items in the course of settlement | 69,519 | 97,585
Lease liabilities (Note 42) | 30,217 | 30,190
Other liabilities |  |
| 90,922 | 58,854
| 469,265 | 381,193

Other liabilities include an amount of €10,385 thousand (2022: €10,385 thousand) relating to the
guarantee fee for the conversion of DTA into tax credits (Note 17) a nd an amount of €19,354 thousand
(2022: €9,874 thousand) relating to card processing transactions. Other liabilities include an amount of
€1,965 thousand as at 31 December 2023 (2022: nil) which relates to dividends declared in May 2023 in
respect of the earnings of the year ended 31 December 2022 for which a liability exists as at 31 December
2023.
The ECL allowance for financial guarantees and commitments is analysed by stage in the table below:

| 2023 | 2022
| €000 | €000
Stage 1 | - | 209
Stage 2 | 18 | 207
Stage 3 |  |
| 19,174 | 17,013
| 19,192 | 17,429

360
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
34. Share capital

| 2023 |  | 2022 |
| Number of |  |  |
| shares |  |  |
| (thousand) |  |  |
|  | €000 |  |
|  |  | Number of |
|  |  | shares |
|  |  | (thousand) |
|  |  |  | €000
Authorised |  |  |  |
Ordinary shares of €0.10 each |  |  |  |
| 10,000,000 | 1,000,000 | 10,000,000 | 1,000,000
Issued |  |  |  |
1 January and 31 December |  |  |  |
| 446,200 | 44,620 | 446,200 | 44,620

Authorised and issued share capital
All issued ordinary shares carry the same rights.
There were no changes to the authorised or issued share capital during the years ended 31 December 2023
and 2022.
Share premium reserve
There were no changes to the share premium reserve during the years ended 31 December 2023 and 2022.
Treasury shares of the Company
The consideration paid, including any directly attributable incremental costs (net of income taxes), for
shares of the Company held by entities controlled by the Group is deducted from equity attributable to the
owners of the Company as treasury shares, until these shares are cancelled or reissued. No gain or loss is
recognised in the consolidated income statement on the purchase, sale, issue or cancellation of such shares.
The life insurance subsidiary of the Group, as at 31 December 2023, held a total of 142 thousand ordinary
shares of the Company of a nominal value of €0.10 each (2022: 142 thousand ordinary shares of a nominal
value of €0.10 each), as part of its financial assets which are invested for the benefit of insurance
policyholders. The cost of acquisition of these shares was €21,463 thousand (2022: €21,463 thousand).
The treasury shares represent 0.03% of the total issued share capital of the Company (2022: 0.03%).
The Company did not provide financial assistance permitted by Section 82 of the Companies Act 2014 for
the purchase of its shares.
Other equity instruments

| 2023 | 2022
| €000 | €000
2023 Reset Perpetual Additional Tier 1 Capital Securities (New Capital |  |
Securities) |  |
| 220,000 | -
2018 Reset Perpetual Additional Tier 1 Capital Securities (Existing Capital |  |
Securities) |  |
| - | 220,000
| 220,000 | 220,000

In December 2018, the Company issued €220 million Fixed Rate Reset Perpetual Additional Tier 1 Capital
Securities (the 'Existing Capital Securities'). The Existing Capital Securities constituted an unsecured and
subordinated obligation of the Company. The coupon was at 12.50% and payable semi-annually.
361
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
34. Share capital (continued)
In June 2023 the Company invited the holders of its outstanding €220,000 thousand Existing Capital
Securities to tender their Existing Capital Securities for cash purchase by the Company at a price equal to
103% of the principal amount. The Company also paid accrued interest on the Existing Capital Securities,
from the last coupon date, 15 June 2023 until the settlement date. As a result of the tender offer,
approximately €204,000 thousand in aggregate nominal amount were purchased and cancelled by the
Company. Furthermore, in July 2023, the Company purchased in the open market approximately €7,000
thousand of the outstanding nominal amount of the Existing Capital Securities, after which €8,250 thousand
in aggregate principal amount remained outstanding. At a meeting held in November 2023, the Board of
Directors resolved to exercise the Company's option to redeem the remaining nominal amount outstanding
of the Existing Capital Securities on 19 December 2023. As a result of the buy-back, a total cost of €6,820
thousand was recorded directly in equity during the year ended 31 December 2023.
At the same time, in June 2023, the Company successfully launched and priced an issue of €220,000
thousand Fixed Rate Reset Perpetual Additional Tier 1 Capital Securities (the 'New Capital Securities'). The
New Capital Securities constitute unsecured and subordinated obligations of the Company, are perpetual
and are issued at par. They carry an initial coupon of 11.875% per annum, payable semi-annually, and
resettable on 21 December 2028 and every five years thereafter. The Company may elect to cancel any
interest payment for an unlimited period, on a non-cumulative basis, whereas it mandatorily cancels
interest payment under certain conditions. The New Capital Securities are perpetual and have no fixed date
of redemption, but can be redeemed (in whole but not in part) at the Company's option from, and including,
21 June 2028 to, and including, 21 December 2028 and on each interest payment date thereafter, subject
to applicable regulatory consents and the relevant conditions to redemption. The New Capital Securities are
listed on the Luxembourg Stock Exchange's Euro Multilateral Trading Facility (MTF) market.
Transaction costs of €3,530 thousand in relation to the issuance of the New Capital Securities were recorded
directly in equity during the year ended 31 December 2023.
During the year ended 31 December 2023, coupon payments for the total amount of €27,339 thousand
(2022: €27,500 thousand) were made to the holders of the AT1 instruments and have been recognised in
retained earnings.
35. Dividends
Based on the 2022 SREP decision, effective from 1 January 2023, any equity dividend distribution is subject
to regulatory approval, both for the Company and BOC PCL. The requirement for approval does not apply if
the distributions are made via the issuance of new ordinary shares to the shareholders which are eligible as
Common Equity Tier 1 Capital nor to the payment of coupons on any AT1 capital instruments issued by the
Company or BOC PCL.
In April 2023, the Company obtained the approval of the European Central Bank to pay a dividend.
Following this approval, the Board of Directors of the Company recommended to the shareholders for
approval at the Annual General Meeting ('AGM') on 26 May 2023, a final dividend of €0.05 per ordinary
share in respect of the earnings of the year ended 31 December 2022 ('Dividend'). The AGM on 26 May
2023 declared a final dividend of €0.05 per share. The Dividend amounted to €22,310 thousand in total.
Information on distribution in respect of 2023 earnings is disclosed in Note 53 of the Consolidated Financial
Statements.
362
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
36. Retained earnings
For the purpose of dividend distribution, retained earnings determined at the Company level are the only
distributable reserve.
Companies, tax resident in Cyprus, which do not distribute at least 70% of their profits after tax as defined
by the Special Defence Contribution Law during the two years after the end of the year of assessment to
which the profits refer, will be deemed to have distributed this amount as dividend. Special defence
contribution (SDC) at 17% is payable on such deemed dividend distribution to the extent that the
shareholders of the Company at the end of the period of two years from the end of the year of assessment
to which the profits refer, are directly or indirectly Cyprus tax residents or individuals who are domiciled in
Cyprus. Deemed dividend distribution does not apply in respect of profits that are directly or indirectly
attributable to shareholders that are non-Cyprus tax residents and individual shareholders who are not
domiciled in Cyprus. From 1 March 2019, the deemed dividend distribution is subject to 1.70% contribution
to the General Health System (GHS), increased to 2.65% from 1 March 2020, with the exemption of April
2020 until June 2020 when the 1.70% rate was applicable.
The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of
the relevant year.
This SDC and GHS are paid by the Company on account of the shareholders. During 2023, SDC and GHS on
deemed dividend distribution of €42 thousand (2022: €4,983 thousand) and €313 thousand (2022: nil)
were accrued by the Company and BOC PCL respectively.
37. Fiduciary transactions
The Group offers fund management and custody services that result in holding or investing financial assets
on behalf of its customers. The Group is not liable to its customers for any default by other banks or
organisations. The assets under management and custody are not included in the consolidated balance
sheet of the Group unless they are placed with the Group. Total assets under management at 31 December
2023, measured at fair value, amounted to €1,967,686 thousand (2022: €1,682,019 thousand).
38. Provisions for pending litigations, claims, regulatory and other matters
The Group, in the ordinary course of business, is involved in various disputes and legal proceedings and is
subject to enquiries and examinations, requests for information, audits, investigations and other
proceedings by regulators, governmental and other public bodies, actual and threatened, relating to the
suitability and adequacy of advice given to clients or the absence of advice, lending and pricing practices,
selling and disclosure requirements, reporting and information security requirements and a variety of other
matters. In addition, as a result of the deterioration of the Cypriot economy and banking sector in 2012 and
the subsequent restructuring of BOC PCL in 2013 as a result of the bail-in Decrees, BOC PCL is subject to a
large number of proceedings and investigations that either precede or result from the events that occurred
during the period of the bail-in Decrees.
Apart from what is described below, the Group considers that none of these matters are material, either
individually or in aggregate. Nevertheless, provisions have been made where: (a) there is a present
obligation (legal or constructive) arising from past events, (b) the settlement of the obligation is expected
to result in an outflow of resources embodying economic benefits, and (c) a reliable estimate of the amount
of the obligation can be made. The Group has not disclosed an estimate of the potential financial effect on
its contingent liabilities arising from these matters where it is not practicable to do so, because it is too
early or the outcome is too uncertain or, in cases where it is practicable, where disclosure could prejudice
conduct of the matters. Provisions have been recognised for those cases where the Group is able to
estimate probable losses (Note 5.4). W here an individual provision is material, the fact that a provision has
been made is stated except to the extent that doing so would be prejudicial. Any provision recognised does
not constitute an admission of wrongdoing or legal liability. There are also situations where the Group may
enter into a settlement agreement. This may occur only if such settlement is in the Group's interest (such
settlement does not constitute an admission of wrongdoing) and only takes place after obtaining legal
advice and all approvals by the appropriate bodies of management. While the outcome of these matters is
inherently uncertain, management believes that, based on the information available to it, appropriate
provisions have been made in respect of legal proceedings, regulatory and other matters as at 31 December
2023 and hence it is not believed that such matters, when concluded, will have a material impact upon the
financial position of the Group.
363
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
38. Provisions for pending litigations, claims, regulatory and other matters (continued)
38.1 Pending litigations and claims
Investigations and litigations relating to securities issued by BOC PCL
A number of institutional and retail customers have filed various separate actions against BOC PCL alleging
that BOC PCL is guilty of misselling in relation to securities issued by BOC PCL between 2007 and 2011.
Remedies sought include the return of the money investors paid for these securities. Claims are currently
pending before the courts in Cyprus and in Greece, as well as the decisions and fines imposed upon BOC
PCL in related matters by Cyprus Securities and Exchange Commission (CySEC) and/or Hellenic Capital
Market Commission (HCMC).
The bonds and capital securities in respect of which claims have been brought are the following: 2007
Capital Securities, 2008 Convertible Bonds, 2009 Convertible Capital Securities (CCS) and 2011 Convertible
Enhanced Capital Securities (CECS).
BOC PCL is defending these claims, particularly with respect to institutional investors and retail purchasers
who received investment advice from independent investment advisors. In the case of retail investors, if it
can be demonstrated that the relevant BOC PCL's officers 'persuaded' them to proceed with the purchase
and/or purported to offer 'investment advice', BOC PCL may face significant difficulties.
To date, a number of cases have been tried in Greece. BOC PCL has appealed against any such cases which
were not ruled in its favour. The resolution of the claims brought in the courts of Greece is expected to take
a number of years.
So far, four capital securities cases have been adjudicated in favour of BOC PCL and five cases have been
adjudicated against BOC PCL at Areios Pagos (Supreme Court of Greece). None of the cases won at the
Court of Appeal have been reversed by the Supreme Court. The cases that BOC PCL has won will be retried
by the Court of Appeal as per the direction of the Supreme Court. One of the said cases has already been
retried by the Court of Appeal and the ruling was in favour of BOC PCL. There has been a new petition for
annulment against this decision of the Court of Appeal and the case will be retried before the Supreme
Court in 2024. The five cases that BOC PCL has lost will not be retried and are therefore deemed as
concluded.
In Cyprus, twenty-three judgments have been issued so far with regards to BOC PCL capital securities.
Fifteen of the said judgments have been issued in favour of BOC PCL (dismissing the plaintiffs' claims) and
eight of them against BOC PCL. BOC PCL has filed appeals with regards to five of the cases where the
judgment was issued against it. In eight of the fifteen cases that BOC PCL won, the plaintiffs have filed an
appeal. It is to be noted that the statutory limitation period for filing claims with respect to this and other
matters for which the cause of action arose prior and up to 31 December 2015, expired on 31 December
2021.
Provision has been made based on management's best estimate of probable outflows for capital securities
related litigation.
Bail-in related litigation
Depositors
A number of BOC PCL's depositors, who allege that they were adversely affected by the bail-in, filed claims
against BOC PCL and other parties (such as the CBC and the Ministry of Finance of Cyprus) including against
BOC PCL as the alleged successor of Laiki Bank on the grounds that, inter alia, the 'Resolution Law of 2013'
and the Bail-in Decrees were in conflict with the Constitution of the Republic of Cyprus and the European
Convention on Human Rights. They are seeking damages for their alleged losses resulting from the bail-in of
their deposits. BOC PCL is defending these actions.
BOC PCL has won five cases with regards to bail-in related litigation (on failure to follow instructions). The
plaintiffs have filed appeals with respect to two of the said judgments. BOC PCL lost two cases with regards
to bail-in related litigation (on failure to follow instructions) and has filed appeals with respect to both
cases.
364
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
38. Provisions for pending litigations, claims, regulatory and other matters (continued)
38.1 Pending litigations and claims (continued)
BOC PCL also won fourteen bail-in decree related cases. In summary, the court ruled that the measures that
the government implemented were necessary to prevent the collapse of the financial sector, which would
have detrimental consequences for the country's economy. Under the circumstances the government could
rely on the doctrine of necessity when it imposed the bail-in. Up to the date of the Consolidated Financial
Statements only three appeals have been filed with respect to the above-mentioned judgments. BOC PCL
lost one Laiki Bail-in decree case but it is the opinion of legal advisors of BOC PCL that this case is a one-off
case which turned on its own particular facts. An appeal by BOC PCL has been filed with respect to this case.
BOC PCL won two and lost three bail-in wrongful application related cases. The two appeals that have been
filed by BOC PCL are still pending with regards to this matter. With regards to the cases that BOC PCL won,
the plaintiffs have not filed an appeal.
Shareholders
A number of actions for damages have been filed with the District Courts of Cyprus alleging either the
unconstitutionality of the Resolution Law and the Bail-in Decrees, or a misapplication of same by BOC PCL
(as regards the way and methodology whereby such Decrees have been implemented), or that BOC PCL
failed to follow instructions promptly prior to the bail-in coming into force. As at the present date, both the
Resolution Law and the Bail-in Decrees have not been annulled by a court of law and thus remain legally
valid and in effect. BOC PCL contests all of these claims.
Legal position of the Group
All of the above claims are being vigorously disputed by the Group, in close consultation with the
appropriate state and governmental authorities. The position of the Group is that the Resolution Law and
the Decrees take precedence over all other laws. As matters now stand, both the Resolution Law and the
Decrees issued thereunder are constitutional and lawful, in that they were properly enacted and have not so
far been annulled by any court.
Provident fund case
In December 2015, the Bank of Cyprus Employees Provident Fund (the Provident Fund) filed an action
against BOC PCL claiming €70 million allegedly owed as part of BOC PCL's contribution by virtue of an
agreement with the Union dated 31 December 2011. Based on facts currently known, it is not practicable at
this time for BOC PCL to predict the resolution of this matter, including the timing or any possible impact on
the Group.
Employment litigation
Former employees of the Group have instituted a number of employment claims including unfair dismissals
and one claim for Provident Fund entitlements against BOC PCL and the Trustees of the Provident Fund. In
July 2021 the claim for Provident Fund entitlements was settled. The Group does not consider that the
pending cases in relation to employment will have a material impact on its financial position. A judgment
has been issued in one of the unfair dismissal cases and BOC PCL lost. BOC PCL has filed an appeal with
respect to this case and similarly, the plaintiff has also filed an appeal. The facts of this case are unique and
it is not expected to affect the rest of the cases where unfair dismissal is claimed.
Additionally, a number of former employees have filed claims against BOC PCL contesting entitlements
received relating to the various voluntary exit plans. As at the reporting date, the Group does not expect
that these actions will have a material impact on its financial position.
Banking business cases
There is a number of banking business cases where the amounts claimed are significant. These cases
primarily concern allegations as to BOC PCL's standard policies and procedures allegedly resulting to
damages and other losses for the claimants (including cases where it is alleged that BOC PCL misled
borrowers and/or misrepresented matters, in violation of applicable laws for matters such as foreign
currency lending and advancing/misselling loans for the purchase of property in Cyprus by UK nationals).
Further, there are several other banking claims, where the amounts involved are not as significant.
Management has assessed either the probability of loss as remote and/or does not expect any future
outflows with respect to these cases to have a material impact on the financial position of the Group. Such
matters arise as a result of the Group's activities and management appropriately assesses the facts and the
risks of each case accordingly.
365
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
38. Provisions for pending litigations, claims, regulatory and other matters (continued)
38.1 Pending litigations and claims (continued)
General criminal investigations and proceedings
The Attorney General and the Cypriot Police (the Police) are conducting various investigations and inquiries
following and relating to the financial crisis which culminated in March 2013. BOC PCL is cooperating fully
with the Attorney General and the Police and is providing all information requested of it. Based on the
currently available information, the Group is of the view that any further investigations or claims resulting
from these investigations will not have a material impact on its financial position.
Others
An investigation is in process related to potentially overstated and/or fictitious claims paid by the non-life
insurance subsidiary of the Group. The information usually required by IAS 37 'Provisions, Contingent
Liabilities and Contingent Assets' is not disclosed on the grounds that it is expected to seriously prejudice
the outcome of the investigation and/or the possible taking of legal action. Based on the information
available at present, management considers that it is unlikely for this matter to have a material adverse
impact on the financial position and capital adequacy of the non-life insurance subsidiary and thereby the
Group, also taking into account that it is virtually certain that compensations will be received from a
relevant insurance coverage, upon the settlement of any obligation that may arise.
38.2 Regulatory matters
The Hellenic Capital Market Commission (HCMC) Investigation
The HCMC is currently in the process of investigating matters concerning the Group's investment in Greek
Government Bonds from 2009 to 2011, including, inter alia, related non-disclosure of material information
in BOC PCL's CCS, CECS and rights issue prospectuses (tracking the investigation carried out by CySEC in
2013), Greek government bonds' reclassification, ELA disclosures and allegations by some investors
regarding BOC PCL's non-compliance with Markets in Financial Instruments Directive (MiFID) in respect of
investors' direct investments in Greek Government Bonds.
A specific estimate of the outcome of the investigations or of the amount of possible fines cannot be given
at this stage, though it is not expected that any resulting liability or damages will have a material impact on
the financial position of the Group.
The Cyprus Securities and Exchange Commission (CySEC) Investigations
CySEC has concluded (in two stages) during 2013 and 2014 its investigation with respect to BOC PCL
exposure to Greek Government Bonds and the non-disclosure of material information and other corporate
governance deficiencies relating to the said exposure. In this respect, CySEC has issued two decisions,
coming to the conclusion that BOC PCL was in breach of certain laws regarding disclosure of information. At
all times, BOC PCL had filed recourses before the Administrative Court regarding the decisions of CySEC and
the fines imposed upon it.
In October 2021 the Administrative Court ruled in favour of BOC PCL in relation to the fine of €160 thousand
on the ground of flawed constitution of the CySEC Board. An appeal to this judgment was filed. In March
2024 the appeal was rejected. With the abovementioned rulings, the said fine has been cancelled. In May
2022, the Administrative Court (under a different bench) ruled against BOC PCL in relation to the fine of
€950 thousand and found that the constitution of the CySEC Board was not flawed. BOC PCL filed an appeal
and in March 2024 the appeal overturned the ruling of the Administrative Court on the grounds that the
constitution of the CySEC Board was flawed and in this case there was a violation of the objective aspect of
the prnciple of impartiality. With the abovementioned ruling, the said fine has been cancelled. In May 2023
the Administrative Court ruled in favour of BOC PCL in relation to the fine of €70 thousand on the ground of
flawed constitution of the CySEC Board. This case is now pending on appeal. Relevant provisions were made
in prior years for the said cases.
As at 31 December 2023 and 31 December 2022 there were no pending CySEC investigations against BOC
PCL.
Central Bank of Cyprus (CBC)
The CBC had conducted an investigation in the past into BOC PCL's issuance of capital securities and
concluded that BOC PCL breached certain regulatory requirements concerning the issuance of Convertible
Capital Securities (Perpetual) in 2009, but not in relation to the CECS in 2011. The CBC had, in 2013,
imposed a fine of €4 thousand upon BOC PCL, who filed a recourse. The Administrative Court cancelled both
the CBC's decision and the fine that was imposed upon BOC PCL in a respective judgment dated in 2020. In
2021, CBC decided to re-examine this matter and to re-open the investigation.
366
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
38. Provisions for pending litigations, claims, regulatory and other matters (continued)
38.2 Regulatory matters (continued)
Commission for the Protection of Competition Investigation (CPC)
In April 2014, following an investigation which began in 2010, CPC issued a statement of objections,
alleging violations of Cypriot and EU competition law relating to the activities and/or omissions in respect of
card payment transactions by, among others, BOC PCL and JCC Payment Systems Ltd (JCC), a card
processing business currently 75% owned by BOC PCL. There was also an allegation concerning BOC PCL's
arrangements with American Express, namely that such exclusive arrangements violated Cypriot and EU
competition law. On both matters, the CPC has concluded that BOC PCL (in common with other banks and
JCC) has breached the relevant provisions of the applicable law for the protection of competition and
imposed a fine of €18 million upon BOC PCL. BOC PCL filed a recourse against the decision and the fine. In
June 2018, the Administrative Court accepted BOC PCL's position and cancelled the decision as well as the
fine imposed upon BOC PCL. During 2018, the Attorney General has filed an appeal before the Supreme
court with respect to such decision. Until a judgment is issued by the Supreme Court, the decision of the
CPC remains annulled and there is no subsisting fine upon BOC PCL. The said appeal is still pending as at 31
December 2023.
In 2019, the CPC initiated an ex officio investigation with respect to unfair contract terms and into the
contractual arrangements/facilities offered by BOC PCL for the period from 2012 to 2016. To date no
charges have been put forward nor have any formal proceedings been instituted against BOC PCL in this
case. The Group is not aware of any further developments in this case.
Association for the Protection of Bank Borrowers (CYPRODAT)
CYPRODAT filed a complaint with the Commission for the Protection of Competition (CPC) in January 2022,
claiming that BOC PCL and another bank have concerted in practices regarding the recent revisions of their
commissions and charges. In April 2022, CPC informed BOC PCL of the initiation of an investigation with
respect to this matter but for which no formulation of a Statement of Objections has been received to date
which would indicate the initiation of formal proceedings.
Consumer Protection Service (CPS)
In July 2017, CPS imposed a fine of €170 thousand upon BOC PCL after concluding an ex officio
investigation regarding some terms in both BOC PCL's and Marfin Popular Bank's loan documentation, that
were found to constitute unfair commercial practices. Decisions of the CPS (according to rulings of the
Administrative Court) are not binding but merely an expression of opinion. BOC PCL has filed a recourse
before the Administrative Court against this decision. The Administrative Court has issued its judgment in
2022 in favour of BOC PCL, and the CPS decision along with the fine have been cancelled. An appeal has
been submitted by CPS with regards to this judgment, which is still pending as at 31 December 2023.
In March 2020, BOC PCL has been served with an application by the director of CPS through the Attorney
General seeking for an order of the court, with immediate effect, the result of which will be for BOC PCL to
cease the use of a number of terms in the contracts of BOC PCL which are deemed to be unfair under the
said order. The said terms relate to contracts that had been signed during 2006-2007. Furthermore, the
said application seeks for an order ordering BOC PCL to undertake measures to remedy the situation. BOC
PCL will take all necessary steps for the protection of its interests. This matter is still pending before the
court as at 31 December 2023.
In April 2021, the director of CPS filed an application for the issuance of a court order against BOC PCL,
prohibiting the use of a number of contractual terms included in BOC PCL's consumer contracts and
requiring the amendment of any such contracts (present and future) so as to remove such unfair terms.
This matter is still pending before the court as at 31 December 2023.
BOC PCL received a letter in July 2021 from CPS, initiating an ex officio investigation under the Distance
Marketing of Financial Services to Consumers Law, with respect to the services and products of BOC PCL for
which the contract between BOC PCL and the consumer is entered into online via BOC PCL's website.
BOC PCL received another letter in July 2021 from CPS, initiating an investigation with respect to an alleged
wrong commercial practice of BOC PCL in promoting a product.
There have been no further developments on the aforementioned investigations since.
367
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
38. Provisions for pending litigations, claims, regulatory and other matters (continued)
38.2 Regulatory matters (continued)
Cyprus Consumers' Association (CCA)
In March 2021, BOC PCL was served with an application filed by the CCA for the issuance of a court order
prohibiting the use of a number of contractual terms included in BOC PCL's consumer contracts and
requiring the amendment of any such contracts (present and future) so as to remove such terms deemed as
unfair. The said contractual terms were determined as unfair pursuant to the decisions issued by the
Consumer Protection Service of the Ministry of Energy, Commerce, Industry and Tourism against BOC PCL
in 2016 and 2017. BOC PCL will take all necessary steps for the protection of its interests. This matter is
still pending before the court as at 31 December 2023.
The Consumer Protection Law 2021 brings under one umbrella the existing legislation on unfair contract
terms and practices with some enhanced powers vested in the Consumer Protection Service, i.e. power to
impose increased fines which are immediately payable. The Consumer Protection Law 2021 has a
retrospective effect in that it also applies to all contracts/practices entered into and/or terminated prior to
this law coming into effect as opposed to contracts/practices which are only entered into/adopted as from
the date of publication of the new Law on Consumer Protection.
There are many factors that may affect the range of outcomes and the resulting financial impact of these
matters, is unknown.
UK regulatory matters
As part of the agreement for the sale of Bank of Cyprus UK Ltd, a liability with regards to UK regulatory
matters remains an obligation for settlement by the Group. The level of the provision represents the best
estimate of all probable outflows arising from customer redress based on information available to
management.
38.3 Οther matters
Other matters include among others, provisions for various other open examination requests by
governmental and other public bodies, legal matters and provisions for warranties and indemnities related
to the disposal process of certain operations of the Group.
The provisions for pending litigations, claims, regulatory and other matters described above and provided in
the tables below do not include insurance claims arising in the ordinary course of business of the Group's
insurance subsidiaries as these are included in 'Insurance contract liabilities'.
38.4 Provisions for pending litigations, claims, regulatory and other matters

| Pending |  |  |
| litigations and |  |  |
| claims |  |  |
| (Note 38.1) |  |  |
|  | Regulatory |  |
|  | matters |  |
|  | (Note 38.2) |  |
|  |  | Other matters |
|  |  | (Note 38.3) |
|  |  |  | Total
2023 | €000 | €000 | €000 | €000
1 January | 63,947 | 14,918 | 48,742 | 127,607
Net increase in provisions including |  |  |  |
unwinding of discount |  |  |  |
| 36,227 | 527 | 4,940 | 41,694
Utilisation of provisions | (28,777) | (727) | (108) | (29,612)
Release of provisions | (10,429) | - | - | (10,429)
Net transfer | - | - | 2,220 | 2,220
Foreign exchange adjustments |  |  |  |
| - | 23 | - | 23
31 December |  |  |  |
| 60,968 | 14,741 | 55,794 | 131,503
Provisions expected to be settled within 12 |  |  |  |
months post reporting date |  |  |  |
| 24,814 | - | 29,606 | 54,420

368
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
38. Provisions for pending litigations, claims, regulatory and other matters (continued)
38.4 Provisions for pending litigations, claims, regulatory and other matters (continued)

| Pending |  |  |
| litigations and |  |  |
| claims |  |  |
| (Note 38.1) |  |  |
|  | Regulatory |  |
|  | matters |  |
|  | (Note 38.2) |  |
|  |  | Other |
|  |  | matters |
|  |  | (Note 38.3) |
|  |  |  | Total
2022 | €000 | €000 | €000 | €000
1 January | 57,844 | 16,415 | 29,849 | 104,108
Net increase in provisions including |  |  |  |
unwinding of discount |  |  |  |
| 15,627 | 950 | 19,017 | 35,594
Utilisation of provisions | (6,314) | (1,357) | (24) | (7,695)
Release of provisions | (3,210) | (1,037) | (100) | (4,347)
Foreign exchange adjustments |  |  |  |
| - | (53) | - | (53)
31 December |  |  |  |
| 63,947 | 14,918 | 48,742 | 127,607
Provisions expected to be settled within 12 |  |  |  |
months post reporting date |  |  |  |
| 26,991 | - | 2,804 | 29,795

Provisions for pending litigations, claims, regulatory and other matters recorded in the consolidated income
statement during the year ended 31 December 2023 amounting to €28,464 thousand (2022: €11,880
thousand), also include a credit amount of €2,801 thousand representing an amount recovered on the
conclusion of open examinations of governmental bodies directly recognised in the consolidated income
statement (2022: nil). The movement in the year ended 31 December 2023 is driven by the progress on
legal cases, and provision for other matters in relation to the run-down and disposal of the Group's legacy
and non-core operations.
Some information required by the IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' is not
disclosed on the grounds that it can be expected to prejudice seriously the outcome of the litigation or the
outcome of the negotiation in relation to provisions for warranties and indemnities related to the disposal
process of certain operations of the Group.
39. Contingent liabilities and commitments
As part of the services provided to its customers, the Group enters into various irrevocable commitments
and contingent liabilities. These consist of financial guarantees, letters of credit and other undrawn
commitments to lend.
Even though these obligations may not be recognised on the consolidated balance sheet, they do contain
credit risk and are therefore part of the overall credit risk exposure of the Group (Note 44.6).
39.1 Capital commitments
Capital commitments for the acquisition of property, equipment and intangible assets as at 31 December
2023 amount to €20,139 thousand (2022: €10,647 thousand).
39.2. Contingent liabilities
The Group, as part of the disposal process of certain of its operations, has provided various representations,
warranties and indemnities to the buyers. These relate to, among other things, the ownership of the loans,
the validity of the liens, tax exposures and other matters agreed with the buyers. As a result, the Group
may be obliged to compensate the buyers in the event of a valid claim by the buyers with respect to the
above representations, warranties and indemnities.
A provision has been recognised, based on management's best estimate of probable outflows, where it was
assessed that such an outflow is probable (Note 38.3).
369
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
40. Additional information on cash flow statement
Non-cash transactions
Repossession of collaterals
During the year ended 31 December 2023, the Group acquired properties by taking possession of collaterals
held as security for loans and advances to customers of €20,921 thousand (2022: €86,016 thousand).
Recognition of RoU assets and lease liabilities
During 2023 the Group recognised RoU assets and corresponding lease liabilities of €11,353 thousand
(2022: €957 thousand).
Net cash flow from operating activities - interest and dividends

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Interest paid | (154,388) | (89,016)
Interest received | 1,071,045 | 505,633
Dividends received (Note 13) |  |
| 856 | 940
| 917,513 | 417,557

Changes in liabilities arising from financing activities

| Funding from |  |
| central banks |  |
| (Note 29) |  |
|  | Debt securities |
|  | in issue and |
|  | Subordinated |
|  | liabilities |
|  | (Note 32) |
|  |  | Total
2023 | €000 | €000 | €000
1 January | 1,976,674 | 599,740 | 2,576,414
Cash flows | - | 320,314 | 320,314
Other non-cash movements |  |  |
| 67,194 | 58,365 | 125,559
31 December |  |  |
| 2,043,868 | 978,419 | 3,022,287

2022 |  |  |
1 January | 2,969,600 | 642,775 | 3,612,375
Cash flows | (979,389) | (66,797) | (1,046,186)
Other non-cash movements |  |  |
| (13,537) | 23,762 | 10,225
31 December |  |  |
| 1,976,674 | 599,740 | 2,576,414

Further information relating to the change in lease liabilities is disclosed in Note 42.
41. Cash and cash equivalents
Cash and cash equivalents comprise:

| 2023 | 2022
| €000 | €000
Cash and non-obligatory balances with central banks | 9,555,323 | 9,452,721
Loans and advances to banks with original maturity less than three months |  |
| 282,998 | 133,432
| 9,838,321 | 9,586,153

370
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
41. Cash and cash equivalents (continued)
Analysis of cash and balances with central banks and loans and advances to banks

| 2023 | 2022
| €000 | €000
Cash and non-obligatory balances with central banks | 9,555,323 | 9,452,721
Obligatory balances with central banks (Note 19) |  |
| 59,179 | 114,537
Total cash and balances with central banks (Note 19) |  |
| 9,614,502 | 9,567,258

Loans and advances to banks with original maturity less than three months | 282,998 | 133,432
Restricted loans and advances to banks |  |
| 101,804 | 71,379
Total loans and advances to banks (Note 19) |  |
| 384,802 | 204,811

Restricted loans and advances to banks include collaterals under derivative transactions of €13,970
thousand (2022: €7,380 thousand) which are not immediately available for use by the Group, but are
released once the transactions are terminated, and collaterals for the reverse repurchase agreements of
€29,524 thousand (2022: n/a).
42. Leases
The Group is a lessee for commercial properties such as office and branch buildings. The basic terms for
lease contracts relating to the branch network are primarily uniform, irrespective of lessors, with the non-
cancellable rental period being two years. The Group has the option to extend the tenancy for four further
periods of two years each. The Group has the right at any time after the expiry of the initial term to
terminate the present rental agreement by providing notice (usually 3 or 6 months' notice) to the lessor.
Depending on the terms agreed, the rent is adjusted at the end of each renewal period, according to the
current rates of the area and considering the relevant legislation.
Office buildings are leased by the Group for the operation of administrative functions. The basic terms for
new lease contracts and the current practice are substantially the same with those for lease contracts of
branches.
During the year ended 31 December 2022 the lease term of existing building contracts was re-assessed
using the assumptions as detailed in Note 5.13.
The carrying amounts of the Group's RoU assets and lease liabilities and the movement during the year
ended 31 December 2023 and the year ended 31 December 2022 is presented in the table below:

2023 |  |
| RoU assets |
| (Note 25) |
|  | Lease
|  | Liabilities
|  | (Note 33)
| €000 | €000
1 January | 30,233 | (30,190)
Depreciation charge for the year (Note 15.1) | (6,736) | -
New leases (Note 25) | 11,353 | (7,113)
Re-assessment of lease terms (Note 25) | (988) | 693
Interest expense | - | (1,453)
Cash outflows-payments |  |
| - | 7,846
31 December |  |
| 33,862 | (30,217)

371
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
42. Leases (continued)

2022 |  |
| RoU assets |
| (Note 25) |
|  | Lease
|  | Liabilities
|  | (Note 33)
| €000 | €000
1 January | 33,581 | (33,981)
Depreciation charge for the year (Note 15.1) | (6,767) | -
New leases (Note 25) | 957 | (772)
Assets derecognised (Note 25) | (1,460) | 1,456
Assets recognised following re-assessment (Note 25) | 3,922 | (3,663)
Interest expense | - | (114)
Cash outflows-payments |  |
| - | 6,884
31 December |  |
| 30,233 | (30,190)

As at 31 December 2023 RoU assets comprised of leases of buildings of a carrying amount of €22,400
thousand (2022: €29,408 thousand) and computer hardware of a carrying amount of €11,462 thousand
(2022: €825 thousand), and are presented within Property and equipment in Note 25.
Interest expense on lease liabilities of €1,159 thousand is included within net insurance service result as it
is directly attributable expense for the fulfilment of insurance contracts within IFRS 17 scope (2022: €100
thousand).
Cash outflows relate to lease payments made during the year.
The analysis of lease liabilities based on remaining contractual maturity is disclosed in Note 46.
372
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
43. Analysis of assets and liabilities by expected maturity

| 2023 |  |  | 2022 (restated) |  |
| Less than |  |  |  |  |
| one year |  |  |  |  |
|  | Over one |  |  |  |
|  | year |  |  |  |
|  |  | Total |  |  |
|  |  |  | Less than |  |
|  |  |  | one year |  |
|  |  |  |  | Over one |
|  |  |  |  | year |
|  |  |  |  |  | Total
Assets | €000 | €000 | €000 | €000 | €000 | €000
Cash and balances with |  |  |  |  |  |
central banks |  |  |  |  |  |
| 9,555,323 | 59,179 | 9,614,502 | 9,452,721 | 114,537 | 9,567,258
Loans and advances to |  |  |  |  |  |
banks |  |  |  |  |  |
| 282,998 | 101,804 | 384,802 | 133,432 | 71,379 | 204,811
Derivative financial |  |  |  |  |  |
assets |  |  |  |  |  |
| 859 | 50,196 | 51,055 | 904 | 47,249 | 48,153
Investments | 736,664 | 2,958,745 | 3,695,409 | 460,070 | 2,243,633 | 2,703,703
Reverse repurchase |  |  |  |  |  |
agreements |  |  |  |  |  |
| - | 403,199 | 403,199 | - | - | -
Loans and advances to |  |  |  |  |  |
customers |  |  |  |  |  |
| 1,192,800 | 8,628,988 | 9,821,788 | 880,158 | 9,073,094 | 9,953,252
Life insurance business |  |  |  |  |  |
assets attributable to |  |  |  |  |  |
policyholders |  |  |  |  |  |
| 27,632 | 621,580 | 649,212 | 15,486 | 526,835 | 542,321
Prepayments, accrued |  |  |  |  |  |
income and other assets |  |  |  |  |  |
| 350,152 | 234,767 | 584,919 | 256,077 | 352,977 | 609,054
Stock of property | 191,818 | 634,297 | 826,115 | 301,275 | 739,757 | 1,041,032
Investment properties | 10,605 | 51,500 | 62,105 | 24,749 | 60,350 | 85,099
Deferred tax assets | 37,909 | 163,359 | 201,268 | 37,909 | 190,025 | 227,934
Property, equipment and |  |  |  |  |  |
intangible assets |  |  |  |  |  |
| - | 334,203 | 334,203 | - | 305,924 | 305,924
| 12,386,760 | 14,241,817 | 26,628,577 | 11,562,781 | 13,725,760 | 25,288,541
Liabilities |  |  |  |  |  |
Deposits by banks | 202,850 | 268,706 | 471,556 | 191,635 | 316,023 | 507,658
Funding from central |  |  |  |  |  |
banks |  |  |  |  |  |
| 2,043,868 | - | 2,043,868 | 1,976,674 | - | 1,976,674
Derivative financial |  |  |  |  |  |
liabilities |  |  |  |  |  |
| 14,079 | 3,901 | 17,980 | 10,538 | 5,631 | 16,169
Customer deposits | 5,984,800 | 13,352,115 | 19,336,915 | 5,893,802 | 13,104,517 | 18,998,319
Insurance liabilities | 88,616 | 569,808 | 658,424 | 86,636 | 511,345 | 597,981
Accruals, deferred |  |  |  |  |  |
income and other |  |  |  |  |  |
liabilities and provisions |  |  |  |  |  |
for pending litigations, |  |  |  |  |  |
claims, regulatory and |  |  |  |  |  |
other matters |  |  |  |  |  |
| 371,498 | 229,270 | 600,768 | 297,689 | 211,111 | 508,800
Debt securities in issue |  |  |  |  |  |
and subordinated |  |  |  |  |  |
liabilities |  |  |  |  |  |
| - | 978,419 | 978,419 | - | 599,740 | 599,740
Deferred tax liabilities |  |  |  |  |  |
| 1,622 | 30,684 | 32,306 | 1,207 | 33,427 | 34,634
| 8,707,333 | 15,432,903 | 24,140,236 | 8,458,181 | 14,781,794 | 23,239,975

The main assumptions used in determining the expected maturity of assets and liabilities are set out below.
Cash and balances with central banks are classified in the relevant time band based on the contractual
maturity, with the exception of obligatory balances with central banks which are classified in the 'Over one
year' time band.
The investments are classified in the relevant time band based on expectations as to their realisation. In
most cases this is the maturity date, unless there is an indication that the maturity will be prolonged or
there is an intention to sell, roll or replace the security with a similar one.
373
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
43. Analysis of assets and liabilities by expected maturity (continued)
Performing loans and advances to customers in Cyprus are classified based on the contractual repayment
schedule. Overdraft accounts are classified in the 'Over one year' time band. The Stage 3 Loans are
classified in the 'Over one year' time band except cash flows from expected receipts which are included
within time bands, according to historic amounts of receipts in the recent months.
Stock of property is classified in the relevant time band based on expectations as to its realisation.
A percentage of customer deposits maturing within one year is classified in the 'Over one year' time band,
based on the observed behavioural analysis.
The expected maturity of all prepayments, accrued income and other assets and accruals, deferred income
and other liabilities is the same as their contractual maturity. If they do not have a contractual maturity, the
expected maturity is based on the timing the asset is expected to be realised and the liability is expected to
be settled.
44. Risk management - Credit risk
In the ordinary course of its business the Group is exposed to credit risk which is monitored through various
control mechanisms across all Group entities in order to prevent undue risk concentrations and to price
credit facilities and products on a risk-adjusted basis.
Credit risk is the risk that arises from the possible failure of one or more customers to discharge their credit
obligations towards the Group.
The Credit Risk Management department, in co-operation with the Credit Risk Control and Monitoring
department, set the Group's credit risk policies and monitor compliance with credit risk policies applicable to
each business line and the quality of the Group's loans and advances portfolio through the timely credit risk
assessment of customers. The credit exposures of related accounts are aggregated and monitored on a
consolidated basis.
The Credit Risk Management department, in co-operation with the Credit Risk Control and Monitoring
department, also safeguard the effective management of credit risk at all stages of the credit cycle, monitor
the quality of decisions and processes and ensure that the credit sanctioning function is being properly
managed.
The credit policies are complemented by the methods/models used for the assessment of the customers'
creditworthiness (credit rating and credit scoring systems).
The loan portfolio is analysed on the basis of the customers' creditworthiness, their economic sector of
activity and geographical concentration.
The credit risk exposure of the Group is diversified across the various industry sectors of the economy.
Credit Risk Management department determines concentration limits for each industry sector, sets
prohibited sectors and defines sectors which may require prior approval before credit applications are
submitted.
The Market & Liquidity Risk department assesses the credit risk relating to exposures to Credit Institutions
and Governments and other debt securities as well as reverse repurchase agreements.
Models and limits are presented to and approved by the Board of Directors, through the relevant authority
based on the authorisation level limits.
The Group's significant judgements, estimates and assumptions regarding the determination of the level of
provisions for impairment are described in Note 5 'Significant and other judgements, estimates and
assumptions' of these Consolidated Financial Statements.
374
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.1 Maximum exposure to credit risk and collateral and other credit enhancements
Loans and advances to customers
The Credit Risk Management department determines the level and type of collateral and other credit
enhancements required for the granting of new loans to customers.
The main types of collateral obtained by the Group are mortgages on real estate, cash collateral/blocked
deposits, bank guarantees, government guarantees, pledges of equity securities and debt instruments of
public companies, fixed and floating charges over corporate assets, assignment of life insurance policies,
assignment of rights on contracts of sale and personal and corporate guarantees.
The Group regularly monitors the changes in the market value of the collateral and, where necessary,
requests the pledging of additional collateral in accordance with the relevant agreement.
Off-balance sheet exposures
The Group offers guarantee facilities to its customers under which the Group may be required to make
payments on their behalf and enters into commitments to extend credit lines to secure their liquidity needs.
Letters of credit and guarantee facilities (including standby letters of credit) commit the Group to make
payments on behalf of customers in the event of a specific act, generally related to the import or export of
goods. Such commitments expose the Group to risks similar to those of loans and advances and are
therefore monitored by the same policies and control processes.
Other financial instruments
Collateral held as security for financial assets other than loans and advances to customers is determined by
the nature of the financial instrument. Debt securities and other eligible bills are generally unsecured with
the exception of asset-backed securities and similar instruments, which are secured by pools of financial
assets. In addition, some debt securities are government-guaranteed. Reverse repurchase agreements are
generally secured by bonds.
In accordance with the terms of the reverse repurchase agreements the Group has as at 31 December 2023
of a carrying value of €403 million, the Group accepts collateral that it is permitted to sell. At 31 December
2023, the total fair value of the collateral received was €426 million, none of which had been resold or
repledged. An amount of €30 million was placed as cash collateral with the counterparty.
The Group has chosen the ISDA Master Agreement for documenting its derivatives activity. It provides the
contractual framework within which dealing activity across a full range of over-the-counter (OTC) products
is conducted and contractually binds both parties to apply close-out netting across all outstanding
transactions covered by an agreement, if either party defaults. In most cases the parties execute a Credit
Support Annex (CSA) in conjunction with the ISDA Master Agreement. Under a CSA, the collateral is passed
between the parties in order to mitigate the market contingent counterparty risk inherent in their open
positions. As at 31 December 2023, the majority of derivative exposures are covered by ISDA netting
arrangements. A detailed analysis of derivative asset and liability exposures is available in Note 21.
Information about the Group's collaterals under derivative transactions is provided in Note 41.
Settlement risk arises in any situation where a payment in cash or securities is made in the expectation of a
corresponding receipt in securities or cash. The Group sets daily settlement limits for each counterparty.
Settlement risk is mitigated when transactions are effected via established payment systems or on a
delivery upon payment basis.
Maximum Exposure to credit risk
The table below presents the maximum exposure to credit risk, the tangible and measurable collateral and
credit enhancements held and the net exposure to credit risk, that is the exposure after taking into account
the impairment loss and tangible and measurable collateral and credit enhancements held. Personal
guarantees are an additional form of collateral, but are not included in the information below since it is
impracticable to estimate their fair value.
The fair value of the collateral presented in the tables below is capped to the carrying value of the loans and
advances to customers.
375
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.1 Maximum exposure to credit risk and collateral and other credit enhancements (continued)

|  | Fair value of collateral and credit enhancements held by the Group |  |  |  |  |  |  |
| Maximum |  |  |  |  |  |  |  |
| exposure to |  |  |  |  |  |  |  |
| credit risk |  |  |  |  |  |  |  |
|  | Cash | Securities |  |  |  |  |  |
|  |  |  | Letters of credit/ |  |  |  |  |
|  |  |  | guarantee |  |  |  |  |
|  |  |  |  | Property | Other | Surplus collateral | Net collateral |
|  |  |  |  |  |  |  |  | Net exposure to
|  |  |  |  |  |  |  |  | credit risk
2023 |  |  |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Balances with central banks (Note 19) | 9,521,961 | - | - | - | - | - | - | - | 9,521,961
Loans and advances to banks (Note 19) | 384,802 | 39,344 | - | - | - | - | - | 39,344 | 345,458
FVPL debt securities (Note 20) | 3,611 | - | - | - | - | - | - | - | 3,611
Debt securities classified at amortised cost and |  |  |  |  |  |  |  |  |
FVOCI (Note 20) |  |  |  |  |  |  |  |  |
| 3,547,782 | - | - | - | - | - | - | - | 3,547,782
Reverse repurchase agreements | 403,199 | - | 426,419 | - | - | - | (29,524) | 396,895 | 6,304
Derivative financial instruments (Note 21) | 51,055 | - | - | - | - | - | - | - | 51,055
Loans and advances to customers (Note 23) | 9,821,788 | 475,241 | 743,890 | 149,415 | 16,755,799 | 275,344 | (9,615,735) | 8,783,954 | 1,037,834
Debtors (Note 28) | 34,662 | - | - | - | - | - | - | - | 34,662
Insurance and reinsurance contract assets |  |  |  |  |  |  |  |  |
(Note 28) |  |  |  |  |  |  |  |  |
| 57,494 | - | - | - | - | - | - | - | 57,494
Deferred purchase payment consideration |  |  |  |  |  |  |  |  |
(Note 28) |  |  |  |  |  |  |  |  |
| 243,013 | - | - | - | - | - | - | - | 243,013
Other assets (Note 28) |  |  |  |  |  |  |  |  |
| 109,314 | - | - | - | - | - | - | - | 109,314
On-balance sheet total |  |  |  |  |  |  |  |  |
| 24,178,681 | 514,585 | 1,170,309 | 149,415 | 16,755,799 | 275,344 | (9,645,259) | 9,220,193 | 14,958,488
Contingent liabilities |  |  |  |  |  |  |  |  |
Acceptances and endorsements | 2,580 | 8 | - | - | 2,570 | 2 | - | 2,580 | -
Guarantees | 703,044 | 71,752 | 1,874 | 6,797 | 145,545 | 255 | - | 226,223 | 476,821
Commitments |  |  |  |  |  |  |  |  |
Documentary credits | 10,251 | 140 | - | - | 21 | - | - | 161 | 10,090
Undrawn formal stand-by facilities, credit lines |  |  |  |  |  |  |  |  |
and other commitments to lend |  |  |  |  |  |  |  |  |
| 1,948,482 | 22,980 | 10,648 | 9,764 | 455,964 | 17,231 | - | 516,587 | 1,431,895
Off-balance sheet total |  |  |  |  |  |  |  |  |
| 2,664,357 | 94,880 | 12,522 | 16,561 | 604,100 | 17,488 | - | 745,551 | 1,918,806
| 26,843,038 | 609,465 | 1,182,831 | 165,976 | 17,359,899 | 292,832 | (9,645,259) | 9,965,744 | 16,877,294

376
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.1 Maximum exposure to credit risk and collateral and other credit enhancements (continued)

|  | Fair value of collateral and credit enhancements held by the Group |  |  |  |  |  |  |
| Maximum |  |  |  |  |  |  |  |
| exposure to |  |  |  |  |  |  |  |
| credit risk |  |  |  |  |  |  |  |
|  | Cash | Securities |  |  |  |  |  |
|  |  |  | Letters of credit/ |  |  |  |  |
|  |  |  | guarantee |  |  |  |  |
|  |  |  |  | Property | Other | Surplus collateral | Net collateral |
|  |  |  |  |  |  |  |  | Net exposure to
|  |  |  |  |  |  |  |  | credit risk
2022 (restated) |  |  |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000
Balances with central banks (Note 19) | 9,475,541 | - | - | - | - | - | - | - | 9,475,541
Loans and advances to banks (Note 19) | 204,811 | 37,251 | - | - | - | - | - | 37,251 | 167,560
FVPL debt securities (Note 20) | 8,968 | - | - | - | - | - | - | - | 8,968
Debt securities classified at amortised cost and FVOCI |  |  |  |  |  |  |  |  |
(Note 20) |  |  |  |  |  |  |  |  |
| 2,499,894 | - | - | - | - | - | - | - | 2,499,894
Derivative financial instruments (Note 21) | 48,153 | - | - | - | - | - | - | - | 48,153
Loans and advances to customers (Note 23) | 9,953,252 | 505,950 | 556,487 | 133,305 | 15,799,569 | 273,789 | (8,231,543) | 9,037,557 | 915,695
Debtors (Note 28) | 29,220 | - | - | - | - | - | - | - | 29,220
Insurance and reinsurance contract assets (Note 28) | 46,380 | - | - | - | - | - | - | - | 46,380
Deferred purchase payment consideration (Note 28) | 311,523 | - | - | - | - | - | - | - | 311,523
Other assets (Note 28) |  |  |  |  |  |  |  |  |
| 60,515 | - | - | - | - | - | - | - | 60,515
On-balance sheet total |  |  |  |  |  |  |  |  |
| 22,638,257 | 543,201 | 556,487 | 133,305 | 15,799,569 | 273,789 | (8,231,543) | 9,074,808 | 13,563,449
Contingent liabilities |  |  |  |  |  |  |  |  |
Acceptances and endorsements | 5,175 | 276 | - | - | 4,886 | 13 | - | 5,175 | -
Guarantees | 651,219 | 99,554 | 1,039 | 4,630 | 197,912 | 384 | - | 303,519 | 347,700
Commitments |  |  |  |  |  |  |  |  |
Documentary credits | 17,624 | 892 | 4 | 1,734 | 4,253 | 12 | - | 6,895 | 10,729
Undrawn formal stand-by facilities, credit lines and |  |  |  |  |  |  |  |  |
other commitments to lend |  |  |  |  |  |  |  |  |
| 1,909,487 | 32,164 | 4,069 | 1,465 | 406,074 | 26,876 | - | 470,648 | 1,438,839
Off-balance sheet total |  |  |  |  |  |  |  |  |
| 2,583,505 | 132,886 | 5,112 | 7,829 | 613,125 | 27,285 | - | 786,237 | 1,797,268
| 25,221,762 | 676,087 | 561,599 | 141,134 | 16,412,694 | 301,074 | (8,231,543) | 9,861,045 | 15,360,717

377
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.2 Credit risk concentration of loans and advances to customers
There are restrictions on loan concentrations which are imposed by the Banking Law in Cyprus, the relevant
CBC Directives and CRR. The Group's Risk Appetite Statement may impose stricter concentration limits
which are monitored by the Group.
The credit risk concentration, which is based on industry (economic activity) and business line, as well as
the geographical concentration, is presented below.
The geographical analysis, for credit risk concentration purposes, is based on the Group's Country Risk
Policy which is followed for monitoring the Group's exposures. Market and Liquidity Risk department is
responsible for analysing the country risk of exposures. ALCO reviews the country risk of exposures on a
quarterly basis and the Board, through its Risk Committee, reviews the country risk of exposures and any
breaches of country risk limits on a regular basis and at least annually.
The table below presents the geographical concentration of loans and advances to customers by country of
risk based on the country of residency for individuals and the country of registration for companies.

2023 |  |  |  |  |  |
| Cyprus | Greece |  |  |  |
|  |  | United |  |  |
|  |  | Kingdom |  |  |
|  |  |  | Russia |  |
|  |  |  |  | Other |
|  |  |  |  | countries |
|  |  |  |  |  | Gross loans at
|  |  |  |  |  | amortised cost
By economic activity |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Trade | 868,039 | 277 | 40 | - | 15,340 | 883,696
Manufacturing | 287,524 | 43,971 | 192 | - | 31,194 | 362,881
Hotels and catering | 928,910 | 29,454 | 36,704 | - | 39,368 | 1,034,436
Construction | 486,622 | 8,332 | 14 | - | 331 | 495,299
Real estate | 871,544 | 108,635 | 1,863 | - | 51,349 | 1,033,391
Private individuals | 4,543,985 | 9,680 | 56,074 | 12,075 | 48,080 | 4,669,894
Professional and other services | 535,994 | 572 | 5,242 | 352 | 54,846 | 597,006
Shipping | 20,622 | 15 | - | - | 222,422 | 243,059
Other sectors |  |  |  |  |  |
| 512,666 | - | - | 2 | 30,184 | 542,852
| 9,055,906 | 200,936 | 100,129 | 12,429 | 493,114 | 9,862,514

2023 |  |  |  |  |  |
| Cyprus | Greece |  |  |  |
|  |  | United |  |  |
|  |  | Kingdom |  |  |
|  |  |  | Russia |  |
|  |  |  |  | Other |
|  |  |  |  | countries |
|  |  |  |  |  | Gross loans at
|  |  |  |  |  | amortised cost
By business line |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Corporate and Large corporate | 3,326,556 | 30,487 | 193 | 324 | 185 | 3,357,745
IBU & International corporate |  |  |  |  |  |
- IBU | 87,127 | 1,688 | 6,544 | 6,901 | 18,618 | 120,878
- International corporate | 115,212 | 164,103 | 43,401 | - | 439,512 | 762,228
SMEs | 945,018 | 482 | 1,177 | - | 2,316 | 948,993
Retail |  |  |  |  |  |
- housing | 3,345,923 | 2,190 | 27,636 | 86 | 16,685 | 3,392,520
- consumer, credit cards and other | 944,196 | 757 | 480 | - | 740 | 946,173
Restructuring |  |  |  |  |  |
- corporate | 48,440 | - | 611 | - | - | 49,051
- SMEs | 33,212 | - | 261 | 532 | 61 | 34,066
- retail housing | 57,685 | - | 2,468 | 122 | 212 | 60,487
- retail other | 19,164 | 22 | 2 | - | 23 | 19,211
Recoveries |  |  |  |  |  |
- corporate | 6,079 | - | 182 | 173 | 911 | 7,345
- SMEs | 13,419 | 1 | 1,173 | 1,623 | 1,183 | 17,399
- retail housing | 50,927 | 50 | 14,718 | 2,399 | 7,231 | 75,325
- retail other | 27,122 | 8 | 1,191 | 269 | 275 | 28,865
Wealth management |  |  |  |  |  |
| 35,826 | 1,148 | 92 | - | 5,162 | 42,228
| 9,055,906 | 200,936 | 100,129 | 12,429 | 493,114 | 9,862,514

378
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.2 Credit risk concentration of loans and advances to customers (continued)

2022 |  |  |  |  |  |
| Cyprus | Greece |  |  |  |
|  |  | United |  |  |
|  |  | Kingdom |  |  |
|  |  |  | Russia |  |
|  |  |  |  | Other |
|  |  |  |  | countries |
|  |  |  |  |  | Gross loans at
|  |  |  |  |  | amortised cost
By economic activity |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Trade | 922,093 | 384 | 37 | - | 35 | 922,549
Manufacturing | 323,074 | 44,978 | - | - | 27,943 | 395,995
Hotels and catering | 928,346 | 16,565 | 35,614 | - | 40,086 | 1,020,611
Construction | 545,421 | 8,955 | 23 | 1 | 1,985 | 556,385
Real estate | 978,708 | 94,823 | 1,866 | - | 51,617 | 1,127,014
Private individuals | 4,496,081 | 11,146 | 73,120 | 19,103 | 54,985 | 4,654,435
Professional and other services | 551,269 | 980 | 5,311 | 313 | 37,830 | 595,703
Shipping | 13,338 | - | - | - | 173,830 | 187,168
Other sectors |  |  |  |  |  |
| 427,535 | 2 | - | 3 | 29,935 | 457,475
| 9,185,865 | 177,833 | 115,971 | 19,420 | 418,246 | 9,917,335

2022 |  |  |  |  |  |
| Cyprus | Greece |  |  |  |
|  |  | United |  |  |
|  |  | Kingdom |  |  |
|  |  |  | Russia |  |
|  |  |  |  | Other |
|  |  |  |  | countries |
|  |  |  |  |  | Gross loans at
|  |  |  |  |  | amortised cost
By business line |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Corporate and Large corporate | 3,380,542 | 17,781 | 50 | 312 | 102 | 3,398,787
IBU & International corporate |  |  |  |  |  |
- IBU | 90,652 | 1,722 | 8,953 | 11,964 | 24,583 | 137,874
- International corporate | 139,813 | 152,143 | 42,327 | - | 351,025 | 685,308
SMEs | 1,021,950 | 1,036 | 1,451 | - | 4,174 | 1,028,611
Retail |  |  |  |  |  |
- housing | 3,272,253 | 2,450 | 36,839 | 186 | 18,906 | 3,330,634
- consumer, credit cards and other | 885,558 | 856 | 576 | 1 | 905 | 887,896
Restructuring |  |  |  |  |  |
- corporate | 66,151 | - | 869 | - | 932 | 67,952
- SMEs | 48,027 | - | 432 | 158 | 384 | 49,001
- retail housing | 70,283 | 104 | 1,841 | 291 | 114 | 72,633
- retail other | 24,093 | 16 | 21 | 192 | 21 | 24,343
Recoveries |  |  |  |  |  |
- corporate | 19,063 | - | 452 | 172 | 32 | 19,719
- SMEs | 26,150 | - | 1,117 | 2,664 | 1,774 | 31,705
- retail housing | 69,790 | 260 | 19,778 | 3,431 | 9,736 | 102,995
- retail other | 31,967 | 12 | 1,265 | 49 | 337 | 33,630
Wealth management |  |  |  |  |  |
| 39,573 | 1,453 | - | - | 5,221 | 46,247
| 9,185,865 | 177,833 | 115,971 | 19,420 | 418,246 | 9,917,335

The loans and advances to customers include lending exposures in Cyprus with collaterals in Greece with a
carrying value as at 31 December 2023 of €128,705 thousand (2022: €106,701 thousand).
The loans and advances to customers reported within 'Other countries' as at 31 December 2023 include
exposures of €1,7 million in Ukraine (2022: €2,6 million) and €4,9 million in Israel (2022: €4,0 million).
379
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.3 Analysis of loans and advances to customers
The movement of the gross loans and advances to customers at amortised cost by staging is presented in
the tables below:

| Stage 1 | Stage 2 | Stage 3 | POCI | Total
2023 | €000 | €000 | €000 | €000 | €000
1 January | 7,867,256 | 1,565,603 | 371,018 | 113,458 | 9,917,335
Transfers to stage 1 | 786,990 | (785,026) | (1,964) | - | -
Transfers to stage 2 | (514,415) | 546,249 | (31,834) | - | -
Transfers to stage 3 | (38,959) | (83,436) | 122,395 | - | -
Foreign exchange and other |  |  |  |  |
adjustments |  |  |  |  |
| - | - | 10 | - | 10
Write offs | (594) | (588) | (79,286) | (5,282) | (85,750)
Interest accrued and other |  |  |  |  |
adjustments |  |  |  |  |
| 388,970 | 39,662 | 47,804 | 8,001 | 484,437
New loans originated or |  |  |  |  |
purchased and drawdowns of |  |  |  |  |
existing facilities |  |  |  |  |
| 1,827,530 | 89,118 | 8,125 | 1,847 | 1,926,620
Loans derecognised or repaid |  |  |  |  |
(excluding write offs) |  |  |  |  |
| (2,038,389) | (210,331) | (107,490) | (22,753) | (2,378,963)
Changes to contractual cash flows |  |  |  |  |
due to modifications |  |  |  |  |
| (2,800) | 20 | (1,895) | (149) | (4,824)
Acquisition of Velocity 2 portfolio |  |  |  |  |
| - | - | - | 3,649 | 3,649
31 December |  |  |  |  |
| 8,275,589 | 1,161,271 | 326,883 | 98,771 | 9,862,514

| Stage 1 | Stage 2 | Stage 3 | POCI | Total
2022 | €000 | €000 | €000 | €000 | €000
1 January | 7,418,695 | 1,701,255 | 1,047,802 | 228,572 | 10,396,324
Transfers to stage 1 | 534,045 | (532,847) | (1,198) | - | -
Transfers to stage 2 | (409,997) | 479,829 | (69,832) | - | -
Transfers to stage 3 | (22,885) | (34,796) | 57,681 | - | -
Foreign exchange and other |  |  |  |  |
adjustments |  |  |  |  |
| (49) | - | 3,473 | - | 3,424
Write offs | (788) | (683) | (169,303) | (22,774) | (193,548)
Interest accrued and other |  |  |  |  |
adjustments |  |  |  |  |
| 187,455 | 69,085 | 63,857 | 18,100 | 338,497
New loans originated or |  |  |  |  |
purchased and drawdowns of |  |  |  |  |
existing facilities |  |  |  |  |
| 1,825,387 | 119,244 | 12,182 | 1,191 | 1,958,004
Loans derecognised or repaid |  |  |  |  |
(excluding write offs) |  |  |  |  |
| (1,659,230) | (234,770) | (104,623) | (31,596) | (2,030,219)
Changes to contractual cash flows |  |  |  |  |
due to modifications |  |  |  |  |
| (5,286) | 2,669 | (4,627) | (704) | (7,948)
Disposal of Helix 3 and Sinope |  |  |  |  |
portfolios |  |  |  |  |
| (91) | (3,383) | (464,394) | (79,331) | (547,199)
31 December |  |  |  |  |
| 7,867,256 | 1,565,603 | 371,018 | 113,458 | 9,917,335

For revolving facilities, overdrafts and credit cards the net positive change in balance by stage excluding
write-offs is reported in 'New loans originated' and the net negative change is reported in 'Loans
derecognised or repaid'.
The analysis of gross loans and advances to customers at amortised cost by staging and by business line
concentration is included in Note 23.
During the year ended 31 December 2023, the Group purchased back certain loans disposed in 2020 as part
of Velocity 2. The loans, which relate primarily to retail unsecured facilities, were classified as POCI and
have a net book value of €1,1 million as at 31 December 2023.
380
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.3 Analysis of loans and advances to customers (continued)
The movement of gross loans and advances to customers at amortised cost, in the Corporate and Large
corporate, IBU & International corporate, SME and Retail business lines in Cyprus (the country where the
loans are managed), are presented in the tables below:

| Corporate |  |  |
| and Large |  |  |
| corporate |  |  |
|  | IBU & |  |
|  | International |  |
|  | corporate |  |
|  |  | SME | Retail
2023 | €000 | €000 | €000 | €000
1 January | 3,398,475 | 823,182 | 1,026,608 | 4,218,530
Transfers (out of)/in business line | 111,905 | (35,005) | (38,809) | 35,074
Write offs | (25,277) | (173) | (142) | (1,165)
Interest accrued | 166,290 | 56,142 | 59,465 | 166,319
New loans originated or purchased | 748,197 | 218,979 | 192,439 | 691,828
Loans derecognised or repaid (excluding |  |  |  |
write offs) |  |  |  |
| (1,037,422) | (179,763) | (291,534) | (773,641)
Changes to contractual cash flows due to |  |  |  |
modifications not resulting in derecognition |  |  |  |
| (4,747) | (256) | 597 | 1,748
31 December |  |  |  |
| 3,357,421 | 883,106 | 948,624 | 4,338,693

| Corporate and |  |  |
| Large |  |  |
| corporate |  |  |
|  | IBU & |  |
|  | International |  |
|  | corporate |  |
|  |  | SME | Retail
2022 (restated) | €000 | €000 | €000 | €000
1 January | 3,344,281 | 768,141 | 1,043,588 | 4,040,108
Transfers in/(out of) business line | (23,764) | (456) | 6,695 | (5,291)
Write offs | (14) | (225) | (311) | (1,866)
Interest accrued | 104,907 | 37,758 | 33,799 | 86,701
New loans originated or purchased | 859,742 | 205,437 | 179,399 | 679,538
Loans derecognised or repaid (excluding |  |  |  |
write offs) |  |  |  |
| (889,683) | (186,828) | (235,449) | (581,009)
Changes to contractual cash flows due to |  |  |  |
modifications not resulting in derecognition |  |  |  |
| 3,006 | (645) | (1,113) | 349
31 December |  |  |  |
| 3,398,475 | 823,182 | 1,026,608 | 4,218,530

44.4 Credit quality of loans and advances to customers based on the internal credit rating
Credit scoring is the primary risk rating system for assessing obligor and transaction risk for the key
portfolios of BOC PCL. For the purposes of credit scoring, these portfolios are Corporate, Retail and SMEs.
Corporate and SME portfolios include legal entities. Retail portfolio includes individuals.
Scoring models use internal and external data to assess and 'score' borrowers and their credit quality, in
order to provide further input on managing limits for existing loans and collection activities. The data is
specific to the borrower but additional data which could affect the borrower's behaviour is also used.
Credit score is one of the factors employed on new clients and management of existing clients. The credit
score of the borrower is used to assess the credit quality for each independent acquisition or account
management action, leading to an automated decision or guidance for an adjudicator. Credit scoring
enhances the credit decision quality and facilitates risk-based pricing where feasible.
Borrower score defines the rating of the borrower from a range of 1-8 where 8 is defined as defaulted. The
12-months probability of default (PD) is calculated per rating. The following table presents weighted PD per
risk level's rating for corporate, retail and SME exposures.
Unrated corporate exposures are assessed using the Group's in-house behavioural scorecard model for
corporate legal entities. Unrated retail exposures include qualifying revolving facilities without scoring (i.e.
prepaid cards) and other revolving facilities (i.e. financial guarantees) which are assigned a more generic
curve. Similarly unrated SME exposures are assigned a more generic segment curve.
381
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.4 Credit quality of loans and advances to customers based on the internal credit rating
(continued)
New customers for corporate and SME legal entities and new lending to retail individuals are separately
disclosed since a time span of seven months is necessary in order to provide an accurate rating.
The portfolios weighted PD per rating is presented below.

2023 | 12-month PD |  |
Rating |  |  |
| Corporate legal entities |  |
| % |  |
|  | Retail individuals |
|  | % |
|  |  | SME legal entities
|  |  | %
1 | 1.32 | 0.10 | 0.18
2 | 1.42 | 0.17 | 0.46
3 | 1.75 | 0.28 | 0.96
4 | 2.38 | 0.42 | 3.37
5 | 3.68 | 0.89 | 8.92
6 | 3.82 | 7.20 | 18.16
7 | 4.88 | 15.21 | 36.65

2022 | 12-month PD |  |
Rating |  |  |
| Corporate legal entities |  |
| % |  |
|  | Retail individuals |
|  | % |
|  |  | SME legal entities
|  |  | %
1 | 1.19 | 0.66 | 0.34
2 | 1.87 | 0.64 | 0.66
3 | 2.02 | 1.39 | 1.89
4 | 2.96 | 2.64 | 7.23
5 | 4.48 | 4.92 | 9.46
6 | 4.97 | 8.58 | 14.87
7 | 10.15 | 24.02 | 30.77

Lower rating exposures demonstrate a better capacity to meet financial commitments, with lower
probability of default, whereas higher rating exposures require varying degrees of special attention and
default risk is of greater concern.
The tables below show the gross loans and advances to customers at amortised cost which are managed in
Cyprus, using the corporate legal entities, SMEs legal entities and retail individuals definition as per the
internal rating of BOC PCL.

| 2023 |  |  | 2022 |  |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
Corporate legal entities | €000 | €000 | €000 | €000 | €000 | €000
Rating 1 | 654,192 | 8,681 | 662,873 | 512,071 | 5,576 | 517,647
Rating 2 | 404,127 | 2,604 | 406,731 | 235,753 | 5,858 | 241,611
Rating 3 | 857,583 | 17,943 | 875,526 | 762,397 | 94,105 | 856,502
Rating 4 | 420,299 | 75,912 | 496,211 | 565,591 | 43,690 | 609,281
Rating 5 | 593,987 | 210,143 | 804,130 | 592,963 | 207,831 | 800,794
Rating 6 | 97,182 | 176,247 | 273,429 | 94,690 | 292,027 | 386,717
Rating 7 | 30,182 | 10,713 | 40,895 | 32,481 | 152,941 | 185,422
Unrated | 230,024 | 34,157 | 264,181 | 190,253 | 18,602 | 208,855
New customers |  |  |  |  |  |
| 397,922 | 14,956 | 412,878 | 427,647 | 37,570 | 465,217
| 3,685,498 | 551,356 |  |  |  |
|  |  | 4,236,854 |  |  |
|  |  |  | 3,413,846 | 858,200 |
|  |  |  |  |  | 4,272,046
Total Stage 3 and POCI |  |  |  |  |  |
|  |  | 157,455 |  |  | 144,903
|  |  | 4,394,309 |  |  | 4,416,949

382
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.4 Credit quality of loans and advances to customers based on the internal credit rating
(continued)

| 2023 |  |  | 2022 |  |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
Retail individuals | €000 | €000 | €000 | €000 | €000 | €000
Rating 1 | 410,510 | 886 | 411,396 | 895,267 | 42,998 | 938,265
Rating 2 | 296,784 | 1,182 | 297,966 | 1,066,411 | 29,995 | 1,096,406
Rating 3 | 531,271 | 8,583 | 539,854 | 845,204 | 72,153 | 917,357
Rating 4 | 1,387,960 | 59,067 | 1,447,027 | 592,998 | 99,388 | 692,386
Rating 5 | 915,585 | 195,178 | 1,110,763 | 197,743 | 78,861 | 276,604
Rating 6 | 63,506 | 91,634 | 155,140 | 64,234 | 77,217 | 141,451
Rating 7 | 104,288 | 121,092 | 225,380 | 17,820 | 80,259 | 98,079
Unrated | - | 2,099 | 2,099 | - | 2,660 | 2,660
New customers |  |  |  |  |  |
| 308,043 | 13,166 | 321,209 | 268,676 | 13,017 | 281,693
| 4,017,947 | 492,887 |  |  |  |
|  |  | 4,510,834 |  |  |
|  |  |  | 3,948,353 | 496,548 |
|  |  |  |  |  | 4,444,901
Total Stage 3 and POCI |  |  |  |  |  |
|  |  | 230,837 |  |  | 288,998
|  |  | 4,741,671 |  |  | 4,733,899

| 2023 |  |  | 2022 |  |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
SMEs legal entities | €000 | €000 | €000 | €000 | €000 | €000
Rating 1 | 120,165 | 3,360 | 123,525 | 161,411 | 33,555 | 194,966
Rating 2 | 210,856 | 47,818 | 258,674 | 175,934 | 71,421 | 247,355
Rating 3 | 108,742 | 29,117 | 137,859 | 32,209 | 29,154 | 61,363
Rating 4 | 45,841 | 14,490 | 60,331 | 9,432 | 25,850 | 35,282
Rating 5 | 13,021 | 5,771 | 18,792 | 6,656 | 7,842 | 14,498
Rating 6 | 5,300 | 3,328 | 8,628 | 5,889 | 10,307 | 16,196
Rating 7 | 3,324 | 2,534 | 5,858 | 3,431 | 5,347 | 8,778
Unrated | - | 6,312 | 6,312 | 49,172 | 24,648 | 73,820
New customers |  |  |  |  |  |
| 64,722 | 4,298 | 69,020 | 60,704 | 2,731 | 63,435
| 571,971 | 117,028 |  |  |  |
|  |  | 688,999 |  |  |
|  |  |  | 504,838 | 210,855 |
|  |  |  |  |  | 715,693
Total Stage 3 and POCI |  |  |  |  |  |
|  |  | 36,842 |  |  | 48,479
|  |  | 725,841 |  |  | 764,172

383
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.5 Credit losses of loans and advances to customers
The movement in ECL of loans and advances to customers is as follows:

| Stage 1 | Stage 2 | Stage 3 | POCI | Total
2023 | €000 | €000 | €000 | €000 | €000
1 January | 22,288 | 27,041 | 113,573 | 15,540 | 178,442
Transfers to stage 1 | 10,985 | (10,504) | (481) | - | -
Transfers to stage 2 | (1,532) | 6,677 | (5,145) | - | -
Transfers to stage 3 | (481) | (2,576) | 3,057 | - | -
Impact on transfer between |  |  |  |  |
stages during the year* |  |  |  |  |
| (8,860) | 3,450 | 24,888 | - | 19,478
Foreign exchange and other |  |  |  |  |
adjustments |  |  |  |  |
| - | - | 91 | - | 91
Write offs | (594) | (588) | (79,286) | (5,282) | (85,750)
Interest (provided) not |  |  |  |  |
recognised in the income |  |  |  |  |
statement |  |  |  |  |
| - | - | 3,827 | 1,079 | 4,906
New loans originated or |  |  |  |  |
purchased* |  |  |  |  |
| 5,953 | - | - | 992 | 6,945
Loans derecognised or repaid |  |  |  |  |
(excluding write offs)* |  |  |  |  |
| (2,798) | (782) | (5,433) | (162) | (9,175)
Write offs* | 455 | 340 | 7,981 | 1,118 | 9,894
Changes to models and inputs |  |  |  |  |
(changes in PDs, LGDs and EADs) |  |  |  |  |
used for ECL calculations* |  |  |  |  |
| 258 | 7,021 | 39,891 | 7,935 | 55,105
Changes to contractual cash flows |  |  |  |  |
due to modifications not resulting |  |  |  |  |
in derecognition* |  |  |  |  |
| (1,469) | 178 | 1,033 | (225) | (483)
31 December 2023 |  |  |  |  |
| 24,205 | 30,257 | 103,996 | 20,995 | 179,453
Individually assessed | 8,287 | 11,983 | 45,178 | 13,480 | 78,928
Collectively assessed |  |  |  |  |
| 15,918 | 18,274 | 58,818 | 7,515 | 100,525
| 24,205 | 30,257 | 103,996 | 20,995 | 179,453

* Individual components of the 'Impairment net of reversals on loans and advances to customers' (Note
16).
The impairment loss for the year ended 31 December 2023 was driven mainly from additional net credit
losses of €21 million recorded on NPEs as part of the Group's de-risking activities and ECL charge of €11
million relates to the overlays applied during the year 2023, as explained in Note 5.2.
Further, following a deep dive assessment by the Group on its loan portfolio during the second half of 2023,
exposures of a total amount of €90 million were classified as unlikely to pay ('UTPs'), of which €76 million
relate to specific customers with idiosyncratic characteristics. Exposures identified as UTPs were transferred
into Stage 3, hence the impact on ECL from 'Impact on transfer between Stages during the year'.
384
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.5 Credit losses of loans and advances to customers (continued)

| Stage 1 | Stage 2 | Stage 3 | POCI | Total
2022 | €000 | €000 | €000 | €000 | €000
1 January | 15,457 | 29,383 | 478,796 | 67,781 | 591,417
Transfers to stage 1 | 9,737 | (9,561) | (176) | - | -
Transfers to stage 2 | (1,009) | 9,857 | (8,848) | - | -
Transfers to stage 3 | (106) | (833) | 939 | - | -
Impact on transfer between |  |  |  |  |
stages during the year* |  |  |  |  |
| (7,575) | (3,186) | 15,387 | (31) | 4,595
Foreign exchange and other |  |  |  |  |
adjustments |  |  |  |  |
| (1) | - | 3,553 | - | 3,552
Write offs | (788) | (683) | (169,303) | (22,774) | (193,548)
Interest (provided) not |  |  |  |  |
recognised in the income |  |  |  |  |
statement |  |  |  |  |
| - | - | 16,687 | 427 | 17,114
New loans originated or |  |  |  |  |
purchased* |  |  |  |  |
| 3,877 | - | - | 35 | 3,912
Loans derecognised or repaid |  |  |  |  |
(excluding write offs)* |  |  |  |  |
| (964) | (2,700) | (16,943) | (2,714) | (23,321)
Write offs* | 736 | 485 | 11,744 | 995 | 13,960
Changes to models and inputs |  |  |  |  |
(changes in PDs, LGDs and EADs) |  |  |  |  |
used for ECL calculations* |  |  |  |  |
| 5,009 | 2,677 | 47,617 | 14,616 | 69,919
Changes to contractual cash flows |  |  |  |  |
due to modifications not resulting |  |  |  |  |
in derecognition* |  |  |  |  |
| (2,085) | 2,226 | (3,818) | (391) | (4,068)
Disposal of Helix 3 and Sinope |  |  |  |  |
portfolios |  |  |  |  |
| - | (624) | (262,062) | (42,404) | (305,090)
31 December 2022 |  |  |  |  |
| 22,288 | 27,041 | 113,573 | 15,540 | 178,442
Individually assessed | 9,066 | 13,401 | 56,957 | 10,664 | 90,088
Collectively assessed |  |  |  |  |
| 13,222 | 13,640 | 56,616 | 4,876 | 88,354
| 22,288 | 27,041 | 113,573 | 15,540 | 178,442

The analysis of credit losses of loans and advances to customers by business line is presented in the table
below:

| Stage 1 | Stage 2 | Stage 3 | POCI | Total
2023 | €000 | €000 | €000 | €000 | €000
Corporate and Large corporate | 12,993 | 11,727 | 32,761 | 5,169 | 62,650
IBU & International corporate |  |  |  |  |
- IBU | 161 | 323 | 40 | 5 | 529
- International corporate | 1,498 | 816 | 38 | 6 | 2,358
SMEs | 2,424 | 2,403 | 1,200 | 303 | 6,330
Retail |  |  |  |  |
- housing | 3,089 | 6,365 | 3,804 | 486 | 13,744
- consumer, credit cards and |  |  |  |  |
other |  |  |  |  |
| 3,676 | 5,652 | 4,968 | 1,161 | 15,457
Restructuring |  |  |  |  |
- corporate | 21 | 1,635 | 6,962 | 9,964 | 18,582
- SMEs | 134 | 589 | 4,334 | 553 | 5,610
- retail housing | 75 | 440 | 12,393 | 204 | 13,112
- retail other | 108 | 224 | 7,060 | 489 | 7,881
Recoveries |  |  |  |  |
- corporate | - | - | 3,342 | 267 | 3,609
- SMEs | - | - | 4,794 | 150 | 4,944
- retail housing | - | - | 13,772 | 1,094 | 14,866
- retail other | - | - | 8,527 | 1,141 | 9,668
Wealth management |  |  |  |  |
| 26 | 83 | 1 | 3 | 113
| 24,205 | 30,257 | 103,996 | 20,995 | 179,453

385
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.5 Credit losses of loans and advances to customers (continued)

| Stage 1 | Stage 2 | Stage 3 | POCI | Total
2022 | €000 | €000 | €000 | €000 | €000
Corporate and Large corporate | 13,997 | 12,096 | 28,951 | 1,498 | 56,542
IBU & International corporate |  |  |  |  |
- IBU | 73 | 332 | 65 | 5 | 475
- International corporate | 567 | 5 | 36 | 4 | 612
SMEs | 2,444 | 3,009 | 1,998 | 214 | 7,665
Retail |  |  |  |  |
- housing | 2,378 | 2,738 | 5,146 | 398 | 10,660
- consumer, credit cards and |  |  |  |  |
other |  |  |  |  |
| 2,552 | 4,794 | 5,763 | 1,020 | 14,129
Restructuring |  |  |  |  |
- corporate | 22 | 2,133 | 7,481 | 9,005 | 18,641
- SMEs | 184 | 706 | 9,157 | 741 | 10,788
- retail housing | 19 | 682 | 9,222 | 347 | 10,270
- retail other | 29 | 536 | 7,309 | 513 | 8,387
Recoveries |  |  |  |  |
- corporate | - | - | 7,917 | 387 | 8,304
- SMEs | - | - | 11,096 | 288 | 11,384
- retail housing | - | - | 11,937 | 651 | 12,588
- retail other | - | - | 7,494 | 465 | 7,959
Wealth management |  |  |  |  |
| 23 | 10 | 1 | 4 | 38
| 22,288 | 27,041 | 113,573 | 15,540 | 178,442

The movement of the ECL allowance for the loans and advances to customers in the Corporate and Large
corporate, IBU & International corporate, SME and Retail business lines in Cyprus (the country where the
loans are managed), is presented in the table below:

| Corporate and |  |  |
| Large |  |  |
| corporate |  |  |
|  | IBU & |  |
|  | International |  |
|  | corporate |  |
|  |  | SME | Retail
2023 | €000 | €000 | €000 | €000
1 January | 56,359 | 1,087 | 5,879 | 24,789
Transfer (out of)/in the business line | (660) | 112 | 76 | (1,888)
Write offs | (25,276) | (173) | (142) | (1,165)
Interest (provided) not recognised in the income |  |  |  |
statement |  |  |  |
| 287 | - | - | 464
New loans originated or purchased | 4,058 | 470 | 616 | 1,804
Loans derecognised or repaid (excluding write offs) |  |  |  |
| (2,627) | (315) | - | (1,615)
Write offs | 18 | 28 | 135 | 740
Changes to models and inputs (changes in PDs, |  |  |  |
LGDs and EADs) used for ECL calculations |  |  |  |
| 12,120 | 885 | 242 | 6,236
Changes to contractual cash flows due to |  |  |  |
modifications not resulting in derecognition |  |  |  |
| 481 | 4 | (469) | (283)
Impact on transfer between stages during the year |  |  |  |
| 17,665 | 789 | (203) | 119
31 December |  |  |  |
| 62,425 | 2,887 | 6,134 | 29,201

386
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.5 Credit losses of loans and advances to customers (continued)

| Corporate and |  |  |
| Large corporate |  |  |
|  | IBU & |  |
|  | International |  |
|  | corporate |  |
|  |  | SME | Retail
2022 (restated) | €000 | €000 | €000 | €000
1 January | 45,541 | 3,643 | 6,626 | 28,215
Transfer in/(out of) the business line | 278 | 8 | (99) | (1,812)
Write offs | (14) | (225) | (311) | (1,866)
Interest (provided) not recognised in the income |  |  |  |
statement |  |  |  |
| 936 | 5 | 14 | 445
New loans originated or purchased | 1,950 | 195 | 299 | 1,261
Loans derecognised or repaid (excluding write offs) |  |  |  |
| (5,699) | (436) | (915) | (818)
Write offs | 9 | 78 | 127 | 1,294
Changes to models and inputs (changes in PDs, |  |  |  |
LGDs and EADs) used for ECL calculations |  |  |  |
| 11,672 | (1,209) | 774 | 2,800
Changes to contractual cash flows due to |  |  |  |
modifications not resulting in derecognition |  |  |  |
| (673) | 35 | 123 | (203)
Impact on transfer between stages during the year |  |  |  |
| 2,359 | (1,007) | (759) | (4,527)
31 December |  |  |  |
| 56,359 | 1,087 | 5,879 | 24,789

During the year ended 31 December 2023 the total non-contractual write-offs recorded by the Group
amounted to €66,547 thousand (2022: €134,767 thousand). The contractual amount outstanding on
financial assets that were written off during the year ended 31 December 2023 and that are still subject to
enforcement activity is €566,451 thousand (2022: €972,621 thousand).
For the calculation of expected credit losses three scenarios were used; base, adverse and favourable with
50%, 30% and 20% probability respectively both for 2023 and 2022.
For Stage 3 individually assessed customers the base scenario focuses on the following variables, which are
based on the specific facts and circumstances of each customer: the operational cash flows, the timing of
recovery of collaterals and the haircuts from the realisation of collateral. The base scenario is used to derive
additional favourable and adverse scenarios. Under the adverse scenario operational cash flows are
decreased by 50%, applied haircuts on real estate collateral are increased by 50% and the timing of
recovery of collaterals is increased by one year with reference to the baseline scenario. Under the
favourable scenario, applied haircuts are decreased by 5%, with no change in the recovery period with
reference to the baseline scenario. Assumptions used in estimating expected future cash flows (including
cash flows that may result from the realisation of collateral) reflect current and expected future economic
conditions and are generally consistent with those used in the Stage 3 collectively assessed exposures.
The above assumptions are also influenced by the ongoing regulatory dialogue BOC PCL maintains with its
lead regulator, the ECB, and other regulatory guidance and interpretations issued by various regulatory and
industry bodies such as the ECB and the EBA, which provide guidance and expectations as to relevant
definitions and the treatment/classification of certain parameters/assumptions used in the estimation of
provisions.
Any changes in these assumptions or difference between assumptions made and actual results could result
in significant changes in the estimated amount of expected credit losses of loans and advances to
customers.
Sensitivity analysis
The Group has performed sensitivity analysis relating to the loan portfolio in Cyprus, which represents more
than 99% of the total loan portfolio of the Group with reference date 31 December 2023 and 2022.
387
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.5 Credit losses of loans and advances to customers (continued)
The Group has applied sensitivity analysis to the below parameters and the impact on the ECL, for both
individually and collectively assessed ECL calculations, is presented in the table below:

| Increase/(decrease) on ECL for |
| loans and advances to customers |
| at amortised cost |
| 2023 | 2022
| €000 | €000
Increase the adverse weight by 5% and decrease the favourable weight by 5% | 1,297 | 1,999
Decrease the adverse weight by 5% and increase the favourable weight by 5% | (1,629) | (2,077)
Increase the expected recovery period by 1 year | 6,090 | 4,955
Decrease the expected recovery period by 1 year | (7,863) | (4,344)
Increase the collateral realisation haircut by 5% | 8,816 | 11,335
Decrease the collateral realisation haircut by 5% | (9,495) | (8,930)
Increase in the PD of stages 1 and 2 by 20%* | 5,424 | 7,367
Decrease in the PD of stages 1 and 2 by 20%* | (5,880) | (6,964)

The increase/(decrease) on ECL, for loans and advances to customers at amortised cost, is further analysed,
per stage, in the table below:

| Stage 1 | Stage 2 | Stage 3 | Total
2023 | €000 | €000 | €000 | €000
Increase the adverse weight by 5% and decrease the |  |  |  |
favourable weight by 5% |  |  |  |
| 295 | 204 | 798 | 1,297
Decrease the adverse weight by 5% and increase the |  |  |  |
favourable weight by 5% |  |  |  |
| (235) | (267) | (1,127) | (1,629)
Increase the expected recovery period by 1 year | 727 | 1,201 | 4,162 | 6,090
Decrease the expected recovery period by 1 year | (695) | (1,121) | (6,047) | (7,863)
Increase the collateral realisation haircut by 5% | 1,037 | 1,692 | 6,087 | 8,816
Decrease the collateral realisation haircut by 5% | (900) | (1,406) | (7,189) | (9,495)
Increase in the PD of stages 1 and 2 by 20%* | 2,624 | 2,800 | - | 5,424
Decrease in the PD of stages 1 and 2 by 20%* | (1,325) | (4,555) | - | (5,880)

| Stage 1 | Stage 2 | Stage 3 | Total
2022 | €000 | €000 | €000 | €000
Increase the adverse weight by 5% and decrease the |  |  |  |
favourable weight by 5% |  |  |  |
| 175 | 321 | 1,503 | 1,999
Decrease the adverse weight by 5% and increase the |  |  |  |
favourable weight by 5% |  |  |  |
| (139) | (435) | (1,503) | (2,077)
Increase the expected recovery period by 1 year | 552 | 1,590 | 2,813 | 4,955
Decrease the expected recovery period by 1 year | (495) | (1,374) | (2,475) | (4,344)
Increase the collateral realisation haircut by 5% | 1,036 | 2,747 | 7,552 | 11,335
Decrease the collateral realisation haircut by 5% | (842) | (2,021) | (6,067) | (8,930)
Increase in the PD of stages 1 and 2 by 20%* | 406 | 6,961 | - | 7,367
Decrease in the PD of stages 1 and 2 by 20%* | (2,217) | (4,747) | - | (6,964)

*The impact on the ECL also includes the transfer between stages of the loans and advances to customers
following the increase/decrease in the PD.
388
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.5 Credit losses of loans and advances to customers (continued)
The sensitivity analysis performed on the collateral realisation haircut and its impact on the ECL by business
line is presented in the table below:

| Increase the |  |  |
| collateral |  |  |
| realisation |  |  |
| haircut by |  |  |
| 5% |  |  |
|  | Decrease the |  |
|  | collateral |  |
|  | realisation |  |
|  | haircut by |  |
|  | 5% |  |
|  |  | Increase the |
|  |  | collateral |
|  |  | realisation |
|  |  | haircut by 5% |
|  |  |  | Decrease the
|  |  |  | collateral
|  |  |  | realisation
|  |  |  | haircut by 5%
| 2023 | 2023 | 2022 | 2022
| €000 | €000 | €000 | €000
Corporate and Large corporate | 2,708 | (2,521) | 2,322 | (1,478)
IBU & International corporate |  |  |  |
- IBU | 9 | (6) | 53 | (49)
- International corporate | 65 | (55) | 68 | (30)
SMEs | 365 | (324) | 487 | (409)
Retail |  |  |  |
- housing | 1,124 | (807) | 1,260 | (1,085)
- consumer, credit cards and other | 336 | (286) | 527 | (457)
Restructuring |  |  |  |
- corporate | 1,029 | (3,337) | 1,253 | (1,333)
- SMEs | 233 | (300) | 628 | (633)
- retail housing | 694 | (616) | 824 | (738)
- retail other | 196 | (175) | 324 | (287)
Recoveries |  |  |  |
- corporate | 123 | (111) | 720 | (665)
- SMEs | 932 | (319) | 948 | (819)
- retail housing | 693 | (455) | 1,378 | (690)
- retail other | 305 | (179) | 540 | (255)
Wealth management |  |  |  |
| 4 | (4) | 3 | (2)
| 8,816 | (9,495) | 11,335 | (8,930)

44.6 Contingent liabilities and commitments
The Group enters into various irrevocable commitments and contingent liabilities. These consist of
acceptances and endorsements, guarantees, documentary credits and undrawn formal stand-by facilities,
credit lines and other commitments to lend.
44.6.1 Contingent liabilities
An analysis of changes in the outstanding nominal amount of exposures and the corresponding ECL are
disclosed in the tables below:

| Stage 1 | Stage 2 | Stage 3 | Total
2023 | €000 | €000 | €000 | €000
Exposures |  |  |  |
1 January | 509,186 | 110,626 | 36,582 | 656,394
Transfers to stage 1 | 8,820 | (8,755) | (65) | -
Transfers to stage 2 | (88,817) | 91,722 | (2,905) | -
Transfers to stage 3 | (585) | (3,763) | 4,348 | -
Net increase/(decrease) |  |  |  |
| 55,227 | (5,003) | (994) | 49,230
31 December |  |  |  |
| 483,831 | 184,827 | 36,966 | 705,624

389
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.6 Contingent liabilities and commitments (continued)
44.6.1 Contingent liabilities (continued)

| Stage 1 | Stage 2 | Stage 3 | Total
2022 | €000 | €000 | €000 | €000
Exposures |  |  |  |
1 January | 432,463 | 136,324 | 45,668 | 614,455
Transfers to stage 1 | 30,378 | (30,378) | - | -
Transfers to stage 2 | (20,997) | 22,353 | (1,356) | -
Transfers to stage 3 | (9) | (3,288) | 3,297 | -
Net increase/(decrease) |  |  |  |
| 67,351 | (14,385) | (11,027) | 41,939
31 December |  |  |  |
| 509,186 | 110,626 | 36,582 | 656,394

| Stage 1 | Stage 2 | Stage 3 | Total
2023 | €000 | €000 | €000 | €000
ECL |  |  |  |
1 January | 119 | 110 | 17,013 | 17,242
Transfers to stage 1 | - | - | - | -
Transfers to stage 2 | - | - | - | -
Transfers to stage 3 | (35) | (4) | 39 | -
(Credit)/charge for the year* |  |  |  |
| (84) | (88) | 2,122 | 1,950
31 December |  |  |  |
| - | 18 | 19,174 | 19,192
Individually assessed | - | - | 19,174 | 19,174
Collectively assessed |  |  |  |
| - | 18 | - | 18
| - | 18 | 19,174 | 19,192

| Stage 1 | Stage 2 | Stage 3 | Total
2022 | €000 | €000 | €000 | €000
ECL |  |  |  |
1 January | 20 | 124 | 21,613 | 21,757
Transfers to stage 1 | 7 | (7) | - | -
Transfers to stage 2 | (16) | 16 | - | -
Transfers to stage 3 | - | (27) | 27 | -
Charge/(credit) for the year* |  |  |  |
| 108 | 4 | (4,627) | (4,515)
31 December |  |  |  |
| 119 | 110 | 17,013 | 17,242
Individually assessed | 77 | 71 | 17,013 | 17,161
Collectively assessed |  |  |  |
| 42 | 39 | - | 81
| 119 | 110 | 17,013 | 17,242

* The credit for the year mainly relates to assets derecognised in the year (2022: Credit for the year mainly
relates to assets derecognised in the year).
390
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.6 Contingent liabilities and commitments (continued)
44.6.1 Contingent liabilities (continued)
The credit quality of contingent liabilities as per the internal rating system of BOC PCL is disclosed in the
table below.

| 2023 |  |  | 2022 |  |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
Corporate legal entities | €000 | €000 | €000 | €000 | €000 | €000
Rating 1 | 130,436 | 266 | 130,702 | 105,872 | 9 | 105,881
Rating 2 | 16,168 | 2 | 16,170 | 16,342 | - | 16,342
Rating 3 | 33,253 | 29,663 | 62,916 | 48,934 | 388 | 49,322
Rating 4 | 26,279 | 2,686 | 28,965 | 34,218 | 7,980 | 42,198
Rating 5 | 25,253 | 30,270 | 55,523 | 76,807 | 5,764 | 82,571
Rating 6 | 19,494 | 281 | 19,775 | 7,845 | 4,118 | 11,963
Rating 7 | 6,485 | 33 | 6,518 | 31 | 4,507 | 4,538
Unrated | 26,003 | 33,737 | 59,740 | 22,127 | 13,622 | 35,749
New customers |  |  |  |  |  |
| 102,235 | 6,174 | 108,409 | 89,653 | 2 | 89,655
| 385,606 | 103,112 |  |  |  |
|  |  | 488,718 |  |  |
|  |  |  | 401,829 | 36,390 |
|  |  |  |  |  | 438,219
Total Stage 3 |  |  |  |  |  |
|  |  | 8,314 |  |  | 9,424
|  |  | 497,032 |  |  | 447,643

| 2023 |  |  | 2022 |  |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
SME legal entities | €000 | €000 | €000 | €000 | €000 | €000
Rating 1 | 42,683 | 2,796 | 45,479 | 30,526 | 38 | 30,564
Rating 2 | 6,435 | 8,181 | 14,616 | 8,552 | 747 | 9,299
Rating 3 | 1,599 | 1,950 | 3,549 | 867 | 489 | 1,356
Rating 4 | 329 | 907 | 1,236 | 280 | 263 | 543
Rating 5 | 31 | 7 | 38 | 58 | 94 | 152
Rating 6 | 3 | 14 | 17 | 1 | 1 | 2
Rating 7 | 4 | 137 | 141 | 552 | - | 552
Unrated | - | 50,393 | 50,393 | 19,630 | 56,891 | 76,521
New customers |  |  |  |  |  |
| 47,141 | 122 | 47,263 | 46,891 | 738 | 47,629
| 98,225 | 64,507 |  |  |  |
|  |  | 162,732 |  |  |
|  |  |  | 107,357 | 59,261 |
|  |  |  |  |  | 166,618
Total Stage 3 |  |  |  |  |  |
|  |  | 28,232 |  |  | 26,571
|  |  | 190,964 |  |  | 193,189

| 2023 |  |  | 2022 |  |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
Retail individuals | €000 | €000 | €000 | €000 | €000 | €000
Unrated |  |  |  |  |  |
| - | 17,208 | 17,208 | - | 14,975 | 14,975
| - | 17,208 |  |  |  |
|  |  | 17,208 |  |  |
|  |  |  | - | 14,975 |
|  |  |  |  |  | 14,975
Total Stage 3 |  |  |  |  |  |
|  |  | 420 |  |  | 587
|  |  | 17,628 |  |  | 15,562

391
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.6 Contingent liabilities and commitments (continued)
44.6.2 Commitments
An analysis of changes in the outstanding exposures and the corresponding ECL are disclosed in the tables
below:

| Stage 1 | Stage 2 | Stage 3 | Total
2023 | €000 | €000 | €000 | €000
Exposure |  |  |  |
1 January |  |  |  |
| 1,564,964 | 319,114 | 43,033 |
|  |  |  | 1,927,111
Transfers to stage 1 |  |  |  |
| 121,814 | (121,602) | (212) |
|  |  |  | -
Transfers to stage 2 |  |  |  |
| (100,140) | 102,838 | (2,698) |
|  |  |  | -
Transfers to stage 3 |  |  |  |
| (4,872) | (3,783) | 8,655 |
|  |  |  | -
Net increase/(decrease) |  |  |  |
| 83,713 | (24,801) | (27,290) |
|  |  |  | 31,622
31 December |  |  |  |
| 1,665,479 | 271,766 | 21,488 | 1,958,733

| Stage 1 | Stage 2 | Stage 3 | Total
2022 | €000 | €000 | €000 | €000
Exposure |  |  |  |
1 January | 1,497,081 | 412,570 | 52,278 | 1,961,929
Transfers to stage 1 | 159,869 | (159,518) | (351) | -
Transfers to stage 2 | (117,601) | 118,493 | (892) | -
Transfers to stage 3 | (276) | (1,205) | 1,481 | -
Net increase/(decrease) |  |  |  |
| 25,891 | (51,226) | (9,483) | (34,818)
31 December |  |  |  |
| 1,564,964 | 319,114 | 43,033 | 1,927,111

| Stage 1 | Stage 2 | Stage 3 | Total
2023 | €000 | €000 | €000 | €000
ECL |  |  |  |
1 January | 90 | 97 | - | 187
Transfers to stage 1 | - | - | - | -
Transfers to stage 2 | - | - | - | -
(Credit)/charge for the year* |  |  |  |
| (90) | (97) | - | (187)
31 December |  |  |  |
| - | - | - | -

| Stage 1 | Stage 2 | Stage 3 | Total
2022 | €000 | €000 | €000 | €000
ECL |  |  |  |
1 January | 19 | 169 | - | 188
Transfers to stage 1 | 4 | (4) | - | -
Transfers to stage 2 | (18) | 18 | - | -
Charge/(credit) for the year* |  |  |  |
| 85 | (86) | - | (1)
31 December |  |  |  |
| 90 | 97 | - | 187
Individually assessed | 68 | 60 | - | 128
Collectively assessed |  |  |  |
| 22 | 37 | - | 59
| 90 | 97 | - | 187

*The charge/(credit) for the year mainly relates to changes to inputs.
392
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.6 Contingent liabilities and commitments (continued)
44.6.2 Commitments (continued)
The credit quality of commitments, as per the internal rating system of BOC PCL is disclosed in the table
below.

| 2023 |  |  | 2022 |  |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
Corporate legal entities | €000 | €000 | €000 | €000 | €000 | €000
Rating 1 | 280,836 | 10,252 | 291,088 | 219,598 | 13,914 | 233,512
Rating 2 | 63,694 | 1,672 | 65,366 | 50,364 | 3,921 | 54,285
Rating 3 | 78,107 | 8,560 | 86,667 | 83,187 | 5,579 | 88,766
Rating 4 | 77,465 | 3,669 | 81,134 | 99,083 | 5,387 | 104,470
Rating 5 | 45,954 | 22,251 | 68,205 | 68,953 | 8,220 | 77,173
Rating 6 | 14,720 | 4,892 | 19,612 | 8,154 | 6,905 | 15,059
Rating 7 | 2,074 | 336 | 2,410 | 1,492 | 10,390 | 11,882
Unrated | 90,986 | 51,113 | 142,099 | 60,960 | 46,201 | 107,161
New customers |  |  |  |  |  |
| 86,953 | 707 | 87,660 | 72,297 | 10,903 | 83,200
| 740,789 | 103,452 |  |  |  |
|  |  | 844,241 |  |  |
|  |  |  | 664,088 | 111,420 |
|  |  |  |  |  | 775,508
Total Stage 3 |  |  |  |  |  |
|  |  | 11,981 |  |  | 14,763
|  |  | 856,222 |  |  | 790,271

| 2023 |  |  | 2022 |  |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
SME legal entities | €000 | €000 | €000 | €000 | €000 | €000
Rating 1 | 275,684 | 34,643 | 310,327 | 189,826 | 75,681 | 265,507
Rating 2 | 54,993 | 56,903 | 111,896 | 37,089 | 20,238 | 57,327
Rating 3 | 11,146 | 13,215 | 24,361 | 9,437 | 5,941 | 15,378
Rating 4 | 2,698 | 1,811 | 4,509 | 1,923 | 2,992 | 4,915
Rating 5 | 530 | 322 | 852 | 1,322 | 2,155 | 3,477
Rating 6 | 173 | 152 | 325 | 303 | 370 | 673
Rating 7 | 7 | 192 | 199 | 177 | 136 | 313
Unrated | - | 8,577 | 8,577 | 58,779 | 29,414 | 88,193
New customers |  |  |  |  |  |
| 16,658 | 915 | 17,573 | 13,683 | 980 | 14,663
| 361,889 | 116,730 |  |  |  |
|  |  | 478,619 |  |  |
|  |  |  | 312,539 | 137,907 |
|  |  |  |  |  | 450,446
Total Stage 3 |  |  |  |  |  |
|  |  | 5,742 |  |  | 23,916
|  |  | 484,361 |  |  | 474,362

| 2023 |  |  | 2022 |  |
| Stage 1 | Stage 2 | Total | Stage 1 | Stage 2 | Total
Retail individuals | €000 | €000 | €000 | €000 | €000 | €000
Rating 1 | 145,977 | 11,477 | 157,454 | 279,094 | 17,526 | 296,620
Rating 2 | 85,690 | 5,503 | 91,193 | 124,039 | 8,630 | 132,669
Rating 3 | 135,923 | 10,084 | 146,007 | 63,108 | 10,745 | 73,853
Rating 4 | 90,081 | 6,541 | 96,622 | 32,345 | 8,307 | 40,652
Rating 5 | 22,724 | 5,899 | 28,623 | 9,304 | 6,516 | 15,820
Rating 6 | 5,317 | 2,645 | 7,962 | 3,464 | 5,395 | 8,859
Rating 7 | 1,142 | 1,459 | 2,601 | 770 | 2,690 | 3,460
Unrated | - | 6,832 | 6,832 | - | 7,437 | 7,437
New customers |  |  |  |  |  |
| 75,947 | 1,144 | 77,091 | 76,213 | 2,541 | 78,754
| 562,801 | 51,584 |  |  |  |
|  |  | 614,385 |  |  |
|  |  |  | 588,337 | 69,787 |
|  |  |  |  |  | 658,124
Total Stage 3 |  |  |  |  |  |
|  |  | 3,765 |  |  | 4,354
|  |  | 618,150 |  |  | 662,478

393
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.7 Collateral and other credit enhancements obtained
The carrying value of assets obtained during 2023 and 2022 by taking possession of collateral held as
security, was as follows:

| 2023 | 2022
| €000 | €000
Residential property | 5,980 | 12,414
Commercial and other property |  |
| 14,560 | 70,238
| 20,540 | 82,652

The total carrying value of stock of property and investment properties obtained over the years by taking
possession of collateral held as security for customer loans and advances and held by the Group as at 31
December 2023, including any expenses capitalised during the year, amounted to €861,675 thousand
(2022: €1,087,556 thousand).
The disposals of repossessed assets during 2023 amounted to €173,587 t housand (2022: €249,252
thousand).
44.8 Currency concentration of loans and advances to customers
The following table presents the currency concentration of the Group's loans and advances to customers at
amortised cost.

| 2023 | 2022
Gross loans at amortised cost | €000 | €000
Euro | 9,336,828 | 9,456,220
US Dollar | 409,555 | 334,663
British Pound | 87,610 | 89,244
Russian Rouble | 324 | 312
Swiss Franc | 27,358 | 35,430
Other currencies |  |
| 839 | 1,466
| 9,862,514 | 9,917,335

44.9 Modified loans and advances to customers
Modified loans and advances to customers are those loans where the original contractual terms of the loans
i. have been modified due to financial difficulties of the borrower and are considered as
forborne/restructured (as explained in Note 44.10), and
ii. have been modified due to commercial renegotiations and such loans are considered as non-
forborne.
Customers classified as Stage 2 and Stage 3 as at 31 December 2022, that had facilities modified (in a prior
or the current period), and are classified as Stage 1 as at 31 December 2023 amount to €137,357 thousand
(2022: €281,391 thousand) and their corresponding ECL amount to €547 thousand (2022: €895 thousand).
Previously classified Stage 2 and Stage 3 customers (with a carrying amount as at 31 December 2022 of
€30,012 thousand (2021: €34,788 thousand)) that had facilities modified during the year and are classified
as Stage 1 at 31 December 2023 amount to €19,113 thousand (2022: €30,012 thousand) and their
corresponding ECL amount to €36 thousand (2022: €51 thousand). Their related modification loss
amounted to €55 thousand (2022: €177 thousand).
Stage 2 and Stage 3 loans that were forborne during the year amounted to €44,827 thousand (2022:
€228,804 thousand). Their related modification loss amounted to €3,036 thousand (2022: €4,669
thousand).
Facilities that reverted to Stage 2 and Stage 3 having once cured during the year amount to €51,720
thousand (2022: €33,784 thousand) and their corresponding ECL amount to €1,984 thousand (2022:
€1,055 thousand) as at 31 December 2023.
394
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.10 Forbearance/Restructuring
Forborne/restructured loans are those loans that have been modified because the borrower is considered
unable to meet the terms and conditions of the contract due to financial difficulties. Taking into
consideration these difficulties, the Group decides to modify the terms and conditions of the contract to
provide the borrower with the ability to service the debt or refinance the contract, either partially or fully.
The practice of extending forbearance/restructuring measures constitutes a grant of a concession whether
temporarily or permanently to that borrower. A concession may involve restructuring the contractual terms
of a debt or payment in some form other than cash, such as an arrangement whereby the borrower
transfers collateral pledged to the Group.
Forborne/restructured loans and advances are facilities for which the Group has modified the repayment
programme (e.g. provision of a grace period, suspension of the obligation to repay one or more
instalments, reduction in the instalment amount and/or elimination of overdue instalments relating to
capital or interest).
For an account to qualify for forbearance/restructuring it must meet certain criteria including the viability of
the customer. The extent to which the Group reschedules accounts that are eligible under its existing
policies may vary depending on its view of the prevailing economic conditions and other factors which may
change from year to year. In addition, exceptions to policies and practices may be allowed in specific
situations in response to legal or regulatory requirements.
Forbearance/restructuring activities may include measures that restructure the borrower's business
(operational restructuring) and/or measures that restructure the borrower's financing (financial
restructuring).
Forbearance/restructuring options may be of a short or long-term nature or a combination thereof. The
Group has developed and deployed sustainable restructuring solutions, which are suitable for the borrower
and acceptable for the Group.
Short-term restructuring solutions are defined as restructured repayment solutions of duration of less than
two years. In the case of loans for the construction of commercial property and project finance, a short-
term solution may not exceed one year.
Short-term restructuring solutions can include the following:
i. Suspension of capital or capital and interest: granting to the borrower a grace period in the payment of
capital (i.e. during this period only interest is paid) or capital and interest, for a specific period of time.
ii. Reduced payments: decrease of the amount of repayment instalments over a defined short-term period
in order to accommodate the borrower's new cash flow position.
iii. Arrears and/or interest capitalisation: capitalisation of the arrears and of any unpaid interest to the
outstanding principal balance for repayment under a rescheduled program.
Long-term restructuring solutions can include the following:
i. Interest rate reduction: permanent or temporary reduction of interest rate (fixed or variable) into a fair
and sustainable rate.
ii. Extension of maturity: extension of the maturity of the loan which allows a reduction in instalment
amounts by spreading the repayments over a longer period.
iii. Sale of Assets: Part of the restructuring can be the agreement with the borrower for immediate or over
time sale of assets (mainly real estate) to reduce borrowing.
iv. Modification of existing terms of previous decisions: In the context of the new sustainable
settlement/restructuring solution, review any terms of previous decisions that may not be met.
v. Consolidation/refinancing of existing facilities: In cases where the borrower maintains several separate
loans with different collaterals, these can be consolidated and a new repayment schedule can be set and
the new loan can be secured with all existing collaterals.
vi. Hard Core Current Account Limit: In such cases a loan with a longer repayment may be offered to
replace / reduce the current account limit.
vii. Split and freeze: the customer's debt is split into sustainable and unsustainable parts. The sustainable
part is restructured to a sustainable repayment program. The unsustainable part is 'frozen' for the
restructured duration of the sustainable part. At the maturity of the restructuring, the frozen part is
either forgiven pro rata (based on the actual repayment of the sustainable part) or restructured.
395
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.10 Forbearance/Restructuring (continued)
viii. Rescheduling of payments: the existing contractual repayment schedule is adjusted to a new
sustainable repayment program based on a realistic, current and forecasted assessment of the cash flow
generation of the borrower.
ix. Liquidation Collateral: An agreement between BOC PCL and a borrower for the voluntary sale of
mortgaged assets, for partial or full repayment of the debt.
x. Currency Conversion: This solution is provided to match the credit facility currency and the borrower's
income currency.
xi. Additional Financing: This solution can be granted, simultaneously with the restructuring of the existing
credit facilities of the borrower, to cover any financing gap.
xii. Partial or total write off: This solution corresponds to the Group forfeiting the right to legally recover
part or the whole of the amount of debt outstanding by the borrower.
xiii. Debt/equity swaps: debt restructuring that allows partial or full repayment of the debt in exchange of
obtaining an equivalent amount of equity by the Group, with the remaining debt right sized to the cash
flows of the borrower to allow repayment. This solution is used only in exceptional cases and only where
all other efforts for restructuring are exhausted and after ensuring compliance with the banking law.
xiv. Debt/asset swaps: agreement between the Group and the borrower to voluntarily transfer the
mortgaged asset or other immovable property to the Group, to partially or fully repay the debt. Any
residual debt may be restructured within an appropriate repayment schedule in line with the borrower's
reassessed repayment ability.
The loans forborne continue to be classified as Stage 3 in the case they are performing forborne exposures
under probation for which additional forbearance measures are extended, or performing forborne
exposures, previously classified as NPEs that present more than 30 days past due within the probation
period.
Forbearance modifications of loans and advances that do not affect payment arrangements, such as
restructuring of collateral or security arrangements, are not regarded as sufficient to categorise the facility
as credit impaired and in Stage 3, as by themselves they do not necessarily indicate credit distress affecting
payment ability such that would require the facility to be classified as NPE.
The forbearance characteristic contributes in two specific ways for the calculation of lifetime ECL for each
individual facility. Specifically, it is taken into consideration in the scorecard development, where, if this
characteristic is identified as statistically significant, it affects negatively the rating of each facility. It also
contributes in the construction through the cycle probability of default and cure curves, where, when
feasible, a specific curve for the forborne products is calculated and assigned accordingly.
The below table presents the movement of the Group's forborne loans and advances to customers
measured at amortised cost.

| 2023 | 2022
| €000 | €000
1 January | 1,106,298 | 1,469,182
New loans and advances forborne in the year | 47,366 | 130,547
Loans no longer classified as forborne and repayments | (705,103) | (241,739)
Write off of forborne loans and advances | (41,996) | (77,357)
Interest accrued on forborne loans and advances | 49,102 | 57,795
Foreign exchange adjustments | 73 | 3,115
Derecognition of Helix 3 and Sinope portfolios |  |
| - | (235,245)
31 December |  |
| 455,740 | 1,106,298

The forborne loans classification is discontinued when all EBA criteria for the discontinuation of the
classification as forborne exposure are met. The criteria are set out in the EBA Final draft Implementing
Technical Standards (ITS) on supervisory reporting and non-performing exposures.
396
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.10 Forbearance/Restructuring (continued)
The below tables present the Group's forborne loans and advances to customers by staging, economic
activity and business line classification, as well as the ECL allowance and tangible collateral held for such
forborne loans.

| 2023 | 2022
| €000 | €000
Stage 1 | - | -
Stage 2 | 261,091 | 857,356
Stage 3 | 173,728 | 215,730
POCI |  |
| 20,921 | 33,212
| 455,740 | 1,106,298

Fair value of collateral

| 2023 | 2022
| €000 | €000
Stage 1 | - | -
Stage 2 | 241,983 | 818,138
Stage 3 | 154,051 | 172,501
POCI |  |
| 19,734 | 30,188
| 415,768 | 1,020,827

The fair value of collateral presented above has been computed to the extent that the collateral mitigates
credit risk.
Credit risk concentration

| 2023 | 2022
By economic activity | €000 | €000
Trade | 15,578 | 41,038
Manufacturing | 10,195 | 17,080
Hotels and catering | 60,129 | 282,460
Construction | 82,849 | 245,695
Real estate | 61,550 | 145,840
Private individuals | 187,537 | 279,934
Professional and other services | 35,197 | 76,135
Shipping | - | -
Other sectors |  |
| 2,705 | 18,116
| 455,740 | 1,106,298

397
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.10 Forbearance/Restructuring (continued)

| 2023 | 2022
By business line | €000 | €000
Corporate and Large corporate | 207,534 | 684,382
IBU & International corporate |  |
- IBU | 2,386 | 11,482
- International corporate | 768 | -
SMEs | 20,823 | 74,474
Retail |  |
- housing | 67,087 | 85,319
- consumer, credit cards and other | 17,265 | 28,944
Restructuring |  |
- corporate | 33,098 | 47,840
- SMEs | 11,749 | 21,002
- retail housing | 34,538 | 53,316
- retail other | 7,399 | 14,402
Recoveries |  |
- corporate | 2,480 | 6,279
- SMEs | 6,157 | 15,635
- retail housing | 34,496 | 49,240
- retail other |  |
| 9,960 | 13,983
| 455,740 | 1,106,298

2023 | Stage 1 | Stage 2 | Stage 3 | POCI | Total
By business line | €000 | €000 | €000 | €000 | €000
Corporate and Large |  |  |  |  |
corporate |  |  |  |  |
| - | 136,097 | 71,330 | 107 | 207,534
IBU & International corporate |  |  |  |  |
- IBU | - | 2,091 | 295 | - | 2,386
- International corporate | - | 768 | - | - | 768
SMEs | - | 19,414 | 1,409 | - | 20,823
Retail |  |  |  |  |
- housing | - | 51,588 | 13,479 | 2,020 | 67,087
- consumer, credit cards and |  |  |  |  |
other |  |  |  |  |
| - | 13,047 | 4,089 | 129 | 17,265
Restructuring |  |  |  |  |
- corporate | - | 21,254 | 1,807 | 10,037 | 33,098
- SMEs | - | 3,686 | 6,760 | 1,303 | 11,749
- retail housing | - | 11,341 | 21,633 | 1,564 | 34,538
- retail other | - | 1,805 | 5,249 | 345 | 7,399
Recoveries |  |  |  |  |
- corporate | - | - | 2,250 | 230 | 2,480
- SMEs | - | - | 5,668 | 489 | 6,157
- retail housing | - | - | 30,643 | 3,853 | 34,496
- retail other |  |  |  |  |
| - | - | 9,116 | 844 | 9,960
| - | 261,091 | 173,728 | 20,921 | 455,740

398
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.10 Forbearance/Restructuring (continued)

2022 | Stage 1 | Stage 2 | Stage 3 | POCI | Total
By business line | €000 | €000 | €000 | €000 | €000
Corporate and Large |  |  |  |  |
corporate |  |  |  |  |
| - | 628,104 | 50,688 | 5,590 | 684,382
IBU & International corporate |  |  |  |  |
- IBU | - | 10,293 | 1,188 | 1 | 11,482
SMEs | - | 72,727 | 869 | 878 | 74,474
Retail |  |  |  |  |
- housing | - | 62,312 | 20,502 | 2,505 | 85,319
- consumer, credit cards and |  |  |  |  |
other |  |  |  |  |
| - | 20,207 | 7,653 | 1,084 | 28,944
Restructuring |  |  |  |  |
- corporate | - | 31,637 | 6,060 | 10,143 | 47,840
- SMEs | - | 7,240 | 11,918 | 1,844 | 21,002
- retail housing | - | 19,912 | 30,649 | 2,755 | 53,316
- retail other | - | 4,924 | 9,021 | 457 | 14,402
Recoveries |  |  |  |  |
- corporate | - | - | 5,837 | 442 | 6,279
- SMEs | - | - | 14,449 | 1,186 | 15,635
- retail housing | - | - | 44,191 | 5,049 | 49,240
- retail other |  |  |  |  |
| - | - | 12,705 | 1,278 | 13,983
| - | 857,356 | 215,730 | 33,212 | 1,106,298

ECL allowance

| 2023 | 2022
| €000 | €000
Stage 1 | - | -
Stage 2 | 8,643 | 13,939
Stage 3 | 47,840 | 68,557
POCI |  |
| 11,510 | 11,259
| 67,993 | 93,755

399
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.11 Credit quality of Group assets exposed to credit risk other than loans and advances to
customers - analysis by rating agency designation
Balances with central banks and loans and advances to banks
Balances with central banks and loans and advances to banks are analysed by Moody's Investors Service
rating as follows:

| 2023 | 2022
| €000 | €000
Aaa - Aa3 | 227,075 | 84,543
A1 - A3 | 23,647 | 25,249
Baa1 - Baa3 | 9,550,286 | 36,544
Ba1 - Ba3 | 4,545 | 9,491,444
B1 - B3 | 254 | 358
Caa - C | 2,148 | 2,192
Unrated | 64,276 | 1,715
Other receivables from banks |  |
| 34,532 | 38,307
| 9,906,763 | 9,680,352

All balances with central banks and loans and advances to banks are classified as Stage 1 (Note 19).
Reverse repurchase agreements
Reverse repurchase agreements counterparties are analysed by Moody's Investors Service rating as follows:

| 2023 | 2022
| €000 | €000
Unrated |  |
| 403,199 | -
| 403,199 | -

The average rating of the collateral (Note 44.1) received was Aa1 as at 31 December 2023
Debt securities and other non-equity securities
Investments in debt securities and other non-equity securities are analysed by Moody's Investors Service
rating as follows:

| 2023 | 2022
Moody's rating | €000 | €000
Aaa - Aa3 | 1,969,693 | 1,109,706
A1 - A3 | 442,968 | 397,831
Baa1 - Baa3 | 1,049,328 | 88,422
Ba1 - Ba3 | 89,404 | 886,419
B1 - B3 | - | 14,243
Unrated |  |
| - | 12,241
| 3,551,393 | 2,508,862
Issued by: |  |
- Cyprus government | 926,421 | 832,113
- Other governments | 761,563 | 425,460
- Banks and other corporations |  |
| 1,863,409 | 1,251,289
| 3,551,393 | 2,508,862
Classified as: |  |
Investments mandatorily measured at FVPL | 3,611 | 8,968
Investments at FVOCI | 431,068 | 453,775
Investments at amortised cost |  |
| 3,116,714 | 2,046,119
| 3,551,393 | 2,508,862

400
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
44. Risk management - Credit risk (continued)
44.11 Credit quality of Group assets exposed to credit risk other than loans and advances to
customers - analysis by rating agency designation (continued)

| FVOCI | Amortised cost
| Stage 1 | Stage 1
2023 | €000 | €000
Aaa - Aa3 | 62,469 | 1,903,613
A1 - A3 | 34,234 | 408,734
Baa1 - Baa3 | 315,640 | 733,688
Ba1 - Ba3 |  |
| 18,725 | 70,679
| 431,068 | 3,116,714

| FVOCI | Amortised cost
| Stage 1 | Stage 1
2022 | €000 | €000
Aaa - Aa3 | 85,199 | 1,015,539
A1 - A3 | 41,947 | 355,884
Baa1 - Baa3 | 856 | 87,566
Ba1 - Ba3 | 325,773 | 560,646
B1 - B3 | - | 14,243
Unrated |  |
| - | 12,241
| 453,775 | 2,046,119

The ratings are provided for the ISIN or if not available for the specific issuance the rating of the
counterparty is used.
45. Risk management - Market risk
Market risk is the risk of loss from adverse changes in market prices namely from changes in interest rates,
foreign currency exchange rates, property and security prices. The Market and Liquidity Risk department is
responsible for monitoring the risk on financial instruments resulting from such changes with the objective
to minimise the impact on earnings and capital. The department also monitors property price risk, liquidity
risk and credit risk from counterparties and countries. It is also responsible for monitoring compliance with
the various market risk policies and procedures.
Interest rate risk
Interest rate risk refers to the current or prospective risk to Group's capital and earnings arising from
adverse movements in interest rates that affect the Group's banking book positions.
Interest rate risk is measured primarily by reference to the impact on net interest income and impact on
economic value. In addition to the above measures, interest rate risk is also measured using interest rate
risk gap analysis, where the assets, liabilities and off-balance sheet items are classified according to their
remaining repricing period. Items that are not sensitive to rate changes are recognised as non-rate
sensitive (NRS) items. Interest rate risk is managed through a 1-Year Interest Rate Effect (IRE) limit on the
maximum reduction of net interest income under the various interest rate shock scenarios. Limits are set as
a percentage of the Group TIER 1 regulatory capital and as a percentage of the net interest income. There
are overall limits as well as separate limits for the Euro and the US Dollar.
Sensitivity analysis
The table below sets out the impact on the Group's net interest income, over a one-year period, from
reasonably possible changes in the interest rates of the Euro and the US Dollar, being the main currencies,
using the assumption of the prevailing market risk policy for the current and the comparative year:
401
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
45. Risk management - Market risk (continued)

|  | Impact on Net Interest Income |
|  | in €000 |
Currency | Interest Rate Scenario |  |
|  | 2023 |
|  | (+140 bps/-120 |
|  | bps for Euro and |
|  | +170 bps/-110 |
|  | bps for US |
|  | Dollar) |
|  |  | 2022
|  |  | (60 bps for Euro
|  |  | and 75 bps for
|  |  | US Dollar)
All | Parallel up | 147,348 | 73,126
All | Parallel down | (135,973) | (77,043)
All | Steepening | (81,265) | (56,569)
All | Flattening | 112,104 | 59,657
All | Short up | 150,679 | 70,381
All | Short down | (140,778) | (73,896)

Euro | Parallel up | 142,318 | 71,829
Euro | Parallel down | (132,297) | (75,343)
Euro | Steepening | (79,595) | (55,812)
Euro | Flattening | 108,998 | 59,132
Euro | Short up | 145,795 | 69,180
Euro | Short down | (137,046) | (72,216)

US Dollar | Parallel up | 5,030 | 1,298
US Dollar | Parallel down | (3,676) | (1,700)
US Dollar | Steepening | (1,670) | (757)
US Dollar | Flattening | 3,106 | 525
US Dollar | Short up | 4,884 | 1,202
US Dollar | Short down | (3,732) | (1,680)

The above sensitivities incorporate assumptions on the pass-through rate of time deposits of 40% for the
upside scenario and 50% for the downside scenario for 2023 (2022: 50% for the upside scenario and 56%
for the downside scenario).
402
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
45. Risk management - Market risk (continued)
The table below sets out the impact on the Group's equity, from reasonably possible changes in the interest
rates under various interest rate scenarios for the Euro and the US Dollar in line with the EBA guidelines.

|  | Impact on |
|  | Equity in |
|  | €000 |
Currency | Interest Rate Scenario |  |
|  | 2023 |
|  | (+140 bps/-120 |
|  | bps for Euro and |
|  | +170 bps/-110 |
|  | bps for US |
|  | Dollar) |
|  |  | 2022
|  |  | (60 bps for Euro
|  |  | and 75 bps for US
|  |  | Dollar)
All | Parallel up | 62,584 | 31,739
All | Parallel down | (89,615) | (68,581)
All | Steepening | (511) | 11,884
All | Flattening | (11,035) | 369
All | Short up | 14,117 | 27,212
All | Short down | (40,727) | (35,032)

Euro | Parallel up | 114,640 | 54,878
Euro | Parallel down | (60,469) | (59,502)
Euro | Steepening | 6,669 | 23,018
Euro | Flattening | 20,775 | 526
Euro | Short up | 48,756 | 47,696
Euro | Short down | (27,450) | (28,040)

US Dollar | Parallel up | 10,529 | 8,599
US Dollar | Parallel down | (29,146) | (9,079)
US Dollar | Steepening | (3,846) | 750
US Dollar | Flattening | (21,422) | 212
US Dollar | Short up | (10,261) | 6,727
US Dollar | Short down | (13,277) | (6,992)

The aggregation of the impact on equity was performed as per the EBA guidelines by adding the negative
and 50% of the positive impact of each scenario.
In addition to the above fluctuations in net interest income, interest rate changes can result in fluctuations
in the fair value of investments at FVPL (including investments held for trading) and in the fair value of
derivative financial instruments impacting the profit and loss of the Group.
The equity of the Group is also affected by changes in market interest rates. The impact on the Group's
equity arises from changes in the fair value of fixed rate debt securities classified at FVOCI.
The sensitivity analysis is based on the assumption of a parallel shift of the yield curve. The table below sets
out the impact on the Group's profit/loss before tax and equity as a result of reasonably possible changes in
the interest rates of the major currencies.

Parallel change in interest rates |  |
((increase)/decrease in net |  |
interest income) |  |
| Impact on profit/loss |
| before tax |
|  | Impact on equity
2023 | €000 | €000
+1.7% for US Dollar |  |
+1.4% for Euro |  |
+3% for British Pound |  |
| (2,468) | (773)
-1.1% for US Dollar |  |
-1.2% for Euro |  |
-3% for British Pound |  |
| 2,115 | 663

403
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
45. Risk management - Market risk (continued)

| Impact on profit/loss |
| before tax |
|  | Impact on equity
Parallel change in interest rates |  |
((increase)/decrease in net |  |
interest income) |  |
| €000 | €000
2022 |  |
+0.75% for US Dollar |  |
+0.6% for Euro |  |
+0.4% for British Pound |  |
| (466) | (394)
-0.75% for US Dollar |  |
-0.6% for Euro |  |
-0.4% for British Pound |  |
| 466 | 386

Currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate
because of changes in foreign currency exchange rates.
In order to manage currency risk, the ALCO has approved open position limits for the total foreign currency
positions. The foreign currency position limits are lower than those prescribed by the CBC. These limits are
managed by T reasury and monitored daily by Market and Liquidity Risk.
The Group does not maintain a currency trading book.
The table below sets out the Group's currency risk resulting from the financial instruments that it holds. The
analysis assumes reasonably possible changes in the exchange rates of major currencies against the Euro,
based mainly on historical price fluctuations. The impact on profit/loss after tax includes the change in net
interest income that arises from the change of currency rate.
The impact on equity arises from the hedging instruments that are used to hedge part of the net assets of
the subsidiaries whose functional currency is not the Euro. The net assets of foreign operations are also
revalued and affect equity (by an approximately equal and opposite impact), but their impact is not taken
into account in the above sensitivity analysis as the above relates only to financial instruments which have a
direct impact either on profit/loss after tax or on equity.

| Change in foreign |  |
| exchange rate |  |
|  | Impact on profit/loss |
|  | after tax |
|  |  | Impact on equity
2023 | % | €000 | €000
US Dollar | +5 | 1,622 | -
Russian Rouble | +60 | 1,364 | -
Romanian Lei | +5 | 3 | (63)
Swiss Franc | +5 | 92 | -
British Pound | +5 | 307 | -
Japanese Yen | +5 | 2 | -
Other currencies | +5 | 48 | -

US Dollar | -5 | (1,467) | -
Russian Rouble | -30 | (210) | -
Romanian Lei | -5 | (3) | 57
Swiss Franc | -5 | (84) | -
British Pound | -5 | (278) | -
Japanese Yen | -5 | (2) | -
Other currencies | -5 | (53) | -

404
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
45. Risk management - Market risk (continued)

| Change in foreign |  |
| exchange rate |  |
|  | Impact on profit/loss |
|  | after tax |
|  |  | Impact on equity
2022 | % | €000 | €000
US Dollar | +10 | 2,534 | -
Russian Rouble | +70 | 2,806 | -
Romanian Lei | +10 | 3 | (349)
Swiss Franc | +10 | 237 | -
British Pound | +10 | 483 | -
Japanese Yen | +10 | 6 | -
Other currencies | +10 | 65 | -
US Dollar | -10 | (2,073) | -
Russian Rouble | -40 | (344) | -
Romanian Lei | -10 | (2) | 285
Swiss Franc | -20 | (356) | -
British Pound | -10 | (396) | -
Japanese Yen | -10 | (5) | -
Other currencies | -10 | (53) | -

Price risk
Equity securities price risk
The risk of loss from changes in the price of equity securities arises when there is an unfavourable change in
the prices of equity securities held by the Group as investments.
Investments in equities are outside the Group's risk appetite, but may be acquired in the context of
delinquent loan workouts. The Group monitors the current portfolio mostly acquired by the Group as part of
the acquisition of certain operations of Laiki Bank, or through delinquent loan workouts, with the objective
to gradually liquidate all positions for which there is a market. Equity securities are disposed of by the
Group as soon as practicable.
Changes in the prices of equity securities that are classified as investments at FVPL, affect the results of the
Group, whereas changes in the value of equity securities classified as FVOCI affect directly the equity of the
Group.
The table below shows the impact on the profit/loss before tax and on equity of the Group from a change in
the price of the equity securities held, as a result of reasonably possible changes in the relevant stock
exchange indices.

| Change in index |  |
|  | Impact on profit/loss |
|  | before tax |
|  |  | Impact on equity
2023 | % | €000 | €000
Cyprus Stock Exchange | +40 | 1 | 900
Athens Exchange | +50 | 419 | -
New York Exchange | +45 | - | -
Other stock exchanges and |  |  |
unlisted |  |  |
| +40 | 26 | 1,270
Non-listed (Real Estate) | +25 | - | 1,732
Cyprus Stock Exchange | -40 | (1) | (900)
Athens Exchange | -50 | (419) | -
New York Exchange | -10 | - | -
Other stock exchanges and |  |  |
unlisted |  |  |
| -40 | (26) | (1,270)
Non-listed (Real Estate) | -10 | - | (693)

405
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
45. Risk management - Market risk (continued)

| Change in index |  |
|  | Impact on profit/loss |
|  | before tax |
|  |  | Impact on equity
2022 | % | €000 | €000
Cyprus Stock Exchange | +50 | 1 | 1,383
Athens Exchange | +34 | 286 | -
New York Exchange | +23 | 1,394 | -
Other stock exchanges and |  |  |
unlisted |  |  |
| +66 | 2 | 2,569
Non-listed (Real Estate) | +25 | - | 1,735
Cyprus Stock Exchange | -33 | (1) | (913)
Athens Exchange | -45 | (379) | -
New York Exchange | -28 | (1,697) | -
Other stock exchanges and |  |  |
unlisted |  |  |
| -59 | (2) | (2,296)
Non-listed (Real Estate) | -10 | - | (694)

Debt securities price risk
Debt securities price risk is the risk of loss as a result of adverse changes in the prices of debt securities
held by the Group. Debt security prices change as the credit risk of the issuer changes and/or as the
interest rate changes mainly for fixed rate securities. The Group invests a significant part of its liquid assets
in highly rated securities. The average Moody's Investors Service rating of the debt securities portfolio of
the Group as at 31 December 2023 was A1 (2022: A2). The average rating excluding the Cyprus
Government bonds and non-rated transactions as at 31 December 2023 was Aa2 (2022: Aa2). Further
information on ratings of debt securities is disclosed in Note 44.11.
Changes in the prices of debt securities classified as investments at FVPL, affect the profit or loss of the
Group, whereas changes in the value of debt securities classified as FVOCI affect directly the equity of the
Group.
The table below indicates how the profit/loss before tax and equity of the Group will be affected from
reasonably possible changes in the price of the debt securities held, based on a Monte Carlo conditional
value at risk (CVAR) methodology.

| Impact on profit/loss |
| before tax |
|  | Impact on equity
2023 | €000 | €000
Up scenario: |  |
Aa3 and above rated bonds | 2,614 | 4,068
A3 and above rated bonds | 151 | 1,938
Baa1 and below rated bonds | 53 | 430
Cyprus Government bonds | - | 27,618
Down scenario: |  |
Aa3 and above rated bonds | (2,614) | (4,068)
A3 and above rated bonds | (151) | (1,938)
Baa1 and below rated bonds | (53) | (430)
Cyprus Government bonds | - | (27,618)

406
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
45. Risk management - Market risk (continued)

| Impact on profit/loss |
| before tax |
|  | Impact on equity
2022 | €000 | €000
Up scenario: |  |
Aa3 and above rated bonds | 3,621 | 4,192
A3 and above rated bonds | 1,733 | 3,324
Baa1 and below rated bonds | 7 | 2,467
Cyprus Government bonds | - | 34,179
Down scenario: |  |
Aa3 and above rated bonds | (3,621) | (4,192)
A3 and above rated bonds | (1,733) | (3,324)
Baa1 and below rated bonds | (7) | (2,467)
Cyprus Government bonds | - | (34,179)

Other non-equity instruments price risk
The table below shows the impact on the profit/loss before tax and equity of the Group from a change in the
price of other non-equity instruments held, as a result of reasonably possible changes in the price index of
the relevant instruments.

| Change in index |  |
|  | Impact on profit/loss |
|  | before tax |
|  |  | Impact on equity
2023 | % | €000 | €000
Other non-equity instruments | +45 | 1,625 | -
Other non-equity instruments | -10 | (361) | -
2022 |  |  |
Other non-equity instruments | +23 | 2,063 | -
Other non-equity instruments | -28 | (2,511) | -

Property price risk
A significant part of the Group's loan portfolio is secured by real estate, the majority of which is located in
Cyprus. Furthermore, the Group holds a substantial number of properties mainly arising from loan
restructuring activities; the enforcement of loan collateral and debt for asset swaps. These properties are
held by the Group primarily as stock of property and some are held as investment properties.
Property risk is the risk that the Group's business and financial position will be affected by adverse changes
in the demand for, and prices of, real estate, or by regulatory capital requirements relating to increased
charges with respect to the stock of property held.
46. Risk management - Liquidity and funding risk
Liquidity Risk
Liquidity risk is the risk that the Group is unable to fully or promptly meet current and future payment
obligations as and when they fall due. This risk includes the possibility that the Group may have to raise
funding at high cost or sell assets at a discount to fully and promptly satisfy its obligations.
It reflects the potential mismatch between incoming and outgoing payments, taking into account
unexpected delays in repayment and unexpectedly high payment outflows. Liquidity risk involves both the
risk of unexpected increases in the cost of funding of the portfolio of assets and the risk of being unable to
liquidate a position in a timely manner on reasonable terms.
In order to limit this risk, management has in place an established Liquidity Policy of managing assets,
taking liquidity into consideration and monitoring cash flows and liquidity on a regular basis. The Group has
developed internal control processes and contingency plans for managing liquidity risk.
407
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
46. Risk management - Liquidity and funding risk (continued)
Management and structure
The Board of Directors sets the Group's Liquidity Risk Appetite which defines the level of risk at which the
Group should operate.
The Board of Directors, through its Risk Committee, approves the Liquidity Policy Statement and reviews at
frequent intervals the liquidity position of the Group.
The ALCO is responsible for setting the policies for the effective management and monitoring of liquidity risk
across the Group.
The Treasury Division is responsible for liquidity management at Group level, ensuring compliance with
internal policies and regulatory liquidity requirements and providing direction as to the actions to be taken
regarding liquidity needs. Treasury Division assesses on a continuous basis the adequacy of the liquid assets
and takes the necessary actions to ensure a comfortable liquidity position.
Liquidity is also monitored by Market and Liquidity Risk department, to ensure compliance with both internal
policies and limits, and with the limits set by the regulatory authorities. Market and Liquidity Risk
department reports the liquidity position to ALCO at least monthly. It also provides the results of various
stress tests to ALCO at least quarterly.
Liquidity is monitored and managed on an ongoing basis through:
(i) Risk appetite: establishes the Group's Risk Appetite Statement together with the appropriate limits
for the management of all risks including liquidity risk.
(ii) Liquidity Policy: sets the responsibilities for managing liquidity risk as well as the framework, limits
and reporting on liquidity and funding.
(iii) Liquidity limits: a number of internal and regulatory limits are monitored on a regular basis. Where
applicable, a traffic light system (RAG) has been introduced for the ratios, in order to raise flags
and take action when the ratios deteriorate.
(iv) Early Warning Indicators: monitoring of a range of indicators for early signs of liquidity risk in the
market or specific to the Group. These are designed to immediately identify the emergence of
increased liquidity risk so as to maximise the time available to execute appropriate mitigating
actions.
(v) Liquidity Contingency Plan: maintenance of a Liquidity Contingency Plan (LCP) which is designed to
provide a framework where a liquidity stress could be effectively identified and managed. The LCP
provides a communication plan and includes management actions to respond to liquidity stresses.
(vi) Recovery Plan: the Group has developed a Recovery Plan (RP), the key objectives of which are,
among others, to set key Recovery and Early Warning Indicators and to set in advance a range of
recovery options to enable the Group to be adequately prepared to respond to stressed conditions
and restore the Group's liquidity position.
Monitoring process
Daily
The daily monitoring of the stock of highly liquid assets is important to safeguard and ensure the
uninterrupted operations of the Group's activities. Market and Liquidity Risk department prepares a daily
report analysing the internal liquidity buffer and comparing it to the previous day's buffer. Results are made
available to members of the Risk and Treasury Divisions. In addition, Treasury monitors daily and intraday
the customer inflows and outflows in the main currencies used by the Group.
The liquidity buffer is made up of: Banknotes, CBC balances (excluding the Minimum Reserve Requirements
(MRR)), unpledged cash and nostro current accounts, as well as money market placements up to the stress
horizon, available ECB credit line and market value net of haircut of unencumbered/available liquid bonds.
Market and Liquidity Risk department also prepares daily stress testing for bank specific, market wide and
combined scenarios. The requirement is to have sufficient liquidity buffer to enable BOC PCL to survive a
twelve-month stress period, including capacity to raise funding under all scenarios.
Moreover, an intraday liquidity stress test takes place to ensure that the Group maintains sufficient liquidity
buffer in immediately accessible form, to enable it to meet the stressed intraday payments.
408
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
46. Risk management - Liquidity and funding risk (continued)
The designing of the stress tests follows guidance and is based on the liquidity risk drivers which are
recognised internationally by both the Prudential Regulation Authority (PRA) and EBA. In addition, it takes
into account SREP recommendations, as well as the Annual Risk Identification Process of the Group. The
stress test assumptions are reviewed on an annual basis and approved by the Board through its Risk
Committee. Whenever it is considered appropriate to amend the assumptions during the year, approval is
requested from ALCO and the Risk Committee. The main items shocked in the different scenarios are:
deposit outflows, wholesale funding, loan repayments, off balance sheet commitments, marketable
securities, own issue covered bond, additional credit claims, interbank takings and cash collateral for
derivatives and repos.
Weekly
Market and Liquidity Risk department prepares a report indicating the level of Liquid Assets including Credit
Institutions Money Market Placements as per LCR definitions.
Monthly
Market and Liquidity Risk department prepares reports monitoring compliance with internal and regulatory
liquidity ratios requirements and submits them to the ALCO, the Executive Committee and the Board Risk
Committee. It also calculates the expected flows under a stress scenario and compares them with the
available liquidity buffer in order to calculate the survival days. The fixed deposit renewal rates, the
percentage of International business unit deposits over total deposits and the percentage of instant access
deposits are also presented. The liquidity mismatch in the form of the Maturity Ladder report (for both
contractual and behavioural flows) is presented to ALCO and the resulting mismatch between assets and
liabilities is compared to previous month's mismatch.
Market and Liquidity Risk department also reports the Liquidity Coverage Ratio (LCR) and Additional
Liquidity Monitoring Metrics (ALMM) to the CBC/ECB on a monthly basis.
Quarterly
The results of the stress testing scenarios are reported to ALCO and Risk Committee quarterly as part of the
quarterly Internal Liquidity Adequacy Assessment Process (ILAAP) review. Market and Liquidity Risk
department also reports the Net Stable Funding Ratio (NSFR) to the CBC/ECB quarterly.
Annually
The Group prepares on an annual basis its ILAAP package. The ILAAP package provides a holistic view of the
Group's liquidity adequacy under normal and stress conditions. Within ILAAP, the Group evaluates its
liquidity risk in the context of established policies and processes for the identification, measurement,
management and monitoring of liquidity risk as implemented by the institution.
Market and Liquidity Risk department also prepares annually an ECB/SRB liquidity report, the 'Joint liquidity
template' that runs for five consecutive days. The report includes information on deposits breakdown, cash
flow information, survival period, LCR ratio, rollover of funding, funding gap (through the Maturity Ladder
analysis), concentration of funding and collateral details. It concludes on the overall liquidity position of BOC
PCL and describes the measures implemented and to be implemented in the short-term to improve liquidity
position if needed.
As part of the Group's procedures for monitoring and managing liquidity risk, there is a Group Liquidity
Contingency Plan (LCP) for handling liquidity difficulties. The LCP details the steps to be taken in the event
that liquidity problems arise, which escalate to a special meeting of the Crisis Management Committee for
LCP (CMC-LCP). The LCP sets out the members of this committee and a series of the possible actions that
can be taken. The LCP is reviewed and tested at least annually.
Liquidity ratios
The Group LCR is calculated based on the Delegated Regulation (EU) 2015/61. It is designed to establish a
minimum level of high quality liquid assets sufficient to meet an acute stress lasting for 30 calendar days.
Τhe minimum requirement is 100%. The Group also calculates its NSFR as per Capital Requirements
Regulation II (CRR II), with the limit set at 100%. The NSFR is the ratio of available stable funding to
required stable funding. NSFR has been developed to promote a sustainable maturity structure of assets
and liabilities.
409
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
46. Risk management - Liquidity and funding risk (continued)
Funding risk
Funding risk is the risk that the Group does not have sufficiently stable sources of funding or access to
sources of funding may not always be available at a reasonable cost and thus the Group may fail to meet its
obligations, including regulatory ones (e.g. MREL).
Main sources of funding
As at 31 December 2023, the Group's main sources of funding were its deposit base and central bank
funding, through the Eurosystem monetary policy operations. Wholesale funding is also becoming an
important source of funding, following the refinancing of the Tier 2 for €300 million in April 2021, the
issuance of senior preferred debt of €300 million in June 2021, the refinancing of AT1 for €220 million in
June 2023 and the issuance of senior preferred debt of €350 million in July 2023.
With respect to TLTRO III operations, the carrying value of the ECB funding as at 31 December 2023 (after
the early repayment of €1 billion within December 2022), was €2,044 million (2022: €1,977 million).
As at 31 December 2023, the wholesale funding nominal amount was €1,170 million (2022: €820 million).
This includes funding raised from the wholesale debt capital markets of €220 million AT1 as described in
Note 34, €300 million Tier 2 issued in April 2021, €300 million senior preferred debt issued in June 2021
and €350 million senior preferred debt issued in July 2023.
Funding to subsidiaries
The funding provided by BOC PCL to its subsidiaries for liquidity purposes is repayable as per the terms of
the respective agreements.
The subsidiaries may proceed with dividend distributions in the form of cash to BOC PCL, provided that they
are not in breach of their regulatory capital and liquidity requirements, where applicable.
Collateral requirements and other disclosures
Collateral requirements
The carrying values of the Group's encumbered assets as at 31 December 2023 and 31 December 2022 are
summarised below:

| 2023 | 2022
| €000 | €000
Cash and other liquid assets | 72,800 | 73,557
Investments | 260,011 | 284,343
Loans and advances |  |
| 3,349,118 | 3,273,369
| 3,681,929 | 3,631,269

Cash is mainly used to cover collateral required for derivatives, trade finance transactions and guarantees
issued. It may also be used as part of the supplementary assets for the covered bond.
As at 31 December 2023 and 2022 investments are mainly used as collateral for ECB funding or as
supplementary assets for the covered bond.
Loans and advances indicated as encumbered as at 31 December 2023 and 2022 are mainly used as
collateral for funding from the ECB and the covered bond.
Loans and advances to customers include mortgage loans of a nominal amount of €1,008 million as at 31
December 2023 (2022: €1,007 million) in Cyprus, pledged as collateral for the covered bond issued by BOC
PCL in 2011 under its Covered Bond Programme. Furthermore, as at 31 December 2023 housing loans of a
nominal amount of €2,329 million (2022: €2,287 million) in Cyprus, are pledged as collateral for funding
from the ECB (Note 29).
410
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
46. Risk management - Liquidity and funding risk (continued)
BOC PCL maintains a Covered Bond Programme set up under the Cyprus Covered Bonds legislation and the
Covered Bonds Directive of the CBC. Under the Covered Bond Programme, BOC PCL has in issue covered
bonds of €650 million secured by residential mortgages originated in Cyprus. The Covered Bonds have a
maturity date of 12 December 2026 and pay an interest rate of 3-months Euribor plus 1.25% on a quarterly
basis. On 9 August 2022, BOC PCL proceeded with an amendment to the terms and conditions of the
covered bonds following the implementation of Directive (EU) 2019/2162 in Cyprus. The covered bonds are
listed on the Luxemburg Bourse. The covered bonds have a conditional Pass-Through structure. All the
bonds are held by BOC PCL. The covered bonds are eligible collateral for the Eurosystem credit operations
and are placed as collateral for accessing funding from the ECB.
Other disclosures
Deposits by banks include balances of €20,462 thousand as at 31 December 2023 (2022: €29,100
thousand) relating to borrowings from international financial and similar institutions for funding, aiming to
facilitate access to finance and improve funding conditions for small or medium sized enterprises, active in
Cyprus. The carrying value of the respective loans and advances granted to such enterprises serving this
agreement amounts to €40,049 thousand as at 31 December 2023 (2022: €55,152 thousand).
Analysis of financial assets and liabilities based on remaining contractual maturity
The analysis of the Group's financial assets and liabilities based on the remaining contractual maturity at 31
December is based on undiscounted cash flows, analysed in time bands according to the number of days
remaining from 31 December to the contractual maturity date.
Financial assets
The analysis of financial assets does not include any interest receivable cash flows. Financial assets have a
much longer duration than financial liabilities and non-discounted interest receivable cash flows are higher
than non-discounted interest payable cash flows (based on remaining contractual maturity). As a result,
non-discounted cash inflows from interest receivable would have greatly exceeded non-discounted cash
outflows on interest payable, thus artificially improving liquidity.
Current accounts, overdrafts and amounts in arrears are included within the first maturity time band which
reflects their contractual maturity. All other loans and advances to customers are analysed according to
their contractual repayment schedule.
Loans and advances to banks are analysed in the time bands according to the number of days remaining
from 31 December until their contractual maturity date. Amounts placed as collateral (primarily for
derivatives) are assigned to different time bands based on either their maturity, or proportionally according
to the maturities of derivatives (where the collateral had no fixed maturity).
Financial assets with no contractual maturity (such as equity securities) are included in the 'Over five years'
time band, unless classified as at FVPL, in which case they are included in the 'On demand and up to one
month' time band.
The investments are classified in the relevant time band according to their contractual maturity.
Financial liabilities
All financial liabilities for the repayment of which notice is required, are included in the relevant time bands
as if notice had been given on 31 December, despite the fact that the Group expects that the majority of its
customers will not demand repayment of such liabilities on the earliest possible date. Fixed deposits are
classified in time bands based on their contractual maturity. Although customers may demand repayment of
time deposits (subject to penalties depending on the type of the deposit account), the Group has the
discretion not to accept such early termination of deposits.
Debt securities in issue and subordinated liabilities are classified in the relevant time band according to the
remaining contractual maturity.
The amounts presented in the table below are not equal to the amounts presented on the balance sheet,
since the table below presents all cash flows (including interest to maturity) on an undiscounted basis.
Derivative financial instruments
The fair value of the derivatives is included in financial assets or in financial liabilities in the time band
corresponding to the remaining maturity of the derivative.
411
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
46. Risk management - Liquidity and funding risk (continued)
Gross settled derivatives are presented in a separate table and the corresponding cash flows are classified
accordingly in the time bands which relate to the number of days until their receipt or payment.
Commitments and contingent liabilities
Amounts of commitments and contingent liabilities are included in the time band on the basis of their
remaining contractual maturities.
In the case of undrawn facilities the Group has the right to cancel them upon relevant notice to the
customers and are hence included in the 'On demand and up to one month' time band.

| On demand |  |  |  |  |
| and up to one |  |  |  |  |
| month |  |  |  |  |
|  | Between one |  |  |  |
|  | and three |  |  |  |
|  | months |  |  |  |
|  |  | Between three |  |  |
|  |  | months and |  |  |
|  |  | one year |  |  |
|  |  |  | Between one |  |
|  |  |  | and five years |  |
|  |  |  |  | Over five years | Total
2023 |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Financial assets |  |  |  |  |  |
Cash and balances with |  |  |  |  |  |
central banks |  |  |  |  |  |
| 9,571,884 | 14,810 | 23,159 | 3,995 | 654 | 9,614,502
Loans and advances to |  |  |  |  |  |
banks |  |  |  |  |  |
| 292,546 | 1,609 | 467 | 79,899 | 10,281 | 384,802
Reverse repurchase |  |  |  |  |  |
agreements |  |  |  |  |  |
| - | - | - | 403,199 | - | 403,199
Fair value of derivative |  |  |  |  |  |
assets |  |  |  |  |  |
| 220 | 99 | 540 | 35,263 | 14,933 | 51,055
Investments at FVPL | 131,664 | - | - | 3,611 | - | 135,275
Investments not at FVPL | 86,322 | 76,184 | 483,759 | 1,816,464 | 1,097,405 | 3,560,134
Loans and advances to |  |  |  |  |  |
customers |  |  |  |  |  |
| 1,100,174 | 188,261 | 723,535 | 2,798,404 | 5,011,414 | 9,821,788
Other assets |  |  |  |  |  |
| 95,211 | 2,649 | 123,783 | 151,298 | 15,303 | 388,244
| 11,278,021 | 283,612 | 1,355,243 | 5,292,133 | 6,149,990 | 24,358,999
Financial liabilities |  |  |  |  |  |
Deposits by banks | 153,942 | 18,737 | 35,481 | 210,135 | 69,494 | 487,789
Funding from central banks | - | 1,752,836 | 313,174 | - | - | 2,066,010
Customer deposits | 15,175,687 | 1,538,792 | 2,424,392 | 214,190 | - | 19,353,061
Debt securities in issue | - | - | 33,323 | 779,464 | - | 812,787
Subordinated liabilities | - | - | 19,885 | 94,663 | 384,739 | 499,287
Fair value of derivative |  |  |  |  |  |
liabilities |  |  |  |  |  |
| 13,362 | 516 | 201 | 2,515 | 1,386 | 17,980
Lease liabilities | 1,710 | 2,193 | 4,583 | 20,304 | 1,427 | 30,217
Other liabilities |  |  |  |  |  |
| 184,487 | 17,640 | 35,090 | 32,836 | 61,882 | 331,935
| 15,529,188 | 3,330,714 | 2,866,129 | 1,354,107 | 518,928 | 23,599,066
Net financial |  |  |  |  |  |
(liabilities)/assets |  |  |  |  |  |
| (4,251,167) | (3,047,102) | (1,510,886) | 3,938,026 | 5,631,062 | 759,933

412
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
46. Risk management - Liquidity and funding risk (continued)

| On demand |  |  |  |  |
| and up to one |  |  |  |  |
| month |  |  |  |  |
|  | Between one |  |  |  |
|  | and three |  |  |  |
|  | months |  |  |  |
|  |  | Between three |  |  |
|  |  | months and |  |  |
|  |  | one year |  |  |
|  |  |  | Between one |  |
|  |  |  | and five |  |
|  |  |  | years |  |
|  |  |  |  | Over five years | Total
2022 (restated) |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Financial assets |  |  |  |  |  |
Cash and balances with |  |  |  |  |  |
central banks |  |  |  |  |  |
| 9,541,665 | 9,624 | 13,489 | 1,480 | 703 | 9,566,961
Loans and advances to |  |  |  |  |  |
banks |  |  |  |  |  |
| 134,556 | 1,340 | 36 | 64,558 | 4,321 | 204,811
Fair value of derivative |  |  |  |  |  |
assets |  |  |  |  |  |
| 507 | 160 | 238 | 10,811 | 36,437 | 48,153
Investments at FVPL | 187,213 | - | - | 2,996 | - | 190,209
Investments not at FVPL | 42,553 | 70,637 | 318,427 | 1,793,724 | 288,153 | 2,513,494
Loans and advances to |  |  |  |  |  |
customers |  |  |  |  |  |
| 907,912 | 219,362 | 641,301 | 3,161,840 | 5,022,837 | 9,953,252
Other assets |  |  |  |  |  |
| 80,245 | 1,703 | 90,641 | 228,167 | 1,706 | 402,462
| 10,894,651 | 302,826 | 1,064,132 | 5,263,576 | 5,354,157 | 22,879,342
Financial liabilities |  |  |  |  |  |
Deposits by banks | 144,389 | 20,320 | 33,128 | 215,446 | 120,895 | 534,178
Funding from central banks | - | - | - | 2,028,300 | - | 2,028,300
Customer deposits | 15,096,274 | 1,591,894 | 2,278,574 | 38,116 | - | 19,004,858
Debt securities in issue | - | - | 7,500 | 339,725 | - | 347,225
Subordinated liabilities | - | - | 19,875 | 89,626 | 420,618 | 530,119
Fair value of derivative |  |  |  |  |  |
liabilities |  |  |  |  |  |
| 10,274 | 255 | 9 | 4,412 | 1,219 | 16,169
Lease liabilities | 665 | 1,111 | 4,727 | 18,350 | 5,552 | 30,405
Other liabilities |  |  |  |  |  |
| 164,768 | 17,046 | 31,424 | 21,613 | 35,168 | 270,019
| 15,416,370 | 1,630,626 | 2,375,237 | 2,755,588 | 583,452 | 22,761,273
Net financial |  |  |  |  |  |
(liabilities)/assets |  |  |  |  |  |
| (4,521,719) | (1,327,800) | (1,311,105) | 2,507,988 | 4,770,705 | 118,069

| On demand |  |  |  |  |
| and up to one |  |  |  |  |
| month |  |  |  |  |
|  | Between one |  |  |  |
|  | and three |  |  |  |
|  | months |  |  |  |
|  |  | Between three |  |  |
|  |  | months and |  |  |
|  |  | one year |  |  |
|  |  |  | Between one |  |
|  |  |  | and five years |  |
|  |  |  |  | Over five years | Total
2023 |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Gross settled derivatives |  |  |  |  |  |
Financial assets |  |  |  |  |  |
Contractual amounts |  |  |  |  |  |
receivable |  |  |  |  |  |
| 56,545 | 6,059 | 2,646 | - | - | 65,250
Contractual amounts payable |  |  |  |  |  |
| (56,310) | (5,992) | (2,599) | - | - | (64,901)
| 235 | 67 | 47 | - | - | 349
Financial liabilities |  |  |  |  |  |
Contractual amounts |  |  |  |  |  |
receivable |  |  |  |  |  |
| 907,453 | 136,201 | 2,617 | - | - | 1,046,271
Contractual amounts payable |  |  |  |  |  |
| (920,105) | (136,063) | (2,637) | - | - | (1,058,805)
| (12,652) | 138 | (20) | - | - | (12,534)

413
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
46. Risk management - Liquidity and funding risk (continued)

| On demand |  |  |  |  |
| and up to one |  |  |  |  |
| month |  |  |  |  |
|  | Between one |  |  |  |
|  | and three |  |  |  |
|  | months |  |  |  |
|  |  | Between three |  |  |
|  |  | months and |  |  |
|  |  | one year |  |  |
|  |  |  | Between one |  |
|  |  |  | and five years |  |
|  |  |  |  | Over five years | Total
2023 |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Contingent liabilities and |  |  |  |  |  |
commitments |  |  |  |  |  |
Contingent liabilities |  |  |  |  |  |
Acceptances and |  |  |  |  |  |
endorsements |  |  |  |  |  |
| 1,321 | 879 | 380 | - | - | 2,580
Guarantees | 140,740 | 77,973 | 250,404 | 203,993 | 29,934 | 703,044
Commitments |  |  |  |  |  |
Documentary credits | 1,242 | 3,830 | 5,179 | - | - | 10,251
Undrawn formal standby |  |  |  |  |  |
facilities, credit lines and |  |  |  |  |  |
other commitments to lend |  |  |  |  |  |
| 1,948,482 | - | - | - | - | 1,948,482
| 2,091,785 | 82,682 | 255,963 | 203,993 | 29,934 | 2,664,357

| On demand |  |  |  |  |
| and up to one |  |  |  |  |
| month |  |  |  |  |
|  | Between one |  |  |  |
|  | and three |  |  |  |
|  | months |  |  |  |
|  |  | Between three |  |  |
|  |  | months and |  |  |
|  |  | one year |  |  |
|  |  |  | Between one |  |
|  |  |  | and five years |  |
|  |  |  |  | Over five years | Total
2022 |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Gross settled derivatives |  |  |  |  |  |
Financial assets |  |  |  |  |  |
Contractual amounts |  |  |  |  |  |
receivable |  |  |  |  |  |
| 149,604 | 83,265 | 1,230 | - | - | 234,099
Contractual amounts payable |  |  |  |  |  |
| (149,166) | (83,215) | (1,222) | - | - | (233,603)
| 438 | 50 | 8 | - | - | 496
Financial liabilities |  |  |  |  |  |
Contractual amounts |  |  |  |  |  |
receivable |  |  |  |  |  |
| 1,034,973 | 65,093 | 1,222 | - | - | 1,101,288
Contractual amounts payable |  |  |  |  |  |
| (1,045,050) | (65,224) | (1,223) | - | - | (1,111,497)
| (10,077) | (131) | (1) | - | - | (10,209)

| On demand |  |  |  |  |
| and up to one |  |  |  |  |
| month |  |  |  |  |
|  | Between one |  |  |  |
|  | and three |  |  |  |
|  | months |  |  |  |
|  |  | Between three |  |  |
|  |  | months and |  |  |
|  |  | one year |  |  |
|  |  |  | Between one |  |
|  |  |  | and five years |  |
|  |  |  |  | Over five years | Total
2022 |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
Contingent liabilities and |  |  |  |  |  |
commitments |  |  |  |  |  |
Contingent liabilities |  |  |  |  |  |
Acceptances and |  |  |  |  |  |
endorsements |  |  |  |  |  |
| 1,756 | 2,890 | 529 | - | - | 5,175
Guarantees | 145,303 | 108,220 | 228,922 | 130,112 | 38,662 | 651,219
Commitments |  |  |  |  |  |
Documentary credits | 1,206 | 6,900 | 9,268 | - | 250 | 17,624
Undrawn formal standby |  |  |  |  |  |
facilities, credit lines and |  |  |  |  |  |
other commitments to lend |  |  |  |  |  |
| 1,909,487 | - | - | - | - | 1,909,487
| 2,057,752 | 118,010 | 238,719 | 130,112 | 38,912 | 2,583,505

47. Risk management - Insurance risk
Insurance risk is the risk that an insured event under an insurance contract occurs and the related
uncertainty of the amount and the timing of the resulting claim. By the very nature of an insurance
contract, this risk is largely random and therefore unpredictable.
414
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
47. Risk management - Insurance risk (continued)
For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning,
the principal risk that the Group faces is that the actual claims and benefit payments will exceed the
carrying amount of insurance liabilities. This could occur because the frequency or severity of claims and
benefits are greater than estimated. Insurance events are largely random and the actual volume and cost of
claims and benefits will vary from year to year compared to the estimate established using statistical or
actuarial techniques.
The above risk exposure is mitigated by the Group through the diversification across a large portfolio of
insurance contracts. The variability of risks is also reduced by careful selection and implementation of
underwriting strategy guidelines, as well as the use of reinsurance arrangements. Although the Group has
reinsurance coverage, it is not relieved of its direct obligations to policyholders and is thus exposed to credit
risk with respect to ceded insurance, to the extent that any reinsurer is unable to meet the obligations
assumed under such reinsurance arrangements. For that reason, the creditworthiness of reinsurers is
evaluated by considering their solvency and credit rating.
Life and Accident and Health insurance contracts
The main factors that could affect the overall frequency of claims are epidemics, major lifestyle changes,
pandemics and natural disasters.
The underwriting strategy and risk assessment is designed to ensure that risks are diversified in terms of
type of risk and level of insured benefits. This is largely achieved through the use of medical screening in
order to ensure that pricing takes account of the current medical conditions and family medical history and
through the regular review of actual claims and product pricing. The Group has the right to decline policy
applications, it can impose additional charges and it has the right to reject the payment of fraudulent
claims.
The most significant risks relating to accident and health insurance contracts result from lifestyle changes
and from climate and environmental changes. The risks are mitigated by the use of strategic selection and
risk-taking at the underwriting stage and by thorough investigation for possible fraudulent claims.
The following sensitivity analysis shows the impact on profit before tax and equity for reasonably possible
movements in key assumptions with all other assumptions h eld constant. The correlation of assumptions
will have a significant effect in determining the ultimate impacts, but to demonstrate the impact due to
changes in each assumption, assumptions are changed on an individual basis while holding all other
assumptions constant. It should be noted that movements in these assumptions are non–linear. Sensitivity
information also varies according to the current economic assumptions.

2023 |  |  |
| Change in |  |
| assumptions |  |
|  | Impact on Profit |
|  | before Tax |
|  |  | Impact on
|  |  | equity
|  | €000 | €000
Change in mortality rates | -10% | 1,956 | 1,711
Change in lapsation and surrender rates | +10% | (143) | (163)
Change in expenses | +5% | (891) | (1,019)
Change in inflation | +1% | (1,673) | (1,912)
Change in discount rate curve at each projection |  |  |
year |  |  |
| -0,25% | 119 | 104

| Change in |  |
| assumption |  |
|  | Impact on Profit |
|  | before Tax |
|  |  | Impact on
|  |  | equity
2022 |  | €000 | €000
Change in mortality rates | -10% | 1,214 | 1,063
Change in lapsation and surrender rates | +10% | 41 | 36
Change in expenses | +5% | (1,361) | (1,556)
Change in inflation | +1% | (2,400) | (2,743)
Change in discount rate curve at each projection |  |  |
year |  |  |
| -0,25% | 4 | 4

Some of the sensitivity scenarios shown in respect of changes to both economic and non–economic
variables may have a consequential effect on the valuation basis when a product is valued on an active
basis which is updated to reflect current economic conditions.
415
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
47. Risk management - Insurance risk (continued)
Non-life insurance contracts other than accident and health
Non-life insurance business is concentrated in Cyprus and the main claims during 2023 and 2022 related to
fire and natural forces and other damage to property, motor vehicle liability and general liability.
Risks under these policies are usually covered for a period of 12 months, with the exception of the goods in
transit class that covers shorter periods and the contractors all risks class that covers longer periods.
The liabilities for outstanding claims arising from insurance contracts issued by the Group are based on
experts' estimates and facts known at the balance sheet date. With time, these estimates are reconsidered
and any adjustments are recognised in the financial statements in the period in which they arise.
The principal assumptions underlying the estimates for each claim are based on experience and market
trends, taking into consideration claims handling costs, inflation and claim numbers for each accident year.
Also, external factors that may affect the estimate of claims, such as recent court rulings and the
introduction of new legislation are taken into consideration.
The insurance contract liabilities are sensitive to changes in the above key assumptions. The sensitivity of
certain assumptions, such as the introduction of new legislation and the rulings of court cases, is very
difficult to be quantified. Furthermore, the delays that arise between the occurrence of a claim and its
subsequent notification and eventual settlement increase the uncertainty over the cost of claims at the
reporting date.
The risk of a non-life insurance contract occurs from the uncertainty of the amount and time of presentation
of the claim. Therefore the level of risk is determined by the frequency of such claims, their severity and
their evolution from one period to the next.
The main risks for the non-life insurance business arise from major catastrophic events like natural
disasters. These risks vary depending on location, type and nature. The variability of risks is mitigated by
the diversification of risk of loss to a large portfolio of insurance contracts, as a more diversified portfolio is
less likely to be affected by changes in any subset of the portfolio. The Group's exposure to insurance risks
from non-life insurance contracts is also mitigated by the following measures: adherence to underwriting
policies, review of all claims occurring, review and processing of claims to minimise the possibility of
negative developments in the future, and use of effective reinsurance arrangements in order to minimise
the impact of risks, especially for catastrophic events.
48. Capital management
The primary objective of the Group's capital management is to ensure compliance with the relevant
regulatory capital requirements and to maintain healthy capital adequacy ratios to cover the risks of its
business, support its strategy and maximise shareholders' value.
The capital adequacy framework, as in force, was incorporated through the Capital Requirements Regulation
(CRR) and Capital Requirements Directive (CRD) which came into effect on 1 January 2014 with certain
specified provisions implemented gradually. The CRR and CRD transposed the new capital, liquidity and
leverage standards of Basel III into the European Union's legal framework. CRR establishes the prudential
requirements for capital, liquidity and leverage for credit institutions. It is directly applicable in all EU
member states. CRD governs access to deposit taking activities and internal governance arrangements
including remuneration, board composition and transparency. Unlike the CRR, member states were required
to transpose the CRD into national law and national regulators were allowed to impose additional capital
buffer requirements.
On 27 June 2019, the revised rules on capital and liquidity (Regulation (EU) 2019/876 (CRR II) and
Directive (EU) 2019/878 (CRD V)) came into force. As an amending regulation, the existing provisions of
CRR apply unless they are amended by CRR II. Certain provisions took immediate effect (primarily relating
to Minimum Requirement for Own Funds and Eligible Liabilities (MREL)), but most changes became effective
as of June 2021. The key changes introduced consist of, among others, changes to qualifying criteria for
Common Equity Tier 1 (CET1), Additional Tier 1 (AT1) and Tier 2 (T2) instruments, introduction of
requirements for MREL and a binding Leverage Ratio requirement (as defined in the CRR) and a Net Stable
Funding Ratio (NSFR).
416
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
48. Capital management (continued)
The amendments that came into effect on 28 June 2021 are in addition to those introduced in June 2020
through Regulation (EU) 2020/873, which among other, brought forward certain CRR II changes in light of
the COVID-19 pandemic. The main adjustments of Regulation (EU) 2020/873 that had an impact on the
Group's capital ratio relate to the acceleration of the implementation of the new SME discount factor (lower
RWAs), extending the IFRS 9 transitional arrangements and introducing further relief measures to CET1
allowing to fully add back to CET1 any increase in ECL recognised in 2020 and 2021 for non-credit impaired
financial assets and phasing-in this starting from 2022 (phasing-in at 25% in 2022, 50% in 2023 and 75%
in 2024) and advancing the application of prudential treatment of software assets as amended by CRR II
(which came into force in December 2020). In addition, Regulation (EU) 2020/873 introduced a temporary
treatment of unrealized gains and losses on exposures to central governments, to regional governments or
to local authorities measured at fair value through other comprehensive income which the Group elected to
apply and implemented from the third quarter of 2020. This temporary treatment was in effect until 31
December 2022.
The Group and BOC PCL have complied with the minimum capital requirements (Pillar I and Pillar II).
In October 2021, the European Commission adopted legislative proposals for further amendments to the
CRR, CRD and the BRRD (the '2021 Banking Package'). Amongst other things, the 2021 Banking Package
would implement certain elements of Basel III that have not yet been transposed into EU law. In addition,
in the case of the proposed amendments to CRD and the BRRD, their terms and effect will depend, in part,
on how they are transposed in each member state. The European Council's proposal on CRR and CRD was
published on 8 November 2022. During February 2023, the European Parliament's ECON Committee voted
to adopt Parliament's proposed amendments to the Commission's proposal. In June 2023, negotiators from
the Council presidency and the European Parliament reached a provisional agreement on amendments to
the Capital Requirements Regulation and the Capital Requirements Directive and were endorsed in
December 2023 by the preparatory bodies of the Council and European Parliament. With the decisions taken
by the Council and European Parliament preparatory bodies, the legal texts have now been published on the
Council and the Parliament websites. Although still subject to legal revision and to the final vote in the
Plenary, no changes in substance are expected until its adoption by the European Parliament by the second
quarter of 2024. It is expected that these provisiions will come into force on 1 January 2025; and certain
measures are expected to be subject to transitional arrangements or to be phased-in over time.
The insurance subsidiaries of the Group, the General Insurance of Cyprus Ltd and EuroLife Ltd, comply with
the requirements of the Superintendent of Insurance including the minimum solvency ratio. The regulated
Cyprus Investment Firm (CIF) of the Group, The Cyprus Investment and Securities Corporation Ltd (CISCO)
complies with the minimum capital adequacy ratio requirements. In February 2023, the activities of the
regulated asset management company of the Group, BOC Asset Management Ltd, were absorbed by CISCO
and BOC Asset Management Ltd was dissolved without liquidation. The payment services subsidiary of the
Group, JCC Payment Services Ltd, complies with regulatory capital requirements under the Provision and
Use of Payment Services and Access to Payment Systems Laws of 2018 to 2023.
Additional information on regulatory capital is disclosed in the 'Risk and Capital Management Report',
(unaudited), which is included in the Annual Financial Report, and in the 'Pillar III Disclosures Report 2023'
(unaudited), which is published on the Group's website.
417
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
49. Related party transactions
Related parties of the Group include associates and joint ventures, key management personnel, members of
the Board of Directors and their connected persons. Connected persons for the purpose of this disclosure
include spouses, minor/dependent children and companies in which the directors/key management
personnel, hold directly or indirectly, at least 20% of the voting shares in a general meeting, or act as
executive director or exercise control of the entities in any way.
Related parties also include entities providing key management personnel services to the Group where
relevant.
(a) Transactions with subsidiaries
The Company is the holding company of the Group. The Company enters into transactions with its
subsidiaries in the normal course of business. Balances and transactions between the Company and its
subsidiaries are disclosed in Note 17 of the Company's financial statements. Transactions with the
subsidiaries have been eliminated on consolidation.
(b) Transactions with associates
From time to time, the Group provides to and receives from its associates certain banking and financial
services. These are not material to the Group and all the transactions are made on normal business terms
as for comparable transactions with customers of a similar standing.
(c) Compensation of the Board of Directors and key management personnel
The following disclosures are made in accordance with the provisions of IAS 24 Related Party Disclosures
and sections 305 and 306 of the Companies Act 2014, in respect of the compensation of the Board of
Directors and key management personnel.
Fees and emoluments of members of the Board of Directors and key management personnel

| 2023 |
|  | 2022
|  | (restated)
Directors' emoluments | €000 | €000
Executives |  |
Salaries and other short-term benefits | 1,061 | 1,046
Variable remuneration - STIP | 400 | -
Retirement benefit plan costs |  |
| 94 | 82
| 1,555 | 1,128
Non-executives |  |
Fees |  |
| 1,077 | 1,212
Total directors' emoluments |  |
| 2,632 | 2,340
Key management personnel emoluments |  |
Salaries and other short-term benefits | 3,058 | 2,864
Termination benefits | 200 | 200
Variable remuneration - STIP | 610 | -
Retirement benefit plan costs |  |
| 262 | 218
Total key management personnel emoluments |  |
| 4,130 | 3,282
Total |  |
| 6,762 | 5,622

Fees and benefits are included for the period that they serve as members of the Board of Directors. Key
management personnel emoluments are included for the period that they serve as key management
personnel.
The retirement benefit plan costs relate to contributions paid for defined contributions plan.
418
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
49. Related party transactions (continued)
Executive Directors' emoluments
A cost of €235 thousand has been recorded by the Group in its Consolidated Income Statement in relation
to awards granted in 2022 and 2023 to the Executive Directors under the Long-Term Incentive Plan (LTIP)
as described in Note 14.2 (2022: cost for awards granted in 2022 of €118 thousand) in relation to LTIP
awards granted but not yet vested. The recognition of such cost is in accordance with the Group accounting
policy described in Note 2.31. N o LTIP cycles had a performance period ending during the years ended 31
December 2023 and 2022, and as such no amounts have been included in the amount of remuneration
within the table above (compared to the 2022 Annual Financial Report in which this cost recorded by the
Group for LTIP awards granted but not vested was included in the tables).
The amount included for the short-term incentive award represents the full amount as approved by the
Board and relevant Board Committees. As disclosed in Note 14.3, t he short-term incentive award is
primarily awarded in the form of cash and in case the award for an individual exceeds a threshold as per
regulatory guidelines, the short-term incentive award is awarded 50% in cash and 50% in shares. In the
case of the Executive Directors, the award will be 50% in the form of cash and 50% in the form of shares.
In case the award to an individual comprises both a cash and a share component, vesting conditions as
described in Note 14.3 apply.
Key management personnel
The emoluments of key management personnel include the remuneration of the members of the Executive
Committee since the date of their appointment to the Committee and the emoluments of other members of
the Senior Management team (Extended EXCO) (prior to the change in the Group organisational structure,
in 2022 the key management personnel included those members of the management team who reported
directly to the Chief Executive Officer or to the Deputy Chief Executive Officer & Chief of Business).
Further, employer's contributions in relation to the emoluments of key management personnel of €351
thousand have been recorded in the Consolidated Income Statement during the year ended 31 December
2023 (2022: €336 thousand). Such amounts are not considered part of the remuneration, but rather an
incremental cost to the Group, and as such have been excluded from the table above (compared to the
2022 Annual Financial Report in which amounts were included in the relevant tables).
Further, a cost of €360 thousand has been recorded by the Group in its Consolidated Income Statement in
relation to awards granted in 2022 and 2023 to the key management personnel under the Long-Term
Incentive Plan (LTIP) (2022: cost for awards granted in 2022 of €204 thousand) in relation to awards
granted but not yet vested. The recognition of such cost is in accordance with the Group accounting policy
described in Note 2.31. N o LTIP cycles had a performance period ended during the years ended 31
December 2023 and 2022 and as such no amounts have been included in the amount of remuneration
within the table above (compared to the 2022 Annual Financial Report in which this cost recorded by the
Group was included in the tables).
The amount included for the short-term incentive award represents the full amount as approved by the
Board and relevant Board Committees. The short-term incentive award is primarily awarded in the form of
cash and in case the award for an individual exceeds a threshold as per regulatory guidelines, the short
term incentive award is awarded 50% in cash and 50% in shares. In the case of the other key management
personnel an amount of €560 thousand will be in the form of cash and an amount of €50 thousand in the
form of shares. In case the award to an individual comprises both a cash and a share component, vesting
conditions as described in Note 14.3 apply.
419
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
49. Related party transactions (continued)
Executive Directors
The fees and emoluments of the Executive Directors are analysed as follows:

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Panicos Nicolaou (Chief Executive Officer) |  |
Salaries and other short-term benefits | 761 | 761
Variable remuneration - STIP | 300 | -
Retirement benefit plan costs |  |
| 68 | 60
| 1,129 | 821
Eliza Livadiotou (Executive Director Finance) |  |
Salaries and other short-term benefits | 300 | 285
Variable remuneration - STIP | 100 | -
Retirement benefit plan costs |  |
| 26 | 22
| 426 | 307
Total |  |
| 1,555 | 1,128

The share-based benefits expense recorded in the Consolidated Income Statement during the year ended
31 December 2023 for the share awards granted under the LTIP amounts to €186 thousand (2022: €93
thousand) for the Chief Executive Officer and to €49 thousand (2022: €25 thousand) for the Executive
Director Finance.
Further, employer's contributions of €64 thousand have been recorded in the Consolidated Income
Statement during the year ended 31 December 2023, of which €38 thousand relate to the Chief Executive
Officer and €26 thousand relate to the Executive Director Finance (2022: total employer's contribution of
€63 thousand, of which €38 thousand relate to the Chief Executive Officer and €25 thousand to the
Executive Director Finance). Such amounts are not considered part of the remuneration of Directors, but
rather an incremental cost to the Group, and as such have been excluded from the table above (compared
to the 2022 Annual Financial Report in which amounts were presented as part of the table).
Non-executive Directors
The fees of Non-executive Directors are analysed as follows:

| 2023 |
|  | 2022
|  | (restated)
| €000 | €000
Efstratios-Georgios Arapoglou | 250 | 250
Lyn Grobler | 155 | 160
Arne Berggren |  |
(2) |  |
| 30 | 120
Constantine Iordanou | 148 | 93
Ioannis Zographakis |  |
(7) |  |
| 113 | 153
Maria Philippou |  |
(4) |  |
| 77 | 105
Nicolaos Sofianos |  |
(6) |  |
| 117 | 125
Paula Hadjisotiriou |  |
(7) |  |
| 141 | 128
Monique Hemerijck |  |
(3) |  |
| 38 | -
Adrian John Lewis |  |
(5) |  |
| 8 | -
Maksim Goldman |  |
(1) |  |
| - | 39
Michael Heger |  |
(1) |  |
| - | 39
| 1,077 | 1,212

Further, employer's contributions in relation to non-executive Directors of €31 thousand have been recorded
in the Consolidated Income Statement during the year ended 31 December 2023 (2022: €35 thousand).
Such amounts are not considered part of the remuneration of Directors, but rather an incremental cost to
the Group, and as such have been excluded from the table above (compared to the 2022 Annual Financial
Report in which amounts were presented as part of the table).
420
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
49. Related party transactions (continued)
(1)
Following the shareholders' vote on 20 May 2022, Mr Maksim Goldman and Dr. Michael Heger have not
been re-elected to the Board of Directors of the Company.
(2)
On 31 March 2023, Mr Arne Berggren resigned as a member of the Board of Directors.
(3)
ECB approved the appointment of Mrs Monique Hemerijck on 10 August 2023.
(4)
On 13 October 2023, Mrs Maria Philippou resigned as a member of the Board of Directors.
(5)
ECB approved the appointment of Mr Adrian John Lewis on 17 November 2023.
(6)
On 11 December 2023, Mr Nicolaos Sofianos resigned as a member of the Board of Directors.
(7)
On 31 December 2023, both Mrs Paula Hadjisotiriou and Mr Ioannis Zographakis resigned from their
respective positions as members of the Board of Directors.
The fees of the non-executive Directors include fees as members of the Board of Directors of the Company
and its subsidiaries, as well as fees as members of committees of the Board of Directors. Fees are included
for the period that they serve as members of the Board of Directors, upon approval of appointment by the
ECB, and for the period that they serve as members of the committees of the Board of Directors, upon their
appointment in the respective committee.
(d) Transactions with Directors and key management personnel
The tables below show the deposits, loans and advances and other credit balances held by the members of
the Board of Directors and key management personnel and their connected persons, as at the balance sheet
date and other relevant information as required by the Companies Act 2014.
Loans to Directors
The following information is presented in accordance with the Companies Act 2014. For the purposes of the
Companies Act 2014 disclosures, 'Directors' means the current Board of Directors of the Company and any
past Directors who were members of the Board of Directors of the Company during the year.
All transactions with members of the Board of Directors and their connected persons are made on normal
business terms as for comparable transactions, including interest rates, with customers of a similar credit
standing.
There were 12 Directors in office during the year (2022: 12 Directors), three of whom availed of credit
facilities (2022: four Directors). Two of the Directors who availed of credit facilities had balances
outstanding at 31 December 2023 (2022: four of the Directors who availed of credit facilities had balances
outstanding). The balances outstanding are disclosed below.
The value of arrangements at the beginning and end of the current and preceding financial years as stated
below, expressed as a percentage of the net assets of the Group at the beginning and end of the current
and preceding financial years is less than 1% in accordance with section 307 of the Companies Act 2014. No
amounts have been waived during the year ended 31 December 2023.
Details of transactions with the Directors and their connected persons, where indicated, for the years ended
31 December 2023 and 2022 are as follows:
421
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
49. Related party transactions (continued)
Board of Directors

| Balance as |  |  |  |  |
| at 1 January |  |  |  |  |
|  | Amounts |  |  |  |
|  | advanced |  |  |  |
|  | during the |  |  |  |
|  | year |  |  |  |
|  |  | Amounts |  |  |
|  |  | repaid |  |  |
|  |  | during the |  |  |
|  |  | year |  |  |
|  |  |  | Balance as at |  |
|  |  |  | 31 December |  |
|  |  |  |  | Aggregate |
|  |  |  |  | maximum |
|  |  |  |  | amount |
|  |  |  |  | outstanding |
|  |  |  |  | during the |
|  |  |  |  | year |
|  |  |  |  |  | Unused
|  |  |  |  |  | credit
|  |  |  |  |  | facilities
Panicos Nicolaou |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
2023 |  |  |  |  |  |
Overdrafts/ credit cards |  |  |  |  |  |
| 2 |  |  |  |  |
|  | n/a | n/a |  |  |
|  |  |  | 2 | 4 | 54
| 2 |  |  | 2 | 4 | 54

Panicos |  |  |  |  |  |
Nicolaou |  |  |  |  |  |
2022 |  |  |  |  |  |
Loans | 35 | - | 35 | - | 35 | -
Overdrafts/ credit cards |  |  |  |  |  |
| 3 |  |  |  |  |
|  | n/a | n/a |  |  |
|  |  |  | 2 | 4 | 46
| 38 |  |  | 2 | 39 | 46

| Balance as |  |  |  |  |
| at 1 January |  |  |  |  |
|  | Amounts |  |  |  |
|  | advanced |  |  |  |
|  | during the |  |  |  |
|  | year |  |  |  |
|  |  | Amounts |  |  |
|  |  | repaid |  |  |
|  |  | during the |  |  |
|  |  | year |  |  |
|  |  |  | Balance as at |  |
|  |  |  | 31 December |  |
|  |  |  |  | Aggregate |
|  |  |  |  | maximum |
|  |  |  |  | amount |
|  |  |  |  | outstanding |
|  |  |  |  | during the |
|  |  |  |  | year |
|  |  |  |  |  | Unused
|  |  |  |  |  | credit
|  |  |  |  |  | facilities
Eliza |  |  |  |  |  |
Livadiotou |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
2023 |  |  |  |  |  |
Loans | 87 | - | 19 | 71 | 87 | -
Overdrafts/ credit cards |  |  |  |  |  |
| 14 |  |  |  |  |
|  | n/a | n/a |  |  |
|  |  |  | 4 | 14 | 59
| 101 |  |  | 75 | 101 | 59
Eliza |  |  |  |  |  |
Livadiotou |  |  |  |  |  |
2022 |  |  |  |  |  |
Loans | 99 | - | 14 | 87 | 99 | -
Overdrafts/ credit cards |  |  |  |  |  |
| 8 |  |  |  |  |
|  | n/a | n/a |  |  |
|  |  |  | 14 | 14 | 48
| 107 |  |  | 101 | 113 | 48

422
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
49. Related party transactions (continued)

| Balance as |  |  |  |  |
| at 1 January |  |  |  |  |
|  | Amounts |  |  |  |
|  | advanced |  |  |  |
|  | during the |  |  |  |
|  | year |  |  |  |
|  |  | Amounts |  |  |
|  |  | repaid |  |  |
|  |  | during the |  |  |
|  |  | year |  |  |
|  |  |  | Balance as at |  |
|  |  |  | 31 December |  |
|  |  |  |  | Aggregate |
|  |  |  |  | maximum |
|  |  |  |  | amount |
|  |  |  |  | outstanding |
|  |  |  |  | during the |
|  |  |  |  | year |
|  |  |  |  |  | Unused
|  |  |  |  |  | credit
|  |  |  |  |  | facilities
Ioannis Zographakis |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
2023 |  |  |  |  |  |
Overdrafts/ credit cards |  |  |  |  |  |
| 2 |  |  |  |  |
|  | n/a | n/a | n/a |  |
|  |  |  |  | 2 | -

Ioannis Zographakis |  |  |  |  |  |
2022 |  |  |  |  |  |
Overdrafts/ credit cards |  |  |  |  |  |
| 2 |  |  |  |  |
|  | n/a | n/a |  |  |
|  |  |  | 2 | 2 | 8

| Balance as |  |  |  |  |
| at 1 January |  |  |  |  |
|  | Amounts |  |  |  |
|  | advanced |  |  |  |
|  | during the |  |  |  |
|  | year |  |  |  |
|  |  | Amounts |  |  |
|  |  | repaid |  |  |
|  |  | during the |  |  |
|  |  | year |  |  |
|  |  |  | Balance as at |  |
|  |  |  | 31 December |  |
|  |  |  |  | Aggregate |
|  |  |  |  | maximum |
|  |  |  |  | amount |
|  |  |  |  | outstanding |
|  |  |  |  | during the |
|  |  |  |  | year |
|  |  |  |  |  | Unused
|  |  |  |  |  | credit
|  |  |  |  |  | facilities

Nicolaos Sofianos |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000
2022 |  |  |  |  |  |
Overdrafts/ credit cards |  |  |  |  |  |
| 1 |  |  |  |  |
|  | n/a | n/a |  |  |
|  |  |  | - | 2 | 10

The balances included in the table above include principal and interest. Also, amounts approved and repaid
are not shown for overdraft and credit card facilities as these are revolving in nature. The aggregate
maximum amount outstanding includes credit card exposures at the maximum statement balance.
No other Directors had any loan facilities or overdraft/credit card balances with the Group during the year
ended 31 December 2023 (2022: nil).
The aggregate expected credit loss allowance on the above loans and credit facilities is below €5 thousand
as at 31 December 2023 (2022: below €5 thousand). All principal and interest that has fallen due on these
loans or credit facilities has been paid.
Connected persons of the Board of Directors
The aggregate of loans to connected persons of Directors in office at 31 December 2023, as defined in
section 220 of the Companies Act 2014, are as follows (2023: aggregate of 2 persons; 2022: aggregate of 2
persons):

| Balance as at 1 |  |  |  |
| January |  |  |  |
|  | Amounts |  |  |
|  | advanced |  |  |
|  | during the year |  |  |
|  |  | Amounts |  |
|  |  | repaid during |  |
|  |  | the year |  |
|  |  |  | Balance as at |
|  |  |  | 31 December |
|  |  |  |  | Aggregate
|  |  |  |  | maximum
|  |  |  |  | amount
|  |  |  |  | outstanding
|  |  |  |  | during the year
Panicos Nicolaou |  |  |  |  |
| €000 | €000 | €000 | €000 | €000
2023 |  |  |  |  |
Overdrafts/credit cards |  |  |  |  |
| 2 |  |  |  |
|  | n/a | n/a |  |
|  |  |  | 1 | 2
2022 |  |  |  |  |
Overdrafts/credit cards |  |  |  |  |
| 1 |  |  |  |
|  | n/a | n/a |  |
|  |  |  | 2 | 3

423
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
49. Related party transactions (continued)

| Balance as at |  |  |  |
| 1 January |  |  |  |
| (or |  |  |  |
| appointment |  |  |  |
| date) |  |  |  |
|  | Amounts |  |  |
|  | advanced |  |  |
|  | during the year |  |  |
|  |  | Amounts |  |
|  |  | repaid during |  |
|  |  | the year |  |
|  |  |  | Balance as at |
|  |  |  | 31 December |
|  |  |  |  | Aggregate
|  |  |  |  | maximum
|  |  |  |  | amount
|  |  |  |  | outstanding
|  |  |  |  | during the year
Eliza Livadiotou |  |  |  |  |
| €000 | €000 | €000 | €000 | €000
2023 |  |  |  |  |
Loans | 74 | - | 13 | 66 | 74
Overdrafts/credit cards |  |  |  |  |
| 10 |  |  |  |
|  | n/a | n/a |  |
|  |  |  | 18 | 18
| 84 |  |  | 84 | 92

2022 |  |  |  |  |
Loans | 83 | - | 12 | 74 | 83
Overdrafts/credit cards |  |  |  |  |
| 7 |  |  |  |
|  | n/a | n/a |  |
|  |  |  | 10 | 10
| 90 |  |  | 84 | 93

The balances included in the table above include principal and interest. Also, amounts approved and repaid
are not shown for overdraft and credit card facilities as these are revolving in nature. The aggregate
maximum amount outstanding includes credit card exposures at the maximum statement balance.
The aggregate expected credit loss allowance on the above loans and credit facilities is below €5 thousand
as at 31 December 2023 (2022: below €5 thousand). All principal and interest that has fallen due on these
loans or credit facilities has been paid.
Key management personnel in office during the year and their connected persons
There were 20 key management personnel in office during the year (2022: 21 key management personnel),
20 of whom availed of credit facilities (2022: 20 key management personnel). All of the key management
personnel who availed of credit facilities had balances outstanding at 31 December 2023 and 31 December
2022.
A number of loans and advances have been extended to key management personnel on the same terms as
those applicable to the rest of the Group's employees and to their connected persons on the same terms as
those of customers of a similar credit standing.
Where no amount is shown in the tables below, this indicates a credit balance, a nil balance, or a balance of
less than €500.
Details of transactions with key management personnel and their connected persons for the years ended 31
December 2023 and 2022 are as follows:

| Balance as |  |  |  |  |  |
| at 1 January |  |  |  |  |  |
|  | Balances of |  |  |  |  |
|  | key |  |  |  |  |
|  | management |  |  |  |  |
|  | personnel |  |  |  |  |
|  | appointed in |  |  |  |  |
|  | the year |  |  |  |  |
|  |  | Other |  |  |  |
|  |  | movements |  |  |  |
|  |  | on balances |  |  |  |
|  |  | of key |  |  |  |
|  |  | management |  |  |  |
|  |  | personnel and |  |  |  |
|  |  | their |  |  |  |
|  |  | connected |  |  |  |
|  |  | persons |  |  |  |
|  |  | during the |  |  |  |
|  |  | year |  |  |  |
|  |  |  | Amounts |  |  |
|  |  |  | advanced |  |  |
|  |  |  | during the year |  |  |
|  |  |  |  | Amounts repaid |  |
|  |  |  |  | during the year |  |
|  |  |  |  |  | Balance as at |
|  |  |  |  |  | 31 December |
|  |  |  |  |  |  | Aggregate
|  |  |  |  |  |  | maximum
|  |  |  |  |  |  | amount
|  |  |  |  |  |  | outstanding
|  |  |  |  |  |  | during the
|  |  |  |  |  |  | year (Since
|  |  |  |  |  |  | appointment
|  |  |  |  |  |  | date)
2023 |  |  |  |  |  |  |
| €000 | €000 | €000 | €000 | €000 | €000 | €000
Loans | 2,400 | - | - | 605 | 490 | 2,092 | 2,439
Overdrafts/credit cards |  |  |  |  |  |  |
| 386 |  |  |  |  |  |
|  | n/a | n/a | n/a | n/a |  |
|  |  |  |  |  | 249 | 568
| 2,786 |  |  |  |  | 2,341 | 3,007

2022 |  |  |  |  |  |  |
Loans | 1,836 | 1,154 | - | 41 | 433 | 2,400 | 2,720
Overdrafts/credit cards |  |  |  |  |  |  |
| 453 |  |  |  |  |  |
|  | n/a | n/a | n/a | n/a |  |
|  |  |  |  |  | 386 | 603
| 2,289 |  |  |  |  | 2,786 | 3,323

424
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
49. Related party transactions (continued)
The balances included in the table above include principal and interest. Also, amounts approved and repaid
are not shown for overdraft and credit card facilities as these are revolving in nature. The aggregate
maximum amount outstanding includes credit card exposures at the maximum statement balance.
The aggregate expected credit loss allowance on the above loans and credit facilities is below €11 thousand
as at 31 December 2023 (2022: below €6 thousand). All principal and interest that has fallen due on these
loans or credit facilities has been paid.
Aggregate amounts outstanding at year end and additional transactions

| 2023 | 2022
| €000 | €000
Loans and advances as at 31 December |  |
Board of Directors | 77 | 105
Key management personnel | 1,849 | 2,191
Connected persons - Board of Directors | 85 | 86
Connected persons - Key management personnel |  |
| 492 | 595
| 2,503 | 2,977
Deposits as at 31 December |  |
Board of Directors | 1,919 | 3,582
Key management personnel | 2,004 | 1,952
Connected persons - Board of Directors | 969 | 1,373
Connected persons - Key management personnel |  |
| 2,402 | 1,805
| 7,294 | 8,712
Interest income for the year |  |
| 119 | 71
Interest expense for the year |  |
| 9 | -
Commission income for the year |  |
| - | 6
Insurance premium income for the year |  |
| 497 | 453
Insurance expenses and subscriptions for the year |  |
| 5 | 296

The above table does not include year end balances for members of the Board of Directors, key
management personnel and their connected persons who resigned during the year, nor balances of
customers that do not meet the definition of connected persons as at 31 December 2023.
As at 31 December 2023 there were 7 Directors in office (2022: 10) and 18 key management personnel in
office (2022: 20).
Interest income and expense are disclosed for the period during which they were members of the Board of
Directors or served as key management personnel.
During the year ended 31 December 2022 connected persons of key management personnel transacted
with REMU for the purchase of a property amounting to €58 thousand. The transaction was made on normal
business terms as for comparable transactions with third parties. No similar transaction took place during
the year ended 31 December 2023.
In addition to loans and advances, there were contingent liabilities and commitments in respect of members
of the Board of Directors and their connected persons, mainly in the form of documentary credits,
guarantees and commitments to lend, amounting to €116 thousand as at 31 December 2023 (2022: €120
thousand).
There were also contingent liabilities and commitments to key management personnel and their connected
persons amounting to €1,197 thousand as at 31 December 2023 (2022: €1,227 thousand).
425
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
49. Related party transactions (continued)
The total unsecured amount of the loans and advances and contingent liabilities and commitments to
members of the Board of Directors, key management personnel and their connected persons (using forced-
sale values for tangible collaterals and assigning no value to other types of collaterals) at 31 December
2023 amounted to €1,489 thousand (2022: €1,212 thousand).
During the year ended 31 December 2023 premiums of €220 thousand (2022: €202 thousand) and nil
claims (2022: €20 thousand) were paid by/to the members of the Board of Directors of the Company and
their connected persons to/from the insurance subsidiaries of the Group.
There were no other transactions during the year ended 31 December 2023 and 2022 with connected
persons of the current members of the Board of Directors or with any members who resigned during the
year.
426
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
50. Group companies
The main subsidiary companies and branches included in the Consolidated Financial Statements of the
Group, their registered office, their activities and the percentage held by the Company (directly or
indirectly) as at 31 December 2023 are:

Company | Registered office | Activities |
|  |  | Percentage
|  |  | holding (%)
Bank of Cyprus Holdings Public |  |  |
Limited Company |  |  |
| 10 Earlsfort Terrace, Dublin 2, |  |
| D02 T380, Ireland |  |
|  | Holding company | n/a
Bank of Cyprus Public Company |  |  |
Ltd |  |  |
| 51 Stasinos Street, Ayia |  |
| Paraskevi, Strovolos, CY-2002, |  |
| Nicosia, Cyprus |  |
|  | Commercial bank | 100
EuroLife Ltd |  |  |
| 4 Evrou Street, CY-2003, |  |
| Strovolos, Nicosia, Cyprus |  |
|  | Life insurance | 100
General Insurance of Cyprus Ltd |  |  |
| 2-4 Themistokli Dervis Street, |  |
| CY-1066, Nicosia, Cyprus |  |
|  | Non-life insurance | 100
JCC Payment Systems Ltd |  |  |
| 1 Stadiou Street, CY-2571, |  |
| Nisou, Cyprus |  |
|  | Card processing transaction |
|  | services |
|  |  | 75
The Cyprus Investment and |  |  |
Securities Corporation Ltd |  |  |
(CISCO) |  |  |
| 1 Agiou Prokopiou and |  |
| Poseidonos Street, CY-2406, |  |
| Engkomi, Nicosia, Cyprus |  |
|  | Investment banking, |
|  | brokerage, discretionary asset |
|  | management and investment |
|  | advice services |
|  |  | 100
Jinius Ltd |  |  |
| 51 Stasinos Street, Ayia |  |
| Paraskevi, Strovolos, CY-2002, |  |
| Nicosia, Cyprus |  |
|  | Digital Economy Platform | 100
LCP Holdings and Investments |  |  |
Public Ltd |  |  |
| 1 Agiou Prokopiou and |  |
| Poseidonos Street, CY-2406, |  |
| Engkomi, Nicosia, Cyprus |  |
|  | Investments in securities and |
|  | participations in companies and |
|  | schemes that are active in |
|  | various business sectors and |
|  | projects |
|  |  | 67
Kermia Ltd |  |  |
| 51 Stasinos Street, Ayia |  |
| Paraskevi, Strovolos, CY-2002, |  |
| Nicosia, Cyprus |  |
|  | Property trading and |
|  | development |
|  |  | 100
Kermia Properties & Investments |  |  |
Ltd |  |  |
| 51 Stasinos Street, Ayia |  |
| Paraskevi, Strovolos, CY-2002, |  |
| Nicosia, Cyprus |  |
|  | Property trading and |
|  | development |
|  |  | 100
S.Z. Eliades Leisure Ltd |  |  |
| 51 Stasinos Street, Ayia |  |
| Paraskevi, Strovolos, CY-2002, |  |
| Nicosia, Cyprus |  |
|  | Land development and |
|  | operation of a golf resort |
|  |  | 70
Auction Yard Ltd |  |  |
| 51 Stasinos Street, Ayia |  |
| Paraskevi, Strovolos, CY-2002, |  |
| Nicosia, Cyprus |  |
|  | Auction company | 100
BOC Secretarial Company Ltd |  |  |
| 51 Stasinos Street, Ayia |  |
| Paraskevi, Strovolos, CY-2002, |  |
| Nicosia, Cyprus |  |
|  | Secretarial services | 100
Bank of Cyprus Public Company |  |  |
Ltd (branch of BOC PCL) |  |  |
| 192 Alexandras Avenue, |  |
| 11521 Athens, Greece |  |
|  | Administration of guarantees |
|  | and holding of real estate |
|  | properties |
|  |  | n/a
BOC Asset Management Romania |  |  |
S.A. |  |  |
| Calea Dorobonti 187B, Sector 1, |  |
| Bucharest, Romania |  |
|  | Collection of the existing |
|  | portfolio of receivables, |
|  | including third party collections |
|  | - In run-down |
|  |  | 100
MC Investment Assets |  |  |
Management LLC |  |  |
| 19-1 Zvezdnyi building, Moscow, |  |
| Russia |  |
|  | Problem asset management |
|  | company - In run-down |
|  |  | 100
Fortuna Astrum Ltd |  |  |
| Internacionalnih Brigada 69, |  |
| 11104, Grad Beograd, Serbia |  |
|  | Problem asset management |
|  | company - In run-down |
|  |  | 100

427
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
50. Group companies (continued)
In December 2022, the Company incorporated Jinius Ltd, a 100% subsidiary, which has been set up to
provide and administrate a Digital Economy Platform. During 2023, the activities of BOC PCL in relation to
the Digital Economy Platform were transferred to Jinius Ltd. As at 31 December 2023 Jinius Ltd is a 100%
subsidiary of BOC PCL.
In February 2023, the Group proceeded with a restructuring of its investment banking and brokerage
activities through the absorption by CISCO of BOC Asset Management Ltd's activities. BOC Asset
Management Ltd was subsequently dissolved.
In addition to the above companies, as at 31 December 2023 BOC PCL had 100% shareholding in the
companies listed below, whose activity is the ownership and management of immovable property:
Cyprus: Hamura Properties Ltd, Tolmeco Properties Ltd, Pelika Properties Ltd, Cobhan Properties Ltd,
Ramendi Properties Ltd, Nalmosa Properties Ltd, Emovera Properties Ltd, Estaga Properties Ltd, Skellom
Properties Ltd, Blodar Properties Ltd, Cranmer Properties Ltd, Les Coraux Estates Ltd, Natakon Company
Ltd, Oceania Ltd, Dominion Industries Ltd, Ledra Estate Ltd, EuroLife Properties Ltd, Laiki Lefkothea Center
Ltd, Labancor Ltd, Joberco Ltd, Zecomex Ltd, Domita Estates Ltd, Memdes Estates Ltd, Kernland Properties
Ltd, Jobelis Properties Ltd, Melsolia Properties Ltd, Koralmon Properties Ltd, Spacous Properties Ltd, Soluto
Properties Ltd, Solomaco Properties Ltd, Linaland Properties Ltd, Unital Properties Ltd, Neraland Properties
Ltd, Wingstreet Properties Ltd, Nolory Properties Ltd, Fitrus Properties Ltd, Lisbo Properties Ltd, Mantinec
Properties Ltd, Colar Properties Ltd, Provezaco Properties Ltd, Hillbay Properties Ltd, Forenaco Properties
Ltd, Hovita Properties Ltd, Astromeria Properties Ltd, Regetona Properties Ltd, Camela Properties Ltd,
Barosca Properties Ltd, Fogland Properties Ltd, Tebasco Properties Ltd, Valecross Properties Ltd, Altco
Properties Ltd, Olivero Properties Ltd, Jaselo Properties Ltd, Elosa Properties Ltd, Flona Properties Ltd,
Toreva Properties Ltd, Resoma Properties Ltd, Mostero Properties Ltd, Helal Properties Ltd, Pendalo
Properties Ltd, Frontyard Properties Ltd, Bonsova Properties Ltd, Thermano Properties Ltd, Venicous
Properties Ltd, Lorman Properties Ltd, Eracor Properties Ltd, Rulemon Properties Ltd, Maledico Properties
Ltd, Balasec Properties Ltd, Bendolio Properties Ltd, Diafor Properties Ltd, Kartama Properties Ltd, Paramina
Properties Ltd, Nouralia Properties Ltd, Resocot Properties Ltd, Soblano Properties Ltd, Talamon Properties
Ltd, Weinar Properties Ltd, Zemialand Properties Ltd, Coeval Properties Ltd, Finevo Properties Ltd, Mazima
Properties Ltd, Riveland Properties Ltd, Rosalica Properties Ltd, Secretsky Properties Ltd, Senadaco
Properties Ltd, Tasabo Properties Ltd, Venetolio Properties Ltd, Zandexo Properties Ltd, Odolo Properties
Ltd, Molemo Properties Ltd, Samilo Properties Ltd, Baleland Properties Ltd, Alezia Properties Ltd, Zenoplus
Properties Ltd, Enelo Properties Ltd, Monata Properties Ltd, Vertilia Properties Ltd, Amary Properties Ltd,
Aparno Properties Ltd, Lomenia Properties Ltd, Midelox Properties Ltd, Montira Properties Ltd, Orilema
Properties Ltd, Cramonco Properties Ltd, Carilo Properties Ltd, Olisto Properties Ltd and Philiki Ltd.
Romania: Otherland Properties Dorobanti SRL, Green Hills Properties SRL, Imoreth Properties SRL, Inroda
Properties SRL, Zunimar Properties SRL, Allioma Properties SRL and Nikaba Properties SRL.
Further, at 31 December 2023 BOC PCL had 100% shareholding in Stamoland Properties Ltd, Unoplan
Properties Ltd, Petrassimo Properties Ltd and Gosman Properties Ltd.
The main activities of the above companies are the holding of shares and other investments and the
provision of services.
At 31 December 2023 BOC PCL had 100% shareholding in BOC Terra AIF V.C.I. Plc which is a real estate
alternative investment fund, currently inactive.
At 31 December 2023 BOC PCL had 100% shareholding in the companies listed below which are reserved to
accept property:
Cyprus: Holstone Properties Ltd, Gelimo Properties Ltd, Rifelo Properties Ltd, Avaleto Properties Ltd and
Larizemo Properties Ltd.
In addition, BOC PCL holds 100% of the following intermediate holding companies:
Cyprus: Otherland Properties Ltd, Battersee Properties Ltd, Bonayia Properties Ltd, Janoland Properties Ltd,
Imoreth Properties Ltd, Inroda Properties Ltd, Zunimar Properties Ltd, Nikaba Properties Ltd, Allioma
Properties Ltd, Landanafield Properties Ltd and Hydrobius Ltd.
428
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
50. Group companies (continued)
BOC PCL also holds 100% of the following companies which are inactive:
Cyprus: Laiki Bank (Nominees) Ltd, Paneuropean Ltd, Nelcon Transport Co. Ltd, Canosa Properties Ltd,
Hοmirova Properties Ltd and Settle Cyprus Ltd.
Greece: Kyprou Zois (branch of EuroLife Ltd), Kyprou Asfalistiki (branch of General Insurance of Cyprus
Ltd), Kyprou Commercial SA and Kyprou Properties SA.
All Group companies are accounted for as subsidiaries using the full consolidation method. All companies
listed above have share capital consisting of ordinary shares.
Acquisitions of subsidiaries
During the years ended 31 December 2023 and 2022 there were no acquisitions of subsidiaries.
Dissolution and disposal of subsidiaries
There were no material disposals of subsidiaries during the year ended 31 December 2023. Salecom Ltd,
Romaland Properties Ltd, Trecoda Properties Ltd, Weinco Properties Ltd, Aktilo Properties Ltd, Stormino
Properties Ltd, Tavoni Properties Ltd, Ameleto Properties Ltd, F olimo Properties Ltd, Steparco Ltd, Thames
Properties Ltd, Edoric Properties Ltd, Finerose Properties Ltd and Cyprialife Ltd were dissolved during the
year ended 31 December 2023. Thelemic Properties Ltd, Arlona Properties Ltd, Tebane Properties Ltd,
Fareland Properties Ltd, Sendilo Properties Ltd, Dilero Properties Ltd, Calinora Properties Ltd, Lynoco
Properties Ltd, Ofraco Properties Ltd, Asianco Properties Ltd, Nigora Properties Ltd, Bascone Properties Ltd,
Calandomo Properties Ltd, Irisa Properties Ltd, Marcozaco Properties Ltd, Alepar Properties Ltd and Nivamo
Properties Ltd were disposed of during the year ended 31 December 2023.
As at 31 December 2023, the following subsidiaries were in the process of dissolution or in the process of
being struck off: Fantasio Properties Ltd, Demoro Properties Ltd, Bramwell Properties Ltd, Blindingqueen
Properties Ltd, Fairford Properties Ltd, Sylvesta Properties Ltd, Battersee Real Estate SRL, Iperi Properties
Ltd, Prodino Properties Ltd, Thryan Properties Ltd, Obafemi Holdings Ltd, Birkdale Properties Ltd, CYCMC IV
Ltd and Ensolo Properties Ltd.
51. Investments in associates and joint venture

| Percentage
| holding
Investments in associates | (%)
Aris Capital Management LLC | 30.0
Rosequeens Properties Limited | 33.3
Fairways Automotive Holdings Ltd | 45.0

The carrying values of the investments in associates are considered to be fully impaired and their value has
been restricted to zero.
Rosequeens Properties SRL
During the year ended 31 December 2022 the Group disposed of its 33.3% holding in associate company
Rosequeens Properties SRL.

| Percentage
| holding
Investment in joint venture | (%)
Tsiros (Agios Tychon) Ltd | 50.0

The carrying value of the investment in the joint venture is considered to be fully impaired and its value has
been restricted to zero.
429
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
52. Country by country reporting
Article 89 of CRD IV requires banks to disclose on a consolidated basis the following information for all countries where the Group operates. The table below
provides information on the following items of the Group for year 2023:

| Total operating |  |  |  |  |
| income/(expense) |  |  |  |  |
|  | Average number |  |  |  |
|  | of employees |  |  |  |
|  |  | Profit/(loss) |  |  |
|  |  | before tax |  |  |
|  |  |  | Accounting tax |  |
|  |  |  | expense on |  |
|  |  |  | profit/(loss) |  |
|  |  |  |  | Corporation tax |
|  |  |  |  | paid/(refunded) |
|  |  |  |  |  | Public subsidies
|  |  |  |  |  | received
Country | €000 |  | €000 | €000 | €000 | €000
Cyprus | 1,102,643 | 2,876 | 565,490 | 46,319 | 21,536 | -
Russia | (4) | 1 | (285) | - | - | -
Romania | (156) | - | (217) | - | - | -
Greece |  |  |  |  |  |
| 326 | 6 | (3,064) | - | (1,394) | -
Total |  |  |  |  |  |
| 1,102,809 | 2,883 | 561,924 | 46,319 | 20,142 | -

Total operating income/(expense), profit/(loss) before tax and accounting tax expense on profit/(loss) are prepared on the same basis as the figures reported
elsewhere in these financial statements.
The activities of Group companies by geographical area are disclosed in Note 50.
Total operating income/(expense): comprises net interest income, net fee and commission income, net foreign exchange gains, net gains on financial
instruments, net gains on derecognition of financial assets measured at amortised cost, net insurance result, net gains from revaluation and disposal of
investment properties, net gains on disposal of stock of property and other income.
Number of employees: the number of employees has been calculated as the average number of employees, on a quarterly basis, who were employed by the
Group during the year ended 31 December 2023.
Profit/(loss) before tax: profit/(loss) before tax represents profits/(losses) after the deduction of inter-segment revenues/(expenses).
Accounting tax expense on profit/(loss): represents the corporation tax expense for the current year and excludes deferred taxes, adjustments in respect of
prior years and other tax provisions.
Corporation tax paid/(refunded) includes actual payments made during 2023 for corporation tax (including insurance premium taxes) and Cyprus special
defence contribution.
430
BANK OF CYPRUS HOLDINGS GROUP
Annual Financial Report 2023
Notes to the Consolidated Financial Statements
53. Events after the reporting period
KEDIPES Loan portfolio acquisition
In December 2023, BOC PCL entered into an agreement with Cyprus Asset Management Company
('KEDIPES') to acquire a portfolio of performing and restructured loans with gross book value of
approximately €58 million with reference date 31 December 2022 (the 'Transaction'). The Transaction is
broadly neutral to the Group's income statement and capital position. Regulatory approvals have been
obtained and the Transaction was completed in March 2024.
Distribution in respect of 2023 earnings
The Group, in March 2024, obtained regulatory approval from the European Central Bank for a distribution
in respect of 2023 earnings of a total amount of €137 million, comprising a cash dividend of €112 million
and a share buyback of ordinary shares of the Company for an aggregate consideration of up to €25 million.
Following ECB approval, the Board of Directors of the Company recommended a final cash dividend to
shareholders and approved in principle to undertake a buyback of ordinary shares as described below.
Proposed Dividend
The Board of Directors has recommended to shareholders a final dividend of €0.25 per ordinary share in
respect of earnings for the year ended 31 December 2023 (totalling €112 million based on the total number
of ordinary shares currently outstanding). This is subject to shareholders' approval at the Annual General
Meeting in May 2024. The financial statements for the year ended 31 December 2023 do not reflect this
dividend, which will be accounted for in shareholders' equity as an appropriation of retained earnings in the
year ending 31 December 2024.
Proposed Buyback of ordinary shares
The Board of Directors of the Company have confirmed their intention to undertake a buyback of ordinary
shares of the Company in an aggregate consideration amount of up to €25 million and in compliance with
the terms of the approval received from the ECB. The financial statements for the year ended 31 December
2023 do not reflect the impact of the proposed share buyback, which will be accounted for as and when
shares are repurchased by the Company.
Dividends and share buybacks are funded out of distributable reserves.
No other significant non-adjusting events have taken place since 31 December 2023.
431
Independent auditors’ report to the members of Bank of Cyprus
Holdings Public Limited Company
Report on the audit of the financial statements
Opinion
In our opinion, Bank of Cyprus Holdings Public Limited Company’s Consolidated financial statements and Company
financial statements (the “financial statements”):
● give a true and fair view of the Group’s and the Company’s assets, liabilities and financial position as at 31
December 2023 and of the Group’s and Company’s profit and cash flows for the year then ended;
● have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as
adopted by the European Union; and
● have been properly prepared in accordance with the requirements of the Companies Act 2014 and, as regards the
Consolidated financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Financial Report 2023 (the “Annual Report”), which
comprise:
● the Consolidated and Company Balance Sheets as at 31 December 2023;
● the Consolidated Income Statement and Consolidated and Company Statements of Comprehensive Income for
the year then ended;
● the Consolidated and Company Statements of Cash Flows for the year then ended;
● the Consolidated and Company Statements of Changes in Equity for the year then ended; and
● the notes to the financial statements, which include a description of the accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (“ISAs (Ireland)”) and
applicable law. Our responsibilities under ISAs (Ireland) are further described in the Auditors’ responsibilities for the
audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in Ireland, which includes IAASA’s Ethical Standard as applicable to listed public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by IAASA’s Ethical Standard were
not provided to the Group or the Company.
Other than those disclosed in note 15 to the financial statements, we have provided no non-audit services to the Group or
the Company in the period from 1 January 2023 to 31 December 2023.
432
Our audit approach
Overview
Overall materiality
● €28.0 million (2022: €16.7 million) - Consolidated financial statements
● Based on c. 5% of profit before tax (2022: Based on c. 1% of net assets).
● €24.1 million (2022: €14.3 million) - Company financial statements
● Based on c. 1% of net assets.
Performance materiality
● € 21.0 million (2022: €10.5 million) - Consolidated financial statements.
● € 18.0 million (2022: €9.3 million) - Company financial statements.
Audit scope
● We audited the complete consolidated financial information of Bank of Cyprus
Public Company Limited (PCL), which is the main trading entity of the Group
and the financial information of Bank of Cyprus Holdings Public Limited
Company, which is the holding company of the Group.
● Our audit scope addressed in excess of 95% of the Group’s total operating
income and the Group’s total assets.
Key audit matters
● Impairment of loans and advances to customers.
● Litigation provisions and regulatory and other claims.
● Valuation of stock of properties.
● Privileged user access over financial reporting systems.
● Carrying value of investment in Bank of Cyprus Public Company Limited
(Company only).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently
uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including
evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to
fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
433
Key audit matter
How our audit addressed the key audit matter
Impairment of loans and advances to customers
Refer to Note 2.17 “Impairment of financial assets”
within Note 2 “Summary of accounting policies”, Note
5.2 “Calculation of expected credit losses” within Note 5
“Significant and other judgements, estimates and
assumptions”, Note 23 “Loans and advances to
customers ”and Note 44 “Risk management - Credit
risk”.
The Group has developed complex models to calculate
expected credit losses (“ECL”) on its loans and advances
to customers. Impairment provisions are calculated on a
collective basis for portfolios of loans of similar credit
risk characteristics and on an individual basis for loans
that are individually significant or which meet specific
criteria determined by management.
We determined this to be a key audit matter due to the
significant judgement exercised by management and the
complexity in making the estimate including:
● The interpretations and assumptions used to
build the models, including the segmentation
employed;
● The allocation of loans and advances to
customers within Stages 1, 2 or 3 including
consideration of relevant overlays, where
applicable;
● Identifying ‘Significant Increase in Credit Risk’;
and
● The inputs, assumptions and probability
weights assigned to multiple economic
scenarios as used by the Group.
We understood and evaluated the design of the overall
control framework relevant to the measurement of
impairment of loans and advances to customers and
tested the operating effectiveness of key controls across
processes relevant to the calculation of ECL.
We read and considered the minutes of the Joint Audit &
Risk committee meetings where key inputs,
assumptions, adjustments and outcomes were discussed
and approved by the Joint Audit & Risk committee.
We assessed the appropriateness of the key assumptions
used in the methodologies and collective ECL model
developed by the Group and their compliance with the
requirements of IFRS 9.
We tested the completeness and accuracy of data inputs
to the collective ECL model on a sample basis.
We assessed the triggers identified by management to
determine the appropriate staging of loans within Stages
1,2 or 3 and tested, on a sample basis, the allocation of
loans and advances to customers to Stages 1, 2 or 3 with
reference to those triggers. As part of this, we considered
the impact of staging overlays, where applicable.
We compared, with the assistance of PwC credit risk
experts, the forward-looking macroeconomic
assumptions used in the base, favourable and adverse
scenarios to publicly available information. We also
assessed the reasonableness of the adverse and
favourable assumptions together with the scenario
weightings applied by management.
We tested, with the assistance of PwC credit risk experts,
the assumptions, inputs and formulas used in the
calculation of collective ECL. This included considering
the appropriateness of the collective ECL model design
and challenging the assumptions used (e.g., Exposure at
Default, Loss Given Default and Probability of Default),
and the appropriateness of the segmentation employed.
We built an ECL calculator model which mathematically
checked the calculation of collective ECL.
We evaluated the Group’s individual loan impairment
assessments for a sample of Stage 3 exposures for
compliance with the Group’s policies, developments
during 2023 and compliance with IFRS 9 requirements;
significant data inputs were tested with reference to
appropriate supporting documentation, such as
collateral valuations and Land Registry records.
434
Key audit matter
How our audit addressed the key audit matter
We evaluated the appropriateness of the Group’s
disclosures particularly in relation to significant
judgements and estimates.
We concluded that the methodologies and judgements
used by management in determining the impairment of
loans and advances to customers were reasonable and the
disclosures made in relation to these matters in the
Consolidated financial statements were appropriate.
Litigation provisions and regulatory and other claims
Refer to Note 2.35 “Provisions for pending litigations,
claims, regulatory and other matters” within Note 2
“Summary of accounting policies”, Note 5.4 “Provisions
for pending litigation, claims, regulatory and other
matters” within Note 5 “Significant and other
judgements, estimates and assumptions” and Note 38
“Provision for pending litigations, claims, regulatory and
other matters”.
The Group is subject to various legal claims,
investigations and other proceedings. Provisions for
pending litigation, claims, regulatory and other matters
amounted to €132 million as at 31 December 2023.
Management together with the Group’s compliance and
legal departments and, where necessary, the risk
management department, review all existing and
potential legal cases, prepare an assessment of potential
outcomes for cases assessed individually and
collectively, and evaluate the probability of economic
outflow from the Group.
We have determined this to be a key audit matter as the
recognition and measurement of provisions in respect of
pending litigation, claims, regulatory and other matters
requires a significant level of judgement by
management. The judgements relate to the probability of
obligating events requiring an outflow of resources to
settle the obligation and the estimation of the extent of
any related economic outflow.
We obtained an understanding of and evaluated the
design of controls relevant to the recognition and
measurement of litigation provisions and regulatory and
other claims. We tested the operating effectiveness of
controls we wished to rely on.
We tested a risk based sample of management’s
assessment of individual cases, including whether an
economic outflow was assessed as probable. We assessed
management’s proposed provisions against information
contained in case files and information obtained from
external legal advisors.
Where deemed necessary, we confirmed case facts and
judgements directly with external legal advisors. For a
sample of cases where economic outflow was assessed as
probable by management, and therefore a provision
recorded, we recalculated the provision and performed
sensitivity analysis on key assumptions used by
management.
We understood the basis of management’s collective
provisions, in circumstances where these are applied,
assessed the key assumptions used by reference to past
experience and recalculated provisions booked.
We inspected the minutes of meetings of the board of
directors and certain of its committees for evidence of
any unidentified legal cases or relevant developments in
current cases, including the minutes of the Settlement of
Legal Cases Committee.
We inspected regulatory correspondence and further
inquired with the compliance department about known
existing circumstances of possible non-compliance with
any regulatory requirements.
We evaluated whether the disclosures made addressed
significant uncertainties and assessed their adequacy
against the relevant accounting standards for both
provisions and contingencies as at 31 December 2023.
435
Key audit matter
How our audit addressed the key audit matter
Based on evidence obtained, while noting the inherent
uncertainty in such matters, we concluded that the
recorded provisions for pending litigation, claims,
regulatory and other matters were reasonable and the
disclosures made in relation to these matters in the
Consolidated financial statements were appropriate.
Valuation of stock of properties
Refer to Note 2.28 “Stock of property”, within Note 2
“Summary of accounting policies”, Note 5.3 “Stock of
property - estimation of net realisable value” within Note
5 “Significant and other judgements, estimates and
assumptions” and Note 27 “Stock of property”.
The Group has acquired a significant number of
properties as a result of restructuring agreements with
customers. These properties are accounted for as stock
of property and measured at the lower of their cost or
net realisable value in accordance with IAS 2.
Valuations obtained from external valuers and the
holding periods for assets are key inputs to determine
the appropriate carrying value.
We determined this to be a key audit matter in light of
the large volume of properties held, the carrying value of
these properties of €826 million at 31 December 2023
and the uncertainty around market conditions when
estimating the carrying amount.
We understood and evaluated the design of the overall
control framework relevant to repossessed properties
and tested the operating effectiveness of key controls
around their valuation.
We focused on the key inputs and assumptions
underlying the valuation of the properties.
We evaluated the competence, capability and objectivity
of management’s external experts (property valuers).
For a sample of external valuation reports, we assessed
the methodology and assumptions used with the
assistance of PwC valuation experts, where relevant. We
tested the accuracy of the application by management of
illiquidity discounts for a sample of properties held at
year end.
For a sample of properties acquired during the year, we
tested ‘cost’ by reference to signed ‘debt-for-asset’
agreements entered into with borrowers, and we tested
the ‘net realisable value’ at year end by reference to
external valuation reports.
We performed look-back procedures by comparing the
price achieved for disposals during 2023 to the carrying
values for those assets at 31 December 2022.
We evaluated whether the disclosures address significant
judgements and estimates and assessed their adequacy
against the relevant accounting standards.
We concluded that the judgements and estimates used
by management in determining the carrying amount of
stock of property were reasonable and the disclosures
made in relation to these matters in the Consolidated
financial statements were appropriate.
436
Key audit matter
How our audit addressed the key audit matter
Privileged user access over financial reporting systems
Refer to Section 3.4 “Audit Committee” in the Corporate
Governance Report.
The Group’s financial reporting is heavily reliant on IT
systems which have been in place for a number of years
and which are inherently complex, thereby creating an
elevated risk to financial reporting.
The Group relies on privileged user access controls
which are critical to ensuring that changes to
applications and underlying data are made in an
appropriate manner and to mitigate the risk of potential
fraud or error.
We determined privileged user access to be a key audit
matter as our audit approach relies on IT dependent
controls and data.
With the assistance of PwC IT audit specialists, we
obtained an understanding of the Group’s IT
environment and evaluated the design and tested the
operating effectiveness of those IT General Controls
(ITGCs) on IT systems that support financial reporting.
Where deficiencies in privileged user access controls
were identified, we sought to identify and test other
compensating controls. Where compensating controls or
other mitigating factors and circumstances were not
identified, we performed additional audit procedures in
respect of user access rights. Specifically, we:
● Extracted user access listings directly from the
production environment of relevant IT
applications, along with their supporting IT
infrastructure to test the completeness of access
rights within the Group’s user access tool that
supports the management of user access, for
the provision, deprovision, and recertification
of privileged access;
● Extracted the list of privileged users on the
Group’s data warehouse and considered the
appropriateness of access during 2023;
● Extracted the list of developers from the
production IT systems and release tools for
those applications where system functionality is
managed in-house and considered the
appropriateness of developer access; and
● Considered the authentication controls of
applications and supporting IT infrastructure to
assess compliance with the Group’s password
policy requirements.
After evaluating the results of these additional audit
procedures, where necessary, our team performed
further audit procedures such that we concluded that
any residual audit risk was reduced to an acceptable
level.
437
Key audit matter
How our audit addressed the key audit matter
Carrying value of investment in Bank of Cyprus
Public Company Limited (Company only)
Refer to Note 2.3 “Investment in subsidiaries” within
Note 2 “Summary of accounting policies”, Note 3
“Significant accounting estimates, judgements and
assumptions”, Note 7 “Investment in subsidiaries” to
the Company financial statements.
The carrying value of the investment in subsidiaries
exceeded the market capitalisation of Bank of Cyprus
Holdings Public Limited Company at 31 December
2023.
Having completed an impairment test, the directors
have determined that the recoverable amount of the
investment, using a value-in-use approach (which is
considered to be higher than fair value less costs to
sell), exceeded the carrying value and a partial
writeback of previous impairment provisions of €573
million was recognised.
We considered this to be a key audit matter due to the
judgement associated with the assessment of the
recoverable amount of the investment at 31 December
2023 including, in particular, the expected cash flows,
the Cost of Equity and the terminal value calculations.
We assessed the forecasts of expected cash flows included
in management’s value in use calculations at 31 December
2023 for consistency with the Group’s recent trading
performance and detailed Financial Plan.
We considered management’s calculation of the estimated
Cost of Equity by reference to external sources used by
management.
We reperformed management’s terminal value calculation
and considered the appropriateness of the long term
growth rate used by reference to external forecasts for the
Cypriot economy as at 31 December 2023.
We concluded that the impairment assessment in respect
of the investment in Bank of Cyprus PCL and the
disclosures made in the financial statements are
reasonable.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the
industry in which the Group operates.
Bank of Cyprus Public Company Limited is the main trading entity of the Group and prepares Consolidated financial
statements which consolidate all other subsidiaries of the Group. In establishing the overall approach to scoping the Group
audit engagement, we determined the type of work that needed to be performed by legal entity.
The Group team was responsible for the scope and direction of the audit. In determining our audit scope, we considered
the nature and extent of audit work that needed to be performed by us, as the Irish Group engagement team and PwC
Cyprus, as component auditors. Where the work was performed by PwC Cyprus component auditors, we determined the
level of involvement the Group team needed to have to be able to conclude whether sufficient appropriate audit evidence
had been obtained as a basis for our opinion on the Consolidated financial statements as a whole.
For the Consolidated financial statements, an audit of the full financial information of Bank of Cyprus Public Company
Limited was performed as this accounts for in excess of 95% of the Group’s total operating income and the Group’s total
assets. The nature and extent of audit procedures were determined by our risk assessment.
438
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Consolidated financial statements
Company financial statements
Overall materiality
€28.0 million (2022: €16.7 million).
€24.1 million (2022: €14.3 million).
How we determined
it
c. 5% of profit before tax (2022: c. 1% of
net assets).
c. 1% of net assets.
Rationale for
benchmark applied
We applied this benchmark because in
our view, this is a metric against which
the recurring performance of the Group
is commonly measured by its
shareholders to assess its performance.
In the prior year, we calculated
materiality based on c. 1% of net assets.
Given that the volatility in profit/loss
before tax experienced for a number of
years due to elevated impairment charges
and losses arising from exceptional
activities are no longer a material part of
the Income Statement, Profit before tax is
now considered a more appropriate
benchmark.
The Company is a holding Company.
Consequently, we consider that net assets
is the most relevant measure to reflect the
nature of its activities and transactions.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the
scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for
example in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to €21.0
million (Group audit) and €18.0 million (Company audit).
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our
normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €1.4
million (Group audit) (2022: €0.8 million) and €1.2 million (Company audit) (2022: €0.7 million) as well as
misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
439
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group and Company’s ability to continue to adopt the going concern
basis of accounting included:
● Performing a risk assessment to identify factors that could impact the going concern assessment.
● Considering the Group’s 4 year Financial Plan approved by the Board in February 2024. In evaluating
management’s base case forecasts and alternative stress scenarios we considered the Group’s model used to
develop projected future operating results and the underlying assumptions. We also considered the Group’s
financial position, historic performance, its past record of achieving strategic objectives and management’s
assessment of the likely impact on financial performance, capital and liquidity for a period of 12 months from the
date on which the financial statements are authorised for issue.
● Reading correspondence with the relevant regulators with regards to regulatory capital and liquidity
requirements of the Group, including in respect of the ECB’s Supervisory Review and Evaluation Process.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s or the Company’s ability to continue as a going
concern for a period of at least twelve months from the date on which the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s
or the Company’s ability to continue as a going concern.
In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or
material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Directors’ Report, we also considered whether the disclosures required by the Companies Act 2014
(excluding the information included in the “Non Financial Statement” as defined by that Act on which we are not required
to report) have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (Ireland) and the
Companies Act 2014 require us to also report certain opinions and matters as described below.
● In our opinion, based on the work undertaken in the course of the audit, the information given in the Directors’
Report (excluding the information included in the “Non Financial Statement” on which we are not required to
report) for the year ended 31 December 2023 is consistent with the financial statements and has been prepared
in accordance with the applicable legal requirements.
● Based on our knowledge and understanding of the Group and Company and their environment obtained in the
course of the audit, we did not identify any material misstatements in the Directors’ Report (excluding the
information included in the “Non Financial Statement” on which we are not required to report).
● In our opinion, based on the work undertaken in the course of the audit of the financial statements,
440
− the description of the main features of the internal control and risk management systems in relation to
the financial reporting process; and
− the information required by Section 1373(2)(d) of the Companies Act 2014;
included in the Corporate Governance Statement, is consistent with the financial statements and has been
prepared in accordance with section 1373(2) of the Companies Act 2014.
● Based on our knowledge and understanding of the Company and its environment obtained in the course of the
audit of the financial statements, we have not identified material misstatements in the description of the main
features of the internal control and risk management systems in relation to the financial reporting process and
the information required by section 1373(2)(d) of the Companies Act 2014 included in the Corporate
Governance Statement.
● In our opinion, based on the work undertaken during the course of the audit of the financial statements, the
information required by section 1373(2)(a),(b),(e) and (f) of the Companies Act 2014 and regulation 6 of the
European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and
Groups) Regulations 2017 is contained in the Corporate Governance Statement.
Corporate Governance Statement
As a result of the directors voluntary reporting we are required by ISAs (Ireland) to review the directors’ statements in
relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the
Company’s compliance with the provisions of the UK Corporate Governance Code and the Irish Corporate Governance
Annex (the “Code”) specified for our review. Our additional responsibilities with respect to the Corporate Governance
Statement as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit
and we have nothing material to add or draw attention to in relation to:
● The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
● The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being managed or mitigated;
● The directors’ statement in the financial statements about whether they considered it appropriate to adopt the
going concern basis of accounting in preparing them, and their identification of any material uncertainties to the
Group’s and Company’s ability to continue to do so over a period of at least twelve months from the date of
approval of the financial statements;
● The directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this
assessment covers and why the period is appropriate; and
● The directors’ statement as to whether they have a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than
an audit and only consisted of making inquiries and considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with the financial statements and our knowledge and understanding of the
Group and Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of
the Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained
during the audit:
● The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Company’s
position, performance, business model and strategy;
● The section of the Annual Report that describes the review of effectiveness of risk management and internal
control systems; and
● The section of the Annual Report describing the work of the Audit Committee.
441
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the
Company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 48, the directors are responsible for
the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they
give a true and fair view.
The directors are also responsible for such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (Ireland) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws
and regulations related to breaches of banking laws and regulations, and we considered the extent to which
non-compliance might have a material effect on the financial statements. We also considered those laws and regulations
that have a direct impact on the preparation of the financial statements such as the Companies Act 2014 and relevant tax
legislation. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and determined that the principal risks were related to the potential
for management bias through judgement and assumptions in significant accounting estimates and manual journal entries
being recorded in order to affect reported performance.
Audit procedures performed by the engagement team included:
● Enquiries of management as to any known or suspected instances of non-compliance with laws and regulations
or fraud.
● Inspection of relevant reports presented to and minutes of meetings of the board of directors and of its principal
committees;
● Inspection of key regulatory correspondence;
● Challenging assumptions and judgements made by management in their significant accounting estimates,
particularly in relation to the key audit matters;
● Incorporating an element of unpredictability into the nature, timing and/or extent of our testing; and
● Applying risk-based criteria to journal entries posted in the audit period to determine journal entries for testing
purposes.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
442
Company Financial Statements
2023
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Company Financial Statements
for the year ended 31 December 2023
445
Contents
Page
Company Statement of Comprehensive Income 446
Company Balance Sheet 447
Company Statement of Changes in Equity 448
Company Statement of Cash Flows 449
Notes to the Company Financial Statements 450-463
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Company Statement of Comprehensive Income
for the year ended 31 December 2023
446
Notes
2023 2022
€000 €000
Income
Income from equity instruments 8 27,339
27,500
Income from debt instruments 8 19,875
19,875
Total income from investments 47,214
47,375
Dividend income from subsidiary 17 22,310
-
Other income 4 13,153
7,752
Total income 82,677
55,127
Administrative and other operating expenses 5 (5,700)
(7,431)
76,977
47,696
Interest expense on subordinated liabilities 14 (20,318)
(20,318)
Finance costs (531)
(429)
Reversal of/(charge for) credit losses on financial instruments 8 3,073
(3,134)
Reversal of impairment of investment in subsidiary 7 573,405
168,678
Profit before tax 632,606
192,493
Tax 6 (42)
(341)
Profit after tax for the year 632,564
192,152
Other comprehensive income (OCI)
OCI not to be reclassified in the income statement in
subsequent periods
Fair value reserve (equity instruments)
Net gains/(losses) on investments in equity instruments
measured at fair value through OCI (FVOCI)
8 27,915
(24,288)
Total OCI not to be reclassified in the income statement
in subsequent periods
27,915
(24,288)
Other comprehensive income/(loss) for the year 27,915
(24,288)
Total comprehensive income for the year 660,479
167,864
The notes on pages 450 to 463 form an integral part of these Company financial statements.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Company Balance Sheet
as at 31 December 2023
447
Notes
2023 2022
€000 €000
Assets
Non-current assets
Investment in subsidiaries 7 2,173,000
1,599,002
Investments 8 537,357
513,188
2,710,357
2,112,190
Current assets
Cash at bank 9 1,965
-
Other assets 103
72
Receivables from related parties 10 843
3,735
2,911
3,807
Total assets 2,713,268
2,115,997
Equity and liabilities
Equity and reserves
Share capital 11 44,620
44,620
Share premium 11 594,358
594,358
Revaluation and other reserves 13 15,659
(6,032)
Retained earnings 12 1,531,055
951,671
Equity attributable to the owners of the Company 2,185,692
1,584,617
Other equity instruments 11 220,000
220,000
Total equity 2,405,692
1,804,617
Non-current liabilities
Subordinated liabilities 14 302,550
302,104
Current liabilities
Bank overdraft 9 1,339
8,390
Other payables 15 3,687
884
Payables to related parties 17(v) -
2
5,026
9,276
Total liabilities 307,576
311,380
Total liabilities and equity 2,713,268
2,115,997
28 March 2024
The notes on pages 450 to 463 form an integral part of these Company financial statements.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Company Statement of Changes in Equity
for the year ended 31 December 2023
448
Share
capital
(Note 11)
Share
premium
(Note 11)
Retained
earnings
(Note 12)
Financial
instruments
fair value
reserve
(Note 8)
Other
reserves
(Note 13)
Total equity
attributable to
the owners of
the Company
Other equity
instruments
(Note 11)
Total
equity
€000 €000 €000 €000 €000 €000 €000 €000
Balance at 1 January 2022 44,620
594,358
792,002
17,934 - 1,448,914 220,000
1,668,914
Profit after tax for the year -
-
192,152
- - 192,152 -
192,152
Other
comprehensive
loss
after
tax for the year
-
-
-
(24,288) - (24,288) -
(24,288)
Total
comprehensive
income
after
tax for the year
-
-
192,152
(24,288) - 167,864 -
167,864
Payment of coupon to AT1
holders (Note 11)
-
-
(27,500)
- - (27,500) -
(27,500)
Defence contribution -
-
(4,983)
- - (4,983) -
(4,983)
Share
-
based
benefits
-
cost
(Note
13)
-
-
-
- 322 322 -
322
Balance at 31 December
2022/1 January 2023
44,620
594,358
951,671
(6,354) 322 1,584,617 220,000
1,804,617
Profit after tax for the year -
-
632,564
- 632,564 -
632,564
Other
comprehensive
income
after tax for the year
-
-
27,915 - 27,915 -
27,915
Total
comprehensive
income
after
tax for the year
-
-
632,564
27,915 - 660,479 -
660,479
Dividends (Note 18) -
-
(22,310)
-
-
(22,310) -
(22,310)
Payment of coupon to AT1
holders (Note 11)
-
-
(27,339)
- (27,339)
(27,339)
Share
-
based
benefits
–
cost
(Note 13)
-
-
-
- 595 595 -
595
Issue of other equity instruments
(Note 11)
-
-
(3,530)
- - (3,530) 220,000
216,470
Repurchase of other equity
instruments (Note 11)
-
-
(6,820)
- (6,820) (220,000)
(226,820)
Transfer to Retained Earnings -
-
6,819
(6,819) - - -
-
Balance at 31 December 2023 44,620
594,358
1,531,055
14,742 917 2,185,692 220,000
2,405,692
The notes on pages 450 to 463 form an integral part of these Company financial statements.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Company Statement of Cash Flows
for the year ended 31 December 2023
449
Notes
2023 2022
€000 €000
Cash flows from operating activities
Profit before tax
632,606
192,493
Adjustments for:
Income from equity instruments 8 (27,339)
(27,500)
Income from debt instruments 8 (19,875)
(19,875)
Dividend income from subsidiary 17 (22,310)
-
(Reversal of)/charge for credit losses of financial instruments 8 (3,073)
3,134
Interest expense on subordinated liabilities 14 20,318
20,318
Reversal of impairment of investment in subsidiary 7 (573,405)
(168,678)
6,922
(108)
Changes in working capital:
Other assets (31) (17)
Receivables from related parties 10 2,892 (3,400)
Other payables 15 838 283
Payables to related parties 17 - 2
Tax paid (40) (25)
Net cash flows from/(used in) operating activities 10,581 (3,265)
Cash flows from investing activities
Income received from equity instruments 8 27,339
27,500
Purchase of other equity instruments 8 (220,000)
-
Proceeds from redemption of other equity instruments 8 226,820
-
Income received from debt instruments 8 19,875
19,875
Dividend income received 17 22,310
-
Net cash flows from investing activities
76,344
47,375
Cash flows from financing activities
Payment of AT1 coupon 11 (27,339) (27,500)
Payment of defence contribution - (4,983)
Payment of interest on subordinated liabilities 14 (19,875) (19,875)
Issue of other equity instruments (net of transaction costs) 11 216,470 -
Repurchase of other equity instruments 11 (226,820) -
Dividends paid (20,345) -
Net cash flows used in financing activities
(77,909) (52,358)
Net increase/(decrease) in cash and cash equivalents
9,016
(8,248)
Cash and cash equivalents:
At beginning of the year
(8,390)
(142)
At end of the year 9 626
(8,390)
The notes on pages 450 to 463 form an integral part of these Company financial statements.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
450
1. Corporate information
Bank of Cyprus Holdings Public Limited Company (the ‘Company’) was incorporated in Ireland on 11 July 2016,
as a public limited company under company number 585903 in accordance with the provisions of the Companies
Act 2014 of Ireland (Companies Act 2014). Its registered office is 10 Earlsfort Terrace, Dublin 2, D02 T380,
Ireland.
The Company owns 100% of the share capital of Bank of Cyprus Public Company Limited (BOC PCL) whose
principal activities, together with BOC PCL’s subsidiaries, involve the provision of banking services, financial
services, insurance services and the management and disposal of property predominately acquired in exchange
of debt. The Board of Directors does not expect that the Company’s activities will change in the foreseeable
future. The Company is tax resident in Cyprus.
The Bank of Cyprus Holdings Group (the ‘Group’) comprises the Company, its subsidiary BOC PCL and the
subsidiaries of BOC PCL.
The shares of the Company are listed and trading on the London Stock Exchange (LSE) and the Cyprus Stock
Exchange (CSE).
The Company financial statements are available at the Company’s registered office (at 10 Earlsfort Terrace,
Dublin 2, D02 T380, Ireland) and on the Group’s website http://www.bankofcyprus.com (Group/Investor
Relations/Financial Results).
Company financial statements
The Company financial statements for the year ended 31 December 2023 were authorised for issue by a resolution
of the Board of Directors on 28 March 2024. The financial statements are available at the Company’s registered
office and on the Group’s website.
The Company financial statements are originally issued in English. The Greek translation of the Company financial
statements will be available on the Group’s website by 5 April 2024. In case of a difference or inconsistency
between the English document and the Greek document, the English document prevails.
2. Summary of accounting policies
2.1 Basis of preparation
The Company financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU) and with those parts of the Companies Act 2014
applicable to companies reporting under IFRSs.
Presentation of the Company financial statements
The Company financial statements are presented in Euro (€) and all amounts are rounded to the nearest
thousand, except where otherwise indicated. A comma is used to separate thousands and a dot is used to separate
decimals.
2.2 Going concern
The going concern assessment of the Company is consistent with the going concern assessment of the Group,
which is presented in Note 3 of the consolidated financial statements of the Group for the year ended 31 December
2023.
2.3 Changes in accounting policies and disclosures
The accounting policies adopted in preparing the financial statements of the Company are consistent with those
adopted in preparing the consolidated financial statements of the Group, a summary of which is presented in
Note 2 of the consolidated financial statements of the Group for the year ended 31 December 2023.
In addition, the following policies are applied:
Investment in subsidiaries
The investment in subsidiaries is measured at cost less impairment.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
451
2. Summary of accounting policies (continued)
2.3 Changes in accounting policies and disclosures (continued)
Investment in subsidiaries (continued)
The Company periodically evaluates the recoverability of the investment in subsidiaries whenever indicators of
impairment are present. Indicators of impairment include items such as declines in revenues, earnings or cash
flows of the subsidiary or material adverse changes in the economic or political stability of the country in which
the subsidiary operates, which may indicate that the carrying amount of the subsidiary is not recoverable. If facts
and circumstances indicate that the investment in subsidiary may be impaired, the Company determines the
recoverable amount of the investment in subsidiary as the higher of its fair value less costs to sell and its value-
in-use. Value-in-use is calculated by estimating the future cash inflows and outflows to be derived from continuing
use of the asset and applying the appropriate discount rate.
If the recoverable amount is lower than the carrying value of the subsidiary, an impairment loss is recognised
equal to the excess of the carrying value over the recoverable amount. In the cases where the recoverable
amount is higher than the carrying value of the subsidiary, that increase is recognised by the Company as a
reversal of the impairment loss recognised in prior periods, to the extent that the increased carrying amount
attributable to the reversal of the impairment does not exceed the carrying amount that would have been
determined had no impairment loss been recognised in prior years.
Further details on the determination of the recoverable amount of the investment in subsidiary are disclosed in
Note 7.
The accounting policies adopted are consistent with those of the previous financial year. The adoption of new and
amended standards and interpretations as explained in Note 2.2 of the consolidated financial statements of the
Group for the year ended 31 December 2023, did not have an impact on the Company financial statements.
3. Significant accounting estimates, judgements and assumptions
The preparation of the Company financial statements requires the Company’s Board of Directors and management
to make judgements, estimates and assumptions that can have a material impact on the amounts recognised in
the Company financial statements and the accompanying disclosures, as well as the disclosures of contingent
liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affecting future periods. The Board of Directors has
made the following judgements and estimations:
Fair value of investments
The best evidence of fair value is a quoted price in an actively traded market. If the market for a financial
instrument is not active, a valuation technique is used. The majority of valuation techniques employed by the
Company use only observable market data and so the reliability of the fair value measurement is relatively high.
However, certain financial instruments are valued on the basis of valuation techniques that feature one or more
significant inputs that are not observable. Valuation techniques that rely on non-observable inputs require a
higher level of management judgement to calculate a fair value than those based wholly on observable inputs.
Valuation techniques used to calculate fair values include comparisons with similar financial instruments for which
market observable prices exist, discounted cash flow analysis and other valuation techniques commonly used by
market participants. Valuation techniques incorporate assumptions that other market participants would use in
their valuations, including assumptions about interest rate yield curves, exchange rates, volatilities and default
rates. When valuing instruments by reference to comparable instruments, management takes into account the
maturity, structure and rating of the instrument with which the position held is being compared.
The Company only uses models with unobservable inputs for the valuation of certain unquoted equity
investments. In these cases, estimates are made to reflect uncertainties in fair values resulting from a lack of
market data inputs, for example, as a result of illiquidity in the market. Inputs into valuations based on
unobservable data are inherently uncertain because there is little or no current market data available from which
to determine the level at which an arm’s length transaction would occur under normal business conditions.
Unobservable inputs are determined based on the best information available.
Further details on the Company’s fair value of assets and liabilities are disclosed in Note 16.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
452
3. Significant accounting estimates, judgements and assumptions (continued)
Impairment review of its subsidiary undertaking
The Company carries its investment in its subsidiary undertaking at cost less impairment and reviews whether
there is any indication of impairment at each reporting date. Impairment testing involves comparing the carrying
value of the investment to its recoverable amount. The recoverable amount is the higher of the investment’s fair
value less costs to sell or its value-in-use. If the recoverable amount is higher than the carrying value of the
investment, that increase is recognised by the Company as a reversal of the impairment loss recognised in prior
periods as explained in Note 2.3. Further details on the Company’s key estimates for the recoverable amount of
the investment in subsidiary are disclosed in Note 7.
4. Other income
2023 2022
€000 €000
Management consultancy services (Note 17 (ii)) 1,170
1,314
Reimbursement of expenses and fees (Note 17 (ii)) 11,983
6,438
13,153
7,752
5. Administrative and other operating expenses
2023 2022
€000 €000
Directors’ fees
(including employer’s contributions)
(Note 17 (iv))
1,108
1,247
Insurance 1,357
1,845
Consultancy and other professional fees 2,142
3,745
Stock exchange fees 680
298
Audit fees 260
253
Other expenses 153
43
5,700
7,431
The Company did not employ any staff during the years 2023 and 2022.
Fees to the independent auditors of the Company for the audit and other professional services provided both in
Cyprus and overseas are presented in the table below:
PwC Ireland PwC Network firms
2023 2022 2023 2022
€000 €000 €000 €000
Audit of the individual and the Group financial
statements
37
35
181
178
Other assurance services
35
-
85
-
Tax advisory services
-
-
1
-
35
-
86
-
72
35
267
178
Amounts above are exclusive of VAT.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
453
6. Tax
The reconciliation between the income tax expense and the profit before tax as estimated using the current
income tax rates is set out below:
2023 2022
€000 €000
Profit before tax 632,606
192,493
Income tax at the normal tax rates in Cyprus 79,076
24,061
Income tax effect of:
- expenses not deductible for income tax purposes 687
813
- income not subject to income tax (76,346)
(21,118)
- other allowable deductions (3,417)
(3,438)
-
318
Other tax charges
42
-
Prior years’ tax adjustments
-
23
42
341
Income tax in Cyprus is calculated at the rate of 12.5% on taxable income (2022: 12.5%).
On 22 December 2022, the European Commission approved Directive 2022/2523 which provides for a minimum
effective tax rate of 15% for the global activities of large multinational groups (Pillar Two tax). The Directive that
follows closely the OECD Inclusive Framework on Base Erosion and Profit Shifting should be transposed by the
Member States throughout 2023, entering into force on 1 January 2024. In Cyprus, the legislation has not been
substantively enacted at the balance sheet date, however it is expected to be enacted within 2024. The Group
expects to be in scope of the draft legislation and has performed an initial assessment of the potential impact of
Pillar Two income taxes and is currently estimated to be in the range of up to 2% of profit before tax. However,
the actual impact will depend on the Group’s consolidated income statement variables at the time of
implementation. Because of the calculation complexity resulting from these rules and as the final legislation has
yet to be implemented, the effects of this reform are still being examined and the Group will further refine the
quantification in view of the first accounting recognition of the additional tax charge in the Group’s consolidated
accounts in 2024.
7. Investment in subsidiaries
2023 2022
€000 €000
1 January 1,599,002
1,430,000
Increase – share-based payment (Note 13) 595
322
Reversal of impairment of investment in subsidiary 573,405
168,678
(Transfer)/incorporation of subsidiary (2)
2
31 December 2,173,000
1,599,002
2023 2022
Company Activities
Percentage
holding %
€000 €000
Bank of Cyprus Public
Company Ltd
Commercial
bank
31 December
2023
100
2,173,000
1,599,000
Jinius Ltd
Provision and
management of
a digital
platform
- -
2
The investment in BOC PCL represents a 100% investment in the share capital of BOC PCL, a company registered
in Cyprus and its activities are presented in Note 1. Its registered office is at 51 Stasinos Street, 2002, Strovolos,
Nicosia, Cyprus.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
454
7. Investment in subsidiaries (continued)
In December 2022 the Company incorporated Jinius Ltd, a 100% subsidiary, which has been set up to provide
and administrate a digital economy platform. As at 31 December 2022 this subsidiary was inactive. During the
year ended 31 December 2023, the Company transferred its 100% shareholding in Jinius Ltd to BOC PCL.
As at 31 December 2023, the Company performed an assessment of the carrying value of the investment in BOC
PCL resulting in a partial reversal of previously recognised impairment loss of €573,405 thousand (2022: partial
reversal of previously recognised impairment loss of €168,678 thousand).
The assessment involved the determination of the recoverable amount of the investment in subsidiary as the
higher of its fair value less costs to sell and the value-in-use (VIU). Compared with 31 December 2022, the VIU
exceeded the carrying value by €573,405 thousand. The increase in VIU was principally due to the impact from
BOC PCL’s actual performance, which was better than previous estimates and revisions to management's best
estimates of BOC PCL’s future earnings in the short to medium term.
In future periods, the VIU may increase or decrease depending on the effect of changes to model inputs. The
main model inputs are described below and are based on factors observed at year-end. The factors that could
result in a change in the VIU and an impairment include a short-term underperformance by BOC PCL, a change
in regulatory capital requirements or an increase in uncertainty regarding the macroeconomic conditions and
future performance of BOC PCL, resulting in a lower forecast of future asset growth or profitability. An increase
in the discount rate could also result in a reduction of VIU and an impairment.
To determine the VIU of the investment in subsidiary, the future cash flows to be derived from continuing use of
the asset were estimated with the use of a dividend discount model. For the assessment as at 31 December 2023,
projections until the end of 2027 were considered in line with the Group’s internal planning horizon. The key
assumptions and factors taken into consideration include:
- Forecasted net lending growth, forecasted net interest income and non-interest income which is based on
historical experience of the Group, strategic priorities, direction and key KPIs of the Group.
- Level of interest rates and yield curves.
- Impairment charge based on historical experience and forecasted general macroeconomic outlook. NPE
expected coverage ratio is also considered.
- Operating cost is impacted by cost saving initiatives, inflationary pressures and envisaged operating model.
- Deposits projections and issuances/redemptions based on the liquidity and funding needs of the Group, as
well as projected MREL requirement.
- Capital requirements: This was based on the current minimum regulatory requirements, incorporating known
changes such as the phasing-in of the O-SII buffer and incorporating an additional capital cushion over the
minimum capital requirements.
The assumptions are based on both internal and external information including the Group’s actual and historic
performance, the key objectives of the Group’s strategy as well as the macroeconomic environment in Cyprus.
From year 2027 onwards, a terminal growth rate has been assumed in the valuation. Growth rate is determined
by reference to long-term economic growth, taking into consideration both Cyprus GDP growth projections and
brokers’ consensus. A long-term growth rate of 2% (2022:2%) was used and does not exceed the relevant long-
term average growth rate of the economy in which it operates.
An appropriate discount rate has been applied which reflects the estimated cost of equity of 13.5% (2022: 14%)
determined on the basis of CAPM model and brokers’ consensus, which take into consideration various risks as
at 31 December 2023.
The impact of changes in the growth rate and the discount rate by reference to the carrying value of the
investment has been assessed by the Management:
- An increase of 1% in the discount rate would result in a lower reversal of impairment by €174,000 thousand
(2022: €121,000 thousand);
- A decrease of 1% in the discount rate would result in an additional reversal of impairment by €208,000
thousand (2022: €143,000 thousand);
- An increase or a decrease of 1% in the long-term growth rate would not have a significant change in the value
of the investment (2022: increase or a decrease of 1% in the long-term growth rate would not have a
significant change in the value of the investment).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
455
8. Investments
2023 2022
€000 €000
Equity instruments at fair value
through other comprehensive
income (Note 17 (vi)) – 2018 issuance
-
213,646
Equity instruments at fair value through other comprehensive
income (Note 17 (vi)) – 2023 issuance
234,742
-
Debt instruments measured at amortised cost (Note 17 (vii)) 302,615
299,542
537,357
513,188
Equity instruments
In December 2018, the Company issued €220,000 thousand of Fixed Rate Reset Perpetual Additional Tier 1
Capital Securities (AT1) (‘Existing Capital Securities’) (Note 11). On the same date, the Company and BOC PCL
entered into an agreement pursuant to which the Company on-lent to BOC PCL the entire €220,000 thousand
proceeds of the issue of the Existing Capital Securities (the loan, the ‘Old AT1 Loan’) on terms substantially
identical to the terms and conditions of the AT1 issued by the Company. The Old AT1 Loan constituted an
unsecured and subordinated obligation of BOC PCL, with an interest at 12.50% and payable semi-annually.
In June 2023, BOC PCL invited the Company to tender its Old AT1 Loan for cash at a purchase price equal to
103% of the principal amount. BOC PCL also paid accrued interest on the Old AT1 Loan from the last coupon
date, 15 June 2023, until the settlement date. As a result of the tender offer, approximately €204,000 thousand
in aggregate principal amount of the Old AT1 Loan was purchased and cancelled by BOC PCL. Furthermore, in
July 2023, BOC PCL purchased and cancelled approximately a further €7,000 thousand of the Old AT1 Loan, after
which €8,250 thousand in aggregate principal amount of the Old AT1 Loan remained outstanding. In December
2023, BOC PCL exercised the option to redeem the remaining €8,250 thousand in aggregate principal amount
outstanding of the Old AT1 Loan.
At the same time, in June 2023, the Company successfully launched and priced an issue of €220,000 thousand
Fixed Rate Reset Perpetual Additional Tier 1 Capital Securities (the 'New Capital Securities') (Note 11). On the
same date, the Company and BOC PCL entered into an agreement pursuant to which the Company on-lent to
BOC PCL the entire €220,000 thousand proceeds of the issue of the New Capital Securities (the new loan, the
‘New AT1 Loan’) on terms substantially identical to the terms and conditions of the AT1 issued by the Company.
The New AT1 Loan constitutes an unsecured and subordinated obligation of BOC PCL. It carries an initial coupon
of 11.875% per annum, payable semi-annually, and resettable on 21 December 2028 and every five years
thereafter. BOC PCL may elect to cancel any interest payment for an unlimited period, on a non-cumulative basis,
whereas it mandatorily cancels interest payment under certain conditions. The New AT1 Loan is perpetual and
has no fixed date of redemption, but can be redeemed (in whole but not in part) at BOC PCL's option from, and
including, 21 June 2028 to, and including, 21 December 2028 and on each interest payment date thereafter.
Both the New AT1 Loan and the Old AT1 Loan have been classified as equity instruments at fair value through
other comprehensive income.
During the year ended 31 December 2023 an income of €27,339 thousand (2022: €27,500 thousand) has been
recognised in profit and loss in respect of these investments.
The fair value of equity instruments held by the Company is determined using models for which all inputs that
have a significant effect on fair value are market observable. Equity instruments are financial instruments whose
fair value is categorised as Level 2 instruments in fair value hierarchy.
There were no transfers in and out of Level 2 during 2023 and 2022.
During the year ended 31 December 2023 a gain of €27,915 thousand (2022: loss of €24,288 thousand) has
been recognised in other comprehensive income in respect of the fair value measurement of these investments,
including gain on tender offer by BOC PCL on the Old AT1 Loan of €6,819 thousand.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
456
8. Investments (continued)
Debt instruments
In April 2021, the Company issued €300,000 thousand unsecured and subordinated Tier 2 Capital Notes (the
‘Notes’) (Note 14) and immediately after, the Company and BOC PCL entered into an agreement pursuant to
which the Company on-lent to BOC PCL the entire €300,000 thousand proceeds of the issue of the Notes (the ‘T2
Loan’) on terms substantially identical to the terms and conditions of the Notes issued by the Company. The
interest is 6.625% per annum payable annually in arrear and resettable on 23 October 2026 at the then prevailing
5-year swap rate plus a margin of 6.902% per annum up to 23 October 2031, payable annually. The note matures
on 23 October 2031. BOC PCL has the option to redeem the T2 Loan early on any day during the six-month period
from 23 April 2026 to 23 October 2026.
The T2 Loan has been classified as a debt instrument measured at amortised cost. During the year ended 31
December 2023 an income of €19,875 thousand (2022: income €19,875 thousand) has been recognised in profit
and loss in respect of this instrument. As at 31 December 2023 the T2 Loan is classified as Stage 1 for ECL
purposes and an amount of €3,073 thousand that relates to a reversal of 12-months ECL has been recognised
for the year ended 31 December 2023 (2022: charge of €3,134 thousand).
9. Bank balances
Bank balances include the following for the purpose of the statement of cash flows:
2023 2022
€000 €000
Cash at bank (Note 17 (v))
1,965
-
Bank overdraft (Note 17 (v)) 1,339
8,390
10. Receivables from related parties
2023 2022
€000 €000
Current assets
Receivables from related parties (Note 17 (v)) 843
3,735
The above balances represent the maximum exposure to credit risk at the balance sheet date.
11. Share capital
2023 2022
Number of
shares
(thousand)
€000
Number of
shares
(thousand)
€000
Authorised
Ordinary shares of €0.10 each 10,000,000
1,000,000
10,000,000
1,000,000
Issued and fully paid
Ordinary shares of €0.10 each 446,200
44,620
446,200
44,620
The Company did not provide financial assistance permitted by section 82 of the Companies Act 2014 of Ireland
for the purchase of its shares.
Authorised and issued share capital
All issued shares are fully paid and carry the same rights.
There were no changes to the authorised or issued share capital during the years ended 31 December 2023 and
2022.
Share premium reserve
There were no changes to the share premium reserve during the years ended 31 December 2023 and 2022.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
457
11. Share capital (continued)
Other equity instruments
2023 2022
€000 €000
2023
Reset Perpetual Additional Tier 1 Capital Securit
ies (New
Capital Securities)
220,000
-
2018
Reset Perpetual Additional Tier 1
Capital Securit
ies
(Existing
Capital Securities)
-
220,000
220,000
220,000
In December 2018 the Company issued €220 million Subordinated Fixed Rate Reset Perpetual Additional Tier 1
Capital Securities (the ‘Existing Capital Securities’). The Existing Capital Securities constituted an unsecured and
subordinated obligation of the Company. The coupon was at 12.50% and payable semi-annually.
The Company, in June 2023, invited the holders of its outstanding €220,000 thousand Existing Capital Securities
to tender their Existing Capital Securities for cash purchase by the Company at a price equal to 103% of the
principal amount. The Company also paid accrued interest on the Existing Capital Securities, from the last coupon
date, 15 June 2023 until the settlement date. As a result of the tender offer, approximately €204,000 thousand
in aggregate nominal amount were purchased and cancelled by the Company.
Furthermore, in July 2023, the Company purchased in the open market approximately €7,000 thousand of the
outstanding nominal amount of the Existing Capital Securities, after which €8,250 thousand in aggregate principal
amount remained outstanding. At a meeting held in November 2023, the Board of Directors resolved to exercise
the Company’s option to redeem the remaining nominal amount outstanding of the Existing Capital Securities on
19 December 2023. As a result of the buy-back, a total cost of €6,820 thousand was recorded directly in equity
during the year ended 31 December 2023.
At the same time, in June 2023, the Company successfully launched and priced an issue of €220,000 thousand
Fixed Rate Reset Perpetual Additional Tier 1 Capital Securities (the 'New Capital Securities'). The New Capital
Securities constitute unsecured and subordinated obligations of the Company, are perpetual and are issued at
par. They carry an initial coupon of 11.875% per annum, payable semi-annually, and resettable on 21 December
2028 and every five years thereafter. The Company may elect to cancel any interest payment for an unlimited
period, on a non-cumulative basis, whereas it mandatorily cancels interest payment under certain conditions. The
New Capital Securities are perpetual and have no fixed date of redemption, but can be redeemed (in whole but
not in part) at the Company's option from, and including, 21 June 2028 to, and including, 21 December 2028 and
on each interest payment date thereafter, subject to applicable regulatory consents and the relevant conditions
to redemption. The New Capital Securities are listed on the Luxembourg Stock Exchange's Euro Multilateral
Trading Facility (MTF) market.
Transaction costs of €3,530 thousand in relation to the issuance of the New Capital Securities were recorded
directly in equity during the year ended 31 December 2023.
During the year ended 31 December 2023, coupon payments for the total amount of €27,339 thousand (2022:
€27,500 thousand) were made to the holders of the AT1 instruments and have been recognised in retained
earnings.
12. Retained earnings
For the purpose of dividend distribution, retained earnings determined at Company level, are the only
distributable reserve.
Companies, tax resident in Cyprus, which do not distribute at least 70% of their profits after tax as defined by
the Special Defence Contribution Law during the two years after the end of the year of assessment to which the
profits refer, will be deemed to have distributed this amount as dividend. Special defence contribution (SDC) at
17% is payable on such deemed dividend distribution to the extent that the shareholders of the Company at the
end of the period of two years from the end of the year of assessment to which the profits refer, are directly or
indirectly Cyprus tax residents or individuals who are domiciled in Cyprus. Deemed distribution does not apply in
respect of profits that are directly or indirectly attributable to shareholders that are non-Cyprus tax residents and
individual shareholders who are not domiciled in Cyprus. The deemed dividend distribution is subject to 2.65%
contribution to the General Health System (GHS).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
458
12. Retained earnings (continued)
The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the
relevant year.
This SDC and GHS are paid by the Company on account of the shareholders. During the year ended 31 December
2023 SDC and GHS deemed dividend distribution of €42 thousand (2022: €4,983 thousand) was accrued by the
Company.
13. Other reserves
Share-based benefits - cost
During the Annual General Meeting of the shareholders of the Company which took place on 20 May 2022, a
special resolution was approved for the establishment and implementation of the share-based Long-Term
Incentive Plan of Bank of Cyprus Holdings Public Limited Company (the ‘LTIP’).
The LTIP involves the granting of share awards based on certain non-market performance and service conditions.
Performance will be measured over a three-year period and will be assessed against an evaluation scorecard
consistent with the Group’s Medium Term Strategic Targets containing both financial and non-financial objectives.
The employees eligible for the LTIP are the members of the Group’s Extended Executive Committee (EXCO). At
the end of the performance period, the performance outcome will be used to assess the percentage of the awards
that will vest. These shares will normally vest in six tranches, with the first tranche vesting after the end of the
performance period and the last tranche vesting on the fifth anniversary of the first vesting date.
On 3 October 2023 (grant date) 479,160 share awards were granted by the Company to 21 eligible employees,
comprising the Extended Executive Committee of the Group. The awards granted in October 2023 are subject to
a three-year performance period 2023-2025 (with all performance conditions being non-market performance
conditions).
On 22 December 2022 (grant date) 819,860 share awards were granted by the Company to 22 eligible employees
comprising the Extended Executive Committee of the Group. The awards granted in December 2022 are subject
to a three-year performance period 2022-2024 (with all performance conditions being non-market performance
conditions).
As the award relates to services received by subsidiary entities of the Company and will be settled in shares of
the Company, it qualifies as an equity-settled transaction and hence the cost of the award relating to the financial
year has been recognised as an addition to the cost of the investment of the subsidiary BOC PCL and the
respective credit in the Statement of Changes in Equity at an amount of €595 thousand for the year ended 31
December 2023 (2022: €322 thousand). Further details on the determination of the cost of the award are
provided in Note 14 of the Consolidated Financial Statements.
14. Subordinated liabilities
Contractual
interest rate
2023 2022
€000 €000 €000 €000
Nominal
value
Carrying
value
Nominal
value
Carrying
value
Subordinated Tier 2
Capital Note – April
2021
6.625% up to
23 October
2026
300,000
302,550
300,000
302,104
300,000
302,550
300,000
302,104
Subordinated Tier 2 Capital Note - April 2021
In April 2021, the Company issued a €300 million unsecured and subordinated Tier 2 Capital Note under the
EMTN Programme. The note was priced at par with a coupon of 6.625% per annum payable annually in arrear
and resettable on 23 October 2026 at the then prevailing 5-year swap rate plus a margin of 6.902% per annum
up to 23 October 2031, payable annually. The note matures on 23 October 2031. The Company has the option
to redeem the note early on any day during the six-month period from 23 April 2026 to 23 October 2026, subject
to applicable regulatory consents. The note is listed on the Luxembourg Stock Exchange’s Euro MTF market.
During the year ended 31 December 2023 an amount of €20,318 thousand has been recognised as interest
expense on these subordinated liabilities (2022: €20,318 thousand).
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
459
15. Other payables
2023 2022
€000 €000
Accruals 1,329
47
VAT payable 34
514
Corporation tax payable 359
323
Dividends payable 1,965
-
3,687
884
Dividends payable of €1,965 thousand as at 31 December 2023 relate to dividends declared in May 2023 (Note
18) out of Group profits for the year ended 31 December 2022 and are outstanding as at 31 December 2023.
Other payables are due within 12 months from the balance sheet date.
16. Fair value measurement
The fair value of the financial assets and financial liabilities approximates their carrying value as at 31 December
2023 and 2022, except for the investments in debt instruments measured at amortised cost (Note 8) and the
subordinated liabilities (Note 14), whose fair value is disclosed below:
202
3
202
2
Fair value
measurement
hierarchy
Carrying
value
Fair
value
Fair value
measurement
hierarchy
Carrying
value
Fair
value
€000 €000
€000 €000
Financial assets
Debt instruments
measured at
amortised cost
(Note 8)
Level 2 302,615
296,762
Level 2 299,542
265,472
Financial
liabilities
Subordinated
liabilities (Note
14)
Level 1 302,550
300,098
Level 1 302,104
265,472
The fair value of the debt instruments measured at amortised cost has been classified as Level 2 in the fair value
hierarchy because it has been estimated using market observable inputs of financial instruments with similar
characteristics.
17. Related party transactions
The following transactions were carried out with related parties:
(i) Income from investments
2023 2022
€000 €000
Income from investments
Equity instruments
BOC PCL 27,339
27,500
Debt instruments
BOC PCL 19,875
19,875
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
460
17. Related party transactions (continued)
(ii) Other income
2023 2022
€000 €000
Management consultancy services 1,170
1,314
Reimbursement of expenses and fees 11,983
6,438
13,153
7,752
The above transactions were carried out between the Company and its subsidiary BOC PCL on an arm’s length
basis.
(iii) Administrative and other expenses
2023 2022
€000 €000
Consultancy and other professional fees 23
23
The above consultancy and other professional fees were carried out between the Company and its subsidiary BOC
PCL on an arm’s length basis.
(iv) Directors’ remuneration
The directors’ fees amount to €1,077 thousand (2022: €1,212 thousand). In addition, employer’s contributions
of €31 thousand have been recorded in the Income Statement during the year ended 31 December 2023
(2022: €35 thousand). Such amounts are not considered part of the remuneration of Directors, but rather an
incremental cost to the Group, and as such have been excluded from the table below (compared to the 2022
Annual Financial Report in which amounts were included in the relevant tables), as further explained in Note 2.1
of the consolidated financial statements of the Group for the year ended 31 December 2023. Both directors’ fees
and employer’s contributions were reimbursed by BOC PCL and included in other income above.
Fees are included for the period that Directors serve as members of the Board of Directors.
Non-executive Directors
The fees of non-executive Directors are analysed as follows:
2023
20
2
2
(restated)
€000 €000
Efstratios-Georgios Arapoglou 250
250
Lyn Grobler 155
160
Constantine Iordanou 148
93
Arne Berggren (resigned on 31 March 2023) 30
120
Ioannis Zographakis (resigned on 31 December 2023) 113
153
Nicolaos Sofianos (resigned on 11 December 2023) 117
125
Paula Hadjisotiriou (resigned on 31 December 2023) 141
128
Maria Philippou
(resigned on 13 October 2023) 77
105
Monique Hemerijck
(approved by ECB on 10 August 2023) 38
-
Adrian John Lewis
(approved by ECB on 17 November 2023) 8
-
Maksim Goldman
(1)
-
39
Michael Heger
(1)
-
39
1,077
1,212
(1)
Following the shareholders' vote on 20 May 2022, Mr Maksim Goldman and Dr. Michael Heger have not been
re-elected to the Board of Directors of the Company.
The fees of the non-executive Directors include fees as members of the Board of Directors of the Company, as
well as of members of the committees of the Board of Directors.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
461
17. Related party transactions (continued)
(v) Year-end balances
2023 2022
€000 €000
Receivables from related parties
BOC PCL 843
3,735
Bank accounts
Cash at bank with BOC PCL 1,965
-
Overdraft with BOC PCL 1,339
8,390
Payables to related parties
Jinius Ltd -
2
The receivables from related parties as at 31 December 2023 and 2022 related to income outstanding from
management consultancy services and reimbursement of expenses and fees.
There were no other significant transactions with related parties of the Company and no information to be
disclosed under section 307 of the Companies Act 2014 of Ireland for the years 2023 and 2022.
(vi) AT1 Capital Securities
In December 2018 the Company and BOC PCL entered into an agreement pursuant to which the Company on-
lent to BOC PCL the entire €220,000 thousand proceeds of the issue of the Existing Capital Securities (‘Old AT1
Loan’). During the year ended 31 December 2023, BOC PLC PCL exercised its option to redeem the Old AT1 Loan.
Further details are disclosed in Note 8.
In addition, in June 2023, the Company and BOC PCL entered into an agreement pursuant to which the Company
on-lent to BOC PCL the entire €220,000 thousand proceeds of the issue of the New Capital Securities (‘New AT1
Loan’). Further details are disclosed in Note 8.
(vii) Subordinated Tier 2 Capital Note
In April 2021 the Company and BOC PCL entered into an agreement pursuant to which the Company on-lent to
BOC PCL the entire €300,000 thousand proceeds of the issue of the Tier 2 subordinated liabilities. Further details
are disclosed in Note 8.
(viii) Dividends received from subsidiaries
Name of subsidiary
2023 2022
€000 €000
BOC PCL 22,310
-
18. Distribution policy and distributions
Based on the 2023 SREP decision and 2022 SREP decision, effective from 1 January 2024 and 2023 respectively,
any equity dividend distribution is subject to regulatory approval for the Company. The requirement for approval
does not apply if the distributions are made via the issuance of new ordinary shares to the shareholders which
are eligible as Common Equity Tier 1 Capital nor to the payment of coupons on any AT1 capital instruments issued
by the Company.
Τhe Group’s distribution policy provides that dividend payments are expected to build prudently and progressively
over time, towards a payout ratio in the range of 30-50% of the Group’s adjusted recurring profitability. Group
adjusted recurring profitability is defined as the Group’s profit after tax before non-recurring items (attributable
to the owners of the Company) taking into account distributions under other equity instruments such as the
annual AT1 coupon. The policy takes into consideration market conditions as well as the outcome of capital and
liquidity planning.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
462
18. Distribution policy and distributions (continued)
Distribution in respect of 2023 earnings
The Group, in March 2024,
obtained
regulatory approval from the European Central Bank for a Distribution in
respect of 2023 earnings of a total amount of
€137 million, comprising a cash dividend of €112 million and a
buyback of ordinary shares of the Company for an aggregate consideration of up to €25 million. Following
ECB approval, the Board of Directors of the Company recommended a final cash dividend to
shareholders and
approved in principle to undertake a buyback of ordinary shares as described below.
Proposed Dividend
The Board of Directors has recommended to
shareholders
a final dividend of
€0.
25 per ordinary share in
respect of earnings for the year ended 31 December 2023 (totalling €112 million based on the total number
of ordinary shares currently outstanding). This is subject to shareholders’
approval at the Annual General
Meeting in May 2024. The financial statements for the year ended 31 December 2023 do not reflect this
dividend, which will be accounted for in shareholders’ equity as an appropriation of retained
earnings in the
year ending 31 December 2024.
Proposed Buyback of ordinary shares
The Board of Directors of the Company have confirmed their intention to undertake a buyback of ordinary
shares of the Company in an aggregate consideration amount of up to €25 million and in compliance with the
terms of the approval received from the ECB.
The financial statements for the year ended 31 December 2023
do not reflect the impact of the proposed share buyback, which will be accounted for as and when shares are
repurchased by the Company.
Dividends and share buybacks are funded out of distributable reserves.
Distribution in respect of 2022 earnings
In April 2023, the Company obtained the approval of the European Central Bank to pay a dividend in respect of
earnings for the year ended 31 December 2022. Following this approval, the Board of Directors of the Company
recommended to the shareholders for approval at the Annual General Meeting (‘AGM’) on 26 May 2023, a final
dividend of €0.05 per ordinary share in respect of the earnings of the year ended 31 December 2022 (‘2022
Dividend’). The AGM on 26 May 2023 declared a final dividend of €0.05 per share. The 2022 Dividend amounted
to €22,310 thousand in total.
19. Financial risk management
The Company is exposed to risks the most significant of which are the liquidity risk and market risk.
19.1 Liquidity risk
Liquidity risk refers to probable losses that the Company may face, in case of repayment difficulties to its cash
flow obligations. The Company does not consider the liquidity risk as significant, since the level of operational
costs is low and BOC PCL has expressed its intention to provide adequate funding to cover any cash flow
obligations coming due.
19.2 Market risk
Market risk is the risk of loss from adverse changes in market prices. The Market and Liquidity Risk department
is responsible for monitoring the risk resulting from such changes with the objective to minimise the impact on
earnings and capital. The department also monitors liquidity risk and credit risk with counterparties and countries.
It is also responsible for monitoring compliance with the various market and liquidity risk policies and procedures.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Notes to the Company Financial Statements
463
19. Financial risk management (continued)
19.2 Market risk (continued)
Price risk
Equity securities price risk
The risk of loss from changes in the price of equity securities arises when there is an unfavourable change in the
prices of equity securities held by the Company as investments.
Investments in equities are outside the Company’s risk appetite.
Changes in the prices of equity securities that are classified as FVOCI affect the equity of the Company.
The table below shows the impact on the equity of the Company from a change in the price of the equity
instruments held, as a result of reasonably possible changes in the relevant stock exchange indices/based on a
Monte Carlo conditional value-at-risk (cVaR) analysis. The analysis is performed on the underlying assets for the
year ended 31 December 2023.
2023
Change in index Impact on equity
% €000
Other stock exchanges and unlisted +5.0 11,737
Other stock exchanges and unlisted -5.0 (11,737)
2022
Other stock exchanges and unlisted +5.0 10,682
Other stock exchanges and unlisted -5.0 (10,682)
20. Capital management
The capital management of the Company is consistent with the capital management of the Group as presented
in Note 48 of the consolidated financial statements of the Group for the year ended 31 December 2023.
21. Events after the reporting date
There were no material events which occurred after the reporting date other than as disclosed in Note 18 of the
financial statements of the Company and in Note 53 of the consolidated financial statements of the Group for the
year ended 31 December 2023.
Alternative Performance Measures Disclosures
2023
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
465
DEFINITIONS
Adjusted recurring
profitability
The Group’s profit after tax before non
-
recurring items (attributable to the
owners of the Company) taking into account distributions under other equity
instruments such as the annual AT1 coupon.
Advisory and other
transformation costs
Comprise mainly of fees of external advisors in relation to: (i) the transformation
program and other strategic projects of the Group and (ii) customer loan
restructuring activities, where applicable.
Allowance for
expected loan credit
losses
Comprises (i)
allowance for expected credit losses (ECL) on loans and advances
to customers (including allowance for expected credit losses on loans and
advances to customers held for sale, where applicable), (ii) the residual fair value
adjustment on initial recognition of loans and advances to customers (including
residual fair value adjustment on initial recognition on loans and advances to
customers classified as held for sale, where applicable), (iii) allowance for
expected credit losses for off-balance sheet exposures (financial guarantees and
commitments) disclosed on the balance sheet within other liabilities, and (iv) the
aggregate fair value adjustment on loans and advances to customers classified
and measured at FVPL.
Basic earnings per
share (attributable to
the owners of the
Company)
Basic earnings per share (attributable to the owners of the Company) is the
Profit/(loss) after tax (attributable to the owners of the Company) divided by the
weighted average number of shares in issue during the year, excluding treasury
shares.
Carbon neutral
The reduction and balancing (through a combination of offsetting investments
or emission credits) of greenhouse gas emissions from own operations.
Cost to Income ratio
Cost
-
to
-
income ratio
is calculated
as
total expenses (as defined)
,
divided by total
income (as defined).
Digital transactions
ratio
This is the ratio of the number of digital transactions performed by individuals
and legal entity customers to the total number of transactions. Transactions
include deposits, cash withdrawals, internal and external transfers. Digital
channels include mobile, browser and ATMs.
Digitally engaged
customers ratio
This is the ratio of digitally engaged individual customers to the total number of
individual customers. Digitally engaged customers are the individuals who use
the digital channels of the Bank (mobile banking app, browser and ATMs) to
perform banking transactions, as well as digital enablers such as a bank-issued
card to perform online card purchases, based on an internally developed
scorecard.
Diluted earnings per
share
Diluted earnings per share is
the Profit/(loss) after tax
(attributable to the
owners of the Company) divided by the weighted average number of ordinary
shares in issue adjusted for the ordinary shares that may arise in respect of
share awards granted to executive directors and senior management of the
Group under the Long-Term Incentive Plan.
Green Asset ratio
The proportion of a credit institution’s assets financing and invested in EU
Taxonomy-aligned economic activities as a share of total covered assets.
Green Mortgage ratio
The proportion of a credit institution’s assets financing EU Taxonomy
-
aligned
mortgages (acquisition, construction or renovation of buildings) as a share of
total mortgage assets.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
466
Gross loans
Gross loans comprise: (i) gross loans and advances to customers measured at
amortised cost before the residual fair value adjustment on initial recognition
(including loans and advances to customers classified as non-current assets held
for sale, where applicable) and (ii) loans and advances to customers classified and
measured at FVPL adjusted for the aggregate fair value adjustment.
The residual fair value adjustment on initial recognition relates mainly to loans
acquired from Laiki Bank (calculated as the difference between the outstanding
contractual amount and the fair value of loans acquired at acquisition date).
Interest
earning
assets
Interest earning assets include:
cash and balances with central banks, plus loans
and advances to banks, plus reverse repurchase agreements, plus net loans and
advances to customers (including net loans and advances to customers classified
as non-current assets held for sale, where applicable) (as defined), plus deferred
consideration receivable (‘DPP’), plus investments (excluding equities, mutual
funds and other non-interest bearing investments).
Legacy exposures
Legacy exposures
are exposures relating to (i) Restructuring and Recoveries
Division (RRD), (ii) Real Estate Management Unit (REMU), and (iii) Non-core
overseas exposures.
Leverage ratio
The leverage ratio is the ratio of tangible total equity to total assets as presented
on the balance sheet. Tangible total equity comprises of equity attributable to the
owners of the Company and other equity instruments minus intangible assets.
Loan credit losses
(PL)
Loan credit losses comprise: (i) credit losses to cover credit risk on loans and
advances to customers, (ii) net gains on derecognition of financial assets
measured at amortised cost relating to loans and advances to customers and (iii)
net gains on loans and advances to customers at FVPL, for the reporting
period/year.
Loan credit losses
charge (cost of risk)
Loan credit losses charge (cost of risk) (
year
-
to
-
date) is calculated as the loan
credit losses (as defined) (annualised based on year-to-date days) divided by the
average gross loans (as defined). The average gross loans are calculated as the
average of the opening balance and the closing balance of Gross loans (as
defined), for the reporting period/year.
Market Shares
Both deposit and loan market shares are based on data from the CBC.
Net Interest Margin
Net interest margin is calculated as the net interest income (
annualized ba
s
ed
on year-to-date days) divided by the ‘quarterly average interest earning assets’
(as defined).
Net loans and
advances to
customers
Net loans and advances to customers comprise gross loans (as defined) net of
allowance for expected loan credit losses (as defined, but excluding allowance
for expected credit losses on off-balance sheet exposures disclosed on the
balance sheet within other liabilities).
Net loans to
deposits ratio
Net loans to deposits ratio is calculated as gross loans (as defined) net of
allowance for expected loan credit losses (as defined), divided by customer
deposits.
Net performing loan
book
Net performing loan book is the total net loans and advances to customers (as
defined) excluding net loans included in the legacy exposures (as defined).
Net zero emissions
The reduction of greenhouse gas emissions to net zero through a
combination of
reduction activities and offsetting investments
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
467
New lending
New lending includes the disbursed amounts of the new and existing non
-
revolving facilities (excluding forborne or re-negotiated accounts) as well as the
average year-to-date change (if positive) of the current accounts and overdraft
facilities between the balance at the beginning of the period and the end of the
period. Recoveries are excluded from this calculation since their overdraft
movement relates mostly to accrued interest and not to new lending.
Non
-
interest income
Non
-
interest income comprises
:
Net fee and commission income, Net foreign
exchange gains/(losses) and net gains/(losses) on financial instruments
(excluding net gains on loans and advances to customers at FVPL), Net insurance
result, Net gains/(losses) from revaluation and disposal of investment properties
and on disposal of stock of properties, and Other income.
Non
-
performing
exposures (NPEs)
As per the EBA standards and
the
ECB
’s
Guidance to Banks on Non
-
Performing
Loans (which was published in March 2017), NPEs are defined as those exposures
that satisfy one of the following conditions:
(i) The borrower is assessed as unlikely to pay its credit obligations in full
without the realisation of the collateral, regardless of the existence of
any past due amount or of the number of days past due.
(ii) Defaulted or impaired exposures as per the approach provided in the
Capital Requirement Regulation (CRR), which would also trigger a
default under specific credit adjustment, diminished financial obligation
and obligor bankruptcy.
(iii) Material exposures as set by the CBC, which are more than 90 days
past due.
(iv) Performing forborne exposures under probation for which additional
forbearance measures are extended.
(v) Performing forborne exposures previously classified as NPEs that
present more than 30 days past due within the probation period.
From 1 January 2021 two regulatory guidelines came into force that affect NPE
classification and Days-Past-Due calculation. More specifically, these are the RTS
on the Materiality Threshold of Credit Obligations Past-Due (EBA/RTS/2016/06)
and the Guideline on the Application of the Definition of Default under article 178
(EBA/RTS/2016/07).
The Days-Past-Due (DPD) counter begins counting DPD as soon as the arrears
or excesses of an exposure reach the materiality threshold (rather than as of the
first day of presenting any amount of arrears or excesses). Similarly, the counter
will be set to zero when the arrears or excesses drop below the materiality
threshold. Payments towards the exposure that do not reduce the
arrears/excesses below the materiality threshold, will not impact the counter.
For retail debtors, when a specific part of the exposures of a customer that fulfils
the NPE criteria set out above is greater than 20% of the gross carrying amount
of all on balance sheet exposures of that customer, then the total customer
exposure is classified as non-performing; otherwise only the specific part of the
exposure is classified as non-performing. For non-retail debtors, when an
exposure fulfils the NPE criteria set out above, then the total customer exposure
is classified as non-performing.
Material arrears/excesses are defined as follows:
- Retail exposures: Total arrears/excess amount greater than €100,
- Exposures other than retail: Total arrears/excess amount greater than
€500
and the amount in arrears/excess of the customer’s total exposure is at least
1%.
The NPEs are reported before the deduction of allowance for expected loan credit
losses (as defined).
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
468
Non
-
recurring
items
Non
-
recurring
items as presented in the ‘Consolidated Income Statement
–
Underlying basis’ relate to ‘Advisory and other transformation costs - organic’
(2022: Non-recurring items relate to: (i) Advisory and Other transformation
costs – organic, (ii) Net profit/(loss)/provisions relating to NPE sales, (iii)
Restructuring and other costs relating to NPE sales, and (iv) Restructuring costs
– Voluntary Staff Exit Plan (VEP), as applicable).
NPE coverage ratio
The NPE coverage ratio is calculated as the allowance for expected loan credit
losses (as defined) over NPEs (as defined).
NPE ratio
NPE ratio is calculated as the NPEs (as defined) divided by
G
ross loans (as
defined).
Operating profit
Operating profit
on the underlying basis
comprises profit before loan credit losses
(as defined), impairments of other financial and non-financial assets, provisions
for pending litigations, regulatory and other provisions (net of reversals), tax,
profit attributable to non-controlling interests and non-recurring items (as
defined).
Operating profit
return on average
assets
Operating profit return on average assets is calculated as the annualised
operating profit (as defined) divided by the quarterly average of total assets for
the relevant period. Average total assets exclude total assets of discontinued
operations at each quarter end, if applicable.
Profit after tax and
before non-recurring
items (attributable
to the owners of the
Company)
Profit/(loss) after tax
and before non
-
recurring items
(attributable to the owners
of the Company) is the operating profit (as defined) adjusted for loan credit
losses (as defined), impairments of other financial and non-financial assets,
provisions for litigation, claims, regulatory and other matters (net of reversals),
tax and (profit)/loss attributable to non-controlling interests.
Profit/(loss) after tax
– organic
(attributable to the
owners of the
Company)
Profit/(loss) after tax
-
organic (attributable to the owners of the Company) is
the profit/(loss) after tax and before non-recurring items (as defined)
(attributable to the owners of the Company), adjusted for the ‘Advisory and
other transformation costs – organic’.
Return on Tangible
equity (ROTE)
Return on Tangible Equity (ROTE) is calculated as Profit/(loss) after tax
(attributable to the owners of the Company) (annualised - (based on year-to-
date days)), divided by the quarterly average of shareholders’ equity minus
intangible assets at each quarter end.
Return on Tangible
equity (ROTE)
excluding amounts
reserved for
distributions
Return on Tangible equity (ROTE) excluding amounts reserved for distributions
is calculated as Profit/(loss) after tax (attributable to the owners of the
Company) (as defined) (annualised - (based on year - to - date days)), divided
by the quarterly average of Shareholders’ equity minus intangible assets and
the amounts approved/recommended for distribution in respect of earnings of
the relevant year the distribution relates to.
Shareholders’ equity
Shareholders’ equity comprise total equity adjusted for non
-
controlling interest
and other equity instruments.
Tangible book value
per share
Tangible book value per share is c
alculated as the total equity attributable to the
owners of the Company, (i.e. Shareholders’ equity as defined) less intangible
assets at each quarter end, divided by the number of shares in issue, excluding
treasury shares.
Tangible equity
Tangible equity comprises of equity attributable to the owners of the company
(as per statutory basis) and other equity instruments minus intangible assets.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
469
Time deposit
s
pass-through
Calculated as a percentage of the cost (interest expense) of Time and Notice
deposits over the average 6-month Euribor rate of the period.
Total expenses
Total expenses on the underlying basis comprise
the total staff costs
,
special
levy on deposits and other levies/contributions and other operating expenses
(excluding ‘Advisory and other transformation costs-organic’, (on an underlying
basis) as reconciled in the table further below) (2022: total expenses on the
underlying basis comprise total staff costs (excluding ‘Restructuring costs –
Voluntary Staff Exit Plan (VEP)’) (on an underlying basis as reconciled in the
table further below), special levy on deposits and other levies/contributions and
other operating expenses (excluding ‘Advisory and other transformation costs-
organic’, ‘Restructuring and other costs relating to NPE sales’, on an underlying
basis as reconciled in the table further below)).
Total income
Total income
on
the underlying basis comprises
the
total of net interest income,
net fee and commission income, net foreign exchange gains, net gains/(losses) on
financial instruments (excluding net gains/(losses) on loans and advances to
customers at FVPL), net insurance result, net gains/(losses) from revaluation and
disposal of investment properties and on disposal of stock of property and other
income (on an underlying basis). A reconciliation of these amounts between the
statutory and the underlying bases is disclosed in the Directors’ Report under
section ‘Group financial results on the underlying basis’.
Underlying basis
Th
e underlying basis is computed by adjusting the results as per the
statutory
basis for reclassification of certain items as explained in the ‘Reconciliation of
the Consolidated Income Statement for the year ended 31 December 2023
between the audited statutory basis and the underlying basis’ within the
Directors’ Report.
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
470
Reconciliations
Reconciliation between the Consolidated Income Statement under the statutory basis and the underlying
basis in the Directors’ Report is included in Section ‘Reconciliation of the Consolidated Income Statement
for the year ended 31 December 2023 between the audited statutory basis and the underlying basis’ of
the Directors’ Report.
Reconciliations between the non-IFRS performance measures and the most directly comparable IFRS
measures which allow for the comparability of the underlying basis to the statutory basis are disclosed
below.
For the purpose of the ‘Alternative Performance Measures Disclosures’, reference to ‘Note’ relates to the
respective note in the Consolidated Financial Statements for the year ended 31 December 2023.
On 1 January 2023, the Group adopted IFRS 17 ‘Insurance Contracts’. As required by the standard, the
Group applied the requirements retrospectively with comparative information previously published under
IFRS 4 ‘Insurance Contracts’ restated from 1 January 2022, the transition date, and therefore comparative
information for Reconciliations of alternative performance measures and Key Performance Ratios
Information have also been restated where applicable.
1. Reconciliation of Gross loans and advances to customers
2023 2022
€000 €000
Gross loans and advances to customers as per the underlying basis
(as defined above)
10,069,828
10,217,453
Reconciling items:
Residual fair value adjustment on initial recognition (Note 23) (69,534)
(89,029)
Loans and advances to customers measured at FVPL (Note 23) (138,727)
(214,359)
Aggregate fair value
adjustment on loans and advances to
customers measured at FVPL
947
3,270
Gross loans and advances to customers at amortised cost as
per the Consolidated Financial Statements (Note 23)
9,862,514
9,917,335
2. Reconciliation of Allowance for expected credit losses (ECL) on loans and advances
to customers
2023 2022
€000 €000
Allowance for expected credit losses
(ECL)
on loans and advances to
customers as per the underlying basis (as defined above)
267,232
281,630
Reconciling items:
Residual fair value adjustment on initial recognition (Note 23) (69,534)
(89,029)
Aggregate fair value adjustment on loans and advances to customers
measured at FVPL
947
3,270
Provisions for financial guarantees and commitments (Note 33) (19,192)
(17,429)
Allowance for ECL of loans and advances to customers as per
the Consolidated Financial Statements (Note 23)
179,453
178,442
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
471
Reconciliations (continued)
3. Reconciliation of NPEs
2023 2022
€000 €000
NPEs as per the underlying basis (as defined above) 365,450
410,563
Reconciling items:
POCI (NPEs) (Note 1 below) (37,273)
(37,742)
Residual fair value adjustment on initial recognition on loans and
advances to customers (NPEs) classified as Stage 3 (Note 23)
(1,294)
(1,803)
Stage 3 gross loans and advances to customers at amortised
cost as per the Consolidated Financial Statements (Note 23)
326,883
371,018
NPE ratio 2023 2022
NPEs (as per table above) (€000) 365,450
410,563
Gross loans and
advances to customers (
as per table
1
above
)
(€000)
10,069,828
10,217,453
Ratio of NPE/Gross loans (%) 3.6%
4.0%
NPE Coverage ratio 2023 2022
Allowance f
or expected credit losses on loans and advances to
customers (ECL) (as per table 2 above) (€000)
267,232
281,630
NPEs (as per table above) (€000) 365,450
410,563
NPE Coverage ratio (%) 73%
69%
Note 1: Gross loans and advances to customers at amortised cost before residual fair value adjustment
on initial recognition include an amount of €37,273 thousand POCI - NPEs (out of a total of €100,197
thousand POCI loans) (2022: €37,742 thousand POCI - NPEs (out of a total of €115,544 thousand POCI
loans)) as disclosed in Note 23.
4. Reconciliation of Loan credit losses
2023 2022
€000 €000
Loan credit losses as per the underlying basis 62,749
46,717
Reconciling items:
Reversal of l
oan credit losses relating to NPE sales, disclosed under
non-recurring items within ‘Net loss/provisions relating to NPE
sales’ under the underlying basis
-
(685)
62,749
46,032
Loan credit losses (as
defined) are reconciled to the statutory basis
as follows:
Credit losses to cover credit risk on loans and advances to
customers (Note 16)
73,294
56,510
Net gains on derecognition of financial assets measured at
amortised cost – loans and advances to customers (see further
below)
(8,144)
(6,428)
Net gains on loans and advances to customers
measured
at FVPL
(Note 11)
(2,401)
(4,050)
62,749
46,032
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
472
Reconciliations (continued)
4. Reconciliation of Loan credit losses (continued)
Net gains on derecognition of financial assets measured at amortised cost in the Consolidated Income
Statement amount to €6,361 thousand (2022: €5,235 thousand) and comprise €8,144 thousand (2022:
€6,428 thousand) net gains on derecognition of loans and advances to customers and €1,783 thousand
(2022: €1,193 thousand) net losses on derecognition of debt securities measured at amortised cost.
5. Reconciliation of Adjusted recurring profitability to Profit after tax for the year
attributable to the owners of the Company
2023
2022
(restated)
€000 €000
Adjusted recurring profitability
as per the underlying basis (
as
defined above)
455,301
146,841
Reconciling items:
Advisory and other transformation costs (Note 15) (2,253)
(14,136)
Staff costs
-
voluntary exit plan and other termination benefits,
separately presented under the underlying basis (as per table 2.1.1
below)
-
(104,325)
Reversal of loan credit losses relating to NPE sales, disclosed under
non-recurring items within ‘Net loss/provisions relating to NPE sales’
under the underlying basis (as per table 4 above)
-
685
Payment of coupon to AT1 holders (Note 34) 27,339
27,500
Cost for repurchase of other equity instruments* (Note 34) 6,820
-
Profit after tax for the year
attributable to the owners of the
Company as per the Consolidated Income Statement
487,207
56,565
* Comprises accrued AT1 coupon as at the date of the repurchase and amount paid for the repurchase
in excess of the nominal price
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
473
Key Performance Ratios Information
For the purpose of the ‘Alternative Performance Measures Disclosures’, reference to ‘Note’ relates to the
respective note in the Consolidated Financial Statements for the year ended 31 December 2023.
1. Net Interest Margin (NIM)
The various components for the calculation of net interest margin are provided below:
2023
2022
(restated)
1.1. Net interest income used in the calculation of NIM €000 €000
Net interest income as per the underlying basis/statutory basis 792,217
370,407
1.2. Interest earning
assets
31
December
2023
30 September
2023
30 June
2023
31 March
2023
31 December
2022
€000 €000 €000 €000
Cash and balances with
central banks (Note 41)
9,614,502
9,565,413
9,127,429
9,247,705
9,567,258
Loans and advances to
banks (Note 41)
384,802
409,903
431,812
415,832
204,811
Reverse repurchase
agreements
403,199
-
-
-
-
Loans and advances to
customers (Note 23)
9,821,788
9,910,455
10,007,819
10,013,108
9,953,252
Prepayments, accrued
income and other assets –
Deferred consideration
receivable (‘DPP’)
(Note 28)
243,013
325,990
320,655
315,755
311,523
Investments
Debt securities (Note 20) 3,547,782
3,488,862
3,178,127
2,746,790
2,499,894
Total interest earning
assets
24,015,086
23,700,623
23,065,842
22,739,190
22,536,738
1.3.
Quarterly average
interest earning
assets (€000)
- 2023
23,211,496
- 2022
22,483,429
1.4. Net Interest Margin (NIM) 2023
2022
(restated)
Net interest income (as per table 1.1. above) (€000) 792,217
370,407
Quarterly average interest earning assets (
as per table 1.3. above
)
(€000)
23,211,496
22,483,429
NIM (%) 3.41%
1.65%
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
474
Key Performance Ratios Information (continued)
2. Cost to income ratio
2.1 Reconciliation of the various components of total expenses used in the cost to income ratio
calculation from the underlying basis to the statutory basis is provided below:
2.1.1 Reconciliation of Staff costs
2023
2022
(restated)
€000 €000
Staff costs as per the underlying basis 192,266
180,829
Reclassifications for:
Restructuring costs
–
voluntary exit plan and other termination
benefits, separately presented under the underlying basis (Note 14)
-
104,325
Staff costs as per the statutory basis (Note 14) 192,266
285,154
2.1.2 Reconciliation of Other operating expenses
2023
2022
(restated)
€000 €000
Other operating expenses as per the underlying basis 148,840
143,780
Reclassifications for:
Operating expenses and restructuring costs relating to NPE sales,
presented within ‘Restructuring and other costs relating to NPE
sales’ under the underlying basis
-
2,911
Advisory and other transformation costs
–
organic, separately
presented under the underlying basis (Note 15)
2,253
11,225
Other operating expenses as per the statutory basis (Note 15) 151,093
157,916
2.1.3 Total Expenses as per the underlying basis
2023
2022
(restated)
€000 €000
Staff costs as per the underlying basis (as per table 2.1.1 above) 192,266
180,829
Special levy on deposits and
other levies/contributions as per the
underlying basis/statutory basis
42,380
38,492
Other operating expenses as per the underlying basis
(as per table
2.1.2 above)
148,840
143,780
Total Expenses as per the underlying basis 383,486
363,101
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
475
Key Performance Ratios Information (continued)
2. Cost to income ratio (continued)
2.2 Reconciliation of the various components of total income used in the cost to income ratio
calculation from the underlying basis to the statutory basis is provided below:
2.2.1 Total Income as per the underlying basis
2023
2022
(restated)
€000 €000
Net interest income as per the underlying basis/statutory basis (
as
per table 1.1 above)
792,217
370,407
Net fee and commission income
as per the underlying basis/statutory
basis
181,023
192,284
Net foreign exchange gains, Net gains/(losses) on financial
instruments and Net gains on derecognition of financial assets
measured at amortised cost as per the underlying basis (as per table
2.2.2 below)
37,184
25,434
Net insurance result* (as per the statutory basis) 53,488
44,566
Net gains/(losses) from revaluation and disposal of investment
properties and Net gains on disposal of stock of properties (as per
the statutory basis)
10,015
12,971
Other income (as per the statutory basis) 18,337
16,681
Total Income as per the underlying basis 1,092,264
662,343
*Net insurance result comprises the aggregate of captions ‘Net insurance finance income/(expense) and net
reinsurance finance income/(expense)’, ‘Net insurance service result’ and ‘Net reinsurance service result’ per the
statutory basis.
2.
2.
2
Reconciliation of Net foreign exchange gains, Net
gains/(losses) on financial instruments and Net gains
on derecognition of financial assets measured at
amortised cost between the statutory basis and the
underlying basis
2023
2022
(restated)
€000 €000
Net foreign exchange gains, Net gains/(losses) on financial
instruments and Net gains on derecognition of financial assets
measured at amortised cost as per the underlying basis
37,184
25,434
Reclassifications for:
Net gains on loans and
advances to customers
at
FVPL disclosed
within ‘Loan credit losses’ per the underlying basis (Note 11)
2,401
4,050
Net gains on derecognition of financial assets measured at
amortised cost-loans and advances to customers, disclosed within
‘Loan credit losses’ per the underlying basis (as per table 4 in
Section ‘Reconciliations’ above)
8,144
6,428
Net foreign exchange gains,
Ν
et gains/(losses) on financial
instruments and Net gains on derecognition of financial assets
measured at amortised cost as per the statutory basis (see below)
47,729
35,912
Net foreign exchange gains, Net gains/(losses) on financial
instruments and Net gains on derecognition of financial assets
measured at amortised cost (as per table above) are reconciled to
the statutory basis as follows:
Net foreign exchange gains 28,588
31,291
Net gains/(losses) on financial instruments (Note 11) 12,780
(614)
Net gains on derecognition of financial assets measured at
amortised cost
6,361
5,235
47,729
35,912
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
476
Key Performance Ratios Information (continued)
2. Cost to income ratio (continued)
2.2 Reconciliation of the various components of total income used in the cost to income ratio calculation
from the underlying basis to the statutory basis is provided below: (continued)
2023
20
22
(restated)
Cost to income ratio
Total expenses (as per table 2.1.3 above) (€000) 383,486
363,101
Total income (as per table 2.2.1 above) (€000) 1,092,264
662,343
Total expenses/Total income (%) 35%
55%
Cost to income ratio
excluding special levy on deposits and
other levies/contributions
2023
2022
(restated)
Total expenses (as per table 2.1.3 above) (€000) 383,486
363,101
Less: Special levy on deposits and other levies/contributions
(
as per
table 2.1.3 above) (€000)
(42,380)
(38,492)
Total expenses
excluding special levy on deposits and other
levies/contributions
341,106
324,609
Total income (as per table 2.2.1 above) (€000) 1,092,264
662,343
Total expenses excluding special levy on
deposits and other
levies/contributions/Total income (%)
31%
49%
3. Operating profit return on average assets
The various components used in the determination of the operating profit return on average assets are
provided below:
31 December
2023
30 September
2023
30 June
2023
31 March
2023
31 December
2022
(restated)
€000 €000 €000 €000 €000
Total assets used in
the computation of the
operating profit return
on average assets per
the Consolidated
Balance Sheet
26,628,577
26,351,640
25,706,637
25,386,804
25,288,541
Quarterly average total
assets (€000)
- 2023
25,872,440
- 2022 (restated)
25,356,051
2023
2022
(restated)
Total income (as per table 2.2.1 above) (€000) 1,092,264
662,343
Total expenses (as per table 2.1.3 above) (€000) (383,486)
(363,101)
Operating profit (€000) 708,778
299,242
Quarterly average total assets (as per table above) (€000) 25,872,440
25,356,051
Operating profit return on average assets (%) 2.7%
1.2%
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
477
Key Performance Ratios Information (continued)
4. Cost of Risk
2023 2022
€000 €000
Loan credit losses (as per table 4 in Section ‘Reconciliations’ above) 62,749
46,717
Average gross loans
(as defined)
(
as per table 1 in Section
‘Reconciliations’ above)
10,143,641
10,537,056
Cost of Risk (CoR) % 0.62%
0.44%
5. Basic earnings per share attributable to the owners of the Company
The various components used in the determination of the ‘Basic earnings per share attributable to the
owners of the Company (€ cent)’ are provided below:
2023
2022
(restated)
Profit after tax (attributable to the owners of the Company) per the
underlying basis/statutory basis for the year ended 31 December
(€000)
487,207
56,565
Weighted average number of shares in issue during the
year
,
excluding treasury shares (thousand) (Note 18)
446,058
446,058
Basic earnings per share attributable to the owners of the Company
(€ cent)
109.2
12.7
6. Return on tangible equity (ROTE)
The various components used in the determination of ‘Return on tangible equity (ROTE)' are provided
below:
2023
2022
(restated)
P
rofit after tax (attributable to the owners of the Company) per the
underlying basis/statutory basis for the year ended 31 December
(€000)
487,207
56,565
Quarterly average tangible total equity as at
31 December
(
as per
table 6.2 below) (€000)
1,961,194
1,741,863
ROTE after tax (%) 24.8%
3.2%
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
478
Key Performance Ratios Information (continued)
6. Return on tangible equity (ROTE) (continued)
6.1 Tangible
shareholder’s
equity
31 December
2023
30 September
2023
30 June
2023
31 March
2023
31
December
2022
(restated)
€000 €000 €000 €000 €000
Equity attributable to
the owners of the
Company per the
statutory basis
2,247,080
2,113,020
1,984,459
1,899,202
1,806,266
Less: Intangible assets
per the statutory basis
(48,635)
(45,899)
(47,546)
(49,430)
(52,546)
Total tangible
shareholder’s equity
2,198,445
2,067,121
1,936,913
1,849,772
1,753,720
6.2 Quarterly
average
tangible
shareholder’s
equity (€000)
- 2023
1,961,194
- 2022 (restated)
1,741,863
7. Return on tangible equity (ROTE), excluding amounts reserved for future distributions
The various components used in the determination of ‘Return on tangible equity (ROTE), excluding
amounts reserved for future distributions' are provided below:
2023
2022
(restated)
P
rofit after tax (attributable to the owners of the Company) per the
underlying basis/statutory basis for the year ended 31 December (€000)
487,207
56,565
Quarterly average tangible total equity as at
31 December
(
as per table
7.2 below) (€000)
1,924,952
1,737,401
ROTE after tax), excluding amounts reserved for future distributions (%) 25.3%
3.3%
7
.1 Tangible
shareholder’s
equity
31 December
2023
30 September
2023
30 June
2023
31 March
2023
31 December
2022
(restated)
€000 €000 €000 €000 €000
Equity attributable to
the owners of the
Company per the
statutory basis
2,247,080
2,113,020
1,984,459
1,899,202
1,806,266
Less: Intangible assets
per the statutory basis
(48,635)
(45,899)
(47,546)
(49,430)
(52,546)
Less:
amounts reserved
for future distributions
(136,590)
(22,310)
(22,310)
Total tangible
shareholder’s equity
2,061,855
2,067,121
1,936,913
1,827,462
1,731,410
BANK OF CYPRUS HOLDINGS GROUP Annual Financial Report 2023
Alternative Performance Measures Disclosures
479
Key Performance Ratios Information (continued)
7. Return on tangible equity (ROTE), excluding amounts reserved for future
distributions (continued)
7.2 Quarterly
average
tangible
shareholder’s
equity (€000)
- 2023
1,924,952
- 2022 (restated)
1,737,401
8. Tangible book value per share
2023
2022
(restated)
€000 €000
Total tangible shareholder’s equity (as per table 6.1 above) (€000) 2,198,445
1,753,720
Number of shares in issue, excluding treasury shares (thousand)
(Note 34)
446,058
446,058
Tangible book value per share (€) 4.93
3.93
9. Leverage ratio
2023
2022
(restated)
Tangible total equity (including Other equity instruments) (
as per table
9.1 below) (€000)
2,418,445
1,973,720
Total assets as per the statutory basis (€000) 26,628,577 25,288,541
Leverage ratio 9.1%
7.8%
9.1 Tangible total equity
2023
2022
(restated)
€000 €000
Equity attributable to the owners of the Company per the statutory basis 2,247,080
1,806,266
Other equity instruments per the statutory basis 220,000
220,000
Less: Intangible assets per the statutory basis (48,635)
(52,546)
Tangible total equity 2,418,445
1,973,720
480
Additional Information –
EU Taxonomy Disclosure Tables
2023
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
481
Additional Information – EU Taxonomy Disclosure Tables
Introduction
These disclosures represent the EU Taxonomy disclosures of Bank of Cyprus Holdings Public Limited Company
('the Group') as at 31 December 2023. They have been prepared in accordance with the requirements of Article
8 of Regulation (EU) 2020/852 which requires undertakings that are subject to Articles 19a or 29a of Directive
2013/34/EU of the European Parliament and of the Council to disclose how and to what extent their activities are
associated with environmentally sustainable economic activities.
The information and all the tables included are unaudited and have been prepared in line with current available
guidance and market practice.
Information based on Annex VI in the Disclosures Delegated Act - Regulation (EU) 2021/2178
Credit institutions shall disclose the information referred to in Article 8(1) of Regulation (EU) 2020/852 as
specified in Annexes V and XI of the Disclosures Delegated Act - Regulation (EU) 2021/2178 which supplements
Regulation (EU) 2020/852. Article 8(1) of Regulation (EU) 2020/852 requires undertakings that are subject to
Articles 19a or 29a of Directive 2013/34/EU of the European Parliament and of the Council to disclose how and
to what extent their activities are associated with environmentally sustainable economic activities. Article 8(2) of
Regulation (EU) 2020/852 requires non-financial undertakings to disclose information on the proportion of the
turnover, capital expenditure and operating expenditure of their activities related to assets or processes
associated with environmentally sustainable economic activities. That provision, however, does not specify
equivalent key performance indicators for financial undertakings, that is credit institutions, asset managers,
investment firms and insurance and reinsurance undertakings. For credit institutions this information shall be
presented in tabular form by using the template set out in Annex VI in the Disclosures Delegated Act - Regulation
(EU) 2021/2178.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
482
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.1 Assets for the calculation of GAR (Turnover Based)
a b c d e f g h i j k l m n o
Million EUR
31st December 2023
Total
gross
carrying
amount
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Of which towards taxonomy relevant sectors (Taxonomy-
eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors (Taxonomy-
eligible)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally
sustainable (Taxonomy-aligned)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both numerator
and denominator
1
Loans and advances, debt securities and
equity instruments not HfT eligible for
GAR calculation
7,249
3,881
-
-
-
-
-
-
-
-
3,881
-
-
-
-
2 Financial undertakings 2,279
148
-
-
-
-
-
-
-
-
148
-
-
-
-
3 Credit institutions 1,971
146
-
-
-
-
-
-
-
-
146
-
-
-
-
4 Loans and advances 505
5
-
-
-
-
-
-
-
-
5
-
-
-
-
5 Debt securities, including UoP 1,465
141
-
-
-
-
-
-
-
-
141
-
-
-
-
6 Equity instruments 1
-
-
-
-
-
-
-
-
-
-
-
7 Other financial corporations 308
2
-
-
-
-
-
-
-
-
2
-
-
-
-
8 of which investment firms 1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9 Loans and advances 1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10 Debt securities, including UoP -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11 Equity instruments -
-
-
-
-
-
-
-
-
-
-
-
12 of which management companies -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13 Loans and advances -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14 Debt securities, including UoP -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15 Equity instruments -
-
-
-
-
-
-
-
-
-
-
-
16 of which insurance undertakings 6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17 Loans and advances 4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18 Debt securities, including UoP -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19 Equity instruments 2
-
-
-
-
-
-
-
-
20 Non-financial undertakings 154
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21 Loans and advances 43
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22 Debt securities, including UoP 111
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23 Equity instruments -
-
-
-
-
-
-
-
-
24 Households 4,781
3,732
-
-
-
-
-
-
-
-
3,732
-
-
-
-
25
of which loans collateralised by residential
immovable property
3,726
3,726
-
-
-
-
-
-
-
-
3,726
-
-
-
-
26 of which building renovation loans -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27 of which motor vehicle loans 139
6
-
-
-
-
6
-
-
-
-
28 Local governments financing 35
1
-
-
-
-
-
-
-
-
1
-
-
-
-
29 Housing financing 1
1
-
-
-
-
-
-
-
-
1
-
-
-
-
30 Other local government financing 34
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31
Collateral obtained by taking possession:
residential and commercial immovable
properties
560
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32 TOTAL GAR ASSETS 7,809
3,881
-
-
- - - - - - 3,881
-
-
-
-
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
483
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.1 Assets for the calculation of GAR (Turnover Based) (continued)
a b c d e f g h i j k l m n o
Million EUR
31st December 2023
Total
gross
carrying
amount
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA )
Of which towards taxonomy relevant sectors (Taxonomy-
eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors (Taxonomy-
eligible)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally
sustainable (Taxonomy-aligned)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Assets excluded from the numerator for
GAR calculation (covered in the
denominator)
6,688 - - - - - - - - - - - - - -
33
Non-financial undertakings 4,900
34
EU SMEs and NFCs (other than SMEs) not
subject to NFRD disclosure obligations
4,576
35
Loans and advances 4,565
36
of which loans collateralised by commercial
immovable property
3,706
37
of which building renovation loans -
38
Debt securities -
39
Equity instruments 11
40
Non-EU country counterparties not subject
to NFRD disclosure obligations
324
41
Loans and advances 324
42
Debt securities -
43
Equity instruments -
44
Derivatives 49
45
On demand interbank loans 275
46
Cash and cash-related assets 93
47
Other categories of assets (e.g. Goodwill,
commodities etc.)
1,371
48
TOTAL ASSETS IN THE DENOMINATOR
(GAR)
14,497
3,881
-
-
-
-
-
-
-
-
3,881
-
-
-
-
49
Assets not covered for GAR calculation 11,444
50
Central governments and Supranational
issuers
1,920
51
Central banks exposure 9,522
52
Trading book 2
53
Total assets 25,941
Off-balance sheet exposures - Undertakings subject to NFRD disclosure obligations
54
Financial guarantees 451 7
-
-
-
-
-
-
-
-
-
-
-
-
-
55
Assets under management
1
4,031 -
-
-
-
-
-
-
-
-
-
-
-
-
-
56
Of which debt securities
57
Of which equity instruments
1
For the 2023 report Assets Under Management has been provided. Future reports will provide detail on AUM split across Debt Se
curities and Equity Instruments. In addition, EU Taxonomy Eligible and EU Taxonomy Aligned information will be provided, wher
e po
s
sible, after collaboration with
third party data vendors regarding existing data limitations faced in the area of EU Taxonomy.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
484
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.2 Assets for the calculation of GAR (CapEx Based)
a b c d e f g h i j k l m n o
Million EUR
31st December 2023
Total
gross
carrying
amount
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Of which towards taxonomy relevant sectors (Taxonomy-
eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors (Taxonomy-
eligible)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally
sustainable (Taxonomy-aligned)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both numerator
and denominator
1
Loans and advances, debt securities and
equity instruments not HfT eligible for GAR
calculation
7,249
3,886
1
1
1
-
-
-
-
-
3,886
1
1
1
-
2 Financial undertakings 2,279
150
-
-
-
-
-
-
-
-
150
-
-
-
-
3 Credit institutions 1,971
146
-
-
-
-
-
-
-
-
146
-
-
-
-
4 Loans and advances 505
5
-
-
-
-
-
-
-
-
5
-
-
-
-
5 Debt securities, including UoP 1,465
141
-
-
-
-
-
-
-
-
141
-
-
-
-
6 Equity instruments 1
-
-
-
-
-
-
-
-
-
-
-
7 Other financial corporations 308
4
-
-
-
-
-
-
-
-
4
-
-
-
-
8 of which investment firms 1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9 Loans and advances 1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10
Debt securities, including UoP -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11
Equity instruments -
-
-
-
-
-
-
-
-
-
-
-
12
of which management companies -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13
Loans and advances -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14
Debt securities, including UoP -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15
Equity instruments -
-
-
-
-
-
-
-
-
-
-
-
16
of which insurance undertakings 6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17
Loans and advances 4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18
Debt securities, including UoP -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19
Equity instruments 2
-
-
-
-
-
-
-
-
-
-
-
20
Non-financial undertakings 154
4
1 1
1 -
-
-
-
4
1 1
1 -
21
Loans and advances 43
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22
Debt securities, including UoP 111
4
1
1
1
-
-
-
-
-
4
1
1
1
-
23
Equity instruments -
-
-
-
-
-
-
-
-
-
-
-
24
Households 4,781
3,732
-
-
-
-
-
-
-
-
3,732
-
-
-
-
25
of which loans collateralised by residential
immovable property
3,726
3,726
-
-
-
-
-
-
-
-
3,726
-
-
-
-
26
of which building renovation loans -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27
of which motor vehicle loans 139
6
-
-
-
-
6
-
-
-
-
28
Local governments financing 35
1
-
-
-
-
-
-
-
-
1
-
-
-
-
29
Housing financing 1
1
-
-
-
-
-
-
-
-
1
-
-
-
-
30
Other local government financing 34
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31
Collateral obtained by taking possession:
residential and commercial immovable
properties
560
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32
TOTAL GAR ASSETS 7,809
3,886
1
1
1
-
-
-
-
-
3,886
1
1
1
-
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
485
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.2 Assets for the calculation of GAR (CapEx Based) (continued)
a b c d e f g h i j k l m n o
Million EUR
31st December 2023
Total
gross
carrying
amount
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Of which towards taxonomy relevant sectors (Taxonomy-
eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors (Taxonomy-
eligible)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally
sustainable (Taxonomy-aligned)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Assets excluded from the numerator
for GAR calculation (covered in the
denominator)
6,688 - - - - - - - - - - - - - -
33
Non-financial undertakings 4,900
34
EU SMEs and NFCs (other than SMEs)
not subject to NFRD disclosure
obligations
4,576
35
Loans and advances 4,565
36
of which loans collateralised by
commercial immovable property
3,706
37
of which building renovation loans -
38
Debt securities -
39
Equity instruments 11
40
Non-EU country counterparties not
subject to NFRD disclosure obligations
324
41
Loans and advances 324
42
Debt securities -
43
Equity instruments -
44
Derivatives 49
45
On demand interbank loans 275
46
Cash and cash-related assets 93
47
Other categories of assets (e.g.
Goodwill, commodities etc.)
1,371
48
TOTAL ASSETS IN THE
DENOMINATOR (GAR)
14,497
3,886
1
1
1
-
-
-
-
-
3,886
1
1
1
-
49
Assets not covered for GAR
calculation
11,444
50
Central governments and
Supranational issuers
1,920
51
Central banks exposure 9,522
52
Trading book 2
53
Total assets 25,941
Off-balance sheet exposures - Undertakings subject to NFRD disclosure obligations
54
Financial guarantees 451
7
-
-
-
-
-
-
-
-
-
-
-
-
-
55
Assets under management
1
4,031
-
- -
-
-
-
-
-
-
-
-
-
-
-
56
Of which debt securities
57
Of which equity instruments
1
For the 2023 report Assets Under Management has been provided. Future reports will provide detail on AUM split across Debt Se
curities and Equity Instruments. In addition, EU Taxonomy Eligible and EU Taxonomy Aligned information will be provided, wher
e po
s
sible, after collaboration
with third party data vendors regarding existing data limitations faced in the area of EU Taxonomy.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
486
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.3 GAR sector information (Turnover Based)
a b c d e f g h i j k l
Breakdown by sector - NACE 4 digits level (code and
label)
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Gross carrying amount Gross carrying amount Gross carrying amount Gross carrying amount Gross carrying amount Gross carrying amount
Mn EUR
Of which
environmentally
sustainable
(CCM)
Mn
EUR
Of which
environmentally
sustainable
(CCM)
Mn EUR
Of which
environmentally
sustainable
(CCA)
Mn
EUR
Of which
environmentally
sustainable (CCA)
Mn
EUR
Of which
environmentally
sustainable (CCM
+ CCA)
Mn
EUR
Of which
environmentally
sustainable
(CCM + CCA)
1 C.10.5 - Manufacture of dairy products 5 -
-
- 5 -
2 C.11.0 - Manufacture of beverages 10 -
-
- 10 -
3
C.14.1 - Manufacture of wearing apparel, except fur
apparel
5 -
-
- 5 -
4
C.20.4 - Manufacture of soap and detergents,
cleaning and polishing preparations, perfumes and
toilet preparations
20 -
-
- 20 -
5
C.21.1 - Manufacture of basic pharmaceutical
products
20 -
-
- 20 -
6
C.26.2 - Manufacture of computers and peripheral
equipment
10 -
-
- 10 -
7 C.26.3 - Manufacture of communication equipment 10 -
-
- 10 -
8 G.47.1 - Retail sale in non-specialised stores 11 -
-
- 11 -
9
J.60.2 - Television programming and broadcasting
activities
10 -
-
- 10 -
10 J.61.3 - Satellite telecommunications activities 10 -
-
- 10 -
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
487
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.4 GAR sector information (CapEx Based)
a b c d e f g h i j k l
Breakdown by sector - NACE 4 digits
level (code and label)
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Non-Financial corporates (Subject
to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Gross carrying amount Gross carrying amount Gross carrying amount Gross carrying amount Gross carrying amount Gross carrying amount
Mn EUR
Of which
environmentally
sustainable
(CCM)
Mn EUR
Of which
environmentally
sustainable
(CCM)
Mn EUR
Of which
environmentally
sustainable
(CCA)
Mn EUR
Of which
environmentally
sustainable (CCA)
Mn EUR
Of which
environmentally
sustainable (CCM
+ CCA)
Mn
EUR
Of which
environmentally
sustainable
(CCM + CCA)
1 C.10.5 - Manufacture of dairy products 5 - - - 5 -
2 C.11.0 - Manufacture of beverages 10 - - - 10 -
3
C.14.1 - Manufacture of wearing
apparel, except fur apparel
5 0.2 - - 5 0.2
4
C.20.4 - Manufacture of soap and
detergents, cleaning and polishing
preparations, perfumes and toilet
preparations
20 - - - 20 -
5
C.21.1 - Manufacture of basic
pharmaceutical products
20 0.4 - - 20 0.4
6
C.26.2 - Manufacture of computers
and peripheral equipment
10 - - - 10 -
7
C.26.3 - Manufacture of
communication equipment
10 - - - 10 -
8
G.47.1 - Retail sale in non-specialised
stores
11 - - - 11 -
9
J.60.2 - Television programming and
broadcasting activities
10 - - - 10 -
10
J.61.3 - Satellite telecommunications
activities
10 - - - 10 -
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
488
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.5 GAR KPI stock (Turnover Based)
a b c d e f g h i j k l m n o
% (compared to total covered assets in the
denominator)
31 December 2023
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion
of total
assets
covered
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both
numerator and denominator
1
Loans and advances, debt securities
and equity instruments not HfT eligible
for GAR calculation
54% 0% 0% 0% 0% 0% 0% 0% 0% 54% 0% 0% 0% 0% 28%
2 Financial undertakings 6% 0% 0% 0% 0% 0% 0% 0% 0% 6% 0% 0% 0% 0% 9%
3 Credit institutions 7% 0% 0% 0% 0% 0% 0% 0% 0% 7% 0% 0% 0% 0% 8%
4 Loans and advances 1% 0% 0% 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 1%
5 Debt securities, including UoP 10% 0% 0% 0% 0% 0% 0% 0% 0% 10% 0% 0% 0% 0% 6%
6 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
7 Other financial corporations 1% 0% 0% 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 1%
8 of which investment firms 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
9 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
10 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
11 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
12 of which management companies 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
13 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
14 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
15 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0% 0% 0% 0% 0%
16 of which insurance undertakings 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
17 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
18 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
19 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
20 Non-financial undertakings 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1%
21 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
22 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
23 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
24 Households 78% 0% 0% 0% 0% 0% 0% 0% 0% 78% 0% 0% 0% 0% 18%
25
of which loans collateralised by
residential immovable property
100% 0% 0% 0% 0% 0% 0% 0% 0% 100% 0% 0% 0% 0% 14%
26 of which building renovation loans 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
27 of which motor vehicle loans 4% 0% 0% 0% 0%
4% 0%
1%
28 Local governments financing 2% 0% 0% 0% 0% 0% 0% 0% 0% 2% 0% 0% 0% 0% 0%
29 Housing financing 100% 0% 0% 0% 0% 0% 0% 0% 0% 100% 0% 0% 0% 0% 0%
30 Other local government financing 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
31
Collateral obtained by taking
possession: residential and commercial
immovable properties
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 2%
32 Total GAR assets 27% 0% 0% 0% 0% 0% 0% 0% 0% 27% 0% 0% 0% 0% 30%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
489
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.6. GAR KPI stock (CapEx Based)
a b c d e f g h i j k l m n o
% (compared to total covered assets in the
denominator)
31 December 2023
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion
of total
assets
covered
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
aligned)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both
numerator and denominator
1
Loans and advances, debt securities
and equity instruments not HfT eligible
for GAR calculation
54% 0% 0% 0% 0% 0% 0% 0% 0% 54% 0% 0% 0% 0% 28%
2 Financial undertakings 7% 0% 0% 0% 0% 0% 0% 0% 0% 7% 0% 0% 0% 0% 9%
3 Credit institutions 7% 0% 0% 0% 0% 0% 0% 0% 0% 7% 0% 0% 0% 0% 8%
4 Loans and advances 1% 0% 0% 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 2%
5 Debt securities, including UoP 10% 0% 0% 0% 0% 0% 0% 0% 0% 10% 0% 0% 0% 0% 6%
6 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
7 Other financial corporations 1% 0% 0% 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 1%
8 of which investment firms 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
9 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
10 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
11 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
12 of which management companies 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
13 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
14 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
15 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0% 0% 0% 0% 0%
16 of which insurance undertakings 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
17 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
18 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
19 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
20 Non-financial undertakings 2% 0% 0% 0% 0% 0% 0% 0% 0% 2% 0% 0% 0% 0% 1%
21 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
22 Debt securities, including UoP 3% 1% 1% 1% 0% 0% 0% 0% 0% 3% 1% 1% 1% 0% 0%
23 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0%
0% 0% 0%
24 Households 78% 0% 0% 0% 0% 0% 0% 0% 0% 78% 0% 0% 0% 0% 18%
25
of which loans collateralised by
residential immovable property
100% 0% 0% 0% 0% 0% 0% 0% 0% 100% 0% 0% 0% 0% 14%
26 of which building renovation loans 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
27 of which motor vehicle loans 4% 0% 0% 0% 0%
4% 0%
1%
28 Local governments financing 2% 0% 0% 0% 0% 0% 0% 0% 0% 2% 0% 0% 0% 0% 0%
29 Housing financing 100% 0% 0% 0% 0% 0% 0% 0% 0% 100% 0% 0% 0% 0% 0%
30 Other local government financing 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
31
Collateral obtained by taking
possession: residential and commercial
immovable properties
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 2%
32 Total GAR assets 27% 0% 0% 0% 0% 0% 0% 0% 0% 27% 0% 0% 0% 0% 30%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
490
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.7 GAR KPI flow (Turnover Based)
a b c d e f g h i j k l m n o
% (compared to total covered assets in the denominator)
31 December 2023
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion
of total
assets
covered
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both numerator and
denominator
1
Loans and advances, debt securities and equity
instruments not HfT eligible for GAR calculation
30% 0% 0% 0% 0% 0% 0% 0% 0% 30% 0% 0% 0% 0% 45%
2 Financial undertakings 4% 0% 0% 0% 0% 0% 0% 0% 0% 4% 0% 0% 0% 0% 24%
3 Credit institutions 4% 0% 0% 0% 0% 0% 0% 0% 0% 4% 0% 0% 0% 0% 22%
4 Loans and advances 1% 0% 0% 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 13%
5 Debt securities, including UoP 9% 0% 0% 0% 0% 0% 0% 0% 0% 9% 0% 0% 0% 0% 9%
6 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
7 Other financial corporations 2% 0% 0% 0% 0% 0% 0% 0% 0% 2% 0% 0% 0% 0% 2%
8 of which investment firms 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
9 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
10 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
11 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
12 of which management companies 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
13 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
14 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
15 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0% 0% 0% 0% 0%
16 of which insurance undertakings 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
17 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
18 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
19 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
20 Non-financial undertakings 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1%
21 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1%
22 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1%
23 Equity instruments 0% 0%
0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
24 Households 64% 0% 0% 0% 0% 0% 0% 0% 0% 64% 0% 0% 0% 0% 20%
25
of which loans collateralised by residential
immovable property
100% 0% 0% 0% 0% 0% 0% 0% 0% 100% 0% 0% 0% 0% 13%
26 of which building renovation loans 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
27 of which motor vehicle loans 12% 0% 0% 0% 0%
12% 0%
1%
28 Local governments financing 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
29 Housing financing 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
30 Other local government financing 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
31
Collateral obtained by taking possession:
residential and commercial immovable properties
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1%
32 Total GAR assets 18% 0% 0% 0% 0% 0% 0% 0% 0% 18% 0% 0% 0% 0% 46%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
491
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.8 GAR KPI flow (CapEx Based)
a b c d e f g h i j k l m n o
% (compared to total covered assets in the
denominator)
31 December 2023
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion
of total
assets
covered
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both numerator and
denominator
1
Loans and advances, debt securities and
equity instruments not HfT eligible for GAR
calculation
31% 0.04% 0.04% 0.04% 0% 0% 0% 0% 0% 31% 0% 0% 0% 0% 45%
2 Financial undertakings 4% 0% 0% 0% 0% 0% 0% 0% 0% 4% 0% 0% 0% 0% 24%
3 Credit institutions 4% 0% 0% 0% 0% 0% 0% 0% 0% 4% 0% 0% 0% 0% 22%
4 Loans and advances 1% 0% 0% 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 13%
5 Debt securities, including UoP 9% 0% 0% 0% 0% 0% 0% 0% 0% 9% 0% 0% 0% 0% 9%
6 Equity instruments 0% 0% 0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
7 Other financial corporations 5% 0% 0% 0% 0% 0% 0% 0% 0% 5% 0% 0% 0% 0% 2%
8 of which investment firms 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
9 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
10 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
11 Equity instruments 0% 0% 0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
12 of which management companies 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
13 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
14 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
15 Equity instruments 0% 0% 0% 0% 0% 0%
0% 0% 0% 0% 0% 0% 0%
16 of which insurance undertakings 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
17 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
18 Debt securities, including UoP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
19 Equity instruments 0% 0% 0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
20 Non-financial undertakings 10% 2% 2% 2% 0% 0% 0% 0% 0% 10% 2% 2% 2% 0% 1%
21 Loans and advances 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1%
22 Debt securities, including UoP 20% 3% 3% 3% 0% 0% 0% 0% 0% 20% 3% 3% 3% 0% 1%
23 Equity instruments 0% 0% 0% 0% 0% 0%
0% 0% 0%
0% 0% 0%
24 Households 64% 0% 0% 0% 0% 0% 0% 0% 0% 64% 0% 0% 0% 0% 20%
25
of which loans collateralised by
residential immovable property
100% 0% 0% 0% 0% 0% 0% 0% 0% 100% 0% 0% 0% 0% 13%
26 of which building renovation loans 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
27 of which motor vehicle loans 12% 0% 0% 0% 0%
12% 0%
1%
28 Local governments financing 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
29 Housing financing 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
30 Other local government financing 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
31
Collateral obtained by taking possession:
residential and commercial immovable
properties
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1%
32 Total GAR assets 19% 0% 0% 0% 0% 0% 0% 0% 0% 19% 0% 0% 0% 0% 46%
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
492
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.9 KPI stock off-balance sheet exposures (Turnover Based)
a b c d e f g h i j k l m n
% (compared to total eligible off-balance sheet assets)
31 December 2023
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
1 Financial guarantees (FinGuar KPI) 2% 0% 0% 0% 0% 0% 0% 0% 0% 2% 0% 0% 0% 0%
2 Assets under management (AuM KPI)
1
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
1 Future reports will provide detail on AUM EU Taxonomy Eligible and Aligned information, where possible, after collaboration with third party data vendors regarding existing data limitations.
1.10 KPI stock off-balance sheet exposures (CapEx Based)
a b c d e f g h i j k l m n
% (compared to total eligible off-balance sheet assets)
31 December 2023
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
1 Financial guarantees (FinGuar KPI) 2% 0% 0% 0% 0% 0% 0% 0% 0% 2% 0% 0% 0% 0%
2 Assets under management (AuM KPI)
1
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
1 Future reports will provide detail on AUM EU Taxonomy Eligible and Aligned information, where possible, after collaboration with third party data vendors regarding existing data limitations.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY
Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
493
Additional Information – EU Taxonomy Disclosure Tables (continued)
1.11 KPI flow off-balance sheet exposures (Turnover Based)
a b c d e f g h i j k l m n
% (compared to total eligible off-balance sheet assets)
1
31 December 2023
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
1 Financial guarantees (FinGuar KPI) 3% 0% 0% 0% 0% 0% 0% 0% 0% 3% 0% 0% 0% 0%
2 Assets under management (AuM KPI)
1
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
1 Future reports will provide detail on AUM EU Taxonomy Eligible and Aligned information, where possible, after collaboration with third party data vendors regarding existing data limitations. Due to data limitations flow eligibility ratio for Financial Guarantees is aligned to stock ratio in this disclosure.
1.12 KPI flow off-balance sheet exposures (CapEx Based)
a b c d e f g h i j k l m n
% (compared to total eligible off-balance sheet assets)
1
31 December 2023
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
1 Financial guarantees (FinGuar KPI) 3% 0% 0% 0% 0% 0% 0% 0% 0% 3% 0% 0% 0% 0%
2 Assets under management (AuM KPI)
1
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
1 Future reports will provide detail on AUM EU Taxonomy Eligible and Aligned information, where possible, after collaboration with third party data vendors regarding existing data limitations. Due to data limitations flow eligibility ratio for Financial Guarantees is aligned to stock ratio in this disclosure.
BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY Annual Financial Report 2023
Additional Information – EU Taxonomy Disclosure Tables
494
Additional Information – EU Taxonomy Disclosure Tables (continued)
Information based on Annex XII in the Disclosures Delegated Act - Regulation (EU) 2021/2178
The disclosure requirements of Article 8(6) and (7) along with Annex XII of Regulation (EU) 2021/2178 were
inserted by the Complimentary Climate Delegated Act and applied from 1 January 2023. This Act included specific
nuclear and gas energy activities in the list of economic activities covered by the EU taxonomy. The criteria for
the specific gas and nuclear activities are in line with EU climate and environmental objectives and will help
accelerate the shift from solid or liquid fossil fuels, including coal, towards a climate-neutral future.
Row
Nuclear energy related activities
1
The undertaking carries out, funds or has exposures to
research, development, demonstration and deployment
of innovative electricity generation facilities that
produce energy from nuclear processes with minimal
waste from the fuel cycle.
NO
2
The
undertaking carries out, funds or has exposures to
construction and safe operation of new nuclear
installations to produce electricity or process heat,
including for the purposes of district heating or
industrial processes such as hydrogen production, as
well as their safety upgrades, using best available
technologies.
NO
3
The undertaking carries out, funds or has exposures to
safe operation of existing nuclear installations that
produce electricity or process heat, including for the
purposes of district heating or industrial processes such
as hydrogen production from nuclear energy, as well as
their safety upgrades.
NO
Fossil gas related activities
4
The undertaking carries out, funds or has exposures to
construction or operation of electricity generation
facilities that produce electricity using fossil gaseous
fuels.
YES
5
The undertaking carries out, funds or has exposures to
construction, refurbishment, and operation of combined
heat/cool and power generation facilities using fossil
gaseous fuels.
YES
6
The undertaking carries out, funds or has exposures to
construction, refurbishment and operation of heat
generation facilities that produce heat/cool using fossil
gaseous fuels.
NO
The Group does not carry out any nuclear and fossil gas related activities. The Group has limited funding to fossil
gas related activities.
Templates 2 and 3 of Annex XII of the Complementary Climate Delegated Act are not applicable and accordingly
have not been included as none of the exposures to nuclear energy and fossil gas related activities are Taxonomy-
aligned. Templates 4 and 5 of Annex XII of the Complementary Climate Delegated Act have not been included
due to limitations on availability of data. Data limitations and their impacts will be reduced in future reports
through collaboration with our third-party data vendors.
iso4217:EUR iso4217:EUR xbrli:shares 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 635400L14KNHZXPUZM19 2023-12-31 635400L14KNHZXPUZM19 2022-12-31 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 635400L14KNHZXPUZM19 2021-12-31 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:IssuedCapitalMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:SharePremiumMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:TreasurySharesMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:RetainedEarningsMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:RevaluationSurplusMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 635400L14KNHZXPUZM19 2021-12-31 ban:LifeInsuranceInForceBusinessReserveMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 635400L14KNHZXPUZM19 2021-12-31 ban:AdditionalTier1CapitalMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:NoncontrollingInterestsMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:TreasurySharesMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:RevaluationSurplusMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ban:LifeInsuranceInForceBusinessReserveMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ban:AdditionalTier1CapitalMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:IssuedCapitalMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:SharePremiumMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:TreasurySharesMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:RetainedEarningsMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:RevaluationSurplusMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 635400L14KNHZXPUZM19 2022-12-31 ban:LifeInsuranceInForceBusinessReserveMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 635400L14KNHZXPUZM19 2022-12-31 ban:AdditionalTier1CapitalMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:NoncontrollingInterestsMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:IssuedCapitalMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:SharePremiumMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:TreasurySharesMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:RetainedEarningsMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:RevaluationSurplusMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ban:LifeInsuranceInForceBusinessReserveMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ban:AdditionalTier1CapitalMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:NoncontrollingInterestsMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:IssuedCapitalMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:SharePremiumMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:TreasurySharesMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:RetainedEarningsMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:RevaluationSurplusMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 635400L14KNHZXPUZM19 2023-12-31 ban:LifeInsuranceInForceBusinessReserveMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 635400L14KNHZXPUZM19 2023-12-31 ban:AdditionalTier1CapitalMember 635400L14KNHZXPUZM19 2023-12-31 ifrs-full:NoncontrollingInterestsMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:IssuedCapitalMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:SharePremiumMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:TreasurySharesMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:RetainedEarningsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:RevaluationSurplusMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ban:LifeInsuranceInForceBusinessReserveMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ban:AdditionalTier1CapitalMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:NoncontrollingInterestsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:TreasurySharesMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:RevaluationSurplusMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ban:LifeInsuranceInForceBusinessReserveMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ban:AdditionalTier1CapitalMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:IssuedCapitalMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:SharePremiumMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:TreasurySharesMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:RetainedEarningsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:RevaluationSurplusMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ban:LifeInsuranceInForceBusinessReserveMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ban:AdditionalTier1CapitalMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:NoncontrollingInterestsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:IssuedCapitalMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:SharePremiumMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:TreasurySharesMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:RetainedEarningsMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:RevaluationSurplusMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ban:LifeInsuranceInForceBusinessReserveMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ban:AdditionalTier1CapitalMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2023-01-01 2023-12-31 ifrs-full:NoncontrollingInterestsMember ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyRequiredByIFRSsMember ifrs-full:IFRS17Member 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:IssuedCapitalMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:SharePremiumMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:TreasurySharesMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:RetainedEarningsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:RevaluationSurplusMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ban:LifeInsuranceInForceBusinessReserveMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ban:AdditionalTier1CapitalMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2021-12-31 ifrs-full:NoncontrollingInterestsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:IssuedCapitalMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:SharePremiumMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:TreasurySharesMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:RetainedEarningsMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:RevaluationSurplusMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ban:LifeInsuranceInForceBusinessReserveMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ban:AdditionalTier1CapitalMember ifrs-full:PreviouslyStatedMember 635400L14KNHZXPUZM19 2022-12-31 ifrs-full:NoncontrollingInterestsMember ifrs-full:PreviouslyStatedMember